Annual financial report R 2016 (Year)

Transcription

1 ELZAB R adjusted Polish Financial Supervision Authority Annual financial report R 2016 (Year) (pursuant to 56 act 1 paragraph 2 and act 6 of 29 th July 2005 Journal of Laws from 2016 item 1639 with further amendments) for issuers of securities engaged in manufacturing, construction and service industries or trade (type of issuer) for the fiscal year 2016 covering the period from 1 st January 2016 to 31 st December 2016 containing financial statements in accordance with IFRS / IAS in the currency PLN submission date: 17 th March 2017 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A ( full issuer name ) ELZAB (abbreviated issuer name) Informatics (sector acc. to WNE classification) Zabrze (zip code ) (town city ) Kruczkowskiego 39 (street) (building number ) (32) (32) (telephone number) (fax) ir@elzab.com.pl ( ) (www) (Vatin) (National Business Registry Number ) Deloitte Sp. z o.o. Sp. k. No.73 (entity authorized to audit) ELZAB R

2 SELECTED FINANCIAL DATA in thousands of PLN in thousands of EUR I. SELECTED FINANCIAL DATA OF ELZAB II. Net revenue from sales products, goods, materials III. Operating profit (loss) IV. Gross profit (loss) V. Profit (loss) attributable to equity holders of the parent VI. Net cash flows from operating activities VII. Net cash flows from investment activities VIII. Net cash flows from financing activities IX. Total net cash flow X. Annualized earnings (loss) per ordinary share (in PLN / EUR) 0,62 1,03 0,14 0,25 XI. Annualized earnings (loss) per ordinary share excluding treasury shares (in PLN/ EUR) 0,67 1,11 0,15 0,27 XII. SELECTED FINANCIAL DATA OF ELZAB 31 st December st December st December st December 2015 XIII. Total assets XIV. Long-term liabilities XV. Short-term liabilities XVI. Equity XVII. Share capital XVIII. Total number of shares XIX. Number of shares adjusted for treasury shares XX. Book value per share (in PLN / EUR) 5,14 4,99 1,16 1,17 XXI. Book value per share excluding treasury shares (in PLN / EUR) 5,54 5,38 1,25 1,26 CONTENTS OF THE REPORT File: Description: 1. Opinion and report SSF IFRS ZUK Elzab S.A. pdf 1. Opinion and report on review of financial statements. 2. Letter of the President R2016. pdf 2. Letter of the President 3. ELZAB financial statements R2016.pdf 3. Financial statements of ELZAB S.A. 4. ELZAB Management statement R2016.pdf 4. Report of the activities of ELZAB S.A. SIGNATURES OF THE COMPANY S REPRESENTATIVES: Date Name and Surname Position/Function Signature 17 th March 2017 Krzysztof Urbanowicz President of the Management Board 17 th March 2017 Jerzy Poplawski Vice President of the Management Board 17 th March 2017 Zbigniew Stanasiuk Member of the Management Board 17 th March 2017 Janusz Krupa Member of the Management Board SIGNATURE OF PERSON RESPONSIBLE FOR BOOKKEEPING: Date Name and Surname Position/Function Signature 17 th March 2017 Małgorzata Kaczmarska Chief Accountant

3 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. ZABRZE, 39 KRUCZKOWSKIEGO STR. FINANCIAL STATEMENTS FOR THE 2016 FINANCIAL YEAR WITH AUDITOR S OPINION AND AUDIT REPORT

4 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. TABLE OF CONTENTS AUDITOR S OPINION... 3 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OF ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. FOR THE 2016 FINANCIAL YEAR... 6 I. GENERAL INFORMATION Details of the audited Company Information on the financial statements for the previous financial year Details of the authorized entity and the key certified auditor acting on its behalf Availability of data and management s representations... 7 II. ECONOMIC AND FINANCIAL POSITION OF THE COMPANY... 8 III. DETAILED INFORMATION Evaluation of the accounting system Information identifying the audited financial statements Information about selected material items of the financial statements Completeness and correctness of notes and explanations and the report on the activities of the Company IV. FINAL NOTES FINANCIAL STATEMENTS FOR THE 2016 FINANCIAL YEAR 1. Statement of Financial Position 2. Statement of Comprehensive Income 3. Statement of Changes in Equity 4. Cash Flow Statement 5. Notes comprising a summary of significant accounting policies and other explanatory information REPORT ON THE ACTIVITIES OF THE COMPANY FOR THE 2016 FINANCIAL YEAR Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 2

5 AUDITOR S OPINION To the Shareholders and Supervisory Board of Zakłady Urządzeń Komputerowych ELZAB S.A. Auditor s report We have audited the attached financial statements of Zakłady Urządzeń Komputerowych ELZAB S.A. with its registered office in Zabrze at 39 Kruczkowskiego Street (hereinafter: the Company ), including statement of financial position prepared as at 31 December 2016, statement of comprehensive income, statement of changes in equity, cash flow statement for the financial year from 1 January 2016 to 31 December 2016 and notes comprising a summary of significant accounting policies and other explanatory information. Responsibility of the Company s manager and those charged with governance for the financial statements The Management Board of the Company is responsible for the preparation of the financial statements, based on properly kept accounting records, and their fair presentation in accordance with the International Accounting Standards, International Financial Reporting Standards, related interpretations published as European Commission regulations and applicable laws. It is also responsible for such internal control as Management Board of the Company determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Under the Accounting Act of 29 September 1994 (Journal of Laws of 2016 item 1047 as amended), hereinafter referred to as the Accounting Act the Management Board of the Company and members of its Supervisory Board are obliged to ensure that the financial statements meet the requirements of the Accounting Act. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit works. We conducted our audit in accordance with Section 7 of the Accounting Act and the National Auditing Standards in line with the wording of the International Standards on Auditing adopted by Resolution No. 2783/52/2015 of the National Council of Statutory Auditors of 10 February 2015 as amended. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 3

6 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board of the Company, evaluating if accounting books based on which financial statements are prepared, are properly kept, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the attached financial statements: give a true and fair view of the economic and financial position of the Company as at 31 December 2016 and its financial performance for the financial year from 1 January 2016 to 31 December 2016 in accordance with the International Accounting Standards, International Financial Reporting Standards, related interpretations published as European Commission regulations and the adopted accounting principles (policies), have been prepared based on properly kept accounting books, comply, with respect to their form and content, with the applicable provisions of law and the articles of association of the Company. Report on other legal and regulatory requirements Opinion on the report on the activities We do not express an opinion on the report on the activities. It is the responsibility of the Management Board of the Company to prepare the report on the activities in accordance with the Accounting Act and other applicable laws. Moreover, the Management Board of the Company and members of the Supervisory Board are obliged to ensure that the financial statements and the report on the activities meet the requirements of the Accounting Act. When auditing the financial statements we were obliged to examine the report on the activities and indicate whether the information contained therein complies with Article 49 of the Accounting Act and the Ordinance of the Minister of Finance of 19 February 2009 on current and periodic information published by issuers of securities and the rules of equal treatment of the information required by the laws of non-member states (Journal of Laws of 2014 item 133 as amended) and is consistent with underlying information disclosed in the attached financial statements. Additionally, it was our responsibility to indicate whether we have detected any material misstatement in the report on the activities based on our knowledge of the Company and its business environment obtained in the course of the audit. 4

7 In our view, the information contained in the report on the activities complies with Article 49 of the Accounting Act and the Ordinance of the Minister of Finance of 19 February 2009 on current and periodic information published by issuers of securities and the rules of equal treatment of the information required by the laws of non-member states (Journal of Laws of 2014 item 133 as amended) and is consistent with underlying information disclosed in the attached financial statements. Moreover, based on our knowledge of the Company and its business environment obtained in the course of the audit, we have not detected any material misstatements in the report on the activities. Statement of compliance with corporate governance principles In relation to our audit of the financial statements, it was our responsibility to examine the Company s statement of compliance with corporate governance principles, which constitutes a separate part of the report on the activities. In our view, the Company s statement provides all information required by the secondary legislation issued under Article 60.2 of the Act on public offering, conditions governing the introduction of financial instruments to organized trading, and public companies of 29 July 2005 (Journal of Laws of 2016 item 1639 as amended) and regulations issued under Article 61 thereof. The information is compliant with the applicable laws and information presented in the financial statements. Piotr Sokołowski Key certified auditor conducting the audit No On behalf of Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. entity authorized to audit financial statements entered under number 73 on the list kept by the National Council of Statutory Auditors: Piotr Sokołowski Vice-President of the Management Board of Deloitte Polska Sp. z o.o. hich is the General Partner of Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. Warsaw, 14 March 2017 The above audit opinion together with audit report is a translation from the original Polish version. In case of any discrepancies between the Polish and English version, the Polish version shall prevail. 5

8 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OF ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. FOR THE 2016 FINANCIAL YEAR I. GENERAL INFORMATION 1. Details of the audited Company The Company operates under the business name Zakłady Urządzeń Komputerowych ELZAB S.A. (hereinafter: the Company ). The Company s registered office is located in Zabrze, 39 Kruczkowskiego Street. The Company operates as a joint stock company. The Company is recorded in the Register of Entrepreneurs kept by the District Court in Katowice, X Commercial Division of National Court Register under KRS number The Company operates based on the provisions of the Code of Commercial Companies As of 31 December 2016, the Company s share capital equaled PLN 22,142, and was divided into 16,137,050 shares with a face value of PLN 1.36 each. In the audited period, the Company conducted activities mainly in the area of production and sale of fiscal equipment and sales of other non-fiscal equipment (including sales systems software). Composition of the Management Board as of the date of the opinion: Krzysztof Urbanowicz Chairman of the Management Board, Jerzy Popławski Vice-Chairman of the Management Board, Zbigniew Stanasiuk Member of the Management Board, Janusz Krupa Member of the Management Board. Changes in the composition of the Management Board during the audited period and until the date of the opinion: on 30 June 2016 Jacek Papaj resigned from the position of Member of the Management Board. His mandate was revoked the very same day, on 16 June 2016 the Supervisory Board appointed Mr. Krzysztof Urbanowicz the Chairman of the Management Board effective from 30 June Information on the financial statements for the previous financial year The activities of the Company in 2015 resulted in a net profit of PLN 16,630, The financial statements of the Company for the 2015 financial year were audited by a certified auditor. The audit was performed by authorized entity Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. The certified auditor issued an unqualified opinion on those financial statements The General Shareholders Meeting which approved the financial statements for the 2015 financial year was held on 30 June The General Shareholders Meeting decided to distribute the net profit for 2016 in the following manner: dividends for shareholders PLN 7,780,913.40; allocation to supplementary capital PLN 8,849, Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 6

9 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. The financial statements for the 2015 financial year were submitted to the National Court Register (KRS) on 13 July The consolidated financial statements for the 2015 financial year were submitted to the National Court Register (KRS) on 13 July Details of the authorized entity and the key certified auditor acting on its behalf The entity authorized to audit the financial statements was appointed by the Supervisory Board. The audit of the financial statements was performed based on the agreement of 10 may 2016 and the Annex No. 1 of 28 February 2017 concluded between the Company and Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. with registered office in Warsaw, al. Jana Pawła II 22, recorded under number 73 on the list of entities authorized to provide audit services kept by the National Council of Statutory Auditors. On behalf of the authorized entity, the audit of the financial statements was conducted under the supervision of Piotr Sokołowski, key certified auditor, (No. 9752), in the registered office of the Company from 6 to 16 February 2016, and outside the Company s premises until the opinion date. Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. and the key certified auditor conducting the audit confirm that they are authorized to carry out audits and meet the requirements of Article 56 of the Act on certified auditors and their self-government, entities authorized to audit financial statements and public supervision (Journal of Laws of 2016 item 1000 as amended) to express an unbiased and independent opinion on the financial statements of the Company. 4. Availability of data and management s representations The scope of our audit was not limited. During the audit, necessary documents and data as well as detailed information and explanations were provided to the authorized entity and the key certified auditor, as confirmed e.g. in the written representation of the Management Board of 14 March 2017 Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 7

10 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. II. ECONOMIC AND FINANCIAL POSITION OF THE COMPANY Presented below are the main items from the income statement and statement of financial position as well as financial ratios describing the financial performance of the Company and its economic and financial position compared to the prior year. Main financial data from consolidated income statement (PLN 000) Sales revenue 99, ,112 Operating expenses 86,396 96,985 Operating profit (loss) 13,704 13,835 Net profit (loss) 10,076 16,630 Main financial data from consolidated statement of financial position (PLN 000) Inventory 15,406 19,880 Trade receivables 32,260 20,750 Current assets 67,542 65,306 Total assets 168, ,429 Equity 82,867 80,572 Short-term liabilities (including short-term provisions and accruals) 56,177 50,187 Trade liabilities 17,859 10,353 Total liabilities and provisions 85,563 78,857 Profitability and efficiency ratios return on sales 14% 13% net return on equity 14% 26% assets turnover ratio 0,59 0,69 receivables turnover in days liabilities turnover in days inventory turnover in days Liquidity/Net working capital debt ratio 51% 49% equity to fixed assets ratio 49% 51% net working capital (PLN 000) 11,365 15,119 current ratio 1,20 1,30 quick ratio 0,93 0,91 Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 8

11 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. An analysis of the above figures and ratios indicated the following trends in 2016: an increase in return on sales, a decrease in net return on equity, a decrease in assets turnover ratio, an increase in receivables and inventory turnover ratio, a decrease in liabilities turnover ratio, an increase in debt ratio, a decrease in equity ratio, a decrease in net working capital, a decrease in current ratio, an increase in quick ratio. Methodology of ratio calculations: Return on sales Net return on equity Assets turnover ratio Receivables turnover ratio Liabilities turnover ratio Inventory turnover ratio Debt ratio Equity ratio Net working capital Current ratio Quick ratio Operating expenses Operating profit Short-term liabilities Net profit Sales revenue Net profit Equity Net profit Sales revenue Total assets Avg. receivables in reporting period times Number of days in reporting period Sales revenue Avg. liabilities in reporting period times Number of days in reporting period Operating expenses Avg Inventory in reporting period times Number of days in reporting period Operating expenses Total liabilities and provisions Total assets Equity Total assets Current assets minus Short term liabilities Current assets Short-term liabilities Current assets minus Inventory Short-term liabilities Costs of products, goods and materials + Selling costs + General and administrative costs Profit before income tax and extraordinary events Total short-term liabilities including provisions and accrued expenses Not including deferred revenue Total liabilities and provisions Total liabilities (excluding equity) Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 9

12 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. III. DETAILED INFORMATION 1. Evaluation of the accounting system The Company has valid documentation describing the adopted accounting principles, complying in all material respects with Article 10 of the Accounting Act. The principles have been applied consistently and did not change compared to the principles applied in the prior year. The opening balance resulting from the approved financial statements for the prior financial year has been properly introduced into the accounting records of the audited period. Based on tests performed during the audit procedures, we have verified the adopted accounting system and found no misstatements that would affect the financial statements. Our audit did not include, though, the entire accounting system used by the Company. The Company performed a physical count of assets, equity and liabilities within the scope necessary to confirm the existence of the presented assets, equity and liabilities. 2. Information identifying the audited financial statements The audited financial statements were prepared as of 31 December 2016 and include: statement of financial position prepared as of 31 December 2016, with total assets and liabilities plus equity of PLN 168,430 thousand, statement of comprehensive income for the period from 1 January 2016 to 31 December 2016, with a net profit of PLN 10,076 thousand and total comprehensive income of PLN 10,076 thousand, statement of changes in equity for the period from 1 January 2016 to 31 December 2016, disclosing an increase in equity of PLN 2,295 thousand, Cash flow statement for the period from 1 January 2016 to 31 December 2016, showing a cash outflow of PLN 82 thousand, notes, comprising a summary of significant accounting policies and other explanatory information. 3. Information about selected material items of the financial statements The structure of assets, equity and liabilities as well as items affecting the financial result has been presented in the financial statements. Property, plant and equipment The Property, plant and equipment in the Company consists of: fixed assets in amount of PLN 22,288 thousand, fixed assets under construction in amount of PLN 1,125 thousand. Long-term investments The Long-term investments in the Company consists of: shares in affiliated in amount of PLN 58,641 thousand, shares in subsidiaries in amount of PLN 440 thousand, shares in other entities in amount of PLN 206 thousand. Additional information correctly describes changes in investments during the financial year. Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 10

13 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. Inventory The structure of inventory and related impairment losses has been correctly presented in the relevant explanatory note to the statement of financial position. Receivables Ageing of trade receivables has been correctly presented in the respective explanatory note to the statement of financial position, together with related impairment losses. Liabilities The nature of contracted loans, security and maturity has been presented in the notes to the financial statements. Ageing of trade liabilities has been disclosed in the relevant explanatory note to the statement of financial position. Prepayments, accruals and provisions for liabilities The structure of prepayments, accruals and provisions for liabilities is presented in notes. 4. Completeness and correctness of notes and explanations and the report on the activities of the Company The Company confirmed the validity of the going concern principle in the preparation of the financial statements. The notes and explanations give a correct and complete description of measurement principles regarding assets, equity, liabilities, financial result and principles of preparation of the financial statements. The notes to the financial statements give a correct and complete description of the reporting items and clearly present other information required under IFRS. The financial statements have been supplemented with the Management Board s report on the activities of the Company in the 2016 financial year. The report contains information required under Article 49.2 of the Accounting Act and the Ordinance of the Minister of Finance of 19 February 2009 on current and periodic information published by issuers of securities and the rules of equal treatment of the information required by the laws of non-member states (Journal of Laws of 2014 item 133 as amended). We have audited the report with respect to the disclosed information derived directly from the audited financial statements. Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 11

