(This is a translation of a document originally issued in Polish) THE LOTOS GROUP

Transcription

1 THE LOTOS GROUP CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31ST 2009 PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ALONG WITH THE INDEPENDENT AUDITOR S OPINION

2 FINANCIAL HIGHLIGHTS CONSOLIDATED... 4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 5 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 7 CONSOLIDATED STATEMENT OF CASH FLOWS... 8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 9 NOTES TO THE FINANCIAL STATEMENTS General Information Composition of the Group Composition of the Management and Supervisory Boards of the Parent Undertaking Approval of the Consolidated Financial Statements Going Concern Duration of the Group Balance-Sheet Date and the Period Covered by the Financial Statements Measurement Currency and Reporting Currency Basis of Preparation of the Consolidated Financial Statements Accounting Policies Basis of Consolidation Investments in Associated Undertakings Intangible Assets Goodwill Related to Subordinated Undertakings Property, Plant and Equipment Tangible Assets under Construction Exploration and Evaluation Assets Leases Non-Current Assets Held For Sale Impairment Losses on Non-Financial Assets Investment Property Inventories Trade and Other Receivables Foreign Currency Transactions Cash and Cash Equivalents Accruals and Deferrals Equity Provisions Retirement Severance Pays and Length-of-Service Awards Profit Distribution for Employee Benefits and Special Accounts Interest-Bearing Bank Loans, Borrowings, and Debt Securities Borrowing Costs Government Subsidies Carbon Dioxide (CO 2 ) Emission Allowances Income Tax Financial Instruments Derivative Financial Instruments Impairment of Financial Assets Recognition of Revenue Sales of Products, Goods for Resale and Services Interest Dividend Management s Estimates Net Earnings/(Loss) per Share Contingent Liabilities and Receivables Joint Venture Segment Reporting Property, Plant and Equipment and Prepayments for Tangible Assets under Construction Non-Current Receivables Prepayments and Accrued Income Investment Property Intangible Assets Assets Held for Sale Business Combinations Investments in Associated Undertakings

3 19. Non-Current Financial Assets Current Financial Assets Financial Instruments Carrying Value of Financial Instruments Items of Income, Expenses, Gains and Losses Disclosed in the Statement of Comprehensive Income by Categories of Financial Instruments Financial Risk Management Sensitivity Analysis with Respect to Market Risk Related to Fluctuations in FX Rates, Interest Rates, Prices of Carbon Dioxide (CO 2 ) Emission Allowances and Prices of Raw Materials and Petroleum Products Maturity Structure of Financial Liabilities and Derivative Financial Instruments Inventories Trade and Other Receivables Cash and Cash Equivalents Cash Structure in the Statement of Cash Flows Share Capital Dividends Earnings/(Loss) Per Share Non-Controlling Interests Interest-Bearing Loans and Borrowings Provisions Other Financial Liabilities Trade and Other Payables, Accruals and Deferred Income Company Social Benefits Fund s Assets and Liabilities Sales Revenue Costs by Type Other Operating Income Other Operating Expenses Finance Income Finance Expenses Corporate Income Tax Business Segments Contingent and Off-Balance-Sheet Liabilities Carbon Dioxide (CO 2 ) Emission Allowances Material Events Subsequent to the Balance-Sheet Date Material Court, Arbitration or Administrative Proceedings and Other Risks Pertaining to the Parent Undertaking or its Subsidiaries Remuneration of the Management the Supervisory Board Members and Information on Loans and Other Similar Benefits Granted to Members of Management and Supervisory Staff of the Parent Undertaking Employment Structure Transactions with Related Undertakings Transactions with Related Undertakings in which the State Treasury Holds a Stake Additional Information on Results of the LOTOS Group Member Undertakings Entity with Significant Influence over the Group Other Information Special Rights of the State Treasury and How These Rights Are Exercised in Companies Information on the Agreement with and Remuneration Payable to the Qualified Auditor of Financial Statements, and Information on the Appointment of the Qualified Auditor to Audit the Financial Statements of Grupa LOTOS S.A Signatures of the Management Board Members and the Person Responsible for Keeping the Accounting Books of Grupa LOTOS S.A