14 ZAKŁADY URZĄDZEŃ KOMPUTEROWYCH ELZAB S.A. IV. FINAL NOTES Management Board s Representations Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. and the key certified auditor received a representation letter from the Company s Management Board, in which the Board stated that the Company complied with the laws in force. Piotr Sokołowski Key certified auditor conducting the audit No On behalf of Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. entity authorized to audit financial statements entered under number 73 on the list kept by the National Council of Statutory Auditors: Piotr Sokołowski Vice-President of the Management Board of Deloitte Polska Sp. z o.o. which is the General Partner of Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. Warsaw, 14 March 2017 Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. 12

15 Letter from the President of the Management Board ELZAB S.A. to Shareholders 31 st December2016 Dear Sir or Madam, On behalf of the Management Board ELZAB S.A. presents an audited annual report presenting the most important achievements of ELZAB S.A. in 2016 as well as possible development prospects for the following years. The year 2016 was a period of consolidation of the Company's market position and the designation of new directions for the coming years thanks to which we will continue to build dynamic value for our shareholders. Despite the lack of regulation regarding new groups of taxpayers required to register turnover with the use of fiscal devices, the results achieved by ELZAB S.A. in 2016 should be considered satisfactory. Revenues from sales amounted to 99,444 thousand PLN, while net profit generated was 10,076 PLN. It is worth mentioning that in the past year there have been many important events for our Company including: ELZAB S.A. incurred capital expenditures for the acquisition and modernization of fixed assets and intangible assets including, inter alia, outlays for the modernization of buildings and structures, modernization of production and office spaces, and production instruments and tools. The Company also allocated part of its net profit for the financial year 2015 in the amount of thousand PLN for payment of dividend. The dividend per share was 0.52 PLN and the dividend was paid on 21 st September In 2015, ELZAB S.A issued 3-year bonds No. A / 2015 worth 25 million PLN under the 5-year bond issue program limited to 50 million PLN. The planned redemption of the bond is foreseen for Interest payments to the bondholders are made twice a year. In the past year, ELZAB S.A established 2 entities - ELZAB HELLAS SPV Sp. z o.o and ELZAB HELLAS S.A whose main goal is to provide fiscal and non-fiscal facilities directly to the Greek market. ELZAB S.A. together with Comp Centrum Innowacji Sp. z o.o and other companies in the COMP.A. Group continue to jointly develop an integrated platform for the sale of services, i.e. M/platforms. M/ platform is Poland's first online platform, which, based on a network of cash registers, allows service providers and sales outlets to grow their business. Through the M / platform you will be able to provide services such as paying bills, card payments, buy insurance, phone recharge, games, internet, telephone payments, cash withdrawals, microloans. I am also pleased to announce that ELZAB S.A in 2016 like in previous years was a laureate of many prestigious competitions, winning prizes for high quality manufactured equipment including: Award "Quality of the Year 2016 Gold" Award "Eagle for Export" for the best exporter in Silesia. Award "Platinum Laurel" for the overall activity awarded by the Regional Chamber of Commerce in Katowice during the 25 th anniversary of the Laurels of Skills and Competences. 1

16 Letter from the President of the Management Board ELZAB S.A. to Shareholders 31 st December2016 The coming years will be a time of great opportunity as well as big challenges facing the ELZAB S.A Company in connection with the planned implementation of online fiscalization in Poland. This will be a solution where the transactions carried out at the cash register will be sent to the central server (repository) collecting sales data. So far, a similar solution has been implemented in several countries, including Hungary, where the cash register is equipped with an encrypted communication module with the Ministry of Finance server and in Croatia and the Czech Republic where any device (laptop, tablet with sales application) communicates with the central server of the Ministry of Finance through Internet. Online countries such as Turkey, Austria, Slovakia and Greece are also prepared for online fiscalization. We are convinced that our well-established position in the fiscal equipment market and our experience in the Hungarian market where ELZAB's online cash registers have achieved sales success will meet the challenges ahead. However, much depends on the final form of the Regulation of the Ministry of Development, which is currently underway specifying the technical conditions of the future form of fiscalisation in Poland. I would like to assure that the Management Board is constantly monitoring the work of the Ministry of Development in terms of changes in fiscal law and is consistently and comprehensively preparing for this process. We are constantly working to ensure that the ELZAB S.A. offer is expanded with new innovative fiscal and non-fiscal devices, as well as comprehensive services dedicated to the needs of demanding contractors. This allows us to constantly improve the machine park management professional staff and experience gained with each new Job. On behalf of the entire Board of Directors of ELZAB S.A. I would like to thank all shareholders for their trust and commitment, motivation and loyalty to customers, and support for employees. I can assure you that we will make every effort to strengthen our market position and improve our financial performance, and to build on this foundation further confidence in our shareholders and investors. In the coming years, new challenges and milestones are emerging, but also extraordinary sales potential. Sincerely, Krzysztof Urbanowicz President of the Board ELZAB S.A. 2

17 Financial Statement of ELZAB S.A. for the period from 1 st January 2016 to 31 st December 2016

18 Table of Contents Section I Introduction to the Financial Statements 3 Section II The financial statements of the ELZAB 25 2

19 ELZAB S.A. Section I Introduction to the financial statements INTRODUCTION TO THE FINANCIAL STATEMENTS a) Name of the company and registered office, indication of the relevant registry court and registry number and the principal subject of the issuer's business according to the Polish Classification of Business, hereinafter referred to as "PKD", and where the issuer's securities are traded on a regulated market - also indicate the industry according to the classification adopted by the market, The name of the company: Zakłady Urządzeń Komputerowych ELZAB S.A., Kruczkowskiego street 39, postal code Zabrze. The company has 3 sales Office: - in Warsaw, Taborowa street 14 - in Wroclaw, Słubicka street 22 - in Suchy Las near Poznan Akacjowa street 4. National Court Register - Register of Entrepreneurs - KRS Business object according to Polish Classification of Activities Z - Manufacture of computers and peripheral devices According to the provisions of the Articles of Association of the Company, the issuer's business is: 1. Manufacture of computers and peripheral equipment PKD Z 2. Manufacture of consumer electronics PKD Z 3. Installation of industrial machinery and equipment PKD Z 4. Other information technology and computer service activities PKD Z 5. Repair of machinery PKD Z 6. Repair of computers and peripheral equipment PKD Z 7. Other research and experimental development on natural sciences and engineering PKD Z 8. Advertising agencies PKD Z 9. Computer programming activities PKD Z 10. Computer consultancy activities PKD Z 11. Other activities auxiliary to financial services, except insurance and pension funding PKD Z 12. Other education n.e.c. PKD B 13. Other accommodation PKD Z 14. Other financial service activities, except insurance and pension funding n.e.c. PKD Z 15. Wholesale of computers, computer peripheral equipment and software PKD Z 16. Wholesale of other office machinery and equipment PKD Z 17. Rental and operating of own or leased real estate PKD Z 18. Agents involved in the sale of machinery, industrial equipment, ships and aircraft PKD Z 19. Agents specialised in the sale of other particular products PKD Z 20. Agents involved in the sale of a variety of goods PKD Z 21. Wholesale of electronic and telecommunications equipment and parts PKD Z 22. Retail sale of computers, peripheral units and software in specialised stores PKD Z 23. Data processing, hosting and related activities PKD Z 24. Web portals PKD Z 25. Rental and leasing of office machinery and equipment (including computers) PKD Z 26. Rental and leasing of other machinery, equipment and tangible goods n.e.c. PKD Z 27. Leasing of intellectual property and similar products, except copyrighted works PKD Z 28. Activities of call centres PKD Z 29. Other credit granting PKD Z 3

20 ELZAB S.A. Section I Introduction to the financial statements b) Indication of the duration of the issuer and units of the Company, if it is marked The Company was created for an indefinite period of time. c) Indication of the periods for which is presented consolidated financial statements and comparative consolidated financial data The report presents the financial statements for the period from 1 st January 2016 to 31 st December 2016 and the comparable period of the previous year i.e. from 1 st January 2015 to 31 st December In the statement of financial position, the data is presented as at 31 st December 2016 and 31 st December d) approval of the financial statements for publication On 17 th March 2017 the Management Board of ZUK ELZAB S.A. adopted a resolution on approval of the consolidated financial statements for the 2016 for publication. e) Composition of the Management Board and the Supervisory Board As for 31 st December 2016, the Management Board of the Company consists of: Krzysztof Urbanowicz President of the Management Board Jerzy Popławski Vice President of the Management Board Zbigniew Stanasiuk Member of the Management Board Janusz Krupa Member of the Management Board Proxy of the Company is Małgorzata Kaczmarska - Chief Accountant. As for 31 st December 2016, the Supervisory Board of the Company consists of: Jacek Papaj - Member of the Supervisory Board Krzysztof Morawski - Member of the Supervisory Board Jarosław Wilk - Member of the Supervisory Board Andrzej Wawer - Member of the Supervisory Board Jacek Pulwarski - Member of the Supervisory Board Grzegorz Należyty- Member of the Supervisory Board Changes in the composition of the Management Board and the Supervisory Board of ELZAB S.A. On 16 th June 2016, at the meeting of the Supervisory Board of ELZAB S.A. with effect from 30 th June 2016 submitted the resignation from the position of Chairman of the Board of ELZAB S.A Mr. Jacek Papaj. Therefore, at the present meeting of the Supervisory Board of ELZAB SA adopted Resolution No. 1/06/2016 on the appointment of Mr. Krzysztof Urbanowicz for the completion of the current 3-year joint term of office, which began with the date of the Ordinary General Meeting approving financial statements for 2013 year and entrusts it with the Position of President of the Management Board of ELZAB S.A. with effect from 30 th June In addition, the Supervisory Board consented to act by Mr. Krzysztof Urbanowicz functions in the bodies of the companies in the group, in which the ELZAB S.A., even if they deal with the competitive activity towards the Company. According to the statement, Mr. Krzysztof Urbanowicz not competitive in relation to the Company and does 4

21 ELZAB S.A. Section I Introduction to the financial statements not participate in a competitive company as a partner in a civil partnership or as a member of the body of a company except for the exercise of the function Member of the Management Board of COMP SA with its registered office in Warsaw, which is the parent undertaking of ELZAB S.A. (Cr. No. 11/2016) On 30 th June 2016 the Annual General Meeting of ELZAB S.A. appointed to the Supervisory Board Mr. Jacka Papaya and Mr. Jaroslaw Wilk. Mr. Waldemar Tevnell ceased to function as a member of the above-mentioned authority. (Cr. No. 14/2016). The Supervisory Board adopted a resolution concerning the election of the Audit Committee. The Audit Committee was appointed: Andrzej Wawer - Chairman of the Audit Committee of the Supervisory Board Jacek Pulwarski - Member of the Audit Committee of the Supervisory Board Grzegorz Należyty - Member of the Audit Committee of the Supervisory Board f) Indication of whether the financial statement and comparable financial data contain aggregate data - if the issuer's enterprise consists of internal organizational units preparing independent financial statements, The Company has sales offices in Warsaw, Wroclaw and Suchy Las near Poznań, which do not prepare independent financial statements. g) Indication whether the issuer is a parent or significant investor and whether it prepares consolidated financial statements, The Company is the parent company and prepares consolidated financial statements. h) In the case of the financial statements for the period during which the merger took place - an indication that it is a financial statement made after the merger and an indication of the method used to calculate the merger. In 2016, ELZAB was not merged with other entities. i) Indication whether the financial statements have been prepared on the assumption that the issuer will continue as a going concern in the foreseeable future and whether there are no circumstances indicating a threat to continuation of business, The financial statements for 2016 were prepared on a going concern basis and there are no circumstances indicating the risk of continuing to operate in the foreseeable future. j) Declare that the financial statements have been restated to ensure comparability of the data, and the statement and explanation of the differences resulting from adjustments to the accounting policies or adjustments to the underlying errors are included in an additional explanatory note, According to Resolution No. 11 of the AGM dated 18 th May 2006 ELZAB S.A. from 1 st January 2007, to the IAS / IFRS as adopted by the European Union has been applied to accounting policies and the preparation of standalone financial statements. 5

22 ELZAB S.A. Section I Introduction to the financial statements There were no accounting changes in the current reporting period. k) Summary and explanation of the differences between the disclosures in the financial statements and comparable financial data and the previously prepared and published annual financial statements Not applicable. l) Indication of whether the financial statements or comparable financial data have been adjusted in line with the reservations in the opinions of entities authorized to audit financial statements for the years for which the financial statements or comparable financial data have been included in the prospectus, The auditors' opinion on ELZAB SA's financial statements for 2016 and 2015 did not contain any objections. m) Declaration of Conformity These consolidated financial statements have been prepared on the basis of International Financial Reporting Standards as endorsed by the European Union (EU). Amendments to existing standards and interpretations applied for the first time in the company's financial statements / group for The following amendments to existing standards and interpretations issued by the International Accounting Standards Board (IASB) and approved for use in the EU enter into force for the first time in the financial statements of the ELZAB for 2016: Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosures on Shares in Other Entities" and IAS 28 "Investments in Associates and Joint Ventures" - Investment Units: Applying Consolidation Exemptions - Approved by EU on 22 nd September 2016 Effective for annual periods beginning on or after 1 st January 2016; Amendments to IFRS 11,,Joint arrangements Accounting for the acquisition of shares in joint operations. Approved by the EU on 24 th November Effective for annual periods beginning on or after 1 st January 2016; Amendments to IAS 1,,Presentation of Financial Statements - presentation of items of other comprehensive income, Initiative in relation to disclosures. Approved by the EU on 18 th December Effective for annual periods beginning on or after 1 st January 2016; Amendments to IAS 16,,Tangible assets and IAS 38 "Intangible Assets" - Explanations on acceptable methods of depreciation. Approved by the EU on 2 nd December Effective for annual periods beginning on or after 1 st January 2016; 6

23 ELZAB S.A. Section I Introduction to the financial statements Amendments to IAS 16,,Tangible assets and IAS 41,,Agriculture - Agriculture: plants crops. Approved by the EU on 23 rd November Effective for annual periods beginning on or after 1 st January 2016; Amendments to IAS 19,,Employee benefits defined benefit plans: employers' contributions. Approved by the EU on 17 th December Effective for annual periods beginning on or after 1st July Amendments to IAS 27,,Individual financial statement Method of the ownership transfer in individual financial statements. Approved by the EU on 18 th December Effective for annual periods beginning on or after 1 st January 2016; Amendments to various standards,,improvements to IFRS ( IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24, and IAS 38 )" - changes made under the procedures for annual amendments to focused primarily on resolving inconsistencies and clarifying wording. Approved by the EU on 17 th December Effective for annual periods beginning on or after 1 st February 2015, Amendments to various standards,,improvements to IFRS ( ) ( IFRS 5, IFRS 7, IAS 19, and IAS 34 )" - changes made under the procedures for annual amendments to focused primarily on resolving inconsistencies and clarifying wording. Approved by the EU on 15 th December Effective for annual periods beginning on or after 1 st January 2016; The above-mentioned standards and interpretations do not have significant effect on the financial statement for New Standards and interpretations adopted by the IASB but not yet approved for use in the EU By approving this financial statement, the following new standards and amendments to standards have been issued by the IASB and approved for use in the EU but have not yet entered into force: IFRS 9,,Financial instruments - Approved by the EU on 22 nd November Effective for annual periods beginning on or after 1 st January 2018; IFRS 15,,Revenue from contracts with customers and Amendments to IFRS 15 "Effective Date of IFRS 15"-Approved by the EU on 22 nd September Effective for annual periods beginning on or after 1 st January 2018; New standards and changes to existing standards issued by the IASB but not yet approved for use in the EU. IFRS in the form approved by the EU do not differ materially from the regulations issued by the International Accounting Standards Board (IASB), except for the following new standards, amendments to standards and new interpretations, which, as of the date of publication of the financial statements, have not yet been approved. For use in the EU (the following dates of entry apply to the full version standards): IFRS 14,,Postponed balances from governed activity - Effective for annual periods beginning on or after 1 st January 2016; The European Commission has decided not to initiate the process of approval of this interim standard for use in the EU until a final version of IFRS 14, 7

24 ELZAB S.A. Section I Introduction to the financial statements MSSF 16 Leasing - Effective for annual periods beginning on or after 1 st January 2019; Amendments to IFRS 2 "Share-based Payments" - Classification and measurement of share-based payment. Effective for annual periods beginning on or after 1 st January 2018; Amendments to IFRS 4 "Insurance Contracts" - Application of IFRS 9 "Financial Instruments", together with IFRS 4 "Insurance Instruments" (effective for annual periods beginning on or after 1 January 2018 or when IFRS 9 "Financial Instruments" " for the first time), Amendments to IFRS 10,,Consolidated Financial Statements ; and IAS 28,,Investments in associates and joint ventures Sale or transfer of assets between an investor and an associate or a joint venture and subsequent changes (the date of entry into force of the change has been postponed until the end of the research on the equity method). Amendments to IFRS 15,,Revenue from Customer Contracts" - Explanatory notes to IFRS 15 "Revenues from customer contracts". Effective for annual periods beginning on or after 1 January 2018), Amendments to IAS 7 "Statement of Cash Flows" - Initiative in relation to disclosures. Effective for annual periods beginning on or after 1 st January 2017; Amendments to IAS 12 "Income Taxes" - Recognition of deferred income tax on unrealized losses. Effective for annual periods beginning on or after 1 st January 2017; Amendments to IAS 40 "Investment Property" - Transfer of Investment Properties (effective for annual periods beginning on or after 1 st January 2018), Amendments to various IFRS ( ) amendments - amendments made to the IFRS 1 (IFRS 1, IFRS 12 and IAS 28), which are primarily intended to address non-compliance and clarification of the vocabulary (amendments to IFRS 12 Are effective for annual periods beginning on or after 1 st January 2017, and amendments to IFRS 1 and IAS 28 apply to annual periods beginning on or after 1 st January 2018), Interpretation of IFRIC 22 "Foreign currency transactions and advances" (effective for annual periods beginning on or after 1 st January 2018). The Company has not conducted an analysis and is not in a position to evaluate the impact of the above changes on the financial statements if they were applied at the balance sheet date. Besides the regulations adopted by the EU hedge accounting for financial assets and liabilities, whose principles have not been approved for use in the EU. According to estimates, application of hedge accounting for the portfolio of financial assets or liabilities pursuant to IAS 39 "Financial Instruments: Recognition and Measurement" would not have a significant impact on the financial statements, if applied as at the balance sheet date. n) description of the adopted accounting principles (policy), including methods of valuation of assets and liabilities and revenues and costs, determining the financial result and the method of preparation of the consolidated financial statements and consolidated comparable data, 8

25 ELZAB S.A. Section I Introduction to the financial statements 1. Preliminary information The financial statements have been prepared under the historical cost convention, except for the revaluation of certain fixed assets and financial instruments. The main accounting policies of ELZAB S.A. are summarized below. The consolidated financial statements for 2016 and for 2015 have been prepared in accordance with the principles of IFRS, as adopted by the European Union. The financial statements also take into account the requirements of the Regulation of the Minister of Finance dated 19 th February On current and periodic information published by issuers of securities and conditions for recognizing as equivalent information required by laws of a non-member state (Journal of Laws of 2014 pos. 133). Segment Reporting The primary reporting format of ELZAB used for segment is business segment while geographical segment is a segment complementary. A business segment is a distinguishable component of an entity in which the distribution of goods or services, which is subject to risks and characterized by returns on investment other than other business segments. The activities of ELZAB S.A. is homogeneous, conducted in the production and sale of electronic equipment and goods purchased for resale. Sale of materials is strictly supplement the basic offer of ELZAB S.A. Provided services include mainly maintenance services and training related to the commercial offer of the Company. ELZAB products offered for sale are characterized by a similar manufacturing process. In terms of sales are used similar methods of distribution and sale of services to a specific audience. Therefore, the ELZAB all its activities are classified into one business segment - electronic, within which distinguishes between fiscal devices, scales and automatic identification devices and systems sales, services, IT and other equipment. A geographical segment is a distinguishable component of an entity's operations by which products or services in a particular economic environment that is subject to risks and is characterized by returns on investment different from those applicable to other areas operating in different economic environments. ELZAB S.A. operates mainly in Polish, which regions because of their proximity, similar economic conditions and scope of risks to be considered largely a homogeneous. For management purposes, it is defined by the value of sales realized on the territory of the Polish and foreign markets. Critical accounting estimates and assumptions Accounting The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates and assumptions as to future events that may affect the value of the assets and current liabilities in future financial statements. Estimates and assumptions are continually evaluated and are based on management's best knowledge, historical experience and expectations as to future events that in a given situation seem justified. However, they may include a margin of error and the actual results may differ from those anticipated. 9

26 ELZAB S.A. Section I Introduction to the financial statements Error Correction Errors may relate to the recognition, measurement, presentation or disclosure of elements of financial statements. Errors detected at the stage of preparation of financial statements, the Company revises the financial statements. Errors detected in subsequent periods are corrected by adjusting comparable data presented in the financial statements in the period in which the error was detected. Company corrects errors of previous periods using the retrospective approach and retrospective restatement, as far as is practicable, guided by the principle of materiality at the same time. Costs of the external financing Costs of the external financing are recognized in the statement of comprehensive income in the period in which they are incurred. If the borrowing costs are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized to them as part of the purchase price or cost of the asset (IAS 23). 2. Fixed assets Tangible fixed assets include tangible and expenditure on fixed assets under construction, which are held for use in the production, supply of goods and services, in order to lease to other entities under lease agreements or for administrative purposes with an expected period of use longer than 1 year, which is expected by the Company to generate a future economic benefit. Expenditure on assets include capital expenditures as well as advance payments for future deliveries of machinery, equipment and services related to the construction of fixed assets. For determining the carrying amount and the determination of depreciation and downs due to impairment of tangible fixed assets, the provisions of IAS 16 (Property, Plant and Equipment) and IAS 36 (Impairment of Assets). Tangible assets include: buildings, structures machinery and equipment means of transport other fixed assets land machinery and equipment under construction requiring assembly and fixed assets under construction Fixed assets and fixed assets under construction at the time of entry as assets are valued at purchase price or production cost. The purchase price is the purchase price of the vendor invoice plus the costs associated with the purchase until the asset is to be used (e.g. Costs of transportation, loading, unloading, insurance, transport, assembly, installation and commissioning, notary fees, duties and taxes). For the cost of production is considered a value, at cost, used to generate the asset tangible assets, external services, payroll and other costs attributable to the value of the produced asset incurred until the asset is put into use. To the initial value also includes reasonable part of borrowing costs in accordance with the guidelines of IAS

27 ELZAB S.A. Section I Introduction to the financial statements The upgrade costs are included in the carrying value of fixed assets when it is likely that this account will generate economic benefits for the Company, and the costs incurred for the modernization can be reliably measured. All other expenditure on repairs and maintenance of fixed assets relates to the financial result in the reporting periods in which they were incurred. Land is not depreciated. Fixed assets are depreciated over their useful economic life. Depreciation is calculated on a straight-line basis, from the month following the month in which the asset is put into use. At the balance sheet fixed assets are stated at acquisition or production cost less any accumulated depreciation and any write-downs made in respect of impairment. The following time ranges have been adopted as the estimated useful lives of tangible assets: buildings, structures: years, machinery and equipment: 2-20 years, means of transport : 2,5 8 years, other fixed assets : 2-10 years ELZAB S.A. granted by administrative right of perpetual usufruct of land presents off-balance sheet, since the content of the decision is not provided for a condition of transfer of title to the Company. In the case of acquisition of such rights on the secondary market, they are presented as intangible assets and amortized over their expected usage. Based on the principle of materiality regulated on the basis of IAS 1 and on the basis of the accounting policies set out in point. 2,, fixed assets in use for longer than one year ': to depreciate at 100% when they are submitted for use, if the initial value is higher than 1000 pln and lower than 3500 PLN; refers to 100% of the costs of materials when they are submitted for use, if the initial value does not exceed 1000 pln. Records Quantitative these assets is carried out on the account off-balance sheet; Depreciation of fixed assets is recognized in the costs of core activities except depreciation of leased space, which is recognized in other operating expenses. The Company reviews periodically, not later than the end of the financial year, verification of the useful lives of fixed assets, final value and depreciation methods and the consequences of changes in these estimates are taken into account in the next and subsequent financial years (prospectively). Fixed assets and fixed assets under construction are tested for impairment if there are indications of loss of value, and for fixed assets under construction during the period of their possible impairment is determined on each balance sheet date. The principles applied in determining the impairment is shown in a further paragraph devoted to this subject. The effects of impairment of fixed assets and fixed assets under construction are recognized in other operating expenses. Gains or losses arising from sale / liquidation of tangible fixed assets is defined as the difference between sales revenue and the carrying value of these items and are recognized in the statement of comprehensive income, respectively the balance as profit or loss on disposal in other income or expenses. Intangible assets include assets that have no physical form, are identifiable, remain under the control of the entity as a result of past events and from which predictions by the Company will achieve future economic benefits. An intangible asset shall be recognized if and only if it is probable that the entity will achieve future economic benefits that are attributable to the asset can be measured reliably and the cost of the asset. In the future economic benefits derived from an intangible asset may include revenue from the sale of products or services, cost savings or other benefits resulting from the use of the asset by the entity. 11

28 ELZAB S.A. Section I Introduction to the financial statements To determine the value at initial recognition, determining depreciation and updating the provisions of IAS 38 (Intangible Assets) and 36 (Impairment of Assets). Intangible assets include: intangible assets arise from the Company s in-house development work, the following conditions: - it is possible to complete the development work so as to be suitable for use or sale - there are provable evidence intention to complete the development work and its use or sale - development work will be able to be used or sold - is known for the way in which development work will generate probable future economic benefits (existence of a market for products arising due to the development work or on the same development work), - available technical and financial resources necessary to complete the development work and its use or sale - it is possible to measure reliably the expenditure on development work. Above mentioned criteria apply to the initial investment and the costs incurred at a later date. - other intangible assets - copyrights and related property rights, rights to inventions, patents, trademarks, utility models and licenses, know-how. Expenditures on development works that do not meet the aforementioned conditions are recognized as a result of the current period. Intangible assets at the time of entry as assets are valued at production cost or at cost. For the cost of production is any expenditure that can be directly subordinated necessary to create, produce and prepare the asset for use in the manner intended by management. The production costs Intangible assets include: materials and services used or consumed in generating the intangible asset, the cost of employee benefits, reasonable borrowing costs and other costs directly attributable to bringing the asset into use in accordance with its intended use. The purchase price is the purchase price taking into account the import customs duties, taxes included in the price of non-deductible and other expenses related to the preparation of an intangible asset for use in accordance with its intended use. At the balance sheet date, intangible assets are shown at cost or at cost less any accumulated depreciation and any write-downs made in respect of impairment. Intangible assets are amortized on a straight line from 2 to 10 years for development costs and other intangible assets. Amortization of intangible assets is recognized in the current operating costs of the company. The company reviews periodically, not later than the end of the financial year, verification of the useful lives of intangible assets, final value and depreciation methods and the consequences of changes in these estimates are taken into account in the next and subsequent financial years (prospectively). In the case of goodwill not subject to amortization. Goodwill is subject to annual impairment tests. Write-offs of goodwill are recognized in the Company financial costs and can not be reversed. Intangible assets with a value less than 3500 PLN, due to the insignificance, can charge the cost of the current period or may be redeemed one time. Impairment of fixed assets and intangible assets apart from goodwill. At each balance sheet date, the Company reviews the carrying values of its fixed assets and intangible assets to 12

29 ELZAB S.A. Section I Introduction to the financial statements determine whether there is any indication of impairment. This happens when the Company obtains sufficient certainty that the asset will not bring the expected future economic benefits and will significantly lower. If any such indication exists, the recoverable amount of the asset in order to determine the potential impairment loss. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. If the recoverable amount is lower than the carrying amount of an asset (or cash-generating unit), the carrying amount of the asset or unit is reduced to its recoverable amount. An impairment loss is recognized immediately as an expense in the period in which it occurred, except if the asset was revalued (when the impairment loss is treated as a revaluation decrease). Write-downs are charged to other operating expenses of the period when the impairment is identified, no later than the end of the financial year. If the Company obtains sufficient assurance that cessation of the reasons for which recognized an impairment loss of an asset or an intangible asset, it reverses the previous revaluation charge in part or in full by recognizing other operating income. Leasing A lease agreement, under which substantially all the risks and rewards incidental to legal ownership are transferred to the Company, is classified as finance lease. Assets held under finance lease shall be recognized as assets at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Each lease payment shall be apportioned between finance cost and the amount that reduces the balance of the liability, in such a way as to maintain a constant rate of interest on the remaining balance of the liability. The interest element of the lease payment is recognized as finance cost in the profit and loss statement over the lease term in such a way as to obtain a constant periodic rate of interest for each period on the remaining balance of the liability. Depreciable leased assets acquired under finance lease are depreciated according to the principles described for property, plant and equipment. A lease agreement, under which a significant portion of risks and rewards incidental to legal ownership are retained by the lessor, is classified as operating lease. Lease payments under operating leases net of any incentives received from the lessor (financing) are accounted for in expense on a straight-line basis over the lease term. 3. Financial assets The Company classifies its financial assets into the following categories: loans and receivables, financial assets held to maturity, financial assets at fair value through profit or loss of income and financial assets available for sale. The classification depends on the purpose of acquisition of the investment. Classification is made on initial recognition, and subsequently subjected to verification on each balance sheet date, if it is required or permitted by IAS 39. Financial assets at fair value through profit or loss This category includes two sub-categories: - Financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or is a derivative not constituting a hedging instrument, 13

30 ELZAB S.A. Section I Introduction to the financial statements - Financial assets designated upon initial recognition as at fair value through profit or loss, if permitted by IAS 39. Assets in this category are classified as current assets if they are held for trading or are expected to be realized within 12 months of the balance sheet date. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments, that are not quoted in an active market. They arise when the Company provides money, supplies goods or services directly to a debtor with no intention to classify these receivables as financial assets at fair value through profit and loss statement. Loans and receivables are included in current assets, except for those whose maturities are greater than 12 months after the balance sheet date. Loans and receivables with maturities greater than 12 months after the balance sheet date, are classified as fixed assets. Loans and receivables are recognized in the balance sheet as: trade and other receivables. Investments held to maturity Investments held to maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company intends and is able to hold to maturity. Financial assets available for sale Available for sale financial assets are those non-derivative financial assets, that are designated as available for sale or are not classified into any of above categories. This category includes shares in related entities. Available-for-sale financial assets are included in fixed assets, unless the Company intends to dispose of the investment within 12 months after the balance sheet date. Purchases and sales of investments are recognized on the transaction i.e. the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs, except for investments in the categories measured at fair value through profit or loss of income, which are initially recognized at fair value without transaction costs. Investments are excluded from the books when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets available for sale and financial assets at fair value through profit or loss are measured at initial recognition at fair value. Financial assets available for sale, if it is not possible to determine their fair value, and they do not have a fixed maturity are measured at cost less accumulated impairment losses. Loans and receivables and financial assets held to maturity are measured at amortized cost using the effective interest rate. The effects of the valuation of financial assets at fair value through profit or loss are recognized in profit or loss of the period in which they arise. The effects of the valuation of financial assets available for sale are recognized in other components of comprehensive income except for impairment losses and the gains and losses from foreign exchange differences that arise on monetary assets. At the time of removal of the accounting records of financial assets are "available for sale", the accumulated gains and losses previously recognized in other items of comprehensive income is recognized in profit or loss. The fair value of investments in active markets are based on current bid prices. If there is no active market for financial assets (or if the securities are not quoted), the Company establishes fair value by using valuation techniques that include the use of recent transactions under normal market conditions, a comparison to other 14

31 ELZAB S.A. Section I Introduction to the financial statements instruments that are substantially the same, analysis discounted cash flow, option pricing models and other techniques / valuation models commonly used in the market, tailored to the specific situation of the issuer. The company assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. If such evidence exists for financial assets available for sale, the cumulative loss recognized in other items of comprehensive income - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is removed from other components of comprehensive income and recognized in profit or loss. The reversal of an impairment loss is recognized if in subsequent periods after the impairment, the fair value of financial instruments has increased as a result of events occurring after recognition of the loss. Losses from impairment recognized in the income statement on equity instruments are not reversed in correspondence with the financial result. If there are indications of impairment of unquoted equity instruments, which are valued at acquisition cost (due to the inability to reliably determine the fair value), the impairment loss is determined as the difference between the asset's carrying value and the present value of estimated future cash flows discounted at the current market return rate of similar financial assets. Write-off such never reversed. If there is evidence of possible impairment of loans and receivables or investments held to maturity are measured at amortized cost, the impairment loss is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate for these assets (ie. the effective interest rate computed at initial recognition for assets based on a fixed rate and the effective interest rate determined at the time of the last revaluation of assets based on a variable interest rate). An impairment loss is recognized in profit or loss. Impairment loss is reversed if in subsequent periods, the impairment loss decreases and the decrease can be attributed to events occurring after recognition. As a result of the reversal of write-down the carrying value of financial assets may not exceed the amortized cost which would be established if not previously recognized impairment loss of value. Reversal of impairment loss is recognized in profit or loss. 4. Assets Inventories Inventories include assets held for sale in the ordinary course of business, that are in the process of production for such sale and which have the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventories include materials, goods, work in progress and finished products. Inventories are valued at purchase price or production cost not higher than net selling prices. The purchase price or production cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase of inventories comprise the purchase price, the cost of taxes and costs of transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. In determining the cost of the purchase is deducted trade discounts, rebates and other similar items. Finished products and work in progress are valued at actual cost. The costs of conversion of inventories include costs directly related to the units of production, such as direct labor and material costs. For the cost of production consists of the systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed indirect production costs are those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation, maintenance of buildings and plant equipment and production (departmental) the costs of management and administration. Indirect variable costs of production are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and labor. To establish the costs of disposal of inventories the Company uses the weighted average method. 15

32 ELZAB S.A. Section I Introduction to the financial statements At the end of the reporting period inventory valuation is performed with the principles of prudence. Impairment losses resulting from prudent valuation and impairment of overdue items are included in the core business. Inventories of goods, materials and finished products until September 2012 were taken write-down, according to an individual assessment of the possibility of their use or resale, and the price realizable at the balance sheet date. Since September 2012 the Company applies the principle of binding period of origin of the supply of a fixed % revaluation. Statistical inventory revaluation is performed on a quarterly basis. Trade and other receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method less impairment losses. In the case of receivables with a maturity of 12 months the discount effect is skipped. Other receivables are valued at the amount due. The determination of impairment losses on receivables occurs when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables and overdue period is over 150 days. The Company makes impairment charges for specific contractors after their prior analysis taking into account the circumstances of the reality of the payment. The Company may also make collective revaluation allowances numerous but small receivables. The decision to impose the write-down of receivables made by the Board at the request of Credit Manager. Impairment of receivables is presented in the item cost of sales. Solution of impairment results in a decrease in cost of sales. Presentation of impairment losses in the statement of comprehensive income as per account balance respectively in the costs of basic sales. Cash Cash includes assets in the form of domestic and foreign currency on hand and in bank accounts. Domestic cash recognized at nominal value. Exchange differences arising from the valuation of the balance sheet date cash denominated in foreign currencies are recognized as follows: - Positive exchange rate differences are included in financial income, - Foreign exchange losses are included in financial expenses. Cash at bank accounts are stated inclusive of interest, which are recognized in financial income. Short-term prepayments Company reports prepayments if the expenditures incurred relate to periods following the period in which they are incurred. Fixed assets held for sale The Company classifies non-current assets held for sale (or group of assets for disposal) as held for sale (IFRS 5 Assets held for sale) if it considers that their carrying amount will be recovered through a sale transaction rather than through continuing use in its business activities. This condition is deemed fulfilled when the sale is highly probable and the asset (asset Company ) is available in its current state for immediate sale. Classifying fixed assets for sale implies that the management of the Company to complete the sale within one year from the date of reclassification of assets. Extending the time period needed for the finalization of the sales transaction does not preclude the classification of the asset (or disposal group) as held for sale if the delay is caused by events or circumstances 16

33 ELZAB S.A. Section I Introduction to the financial statements beyond the individual's control and where there is sufficient evidence that the entity is determined to carry out his plan sales the asset (or disposal group). In relation to assets held for sale cease to be depreciated. The Company measures fixed asset (or group of assets for sale) classified as held for sale at the lower of carrying amount or fair value less costs to sell. In the statement of financial assets held for sale (or disposal group) is presented in a separate item of current assets. If the assets for sale involve liabilities which I transferred in the transaction, including the disposal group, these liabilities are presented as a separate item in current liabilities. 5. Equity The Company's equity includes: share capital (share capital) share capital is recognized in the amount shown under the Statutes and the National Court Register, supplementary capital supplementary capital is divided into two categories: - capital from the issuance of shares above their nominal value - on this capital are transferred surplus achieved in the issue, net of costs incurred in connection with the issuance of shares - supplementary capital - is created from appropriations of profit for subsequent financial years in the amount and according to the principles set out in the Code of Commercial Companies, reserve capital created on the objectives set by the Company, own shares own shares to the value purchased by the company of its own shares for redemption and for resale or other purpose related to the implementation of the strategy of the Company (the value of shares purchased is deducted from the Company's equity), retained earnings, which include: - Undistributed profit or uncovered loss from previous years (accumulated profit / loss from previous years) - the result of the current financial year. 6. Liabilities and provisions for liabilities Provisions The Comany establishes provisions when there is a current legal or constructive obligation arising from past events, that a likely liability to pay. There must be a greater likelihood that the outflow of funds will be required to settle the obligation, than that will not be required and if its size can be reliably estimated. The costs of reserves, depending on their type, are shown in the relevant cost categories. If it is likely that some or all of the economic benefits required to settle a provision will be recovered from a third party, the receivable is recognized as an asset if the likelihood of recovery is high, and it can be reliably measured. The provisions are reviewed at the balance sheet date to adjust the estimates to reflect the current knowledge on this day. Provisions for employee benefits 17

34 ELZAB S.A. Section I Introduction to the financial statements The Company's employees are entitled to payment of the benefits after the acquisition of certain rights to these benefits. Provisions for retirement benefits are estimated at 1 monthly check. Estimates of pension payments made on behalf of the Company's independent actuary or employees of the Company. In addition, the Company creates a provision for accrued leaves whose value is estimated based on the rules for determining the equivalent for unused annual leave. Provisions for employee benefits are recognized in the cost of core business. The company also estimates a provision for an annual premium of the Board and quarterly bonuses for the employees covered by the Program Management by Objectives. Management bonus is discretionary, depending on the decision of the Supervisory Board and shall be paid upon approval of the annual report of the Company. Payment of quarterly bonus for employees is dependent on the achievement of the objectives of the company and individual goals. Provision for bonuses of the Board and quarterly bonuses of employees is recognized in the costs of core activities. Bank loans Bank loans are recognized at the fair value of the proceeds, less costs directly related to their acquisition. In subsequent periods, loans are measured at amortized cost using the effective interest rate. Irrelevant discount amount are not included in the books and in the financial statements. Company as long-term loans treat loans whose repayment falls into a period of more than 12 months after the balance sheet date. Current liabilities Current liabilities Short-term liabilities include liabilities whose maturity from the date of the balance sheet date falls within a period shorter than 12 months. Liabilities trade payables are recognized in the balance sheet, regardless of their maturity, as short-term liabilities. Short-term liabilities include in particular liabilities Trade payables, loans and borrowings, wages, taxes, duties, insurance and other benefits. Financial liabilities, including trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method. In the case of liabilities with a maturity of 12 months the discount effect is skipped. Any late payment fees are recognized upon receipt of notes from suppliers. Other liabilities are recognized at the amount due. Special funds include the Social Fund. An increase in the Company's Social Benefits Fund due to the distribution of a portion of profit is recognized in the employee benefits costs in the financial year in which the resolution on the division was made. This item is presented per balance in relation to the loans and cash provided on the Social Fund's account. Deferred revenue Deferred revenue includes accrued but not yet received income benefits, which are recognized as income on a cash basis. 7. Revenue recognition Revenue from sales is recognized at the fair value of the consideration received or receivable, net of expected discounts, customer returns and similar reduction in the value-added tax VAT and other sales-related taxes. Revenues from sales of products, goods and materials are recognized when all the following conditions: 18

35 ELZAB S.A. Section I Introduction to the financial statements transfer from the company to the buyer the significant risks and rewards of ownership of the goods / products / materials, assignment by the Company management functions to a degree associated with ownership and effective control over the sold items, the possibility of making a reliable estimate of the amount of revenues, it is probable that the economic benefits associated with the transaction, the possibility of reliable valuation of costs incurred or expected in connection with the transaction Dividend income is recognized when the right to receive payment. Interest income is recognized on an accrual basis using the effective interest rate, if the gain is not doubtful. 8. Principles of consolidation Subsidiaries and non-controlling interest Subsidiaries are all entities in respect of which ELZAB S.A. has the power to govern the financial and operating policies, generally accompanying a shareholding of a majority of the voting rights. When assessing whether ELZAB S.A. controls another entity, the existence and effect of potential voting rights that are currently exercisable or convertible. The financial results of subsidiaries acquired or sold during the year are included in the consolidated financial statements from / until their effective acquisition or disposal. Where appropriate, the financial statements of subsidiaries are adjusted in order to standardize the accounting principles applied by the entity with the principles applied by the other Company entities. All transactions, balances, income and expenses between affiliates included in consolidation are eliminated in full on consolidation. Non-controlling interests are presented separately from the Company's equity. Non-controlling interests may be initially measured either at fair value or in proportion to the share of fair value of net assets acquired. Selecting one of the above mentioned method is available for each business combination. In subsequent periods the value of non-controlling includes the value recognized initially adjusted for changes in the value of the equity in proportion to their shareholding. Total income is allocated to non-controlling interests even if it results in a negative value of these shares. Changes in the share in the subsidiary does not cause loss of control are recognized as equity transactions. The book values of the Company s share and non-controlling interests are appropriately modified to reflect changes in the structure of the share. The difference between the value of which is modified value of the minority interest and the fair value of payments received or transmitted is recognized directly in equity of the Company. In the event of loss of control over a subsidiary, the profit or loss on disposal is calculated as the difference between: (i) the aggregate fair value of the consideration received and the fair value of units remaining in the Company and (ii) the book value of assets (including goodwill), liabilities and minority interest. The amounts recognized in relation to the divested unit, in other comprehensive income are reclassified to the statement of comprehensive income. The fair value of shares in the unit remain in the Company after the sale, is considered the initial fair value for their subsequent recognition in accordance with IAS 39, or the initial cost of investments in associates or joint ventures. Goodwill arising on the acquisition is determined as of the acquisition date surplus of the sum transferred payments, the value of non-controlling interest and the fair value of previously held interests in the acquiree over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized at the acquisition date. 19

36 ELZAB S.A. Section I Introduction to the financial statements In the event of a negative value, the Company makes a review of the determination of fair values of individual components of net assets acquired. If the result of the review is still the value is negative it is immediately recognized in the financial result. Goodwill is initially recognized as an asset at cost and subsequently measured at cost less accumulated loss due to impairment. For the purpose of impairment testing, goodwill is allocated to each Group centers generating cash flows that should benefit from the synergies of the merger. Units generating cash flows to which goodwill is allocated, are tested for impairment annually or more frequently if it can be reliably assumed that the impairment occurred. If the recoverable amount of cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of goodwill allocated to this resort, and then to the other assets of the unit pro rata to the carrying value of the individual assets of the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or a jointly controlled entity on its goodwill taken into account when calculating the profit / loss on disposal. Shares in subsidiaries in separate financial statements Due to the fact that the entities whose shares are held by ELZAB S.A. there is no active market, investments in subsidiaries and associates are valued at acquisition cost less accumulated impairment losses. At each balance sheet date an assessment is made whether there is objective evidence that the investment is impaired, by comparing the net asset or part of the net assets of the value of any shares. Impairment loss of investments financial costs. In the case of cessation of the reason for which a write-off of impairment losses, the equivalent of the whole or part of the previous revaluation charge increases the value of investments and is recognized as financial income. Subsidiaries are fully consolidated from the date control over them ELZAB S.A. They cease to be consolidated from the date that control ceases. The Company may decide not to consolidate the subsidiary and a decision must be taken after taking into account the criteria of IAS 27 and SIC 12 concerning the control in terms of the possibility of direct financial and operating policies of the entity and other conditions that determine the ability to direct decision-making unit to obtain benefits. An associate, is consolidated using the equity method. The consolidated balance sheet is presented in fixed assets in line - "Long-term financial assets", while in the consolidated balance sheet in fixed assets in the line "Investments in subsidiaries are valued using the equity method". 9. Foreign currency transactions and valuation of items denominated in foreign currencies Functional currency and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (the functional currency). Economic transactions are recognized in Polish zloty (PLN) and the Hungarian Forint (HUF, until the sale of shares held MICRA METRIPOND KFT), which is the functional currency. Presentation currency is the PLN. The items in the financial statements are presented rounded to the nearest thousand. There may be a case of feeding data with greater accuracy. Transactions and balances Transactions denominated in foreign currencies are translated at the time of initial recognition into the functional currency according to the average exchange rate announced by the National Bank of Poland on the last business day preceding the date of the transaction. 20

37 ELZAB S.A. Section I Introduction to the financial statements At the balance sheet denominated in foreign currency monetary items are translated at the closing rate (closing rate - this is the average rate of the Bank effective as at the valuation date). Assets and liabilities measured at fair value and denominated in foreign currencies are valued at the exchange rate prevailing on the date of determination of fair value. Non-monetary items are valued at historical cost. Gains and losses from foreign exchange differences resulting from the settlement of foreign currency transactions and assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income. Revenues and expenses are translated using the average exchange rate of NBP average exchange rates on the last day of each month of the reporting period, 10. Principles of preparation of the statement of comprehensive income ELZAB S.A. prepares the consolidated statement of comprehensive income by function, in a one-piece, which includes all the components of total income. In the statement of comprehensive income is separated continuing operations and discontinued operations. The net financial result is composed of: - as a result of the sale - result from other operating activities - as a result of financial operations,- - mandatory burden the financial result of the income tax from legal entities Cost of products sold shall be adjusted on the result of renovation of stocks of finished products. Value of goods and materials takes into account the results from the revaluation of inventories of goods and materials. The result of updating receivables adjusts the costs of sales. In the statement of comprehensive income's results-it presents itself: in other operating profit or loss on disposal of fixed assets, financing activities: - gain or loss on the disposal of investments respectively in financial income or expenses - Surplus of foreign exchange gains or losses in other financial income - Surplus of foreign exchange losses over gains in other financial expenses. 11. Principles of preparing the statement of cash flows The Company prepares its consolidated statement of cash flows using the indirect method. In the cash flow statement is used in the following breakdown of activities: Operating activities which includes sales of products, goods, materials and services. It includes all activities which aim to make a profit. The value of net cash flows from operating activities is obtained by adjusting the financial result for items that did not result in cash flow and have been recognized in profit and the cash titles on other activities than operating activities. Investing activities include: 21

38 ELZAB S.A. Section I Introduction to the financial statements - cash spent on acquisition of tangible fixed assets and intangible assets - cash inflows from the sale of tangible fixed assets and intangible assets - expenditure of funds for the purchase of shares and bonds and securities - cash inflows from the sale or redemption of foreign shares and bonds - expenses related to loans, - repayment of loans with interest, - inflows from dividends received from stocks and shares and interest on cash deposits with long-term, Financing activities include: - cash inflows from bank loans taken out, - repayment of loans and servicing loans (interest) - cash inflows from the issue of shares - expenditure on the payment of dividends to shareholders. 12. Current income tax and deferred income tax Current income tax is calculated on the basis of tax result (tax base) for the year. Taxable income is determined based on the result of the balance sheet with the exception of taxable income and expenses which are deductible in the period other than the financial year and such income, which will never be subject to taxation, and such costs, which never will be a deductible. Load current income tax is calculated based on the tax rates applicable in a given year. Exchange rate differences for tax purposes are calculated according to the rules laid down in Article 15a of the Law on income tax from legal persons. Realized foreign exchange gains constitute taxable income and realized foreign exchange losses are the cost of the tax, depending on changes in foreign currency exchange rate. Deferred income tax is determined in respect of temporary differences between the carrying amounts of assets and liabilities and their tax value. Deferred income tax in the income statement and in the statement of comprehensive income is due to changes in state assets and provisions for income tax: deferred tax assets in the amount of expected future income tax deduction in respect of deductible temporary differences, which will result in a future reduction of the tax base and tax loss deduction, taking into account the precautionary principle. Deferred tax assets are recognized when it is probable that future profits will be taxable, which will enable the use of temporary differences. reserve of the income tax from the title postponed is established in the amount of income tax payable in the future in respect of taxable temporary differences, which will in the future increase the tax base. Taxable temporary differences exist if the book value of the assets exceeds their tax value and the book value of liabilities is lower than their tax base. Assets and deferred tax liabilities are recognized in the statement of financial position on balance. Verification of assets and the deferred tax assets is made at the end of each quarter of the financial year. The amount of assets and deferred income tax is determined by the rates applicable in the year of the tax obligation. o) An indication of the average exchange rate of the PLN in the periods covered by the consolidated financial statements and comparative consolidated financial data in relation to the euro set by the Polish National Bank, in particular: - The exchange rate prevailing on the last day of each period - The average rate for the period, calculated as the arithmetic average of the rates prevailing on the 22

39 ELZAB S.A. Section I Introduction to the financial statements last day of each month in the period, and in appropriate cases - calculated as the arithmetic average of the rates prevailing on the last day of the period and the last day of the preceding period -The highest and the lowest exchange rate applicable in each period, To convert the selected financial data for the period, the following euro exchange rates were assumed: - individual items of assets and liabilities from the balance sheet for 30 th December 2016 and cash flows of 2016 were converted according to EUR/PLN exchange rates published by the National Bank of Poland prevailing on the last day of the period: 30 th December , individual items of Profit and Loss Statement and Cash Flow Statement were converted according to the rate being the arithmetic mean of average EUR/PLN exchange rates published by the National Bank of Poland prevailing on the last day of each month from 1 st January to 31 st December ,3757 The highest rate adopted for the calculation of the average exchange rate of 2016 amounted to 4,4405 (29 th January 2016 ), while the lowest was (31 st March 2016 ). To convert the selected financial data for the comparable period, the following euro exchange rates were assumed: - individual items of assets and liabilities from the balance sheet and cash flows for 2016 were converted according to EUR/PLN exchange rates published by the National Bank of Poland prevailing on the last day of the period: 31 st December , individual items of Profit and Loss Statement and Cash Flow Statement were converted according to the rate being the arithmetic mean of average EUR/PLN exchange rates published by the National Bank of Poland prevailing on the last day of each month from 1 st January to 31 st December ,1848 The highest rate adopted for the calculation of the average exchange rate in 2015 amounted to 4,2652 (30 th October 2015 ), while the lowest was - 4,0337 (30 th April 2015 ). 23

40 ELZAB S.A. Section I Introduction to the financial statements p) Indication of at least the basic balance sheet items of the profit and loss account and the cash flow statement from the financial statements and comparable financial data converted into EURO with an indication of the principles adopted for that conversion. in thousands of PLN in thousands of EUR SELECTED FINANCIAL DATA OF ELZAB Net revenue from sales Operating profit (loss) Gross profit (loss) Profit (loss) attributable to equity holders of the parent Net cash flows from operating activities Net cash flows from investment activities Net cash flows from financing activities Total net cash flow Annualized earnings (loss) per ordinary share (in PLN / EUR) 0,62 1,03 0,14 0,25 Annualized earnings (loss) per ordinary share excluding treasury shares (in PLN/ EUR) 0,67 1,11 0,15 0,27 in thousands of PLN in thousands of EUR SELECTED FINANCIAL DATA OF ELZAB Total assets Long-term liabilities Short-term liabilities Equity Share capital Total number of shares Number of shares adjusted for treasury shares Book value per share (in PLN / EUR) 5,14 4,99 1,16 1,17 Book value per share excluding treasury shares (in PLN / EUR) 5,54 5,38 1,25 1,26 The courses used to convert the selected financial data are shown in the preceding paragraph. 24

41 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł STATEMENT OF FINANCIAL POSITION ELZAB S.A. ASSETS No. Notes (thousand PLN) As of 31st As of 31st December 2016 December 2015 A. Non-current assets Tangible fixed assets Note no Investment real estate Note no.1a Intangible assets Note no Long-term financial assets Note no Deferred income tax assets Note no Long-term receivables and accruals Note no.5, 3a B. Current assets Stocks Note no Short-term receivables and prepayments Note no.5, 3a Receivables from income tax Short-term financial assets Note no.3a Cash and cash equivalents Note no.7, 3a C.Non-current assets classified as held for sale Note no Total assets LIABILITIES No. Notes As of 31st As of 31st December 2016 December 2015 A. Equity Share capital Note no Surplus from sale of shares above their nominal value Own shares Note no Other reserves - own shares Reserves and spare Note no Profit / loss from previous years and the current year, including: Cumulative gains / losses from previous years Profit / loss for the current year B. Long-term liabilities Provisions Note no Deferred income tax Note no Long-term bank credits and loans Note no Long-term lease liabilities Note no.13a Long-term financial liabilities Note no Long-term liabilities and accruals C. Current liabilities Provisions Note no Short-term bank credits and loans Note no Short-term lease Note no.13a Short-term financial liabilities Short-term liabilities and accrual Note no Liabilities Income tax Total liabilities STATEMENT OF COMPREHENSIVE INCOME ELZAB S.A. OPTION SPREADSHEET No. Notes (thousand PLN) As of 31st As of 31st December 2016 December 2015 A. Revenues from sales of products, goods and materials Note no B. Costs of products, goods and materials Note no C. Gross profit / loss from the sale of (A-B) D. Cost of sales Note no E. General and administrative expenses Note no F. Net profit / loss from the sale of (C-D-E) G. Other income Note no H. Other expenses Note no I. Profit / loss from operating activities (F + G-H) J. Financial income Note no K. Financial costs Note no L. Gross profit / loss (I + J-K) M. Income tax Note no N. Net profit / loss from continuing operations (L-M) O. Net profit / loss from discontinued operations Note no P. Net profit / loss (N + O) R.Other total income 0 0 Income tax - Reversal of provision for the difference in the balance sheet depreciation and tax at the moment of transition to IFRS 0 0 S. Total comprehensive income (P + R)R) No. Notes As of 31st As of 31st December 2016 December 2015 Earnings per share: - Annualized net profit / loss The number of all shares Number of shares excluding own shares Note no Basic earnings continuing operations (for all shares) 0,62 1,03 - Basic earnings continuing operations (the number of shares adjusted for the treasury shares) 0,67 1,11 - Basic earnings from discontinued operations 0,00 0,00 25

42 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł STATEMENT OF CASH FLOWS ELZAB S.A. (thousand PLN) INDIRECT METHOD For the period For the period from 1st from 1st January 2016 to January 2015 to 31st December 31st December Cash flows from operating activities Net profit / loss Adjustments for: Depreciation of fixed assets Amortization of intangible assets Impairment of goodwill Gains / losses on foreign exchange differences Costs and interest income Dividend income Profit / loss from investing activities Change in provisions Change in inventories Change in receivables and prepayments Change in liabilities and accruals Tax recognized in the statement of comprehensive income Paid / returned income tax Other adjustments Net cash flows from operating activities Cash flows from investing activities Proceeds from sale of fixed assets and intangible assets Net proceeds from the sale of associates and subsidiaries Proceeds from sales of short-term financial assets Proceeds from interest Proceeds from dividends Repayment of loans Expenditure on acquisition of tangible fixed assets and intangible assets Net expenses for the acquisition of subsidiaries and associates Expenditures for the purchase of short-term financial assets Loans granted Other Net cash flows from investing activities Cash flows from financing activities Proceeds from borrowings Net proceeds from issue of shares, bonds, notes, bills Repayment of borrowings Payment of liabilities under finance lease agreements Dividends paid to shareholders Dividends paid to minority shareholders Purchase of own shares Interest paid Other Net cash flows from financing activities Increase / decrease in cash and cash equivalents Cash, cash equivalents at beginning of period Cash, cash equivalents at end of period including: Corporate Social Benefits Fund The amount of unused credit limit in the bank account

43 DZIAŁ II Sprawozdanie finansowe ELZAB S.A. za 2016 r. w tys. zł STATEMENT OF CHANGES IN EQUITY (thousand PLN) ELZAB S.A. Share capital Surplus from sale of shares above their nominal value Own shares Other reserves - own shares Supplementary capital created from profits Reserve capital from revaluation of assets Profit / loss from previous years and the current year, including: profit / loss from previous years net profit / loss of the current year Balance at 1st January Changes in accounting policies 0 Balance at 1st January 2016 after adjustments (restated) Total comprehensive income Transfer of reserve capital to reserve capital - share buyback 0 0 Settlement of financial result for the previous financial year Adjustment due to liquidation of fixed assets Income tax - Reversal of provision for the difference in the balance sheet depreciation and tax as a result of the valuation of fixed assets on the date of transition to IFRS Profit / Loss for the financial year Other changes in equity Settlement of the financial result for the previous financial year - dividend payment Balance at 31st December Total STATEMENT OF CHANGES IN EQUITY (thousand PLN) ELZAB S.A. Share capital Surplus from sale of shares above their nominal value Own shares Other reserves - own shares Supplementary capital created from profits Reserve capital from revaluation of assets Profit / loss from previous years and the current year, including: profit / loss from previous years net profit / loss of the current year Balance at 1st January Changes in accounting policies 0 Balance at 1st January 2015 after adjustments (restated) Total comprehensive income Transfer of reserve capital to reserve capital - share buyback 0 0 Settlement of financial result for the previous financial year Adjustment due to liquidation of fixed assets Income tax - Reversal of provision for the difference in the balance sheet depreciation and tax as a result of the valuation of fixed assets on the date of transition to IFRS Profit / Loss for the financial year Other changes in equity Settlement of the financial result for the previous financial year - dividend payment Balance at 31st December Total 27

44 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO.1 TANGIBLE FIXED ASSETS (thousand PLN) TANGIBLE FIXED ASSETS Fixed assets, including: Fixed assets under construction Tangible fixed assets, total As of 31st As of 31st December December Commitments relating to the purchase of fixed assets as at 31st December 2016 amount to 972 thousand PLN (mainly modernization of buildings and equipment). There were compensation for tangible fixed assets of 13 thousand PLN. In 2016 the gross value of property, plant and equipment did not include external financing costs. From the period from 1st January 2016 to 31st December 2016 Land Buildings Means of Machines and transport devices Others Total Gross value at beginning of period Additions acquisition improvement Movements from other asset items Adopted on the basis of a financial leasing agreement Decreases sale Termination of contracts of lease Relocations to other asset items Liquidation Attributed to discontinued operations 0 Movements of the inner (+/-) 0 0 Gross value at end of period Accumulated amortization at beginning of period amortization for the period Other increases Other reductions Termination of contracts of lease Accumulated amortization at end of period Impairment losses at the beginning of the period 0 Shot during an impairment loss of value 0 Reversal during an impairment loss of value 0 at the end of the period Net value at end of period From the period from 1st January 2015 to 31st December 2015 Land Buildings Means of transport Machines and devices Gross value at beginning of period Additions acquisition improvement Movements from other asset items Adopted on the basis of a financial leasing agreement Decreases sale Relocations to other asset items Liquidation Attributed to discontinued operations 0 Movements of the inner (+/-) Gross value at end of period Accumulated amortization at beginning of period amortization for the period decrease Accumulated amortization at end of period Impairment losses at the beginning of the period 0 Shot during an impairment loss of value 0 Reversal during an impairment loss of value 0 The value takes into account depreciation and impairment losses at the end of the period Net value at end of period Others Total 28

45 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł FIXED OFF-BALANCE SHEET (thousand PLN) FIXED OFF-BALANCE SHEET As of 31st As of 31st December 2016 December 2015 used under rental, lease or other agreement, including leasing agreement, including: Used under operating leases Land in perpetual usufruct 0 4 Fixed assets off-balance sheet, total 0 4 Amount of contingent liabilities: As of 31st December 2016: - promissory notes for lease of operating lease agreements (balance sheet, finance lease) concluded with ING Lease (Polska) Sp. z o.o. based in Warsaw to finance the purchase of production and non-production equipment (IT equipment) and cars from Millennium Leasing Sp. z o.o. to finance car purchase. The total value of the leased asset amounted to thousand PLN - Promissory note of Millennium S.A. - credit limit is thousand PLN, mbank S.A. - credit limit is thousand PLN, BZ WBK S.A. - credit limit is thousandpln, ING S.A. - credit limit is thhousand PLN. As of 31st December 2015: - promissory notes for lease of operating lease agreements (balance sheet, finance lease) concluded with ING Lease (Polska) Sp. z o.o. based in Warsaw to finance the purchase of production and non-production equipment (IT equipment) and cars, from Millennium Leasing Sp. z o.o. and BMW Financial Services Polska Sp. z o.o. to finance car purchases. The total value of the leased asset amounted to thousand PLN. - promissory note promissory note in the current account of PEKAO S.A. - the limit of the loan is thousand PLN, PKO BP S.A. - credit limit is thousand PLN, Millennium S.A. - credit limit is thousand PLN, mbank SA - credit limit is thousand PLN. The amount of off-balance sheet liabilities (net capital) at the end of 2015 and 2016 was 0. On 31st December 2016 were the following security on tangible fixed assets of the Company ELZAB S.A : a) securing loans for thermal modernization taken on WFOŚiGW - contractual mortgage KW GL1Z / eighths with assignment of rights from the insurance policy to the amount of thousand PLN b) a registered pledge on cutting machine nibbling PX1225 Strippit INC. ING Bank Slaski - securing a loan for the purchase of maszyny- to thousand PLN ELZAB S.A. rents space for an office in Warsaw. There is no information on the value of leased space.in off-balance sheet records there are land in perpetual usufruct in the amount of 0 thousand Contingent assets: Securing the loan of 150,000 thousand EUR issued by ELZAB S.A. is secured by a registered pledge on all of shares in MONEA V Sp. z o. o. to a maximum security of 300,000 thousand EUR and a surety of 300,000 thousand EUR granted by MONEA V Sp. z o. o. to a natural person and also registered pledge on shares representing 33 % of the share capital of ELZAB HELLAS SPV Sp. z o. o., what MONEA V Sp. z o. o. owns in ELZAB HELLAS SPV Sp. z o.o. up to the maximum amount of collateral of 300 thousand EUR. NOTE NO. 1a INVESTMENTS PROPIERTIES (tys. zł) INVESTMENT PROPERTIES Status at the beginning of the period a) Increase - Acquisition - Other b) Decreases - Sale - write-downs Status at the end of the period As of 31st As of 31st December December The Board of ELZAB S.A. decided to reclassify the property in Suchy Las from the item "Non-current assets classified as held for sale" under "Investment property". The property in the balance sheet is stated at acquisition cost less depreciation and impairment losses. The fair value of investment property is measured on the basis of the valuation made by an independent valuer using the income method. The total value of investment property as at 31st December 2016 is classified in Tier 3 of the fair value hierarchy in accordance with IFRS 13 Fair Value Measurement Fair value of real estate in Suchy Las, according to the latest estimate for 2016 is 7,570 thousand PLN. The property is located in Suchy Las near Poznan. The income and expenses generated by the property in 2016 are as follows: - income from leases and re-invoicing of costs of maintaining the property thousand PLN. - property maintenance costs thousand PLN. The property as office Elzab S.A. is located in Suchy Las. NOTE NO. 2 INTANGIBLE ASSETS (EXCLUDING GOODWILL) (Thousand PLN) INTANGIBLE ASSETS Intangible assets produced on their own Development work in progress, intangible assets in progress Other intangible assets Total intangible assets As of 31st As of 31st December December Commitments related to the purchase of intangible assets as of 31st December 2016 amounted to 74 thousand PLN. INTANGIBLE ASSETS - GOODWILL Goodwill resulting from the merger of ELZAB SA and MEDESA Sp. o.o.. Total intangible assets - goodwill As of 31st As of 31st December December As at the balance sheet date, the Company performed a goodwill impairment test in accordance with IAS 36. The test was based on an estimate of future cash flows and a discount of the present value. The main assumptions of the test indicated the annual increase in revenue generated by the sale of weights. The weighted average cost of capital was 5.75%. In the face of the test, the Management Board of the Company did not find any evidence of impairment of the asset in the books. 29

46 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł For the period from 1st January 2016 to 31st December 2015 Intangible assets produced on their own Other intangible assets Total Development Development Others work work Others Gross value at beginning of period Additions acquisition displacement from other asset items developmental works led on their own Decreases withdrawal from use Liquidation sell for value revaluation from reclassification to non-current assets held for sale other Gross value at end of period Accumulated amortization at beginning of period amortization for the period other increases 0 Decreases 0 Accumulated amortization at end of period Impairment allowance at the beginning of the period 0 Recognition in the period of impairment allowance 0 Reversal of impairment losses 0 Value of amortization and write-down at the end of the period Adjustment due to net exchange differences arising from translation 0 Net value at end of period Depreciation on intangible assets was charged at the cost of manufacturing: thousand PLN, selling costs: 163 thousand PLN, administrative costs: 277 thousand PLN, 13 thousand PLN were charged to development works. For the period from 1st January 2016 to 31st December 2015 Intangible assets produced on their own Other intangible assets Total Development work Others Development work Gross value at beginning of period Additions acquisition developmental works led on their own acquisition within the framework of economic connections for value revaluation other Decreases Withdrawal from use Liquidation sell for value revaluation from reclassification to non-current assets held for sale other Gross value at end of period Accumulated amortization at beginning of period amortization for the period other increases 0 Decreases 0 Accumulated amortization at end of period Impairment allowance at the beginning of the period 0 Recognition in the period of impairment allowance 0 Reversal of impairment losses 0 Value of amortization and write-down at the end of the period Adjustment due to net exchange differences arising from translation 0 Net value at end of period Depreciation on intangible assets was charged at the cost of manufacturing: thousand PLN, selling costs: 150 thousand PLN, administrative costs: 250thousand PLN, 36 thousand PLN were charged to development works. Others 30

47 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł EXPENDITURES FOR DEVELOPMENT SUSTAINED IN THE YEAR For the period from 1st January 2016 to 31st December 2016 For the period from 1st January 2015 to 31st December 2015 Depreciation Consumption of raw and auxiliary materials Salaries with charges Other costs (including, among others, the costs of faculty, external services) TOTAL Capital development are recognized on intangible assets in progress until the end of the work. Period costs were not charged with the development work, beyond the write-off depreciation in the amount of thousand PLN and the cost of sales development. The value of the latter amounted to 63 thousand PLN Not written down development. In 2016 ELZAB S.A. still continued partnership project "Innovative Selling Position", which was funded under Measure 1.4 Support for Target Projects of the Operational Program Innovative Economy The subject of the project is the development of an innovative retail store - the cash register. The project also includes model functionality that is innovative in terms of new services and values, delivered in the form of prototypes, protocols, programs and collaborative elements. The amount of grant awarded for the project amounted to 906 thousand PLN, including ELZAB S.A. which amounted to 532 thousand PLN. NOTE NO. 3 LONG-TERM FINANCIAL ASSETS (in thousand PLN) The percentage of shares and voting rights held by the Company Place of 31st 31st registration and December December Name of subsidiary Core business activity ELZAB SOFT Sp. z o.o. production, distribution Poland 87,50% 87,50% ELZAB HELLAS SPV Sp. z o.o. consulting Poland 67,00% 0,00% The percentage of shares and voting rights held by the Company 31st December st December 2015 Place of registration and Name of the associated company Core business activity COMP CENTRUM INNOWACJI Sp.z o.o. activity connected with the Poland consulting in the computer science 49,72% 49,72% The percentage of shares and voting rights held by the Company Place of 31st 31st registration and December December Other units Core business activity CLOU Sp. z o.o. Marketing, publishing, advertising Poland 30,00% 0,00% 31

48 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł 31st December st December 2015 Name of subsidiary Expense Impairment Net value Expense Impairment Net value ELZAB SOFT Sp. z o.o ELZAB HELLAS SPV Sp. z o.o Investments in subsidiaries, total st December st December 2015 Name of the associated company Expense Impairment Net value Expense Impairment Net value COMP CENTRUM INNOWACJI Sp.z o.o Investments in associated, total st December st December 2015 Other units Expense Impairment Net value Expense Impairment Net value CLOU Sp. z o.o Invest in other units, total ` SELECTED FINANCIAL DATA OF SUBSIDIARIES ELZAB SOFT Sp. z o.o. for 2016 ELZAB HELLAS SPV Sp. z o.o. (August - December 2016) Net revenue from the sale of products, goods and materials Net profit (loss) Total assets Receivables Liabilities and long-term reserves Short-term liabilities and provisions Equity capital NOTE NO. 3a SHORT-TERM FINANCIAL ASSETS (thousand PLN) Type of financial instrument As of 31st As of 31st December 2016 December 2015 Cash Cash at bank Loans granted and own receivables Receivables without taxes receivable Interest-bearing loan Bill of exchange receivables - - Investments held to maturity recorded at amortized cost Other cash (bonds) NOTE NO. 4 ASSETS AND PROVISIONS FOR DEFERRED INCOME TAX (thousand PLN) As of 31st December 2016 As of 31st December 2015 As of 31st December 2016 As of 31st December 2015 Deferred income tax temporary differences - Financial leasing The difference between the carrying amount and tax due to increases in the value of tangible fixed asset Other ( interest ) Gross reserves for deferred income tax Deferred income tax - Jubilee awards, retirement benefits Valuation of real estate in Suchy Las Unused holidays Accrued expenses Unmatched development work The difference between the carrying value and tax base of intangible assets Fund promotional and advertising Guarantee fund Interest on issued by ELZAB S.A. bonds Other Tax loss possible to deduct Gross assets for deferred income tax Load / recognition of deferred income tax Deferred tax assets Compensation of assets with deferred income tax liabilities as of 31st December 2016 and 31st December 2015 Balance As of 31st As of 31st December 2016 December 2015 Deferred income tax Provisions for deferred income tax Balance of deferred income tax Balance of the provision for deferred income tax 0 0 Profit and Loss Account 32

49 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO. 5 RECEIVABLES AND PREPAYMENTS ( thousand PLN) As of 31st As of 31st December 2016 December 2015 Trade receivables and services from other entities: Long-term Short-term Trade receivables and services from related parties: Long-term Short-term Prepayments: Long-term Short-term Other receivables: Long-term Short-term Accruals: Long-term Short-term Impairment losses at the beginning of the period Recognition during the write-downs for impairment Reversal during an impairment loss of value Impairment losses at the end of the period TOTAL SHORT-TERM RECEIVABLES As of 31st As of 31st December 2016 December 2015 a) from related parties For deliveries and services with maturity date: up to 12 months over to 12 months others b) receivables from other entities For deliveries and services with maturity date: up to 12 months over to 12 months Taxes, subsidies, customs duties, social and health insurance and other benefits Other (including prepayments) Short-term receivables Total net c) impairment of receivables Short-term receivables Total gross As of 31st December 2016 there is no security on receivables. CHANGE IN WRITE-DOWNS ON SHORT-TERM RECEIVABLES As of 31st As of 31st December 2016 December 2015 Balance at beginning of period a) increase (due to) Write downs b) decrease (due to) Reversal of write-downs Reversal of impairment losses 0 0 The amount of revaluation write-offs for short-term receivables at the end of the period SHORT-TERM RECEIVABLES FROM RELATED PARTIES As of 31st As of 31st December 2016 December 2015 a) for deliveries and services b) other Short-term receivables from related entities, net total c) write-downs of receivables from related parties 0 0 Short-term receivables from related entities, gross total GROSS CURRENT RECEIVABLES (CURRENCY) As of 31st As of 31st December 2016 December 2015 a) in Polish currency b) in foreign currencies (by currency and after conversion into PLN) b1.unit / currency in thousand GBP thousand PLN b2.unit / currency in thousand EUR thousand PLN b3.unit / currency in thousand HUF thousand PLN b4.unit / currency in thousand USD thousand PLN other currencies in thousand PLN 0 0 Short-term liabilities, total TRADE RECEIVABLES (GROSS) - WITH REMAINING FROM THE BALANCE SHEET DATE: As of 31st As of 31st December 2016 December 2015 a) up to 1 month b) from 1 month to 3 months c) over 3 months to 6 months d) over 6 months to 1 year 0 2 e) over 1 year 0 0 f) overdue receivables Trade receivables and services, total (gross) g) write-downs of receivables from supplies and services Trade receivables and services, total (net)

50 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł INCLUDING: GROSS DUTY AND SERVICES FROM RELATED PARTIES - DUE FROM BALANCE SHEET DURATION: As of 31st December 2016 As of 31st December 2015 a) up to 1 month b) from 1 month to 3 months c) over 3 months to 6 months d) over 6 months to 1 year 0 0 e) over 1 year 0 0 Trade receivables and services, total (gross) Trade receivables and services, total (gross) f) write-downs of receivables from supplies and services 0 0 Trade receivables and services, total (net) TRADE RECEIVABLES AND SERVICES OVERDUE (GROSS) - DIVIDED INTO RECEIVABLES NOT REPAID OVER: As of 31st As of 31st December 2016 December 2015 a) up to 1 month b) from 1 month to 3 months c) over 3 months to 6 months d) over 6 months to 1 year e) over 1 year Trade receivables and services, past due total (gross) f) write-downs of receivables from supplies and services Trade receivables and services, past due, total (net ) INCLUDING: RECEIVABLES FROM DELIVERY AND SERVICES FROM RELATED UNITS, PAST DUE (GROSS) - DIVIDED INTO RECEIBABLES NOT PAID IN PERIOD: As of 31st As of 31st December 2016 December 2015 a) up to 1 month b) from 1 month to 3 months c) over 3 months to 6 months d) over 6 months to 1 year e) over 1 year 0 Trade receivables and services, past due total (gross) f) write-downs of receivables from supplies and services, past due 0 0 Trade receivables and services, past due, total (net ) SHORT-TERM PREPAYMENTS As of 31st As of 31st December 2016 December 2015 Long term rent 0 3 Property insurance Bond issue costs Other (mainly cost invoices for subsequent periods) Short-term prepayments, total LONG-TERM PREPAYMENTS As of 31st As of 31st December 2016 December 2015 Costs of bond issuance Long-term prepayments, total NOTE NO 6 INVENTORIES As of 31st As of 31st December 2016 December 2015 Materials Semi-finished products and work in progress Finished products Goods Total inventories STATE OF WRITE-DOWNS OF INVENTORIES AS OF 31st December 2016 The gross value of inventories Impairment The net value of inventories Materials Semi-finished products and work in progress Finished products Goods Total inventories STATE OF WRITE-DOWNS OF INVENTORIES AS OF 31st December 2015 The gross value of inventories Impairment The net value of inventories Materials Semi-finished products and work in progress Finished products Goods Total inventories STATE OF WRITE-DOWNS OF INVENTORIES As of 31st As of 31st December 2016 December 2015 Balance at beginning of period Increase due Creating write-off Prudent valuation 0 0 Decreases due Reversal of impairment Reversal of the prudence of the previous year 0 0 Allowances at end of period As of 31st December 2016 there are no stock inventories 34

51 DZIAŁ II Sprawozdanie finansowe ELZAB S.A. za 2016 r. w tys. zł NOTE NO. 6 INVENTORIES (thousand PLN ) From the period from 1st January 2016 to 31st December 2016 Valuation by purchase price / manufacturing cost Amount of revaluation allowances for inventories at the beginning of the period Amounts of reversal of allowances for inventories recognized as a deduction of these write-offs during the period Amounts of revaluation writeoffs for inventories recognized as a cost over the period Amount of revaluation allowances for inventory at end of period Value of inventories recognized as cost over time Balance sheet value of inventories at the end of the period Value of inventories as security for liabilities Materials Products in progress Finished products Goods TOTAL Including long-term part Valuation by purchase price / manufacturing cost Amount of revaluation allowances for inventories at the beginning of the period From the period from 1st January 2015 to 31st December 2015 Amounts of reversal of allowances for inventories recognized as a deduction of these write-offs during the period Amounts of revaluation writeoffs for inventories recognized as a cost over the period Amount of revaluation allowances for inventory at end of period Value of inventories recognized as cost over time Balance sheet value of inventories at the end of the period Value of inventories as security for liabilities Materials Products in progress Finished products Goods TOTAL Including long-term part 34

52 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO. 7 CASH AND CASH EQUIVALENTS (thousand PLN) As of 31st As of 31st December 2016 December 2015 Cash at the bank and at the cashier Short-term deposits 0 0 Commercial counterparty bills 0 0 Total gross Revaluation write-downs on trading bills of exchange 0 0 Net total, including: cash at the bank and at the cash register assigned discontinued activity 0 0 The amount of unused credit limit in the bank account Cash and cash equivalents shown in the cash flow statement are consistent with values balance sheet. There were no non-cash transactions disclosed in the statement of cash flows, which would be excluded from investing and financing activities. There were no net cash flows relating to discontinued operations. NOTE NO 8 NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE (thousand PLN) As of 31st As of 31st December 2016 December 2015 ASSETS Tangible fixed assets, including: land buildings Intangible assets 0 0 Inventories 0 0 Receivables and accruals 0 0 Funds 0 0 Total long-term assets classified as held for sale The Board of ELZAB S.A. decided to reclassify the property in Suchy Las from the item "Non-current assets classified as held for sale" under "Investment property". The property is still available for immediate sale. The Management Board is actively seeking buyers of real estate. NOTE NO. 9 NOTE NO. 10 OWN SHARES As of 31st As of 31st December 2016 December 2015 Own shares purchased for redemption Own shares purchased for resale or other purpose related to the Company's Strategy Own shares

53 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO. 11 RESERVES, SPARE AND CAPITAL REVALUATION (thousand PLN) For the period from 1st January 2016 to 31st December 2016 Supplementary capital created from profit Reserve capital from revaluation of tangible fixed assets Total Balance at beginning of period Changes in accounting policies Balance at beginning of period after adjustments (restated) Increase due to transfer of the result from the previous year Increase in sales and liquidation of fixed assets Balance at end of period For the period from 1st January 2015 to 31st December 2015 Supplementary capital created from profit Reserve capital from revaluation of tangible fixed assets Total Balance at beginning of period Changes in accounting policies Balance at beginning of period after adjustments (restated) Increase due to transfer of the result from the previous year Balance at end of period The capital created from profits may be subject to payment in the form of dividends. ELZAB S.A. creates a reserve capital for purchase of own shares. NOTE NO 12 PROVISIONS (thousand PLN) For the period from 1st January 2016 to 31st December 2016 Provisions for warranty repairs, guarantees Retirement pension, unused leave Other employee benefits (bonuses, quarterly and annual) Other reserves (including the reserve fund for the promotion and advertising) Total Value at the beginning of the period, including: Short-term at beginning of period Long-term at the beginning of the period Additions Created in the period and an increase in the existing Acquired as connections jedn.gospodarczych Decreases Utilized during the year Solved but unused Adjustment due to foreign exchange losses on translation of Adjustment for the planned reduction in retirement age Value at the end of the period including: Short-term end of the period Long-term at the end of the period The main items of the reserves are as follows: A. Provisions for employee benefits include: provision for unused holidays in the size of projected salaries for the holiday, provision for retirement bonuses, calculated using unit rights. The provision for the benefit depends on the number of units produced entitlement to benefits, the full amount of the projected benefit obligation, the current basis of benefit, projected increase in minimum benefits, the discount rate and the probability of the benefit in question. The calculations are mistaken into account only currently employed workers who have lost their entitlement to benefits. provision for bonuses of the Board - is discretionary, dependent on the decision of the Supervisory Board, created in the amount approved by the Supervisory Board provision for quarterly bonus, on the part of employees who are covered by the Programme Management By Objectives The last valuation of the present value of obligations arising from benefits on retirement and pension benefits was made on the day of 31th December 2016 by the Company. B. Provision for warranty repair - the guarantee period provided by ELZAB S.A. does not exceed 12 months, which causes that the change in the value of money over time has no significant impact on the estimation of reserves. The value of the reserve is estimated at the amount of the difference between the amount of warranty service charge for all sold in 2015 and those installed at the end customer. In 2016 the reserves created in 2015 in the amount of outstanding warranty service were removed. C. Provision for marketing activities - is the cost of the 2016 promotion, which will take place in 2017 A significant proceedings aren't rolling before the court, with competent authority for the conciliation or with body of public authority. By letter of 24th June 2016, the President of the Energy Regulatory Office initiated administrative proceedings against the Company imposing a fine on the basis of documents handed over to the President of the Energy Regulatory Office by the Distribution System Operator, to which the Company is connected at the relevant places, according to the President of the Energy Regulatory Office, suspected Violation by the Company from 10th August to 31st August 2015 of the obligation to comply with restrictions on the supply and consumption of electricity, which, according to Art. 56 sec. 1 pt. 3a of the Energy Law, is subject to a fine. As a result, the Company submitted to the President of ERO relevant explanations presenting the Company's position in the matter. As of the date of preparation of this report, administrative proceedings have not been finalized and therefore this report does not include additional entries in this respect. 37

54 DZIAŁ II Sprawozdanie finansowe ELZAB S.A. za 2016 r. w tys. zł NOTE NO. 13 Liabilities from bank loans and borrowings Balance at 31st December 2016 Type of credit / loan Name of the bank / lender Currency Terms of interest Maturity date Security Overdraft ING BANK ŚLĄSKI SA PLN WIBOR 1M + BANK's MARGIN 6th May 2017 statement on submission to enforcement, power of attorney to the accounts Investment loan ING BANK ŚLĄSKI SA PLN WIBOR 1M + 30th April Registered pledge on cutting machine brand BANK's MARGIN 2018 PX1225 Strippit INC. with assignment of rights from insurance policy, declaration on submission to enforcement, power of attorney to the accounts Overdraft Bank Millennium SA PLN WIBOR 1M + 28th February statement on submission to enforcement, power of BANK's MARGIN 2017 attorney to the accounts Overdraft BZ WBK SA PLN WIBOR 1M + 30th BANK's MARGIN September 2017 Overdraft mbank SA PLN WIBOR 1M + 4th July 2017 BANK's MARGIN Loan Wojewódzki Fundusz Ochrony Środowiska i Gospodarki Wodnej w Katowicach PLN rediscount rate plus a margin of no less than 3.50% 30th September 2019 Blank promissory note with a promissory note declaration, statement of submission to enforcement, power of attorney to the accounts Blank promissory note with a promissory note declaration, statement of submission to execution contractual mortgage KW GL1Z / /8 with assignment of rights from insurance policy Amount by agreement Amount per contract in PLN Foreign-currency liability Commitment PLN Total Liabilities from bank loans and borrowings Balance at 31st December 2015 Type of credit / loan Name of the bank / lender Currency Terms of interest Maturity date Security Overdraft ING BANK ŚLĄSKI SA PLN WIBOR 1M + BANK's MARGIN 5th May 2016 statement on submission to enforcement, power of attorney to the accounts Investment loan ING BANK ŚLĄSKI SA PLN WIBOR 1M + 30th April Registered pledge on cutting machine brand BANK's MARGIN 2018 PX1225 Strippit INC. with assignment of rights from insurance policy, declaration on submission to enforcement, power of attorney to the accounts Overdraft Bank Millennium SA PLN WIBOR 1M + 28th February statement on submission to enforcement, power of BANK's MARGIN 2017 attorney to the accounts Overdraft PKO BP PLN WIBOR 1M + 28th June BANK's MARGIN 2016 Overdraft mbank SA PLN WIBOR 1M + 28th June BANK's MARGIN 2016 Loan Wojewódzki Fundusz PLN rediscount rate plus 30th Ochrony Środowiska i a margin of no less September Gospodarki Wodnej w than 3.50% 2019 Katowicach Blank promissory note with a promissory note declaration, statement of submission to enforcement, power of attorney to the accounts Blank promissory note with a promissory note declaration, statement of submission to execution contractual mortgage KW GL1Z / /8 with assignment of rights from insurance policy Amount by agreement Amount per contract in PLN Foreign-currency liability Commitment PLN Total

55 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO 13a OTHER FINANCIAL LIABILITIES (LEASING) * (thousand PLN) OPERATING LEASE 1. The total amount of future lease payments at the balance sheet date. 2. The present value of lease payments for each of the following periods, including: - up to 1 year - from 1 to 5 years - over 5 years 3. Subleasing fees recognized as revenue in the period As of 31st As of 31st December 2016 December OPERATING LEASE As of 31st As of 31st December 2016 December The total amount of future lease payments at the balance sheet date The present value of lease payments for each of the following periods, including: up to 1 year from 2 to 3 years over 3 up to 5 years over 5 years The amount of interest in the current year The amount of interest to the end of the lease )*Financial instruments measured at amortized cost Leasing is covered by means of transport, production equipment and IT equipment. The net value of these fixed assets as of 31st December 2016 amounted to 2,726,000 thousand PLN. Major provisions of lease agreements: The contract period lessor is entitled to make proportional adjustments to the remuneration due to changes in tax rates, stamp duties or other taxes public, While ELZAB S.A. not solve the earlier agreement and subject to the obligations of the agreement, the Company has the right to purchase vehicles for the selling price corresponding to the predetermined value of the final, Agreements may be terminated either by the lessor (the reasons set out in the agreement) and the lessee (without giving reasons). Termination of contracts associated with the payment of amounts due by the user specified in the agreement, The lessee will immediately notify the Financing of any events and circumstances which may affect its ability to perform its obligations under this Agreement, including the deterioration in its financial situation. NOTE NO 14 LIABILITIES AND PREPAYMENTS (thousand PLN) As of 31st As of 31st December 2016 December 2015 Liabilities from supplies and services to other units: Long-term Short-term Liabilities Trade payables to related parties: Long-term Short-term Prepayments: Long-term Short-term 0 0 Other liabilities: Long-term Short-term Accruals: Long-term Short-term Deferred income: Long-term Short-term TOTAL SHORT-TERM LIABILITIES WITHOUT FINANCIAL OBLIGATIONS As of 31st As of 31st December 2016 December 2015 a) to related parties For deliveries and services with maturity date: Up to 12 months Over 12 months other 0 0 b) to related parties For deliveries and services with maturity date: Up to 12 months Over 12 months taxes, customs duties, insurance and other benefits remuneration other 3 8 Short-term liabilities together SHORT-TERM LIABILITIES WITHOUT FINANCIAL LIABILITIES (CURRENCY) As of 31st As of 31st December 2016 December 2015 a) in Polish currency b) in foreign currencies (by currency and after conversion into PLN) b1. unit / currency in thousand EUR thousand PLN b2. unit / currency in thousand USD thousand PLN b3. unit / currency in thousand GBP thousand PLN b4. unit / currency in thousand HUF thousand PLN 1 1 other currencies in thousand PLN 0 11 Short-term liabilities together LONG-TERM LIABILITIES WITHOUT COMMITMENTS UNDER FINANCIAL As of 31st As of 31st LIABILITIES December 2016 December 2015 Deposits on rented space Long-term commitments, total PREPAYMENTS As of 31st As of 31st December 2016 December 2015 a) Passive accruals Short-term (by title) Costs of auditing the financial statements b) deferred income Long-term (by title) grant Short-term (by title) other Prepayments, total

56 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME (thousand PLN) NOTE NO 15 NET SALES OF PRODUCTS, GOODS AND MATERIALS (BUSINESSLIKE STRUCTURE) For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Revenues from sales of products Sales of services Revenues from sales of materials Revenues from sales of goods Total Including revenues from related parties Sales to one entity exceeded 10% of sales revenue in NET REVENUES FROM SALES (TERRITORIAL STRUCTURE) For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Revenues from sales of the Republic of Poland % Share in total sales 82,2% 94,1% Including: goods and services Goods and materials Revenues from sales on the foreign market % Share in total sales 17,8% 5,9% Including: goods and services Goods and materials Total INFORMATION CONCERNING SEGMENTS OF OPERATION The main activity of ELZAB S.A. and the source of sales revenue are electronic devices, which are products of own production and goods purchased for further resale. Revenues generated from resale of materials are related to the electronics industry and are a complement to the main offer. Provided services are mainly warranty and postwarranty service offered for sale of equipment. The product range offered for sale is characterized by a similar production process, distribution methods and service delivery methods and is targeted to a specific audience. Because for most of the factors referred to in the definition of segment is met similarities and areas of activity of the Company does not meet the conditions that were considered to be reportable segments under IFRS 8, there is no need to separate business and geographical segments with different levels of risk and return on investment. Therefore, there shall be no division of the carrying amounts of the assets and liabilities because they are involved in the generation of profit in one segment of the electronics industry. The range offered for sale has a similar production process, distribution and methods used to provide services and is designed for specific audiences. In this situation, there is no need to make the distribution of the carrying amounts of the assets and liabilities because they are involved in the generation of profit in one segment of the electronics industry. Currently, sales are carried out through offices in Warsaw, Wroclaw and in Suchy. Sale is supported by regional sales managers serving various regions of the country. For management purposes, the gross margin achieved on individual assortments or assortment groups is reported. NOTE NO 16 PRIME COSTS IN THE CALCULATING ARRANGEMENT (thousand PLN) TYPE OF COSTS INCURRED For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Depreciation of fixed assets Amortization of intangible assets Employee benefits costs Usage of materials and energy Cost of outsourced services The costs of external services Other expenses (including the remuneration of the members of the Supervisory Board) Change in products, work in progress and the cost of manufacturing products for own needs Total COSTS IN THE CALCULATING ARRANGEMENT For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Cost of sales General and administrative expenses Cost of products sold Total The value of sold goods and materials The result of updating inventories of The result of updating stocks of goods and materials The result of updating receivables 75 1 Total cost of sales COSTS OF EMPLOYEE BENEFITS For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Payroll costs Social security costs The costs of the benefits of health and safety regulations Costs due to staff training and qualifications Costs of old-age and disability pensions Other employee benefits Provisions for employee benefits Total

57 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO 17 OTHER INCOME AND EXPENSES (thousand PLN) OTHER INCOME For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Income from the lease of fixed assets Profit on sale of property, plant and equipment and intangible assets Release of the reserve for non-developed development works 0 0 Other (including m.in: awarded court costs and court proceedings, damages and compensation, subsidy, income from contractual penalties) TOTAL including non-cash revenues arising from exchanges of goods or services 0 0 OTHER COSTS For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Costs of execution, court and process 20 5 Cost of leased space Other (including: donation, incidental expenses) TOTAL NOTE NO. 18 FINANCIAL INCOME AND EXPENSES (thousand PLN) FINANCIAL INCOME For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Interest income: from bank deposits from bonds from loans granted from cash 1 1 Income from foreign exchange differences Updating investment value 0 0 Reversal of impairment losses on financial assets, including: interest on receivables Profit on sales of subordinated entities *) Other financial income (accrued commissions, accrued interest on bonds and loans, overdue payments) TOTAL *) Profit on sales of subordinated entities For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Sales revenue Cost of investment sales PROFITS FOR SALES OF SUBSIDIARIES FINANCIAL COSTS For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 The interest costs, including those relating to: Bank loans Loans Financial leasing contracts Interest paid on bonds Other interest 11 7 Accrued interest on bonds issued Other borrowing costs (commissions) Losses from foreign exchange differences 0 0 Valuation of forward transactions 0 1 Impairment of interest on principal receivables Reversal of the unit measurement of funds and accrued interest 0 48 TOTAL NOTE NO. 19 CURRENT INCOME TAX For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 The financial result before tax from continuing operations Profit / loss before tax from discontinued operations 0 0 The difference between the gross and taxable income, including: Tax rate (%) 19% 19% The difference between the gross and taxable income, including: A / exclude non-taxable income B / adding non-deductible expenses C / Deduction of donation -362 The tax base Tax charge at the applicable tax rate Tax burden / recognition recognized in the income statement DEFERRED INCOME TAX For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Decrease due to creation of assets and the reversal of provisions for temporary differences Increase due to the write-off of assets and the establishment of reserves for temporary differences Deferred income tax time, total

58 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł MAIN COMPONENTS OF LOAD / RECOGNITION OF TAX IN THE PROFIT AND LOSS For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Current income tax Current load of titles tax Deferred income tax Load / recognition of deferred tax relating to origination and reversal of temporary differences Load / recognition of deferred tax relating to changes in tax rates 0 0 Load / credit shown in the profit and loss account, including: Assigned to continuing operation Attributed to discontinued operations

59 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł NOTE NO. 20 DISCONTINUED OPERATIONS (thousand PLN) In 2016, the ELZAB Group did not cease any activity and does not plan to discontinue any activity in the following year. NOTE NO. 21 EARNINGS PER SHARE DETAILS OF FINANCIAL RESULTS AND SHARES, used to calculate basic and diluted earnings per share For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 Net profit / loss from continuing operations Profit / loss on discontinued operations 0 0 Net profit / loss The total number of shares Number of shares Number of shares adjusted for treasury shares The Company has no instruments causing dilution of the share capital. Basic earnings per share is calculated by dividing the net profit / loss attributable to shareholders of the Company and the weighted average number of ordinary shares during the year, excluding ordinary shares purchased by the Company and reported as treasury shares The calculation of earnings / loss per share is the statement of comprehensive income NOTE NO. 22 RELATED PARTY TRANSACTIONS Commercial transactions Sales for ELZAB S.A. For the period For the period from 1st January from 1st January 2016 to 31st 2015 to 31st December 2016 December 2015 COMP S.A COMP CENTRUM INNOWACJI Sp. z o.o JNJ Limited ELZAB SOFT Sp. z o.o ELZAB HELLAS SPV Sp. z o.o ELZAB HELLAS S.A MICRA METRIPOND KFT ENIGMA SYSTEMY OCHRONY INFORMACJI Sp. z o.o INSOFT Sp. z o.o. 4 5 PAYTEL S.A Total The above note also were recognized revenue from leases from related parties and which are recognized in other operating income There were no sales transactions that would differ from those commonly used for sales contracts. For the period For the period from 1st January from 1st January Purchases of ELZAB S.A to 31st December to 31st December 2015 COMP S.A COMP CENTRUM INNOWACJI Sp. z o.o ELZAB SOFT Sp. z o.o ELZAB HELLAS SPV Sp. z o.o ELZAB HELLAS S.A MICRA METRIPOND KFT 3 2 INSOFT Sp. z o.o PAYTEL S.A Total Receivables For the period For the period from 1st January from 1st January Receivables from the ELZAB S.A. gross 2016 to 31st December to 31st December 2015 COMP S.A COMP CENTRUM INNOWACJI Sp. z o.o JNJ Limited ELZAB SOFT Sp. z o.o ELZAB HELLAS SPV Sp. z o.o ELZAB HELLAS S.A MICRA METRIPOND KFT ENIGMA SYSTEMY OCHRONY INFORMACJI Sp. z o.o The Group's gross receivables from related parties ELZAB Impairment losses on receivables 0 0 The Group's net receivables from related parties ELZAB Commitment For the period For the period from 1st January from 1st January Commitment of ELZAB S.A to 31st December to 31st December 2015 COMP S.A COMP CENTRUM INNOWACJI Sp. z o.o ELZAB SOFT Sp. z o.o ELZAB HELLAS SPV Sp. z o.o ELZAB HELLAS S.A CLOU Sp. z o.o MICRA METRIPOND KFT 1 1 INSOFT Sp. z o.o PAYTEL S.A. 2 2 Total For the period For the period from 1st January from 1st January ELZAB's liabilities to affiliates for loans taken out 2016 to 31st December to 31st December 2015 not applicable 0 0 Total

60 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł For the period For the period from 1st from 1st January 2016 January 2015 to ELZAB receivables from affiliates related to borrowed loans, with accrued interest to 31st 31st December ELZAB HELLAS SPV Sp. z o.o COMP CENTRUM INNOWACJI Sp. z o.o ELZAB SOFT Sp. z o.o Total

61 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł The amount of receivables from covered bonds, with accrued interes As of 31st December 2016 As of 31st December 2016 COMP CENTRUM INNOWACJI Sp. z o.o Total For the period For the period from 1st January from 1st January Other income 2016 to 31st December to 31st December 2015 ELZAB SOFT Sp. z o.o. 3 8 ELZAB HELLAS SPV Sp. z o.o. 4 0 COMP S.A COMP CENTRUM INNOWACJI Sp. z o.o. sprzedaż udziałów MICRA METRIPOND KFT COMP CENTRUM INNOWACJI Sp. z o.o. odsetki od pożyczek i obligacji Total For the period For the period from 1st January from 1st January Other costs 2016 to 31st December to 31st December 2015 MICRA METRIPOND KFT zapłacone/naliczone odsetki od udzielonej pożyczki 0 14 Total 0 14 In 2016, there were no transactions other than those listed above. NOTE NO. 23 EVENTS AFTER THE BALANCE SHEET DATE There were no significant events after the balance sheet date. NOTE NO. 24 KEY RISKS AND RISKS OF THE GROUP ELZAB ELZAB Group's strategic objective is to increase shareholder value, through an increased financial results, which is a fundamental element sales growth in domestic and foreign markets. There is a risk factor independent, which will influence the effects of implementing this strategy, in particular, decline in demand for products, perturbations in capturing foreign markets, intensifying competition in markets where ELZAB Group operates or intends to operate, the slowdown in the economy. In 2016 ELZAB S.A acted in a competitive market. Competitors are local manufacturers and importers of equipment from abroad. Competition in the market forces the necessity to undertake promotional and marketing actions which lower the margin obtained, which may be noticeable in the results achieved by the Company. ELZAB S.A main suppliers of materials, subassemblies for the production of cash registers and goods and materials are 80% domestic suppliers and 20% foreign suppliers. The four largest suppliers from domestic companies account for a total of 58% of total deliveries. One supplier of foreign companies exceeds 5% of the total supply (8.3%). Purchasing materials for production and commodities and trading materials for foreign currencies poses a risk of rising costs in case of zloty depreciation. Exchange rate risk is difficult to estimate due to the unpredictability of exchange rate fluctuations. In addition, for part of the supply, changes in exchange rates do not translate directly into the Company's results due to purchases of imported materials from domestic suppliers. The specificity of fiscal market in Poland is its seasonality. In terms of basic products ELZAB SA they are fiscal devices seasonality is associated with the entry into force of the regulations of the Minister of Finance imposing an obligation to install cash registers new groups of taxpayers.at the end of In connection with the entry into force of the Regulation of the Minister of Finance dated 4th November On exemptions from the obligation to keep records using cash registers requiring the latest by 3rd January To record sales using cash registers specific groups of taxpayers, released earlier this obligation, regardless of the market, increased sales of small banks on the Polish market. Previous decisions arising from the Regulations, which stimulated demand are: - in Ordinance of the Minister of Finance of 29th November On exemptions from the obligation to keep records using cash registers. In the first quarter of Obligation to register sales by fiscal device were covered by taxpayers who, in Realized turnover for individuals worth more than 20 thousand. zł (until then it was 40 thousand. zł). Obligation to register sales were also covered by, among others, schools rides; - In When the duty to record turnover, from 1 May 2011., Included important new groups of taxpayers - doctors and lawyers. Since 2018 a new registration organization for sale at the cash registers has been in force in Poland. According to the draft ordinance of the Minister of Development, online fiscalization will be implemented, meaning that each fiscal unit will link - and transfer the transaction data - to the central server. Seasonality of sales is not important in the case of the replacement market. The economic situation of the country will be important to the financial situation of ELZAB S.A.The sales revenue of the Company depends on the extent to which the economic situation in the country affects the activity of ELZAB S.A Financial risks The Company's operations expose it to a variety of financial risks. Risk management aims to minimize the potential adverse impact of these risks on the Group's financial performance. The financial risk factors to which the ELZAB Group is exposed to a greater or lesser extent include: - Credit risk, - Liquidity risk, - Market risk, consisting of: price risk, interest rate risk and exchange rate risk. The main financial instruments used by ELZAB S.A. There are bank loans, bonds and leasing (short- and long-term) and trade liabilities. ELZAB S.A. use these instruments to finance your business. ELZAB S.A. also has financial assets, mainly consisting of receivables due to deliveries and cash and cash equivalents. 45

62 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł Classification of financial instruments is presented in the tables below: Categories and classes of financial instruments FINANCIAL ASSETS AND LIABILITIES BY CATEGORY (ACCORDING TO IAS 39) As of 31st December 2016 As of 31st December 2016 Aktywa finansowe Financial assets Loans granted and own receivables Cash and cash equivalents Investments held to maturity, carried at amortized cost Financial liabilities Liabilities measured at amortized cost Loans and receivables do not include tax liabilities, advance payments for supplies, prepayments. Liabilities measured at amortized cost do not include tax liabilities, advances received for supplies. Given the nature and characteristics of the above categories of financial instruments, within each group divided into the following classes of instruments: LOANS AND RECEIVABLES OWN As of 31st December 2016 As of 31st December 2016 Receivables from related parties (Note 5) Receivables from other entities Short-term (Note 5) - Trade Receivables from other entities Short-term (Note 5) - other Loans granted (Note 3a) Total The impact of this category result for the period: change of impairment losses on receivables recognized in the result for the period 75 1 change of impairment losses on loans recognized in the result for the period 0 0 Interest accrued on loans granted, charged to the result of the period Interest income on receivables LIABILITIES MEASURED AT AMORTIZED COST As of 31st December 2016 As of 31st December 2016 Loan liabilities (Note 13) Liabilities for bonds issued Trade payables to related parties (Note 14) Other liabilities to related parties (Note 14) 0 0 Trade liabilities to other entities Short-term (Note 14) Other liabilities to other entities Short-term (Note 14) Long-term liabilities under finance lease (Note 13a) Total The impact of this category result for the period: interest on the loan referenced in the result for the period interest on issued bonds, referenced in the result for the period interest on leases, recognized in result for the period Credit risk The table below shows the maximum credit risk to which the Company is exposed. The maximum exposure to credit risk As of 31st December 2016 As of 31st December 2016 Shares in subsidiaries Shares in associates Shares in other entities Receivables Loan Cash and cash equivalents, excluding deposits and cash in hand Other financial instruments - deposits and bonds, bills of exchange Total Shares in subsidiaries The subsidiary, within the control of ELZAB S.A, is obliged to present monthly financial results and to analyze the deviations between planned and achieved results. ELZAB S.A constantly reviews the financial position and basic ratios of the subsidiary. Receivables ELZAB SA to its customers apply the principles of the credit policy consists in assigning each client an appropriate credit limit is dependent on the amount of annual purchases gross repayments of receivables and the financial situation of the recipient. In 2013 has been revised payment terms, which are counted from the date of invoice (30 and 60 days).in rare cases once awarded a payment date 90 days from the date of the invoice. The balance of receivables is monitored on a regular basis. ELZAB S.A. consistently treats the audience payments on time. If you do not meet the agreed terms of payment in the implementation of subsequent contracts change in the terms on prepayment, payment in cash or blocking deliveries to the customer. The consistent application of these procedures increases the guarantee of transactions with reliable partners.in addition, credit policy ELZAB S.A. is the need to verify the information agencies new clients, which is to be allocated to deferred payments. Concentration of receivables In ELZAB S.A. There is no concentration of receivables, therefore the risk of loss of liquidity is not Cash and cash equivalents The Company policy assumes the ongoing balancing of cash inflows and expenditures to generate, on a monthly basis, surplus cash from operating activities. Cash loss is acceptable. In 2015 and in 2016, the Company financed with overdraft facility. In addition, the Company analyzes its receipts and expenditures on a monthly basis. In 2015, the Company issued three-year bonds with a nominal value of 25,000 thousand PLN. Liquidity risk The Group's policy is to maintain an appropriate level of cash sufficient to settle its obligations, maintaining the necessary level of working capital and to finance current investment needs and development. The Company has additional financing options in the form of a credit limit in its current bank account.consistent control of receipts and expenditures allows the Company to make current liabilities, which means that the Company does not have significant past due liabilities.the tables below present an analysis of the maturity of financial liabilities according to the remaining period until the contractual maturity date from the balance sheet date. 46

63 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł The current Contracted value of cash flow Up to 1 year From 1 to 3 years From 3 to 5 years Over 5 years 31st December 2016 value Liabilities from finance leases Bank loans, including overdraft, loans Bond liabilities Liabilities due to capital increase in CLOU Sp. z o.o Trade liabilities Financial liabilities - derivatives 0 0 Contracted 31st December 2015 The current value value of cash flow Up to 1 year From 1 to 3 years From 3 to 5 years Over 5 years Financial liabilities Liabilities from finance leases Bank loans, including overdraft, loans Bond liabilities Trade liabilities Financial liabilities - derivatives 5 5 The structure of trade liabilities by maturity date: The structure of trade liabilities by maturity Total for the Required for Paid to the day Paid to the Paid to the Paid above 31st December 31st December 31st January 31st March 30th June 30th September Trade liabilities st December st December st January st March th June th September 2016 Trade liabilities According to the Company's assessment, cash, credit line and cash-generating operating cash flow forecasts will be sufficient to cover liabilities, including loans including interest and bank commissions. Market risk ELZAB S.A is not exposed to the significant risk of trading in securities on an active market. Interest rate risk The Group is exposed to interest rate risk due to the partial financing of its business by bank loans, bonds issued and leasing. Impact of interest rate risk on financial result ELZAB S.A. However, it is not significant due to the level of debt with interest on loans and leases. In 2015 ELZAB SA issued bonds, which affected the level of interest costs. The Company does not use interest rate derivatives as collateral. The following table illustrates the sensitivity profile of ELZAB S.A. to the risk of changes in interest rates and their impact on the financial result on the assumption that interest rates will change by 1% 31st December 31st December Instruments with a variable interest rate Bank loans Lease liability Liabilities for bonds issued The impact of changes in interest rates on the financial result an increase of 1% a reduction of 1% Exchange rate risk "ELZAB S.A. is exposed to exchange rate risk as part of sales and purchases are denominated in foreign currencies.foreign exchange risk is higher for foreign and domestic supplies purchased by intermediaries but originating in foreign countries, where domestic prices are established for currency prices. " In 2016 ELZAB Group entities hedged exchange rate risk by entering forward transactions At 31st December 2016, the following open forward transactions occurred. Date of the transaction currency quantity course time limit for implementation completion valuation at the balance future expenses / proceeds 25th November 2016 PLN/USD 27 4, th November 2016 PLN/USD 6 4, st December 2016 PLN/USD 34 4, th December 2016 PLN/USD 18 4, th December 2016 PLN/USD 18 4, th November 2016 HUF/PLN , nd November 2016 HUF/PLN , th October 2016 HUF/PLN , th October 2016 HUF/PLN 757 1, th October 2016 HUF/PLN 43 1, th December 2016 HUF/PLN , HUF: refers to the price for 100 HUF total

64 DZIAŁ II Sprawozdanie finansowe ELZAB za 2016 r. w tys. zł ELZAB S.A. constantly analyzes the development of foreign exchange rates and plans its payments so that transactions can be made after the exchange rate negotiated with the bank. The Company also includes forward transactions to mitigate the adverse effects of currency fluctuations. 31st December 31st December Share of sales value in non-functional currency in total sales 17,76% 5,91% 31st December 31st December Share of the value of purchases in a currency other than functional in total purchases 20,00% 13,80% The tables below show the sensitivity profile of the risk of changes in exchange rates, broken down by currency (in thousands.) 31st December 2016 Total In the currency EUR In the currency USD currency HUF In the currency GBP Trade receivables and other receivables in the currency after translation into PLN as of 31st December ,424 4,1793 0, ,1445 Converted into PLN change in the exchange rate, the impact on the financial result result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% change in the exchange rate, the impact on the financial result result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% st December 2016 Total In the currency EUR In the currency USD currency HUF In the currency GBP Trade receivables and other receivables in the currency after translation into PLN as of 31st December ,424 4,1793 0, ,1445 Converted into PLN change in the exchange rate, the impact on the financial result result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% change in the exchange rate, the impact on the financial result result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% Balance sheet exposure to foreign exchange risk Total In the currency EUR In the currency USD currency HUF In the currency GBP Exchange rate change, impact on financial result per balance result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% Exchange rate change, impact on financial result per balance 0 result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% st December 2015 Total In the currency EUR In the currency USD currency HUF In the currency GBP Trade receivables and other receivables in the currency after translation into PLN as of 31st December ,2615 3,9011 0, ,7862 Converted into PLN change in the exchange rate, the impact on the financial result result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% change in the exchange rate, the impact on the financial result result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% st December 2015 In the currency EUR In the currency USD currency HUF In the currency GBP Trade receivables and other receivables in the currency after translation into PLN as of 31st December ,2615 3,9011 0, ,7862 Converted into PLN change in the exchange rate, the impact on the financial result result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% change in the exchange rate, the impact on the financial result result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% Balance sheet exposure to foreign exchange risk Total In the currency EUR In the currency USD currency HUF In the currency GBP Exchange rate change, impact on financial result per balance result in thousands PLN, when the growth rate of 5% result in thousands PLN, when the growth rate of 10% Exchange rate change, impact on financial result per balance 0 result in thousands PLN, the drop rate of 5% result in thousands PLN, the drop rate of 10% In 2016 in connection with the sale and purchase of foreign currency fluctuations in exchange rates may have an impact on the financial result by the value of the consumption of material and through sales realized in foreign currencies and through the implementation of payments in foreign currencies. Capital risk management The objective of managing capital are to safeguard the Group's ability to continue its operations ELZAB, so that it can generate return for shareholders and to maintain an optimal capital structure to reduce its cost. The objective of managing capital are to safeguard the Group's ability to continue its operations ELZAB, so that it can generate return for shareholders and to maintain an optimal capital structure to reduce its cost. ELZAB Group monitors capital using the debt ratio. The debt ratio is calculated as the ratio of net debt to total capital. Net debt is calculated as the sum of liabilities (loans, trade and other payables) less cash and cash equivalents. Total capital is calculated as the sum of equity and net debt. 48

65 Zakłady Urządzeń Komputerowych ELZAB S.A. Report on operations of ELZAB S.A. of 2016 Zabrze, 31 st December 2016

66 Zakłady Urządzeń Komputerowych ELZAB S.A. SPIS TREŚCI I. INFORMATION ABOUT THE COMPANY Basic information Composition of Management and Supervisory Board History of the Company Organizational Structure HR and payroll situation Employee Stock Control System Environment and Health and Safety Dependence on suppliers and customers II. BASIC ECONOMIC AND FINANCIAL SIZES Revenues Costs Selected balance sheet items Financial instruments Development work Investment real estate III. KEY FINANCIAL INDICATORS IV. OBLIGATIONS, CONDITIONAL AND OFF-BALANCE-SHEET ASSETS V. NON-SPECIAL EVENTS AND OTHER FACTORS AFFECTING FINANCIAL SITUATION ELZAB S.A VI. POSSIBILITIES OF PAYMENT AND CASH FLOW STATEMENT VII. INVESTMENTS INVESTMENTS IN TOTAL FIXED ASSETS AND INTANGIBLE ASSETS INVESTMENTS IN FINANCIAL ASSETS VIII. INFORMATION ABOUT SIGNIFICANT TRANSACTIONS AND TRANSACTIONS WITH RELATED ENTITIES IX. INFORMATION ABOUT LOANS AND GUARANTEES PROVIDED X. SIGNIFICANT PROCEEDINGS PENDING BEFORE COURT, COMPETENT ARBITRATION AUTHORITY OR PUBLIC ADMINISTRATION XI. SIZE AND TYPES OF COMPANY CAPITAL Equity capital Settlement of profit from previous years Proposed split of the result for the current period Ownership Capital Structure Shares ELZAB SA in the possession of members of the Management and the Supervisory Board Shares in associated companies held by members of the Management Board and the Supervisory Board Tender offer for sale of shares - Changes in Shareholding ELZAB S.A Purchase of own shares Listing of shares in ELZAB S.A. on the Warsaw Stock Exchange XII. INFORMATION ON THE ISSUE, REDEMPTION AND REPAYMENT OF DEBT AND EQUITY SECURITES XIII. INFORMATION ON SIGNIFICANT NEW CONTRACTS XIV. AGREEMENT WITH THE ENTITY AUTHORIZED TO AUDIT FINANCIAL STATEMENTS XV. EMPLOYEE PENSION SCHEME XVI. BASIC RISKS AND THREATS IN THE ELZAB S.A XVII. COMPANY DEVELOPMENT FORECAST XVIII. STATEMENT OF CORPORATE GOVERNANCE

67 Zakłady Urządzeń Komputerowych ELZAB S.A. XIX. Statement of compliance XX. Statement on the appointment of the auditor

68 Zakłady Urządzeń Komputerowych ELZAB S.A. I. INFORMATION ABOUT THE COMPANY 1. Basic information Zakłady Urządzeń Komputerowych ELZAB S.A. Kruczkowskiego Street 39 Postal code Zabrze Phone Fax The company has 3 sales Office: - in Warsaw, Taborowa Street 14 - in Wroclaw, Słubicka Street 22 - in Suchy Las near Poznań Akacjowa Street 4. Auditor: Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp.k. Al. Jana Pawła II 19, Postal code Warszawa, Poland Audit of financial statements of ELZAB S.A. for 2016 was made pursuant to an agreement dated 10 th May 2016 with the annex of 28 th January 2017 by Deloitte Polish limited liability company with registered office in Warsaw. PKD: 2620 Z manufacture of computers and peripherals REGON: TIN: CIEP: E WZ KRS : District Court in Gliwice, X Commercial Division Share capital: ,40 PLN Capital paid: ,40 PLN Company listed on the WSE since 13 th May Market quotation basic Sector IT The Company joined the Liquidity Support Program in July Composition of Management and Supervisory Board As for 31 st December 2016 the Management Board of the Company consists of: Krzysztof Urbanowicz President of the Management Board Jerzy Popławski Vice President of the Management Board Zbigniew Stanasiuk Member of the Management Board 4

69 Zakłady Urządzeń Komputerowych ELZAB S.A. Janusz Krupa Member of the Management Board Proxy of the Company is Małgorzata Kaczmarska - Chief Accountant. As for 31 st December 2016, the Supervisory Board of the Company consists of: Jacek Papaj - Member of the Supervisory Board Krzysztof Morawski - Member of the Supervisory Board Jarosław Wilk - Member of the Supervisory Board Andrzej Wawer - Member of the Supervisory Board Jacek Pulwarski - Member of the Supervisory Board Grzegorz Należyty- Member of the Supervisory Board Changes in the composition of the Management Board and the Supervisory Board of ELZAB S.A. On 16 th June 2016, at the meeting of the Supervisory Board of ELZAB S.A. with effect from 30 th June 2016 submitted the resignation from the position of Chairman of the Board of ELZAB S.A Mr. Jacek Papaj. Therefore, at the present meeting of the Supervisory Board of ELZAB SA adopted Resolution No. 1/06/2016 on the appointment of Mr. Krzysztof Urbanowicz for the completion of the current 3-year joint term of office, which began with the date of the Ordinary General Meeting approving financial statements for 2013 year and entrusts it with the Position of President of the Management Board of ELZAB S.A. with effect from 30 th June In addition, the Supervisory Board consented to act by Mr. Krzysztof Urbanowicz functions in the bodies of the companies in the group, in which the ELZAB SA, even if they deal with the competitive activity towards the Company. According to the statement, Mr. Krzysztof Urbanowicz not competitive in relation to the Company and does not participate in a competitive company as a partner in a civil partnership or as a member of the body of a company except for the exercise of the function Member of the Management Board of COMP SA with its registered office in Warsaw, which is the parent undertaking of ELZAB S.A. (Cr. No. 11/2016) On 30 th June 2016 The Annual General Meeting of ELZAB S.A. appointed to the Supervisory Board Mr. Jack Papaya and Mr. Jaroslaw Wilk. Mr. Waldemar Tevnell ceased to function as a member of the above-mentioned authority. (Cr. No. 14/2016). The Supervisory Board adopted a resolution concerning the election of the Audit Committee. The Audit Committee was appointed: Andrzej Wawer - Chairman of the Audit Committee of the Supervisory Board Jacek Pulwarski - Member of the Audit Committee of the Supervisory Board Grzegorz Należyty - Member of the Audit Committee of the Supervisory Board 5

70 Zakłady Urządzeń Komputerowych ELZAB S.A. 3. History of the Company Key events in the history of ELZAB S.A Rising in Zabrze branch of Experimental Department at Zakłady Mechaniki Precyzyjnej "BŁONIE" from Warsaw 1971 Establishment of the State Enterprise under the name of "Experimental Company for the Production of Peripheral Devices" 1973 Production of engineering calculator MERA Transformation of the company into Zakłady Urządzeń Komputerowych MERA- ELZAB 1977 Production of screen monitors MERA Launch of production of professional microcomputer ComPAN-8 and personal computer Meritum II 1987 Construction of electronic production hall with one of the most modern electronics assembly department at the time 1992 Transformation of Zakładów Urządzeń Komputerowych ELZAB S.A. into a Single-Company State Treasury 1993 ELZAB cash register terminal Xcel 260 received the first admission granted by the Ministry of Finance for fiscal equipment in Poland 1995 Bank agreement regulating the obligations between ELZAB S.A. and Górnośląski Bank Gospodarczy S.A. in Katowice and other creditors ELZAB S.A. in the RELPOL Group (repurchase of shares from creditors) and obtaining the Quality Certificate ISO 9001: 1997, ISO 9002: 1997, ISO 9003: ELZAB S.A shares debuted on the Warsaw Stock Exchange Obtaining the Quality Certificate ISO 9001: 1997, ISO 9002: 1997, ISO 9003: Obtaining the Quality Certificate ISO 9001: 1997, ISO 9002: 1997, ISO 9003: ELZAB S.A. in the Italian MWCR Group (acquisition of shares from RELPOL S.A.) and obtaining the ISO 9001: 2000 Quality Certificate 2004 Acquisition of shares in MICRA METRIPOND KFT and MEDESA Sp. z o. o (merged in 2009 with ELZAB S.A. under Article point 1) K.S.H. i.e. by transferring all the assets of MEDESA Sp. z o. o. on ELZAB S.A.) Public subscription of Series D shares Receipt of the European Medal for the ELZAB Mini Cash Register 2007 ELZAB S.A in the BBI CAPITAL Group (acquisition of shares from MWCR S.p.A.) 2008 ELZAB S.A, affiliated with EXORIGO Sp. z o.o. i UPOS SYSTEM Sp. z o.o. Obtaining International Quality Certificate ISO 9001: ELZAB S.A. in the NOVITUS Group 2011 The owner of the majority stake in ELZAB S.A is COMP S.A. 6

71 Zakłady Urządzeń Komputerowych ELZAB S.A. Received the Gold Quality Award of the Polish Center for Research and Certification 2012 Company COMP S.A. as a result of a tender offer shares of ELZAB S.A. acquired 2,792,428 ELZAB S.A shares, representing 17.3 % of the share capital of ELZAB S.A and % of the total number of votes at the General Meeting of ELZAB S.A. Currently at 31 st December 2015, COMP S.A. holds a total of 13,420,394 ELZAB S.A shares (including own shares), representing % of the share capital of ELZAB S.A. The total number of votes from shares held by COMP S.A. is 13,494,194 votes, representing % of the total number of votes at ELZAB S.A of General Meeting Awarded the prestigious "Good Design 2013" prize for the ELZAB K10 cash register, the world's first cash register with touch panel ELZAB S.A is a capital-related company with Comp Center of Innovation Received the prestigious prizes "Red Dot" and "Teraz Polska" for the ELZAB K10 fiscal cash register 2015 Winning the prestigious Bull and Bear Award in the category "Best Investment in a Stock Company 2014" for ELZAB S.A, Completion of the project "ELZAB S.A thermo-modernization of buildings in with financial support from the Voivodship Fund for Environmental Protection and Water Management in Katowice and partial modernization of ELZAB S.A buildings including reception, sales, service, production hall, The issue of 3-year bonds No. A / 2015 Disposal of shares in MICRA METRIPOND KFT to Comp Company Innovation Center Winning the first place and the Golden Paragon prize in the category "Electronic Shop Eq uipment" by ELZAB Mera TE TFT fiscal printer The formation of ELZAB HELLAS Capital Group 4. Organizational Structure Acquisition of shares in Clou Sp. With o.o. (Formerly MONEA XI Sp. z o.o.) Received the Platinum Prize "Behind the Entire Business" granted by the Regional Chamber of Commerce in Katowice during the 25th Jubilee Laura Skill and Competence Awards Winning the award "Export Eagle" for the best exporter in Silesia Received the "Quality of the Year 2016 Gold" The Management Board manages the Company and represents the Company outside. The Supervisory Board exercises permanent supervision over the Management Board. The Management Board of the Company includes: President of the Management Board, Vice-President of the Management Board and two members of the Management Board. As of 31 st December 2016 the Company's structure was divided into 4 divisions, which included specialists and experts from the fields of business and economy, including logistics, production, finance, trade and development. The Financial Division includes the following organizational units: controlling, accounting, 7

72 Zakłady Urządzeń Komputerowych ELZAB S.A. receivable management and technical and administrative departments.. Production and Logistics Division includes: Mechanical, electronic and lacquering departments (since 1 st April 2016), technology department, planning, cooperation, Fire protection, Health and safety and logistics-related cells, ie purchasing department, warehouse management and logistic support as well as quality control. The B & R division comprises the following organizational units: a research and calibration laboratory and a R & D department, which is divided into the engineering department, the software department, the prototype and the corporate project department. The Business Division is divided into three main departments, which include the following organizational units: sales, marketing, technical support and training. As of 31 st December 2016 ELZAB S.A. owns shares in the following companies: ELZAB SOFT Sp. z o.o. in Zabrze 87,50 %, ELZAB HELLAS SPV Sp. z o.o. in Zabrze 67,00 % ELZAB HELLAS S.A. in Greece 67,00%(Indirect share) Comp Centrum Innowacji Sp. z o.o. in Warsaw 49,72 % Clou Sp. z o.o. in Warsaw 30,00 % On 3 rd August 2016 ELZAB S.A. acquired 100% of shares in ELZAB HELLAS SPV Sp z o. o. (the company was originally named as DIURA Sp. z o. o. and was based in Warsaw, a changes was registered in the National Court Register on 30 th August 2016). The share capital amount to 5 thousand PLN. On 22 nd September 2016 ELZAB S.A. sold 33% of shares in ELZAB HELLAS SPV Sp. z o.o. for MONEA V Sp. z o.o. On 15 th September 2016 a company ELZAB HELLAS AE (joint stock company) based in Greece (registration 19 th September 2016) was appointed ELZAB HELLAS SPV Sp. z o. o. Share capital of 24 thousand EUR, was paid on 4 th October On 28 th December 2016 ELZAB acquired shares in MONEA XI Sp. z o. o. - currently Clou Sp. z o. o. The value of shares held amount to 206 thousand PLN. Graphical representation of the organizational structure of the group and affiliates of the issuer on 31 st December

73 Zakłady Urządzeń Komputerowych ELZAB S.A. 5. HR and payroll situation Employment The average employment in 2016 was 276 people, and compared to the average employment in 2015 of 276 people did not change. Employment at 31 st December 2016 amounted to 274 persons. The employment levels as at 31 st December 2016 and 31 st December 2015, by type of activity, were as follows: Type of activity Number of persons Number of persons 31st December st December.2015 Management 2 2 Production Logistics Developmental activities Commercial activities Support sections - finance, controlling, administration, human resources Total In addition, 2 members of the Management Board perform work based on appointment based on the resolution of the Supervisory Board. Employee employment structure by age at 31 st December 2016 compared to the end of 31 st 9