4 Consolidated financial statements for the year ended December 31st 2009 FINANCIAL HIGHLIGHTS CONSOLIDATED PLN 000 EUR 000 THE LOTOS GROUP Year ended Year ended Year ended Year ended Dec Dec Dec Dec (comparable data) (comparable data) Sales revenue 14,321,041 16,294,738 3,299,323 4,613,329 Operating profit/(loss) 419,793 (145,828) 96,713 (41,286) Pre-tax profit/(loss) 1,109,608 (503,700) 255,635 (142,606) Net profit/(loss) from continuing operations 911,812 (389,415) 210,066 (110,250) Profit/(loss) from continuing operations attributable to owners of the Parent 900,761 (453,549) 207,520 (128,408) Profit from continuing operations attributable to noncontrolling interests 11,051 64,134 2,546 18,157 Total comprehensive income 928,661 (362,559) 213,948 (102,647) Comprehensive income attributable to owners of the Parent 908,083 (426,693) 209,207 (120,804) Comprehensive income attributable to non-controlling interests 20,578 64,134 4,741 18,157 Net cash provided by/(used in) operating activities 694, , ,000 88,239 Net cash provided by/(used in) investing activities (3,339,669) (2,417,112) (769,403) (684,327) Net cash provided by/(used in) financing activities 2,155,844 1,963, , ,801 Total net cash flow (486,988) (138,751) (112,194) (39,283) Basic earnings/(loss) per ordinary share (PLN/EUR) 7.44 (3.74) 1.71 (1.06) Diluted earnings/(loss) per ordinary share (PLN/EUR) PLN 000 EUR 000 As at Dec As at Dec As at Dec As at Dec (comparable data) (comparable data) Total assets 15,062,506 12,187,558 3,666,449 2,920,995 Equity attributable to owners of the Parent 6,677,002 5,389,534 1,625,287 1,291,711 Non-controlling interests 36, ,078 8,946 94,928 Total equity 6,713,754 5,785,612 1,634,233 1,386,639 Items of the statement of financial position as at December 31st 2009 presented in the Financial Highlights table were translated using the euro mid-exchange rate published by the National Bank of Poland for that date, i.e. EUR 1 = PLN Items of the statement of comprehensive income and the statement of cash flows for the year ended December 31st 2009 presented in the Financial Highlights table were translated at the exchange rate of EUR 1 = PLN (the arithmetic mean of the mid-exchange rates quoted by the National Bank of Poland for the last day of each full month in the period January 1st December 31st 2009). Items of the statement of financial position as at December 31st 2008 presented in the Financial Highlights table were translated using the euro mid-exchange rate quoted by the National Bank of Poland for that date, i.e. EUR 1 = PLN Items of the statement of comprehensive income and the statement of cash flows for the year ended December 31st 2008 presented in the Financial Highlights table were translated at the exchange rate of EUR 1 = PLN (the arithmetic mean of the mid-exchange rates quoted by the National Bank of Poland for the last day of each full month in the period January 1st December 31st 2008). The notes to the financial statements, presented on pages , are their integral part. 4

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at December 31st 2009 and December 31st 2008 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (PLN 000) Note Dec Dec (comparable data) ASSETS Non-current assets Property, plant and equipment 11 9,361,963 5,532,612 Prepayments for tangible assets under construction ,536 1,200,713 Goodwill 17 46,688 45,562 Intangible assets 15 89,240 55,921 Investment property 14 3,762 4,898 Investments in associates 18 88,255 59,048 Non-current financial assets 19 86,052 49,364 Deferred tax assets 41 74, ,223 Non-current receivables 12 22,061 9,152 Prepayments and accrued income 13 5,087 12, Total non-current assets 9,930,911 7,102, Current assets Inventories 22 3,023,144 2,447,247 Trade and other receivables 23 1,536,854 1,364,881 Current tax receivable 131, ,971 Prepayments and accrued income 13 25,982 45,863 Current financial assets 20 47, ,912 Cash and cash equivalents , , Total current assets 5,126,386 5,076, Assets held for sale 16 5,209 8, ========== ========== Total assets 15,062,506 12,187,558 ========== ========== The notes to the financial statements, presented on pages , are their integral part. 5

6 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at December 31st 2009 and December 31st 2008 (PLN 000) Note Dec Dec (comparable data) EQUITY AND LIABILITIES Equity Share capital , ,700 Statutory reserve funds 1,311, ,951 Retained earnings 5,221,504 4,297,823 Translation of foreign operations 14,277 7, Equity attributable to owners of the Parent 6,677,002 5,389, Non-controlling interests 29 36, , Total equity 6,713,754 5,785, Non-current liabilities Interest-bearing loans and borrowings 30 4,942,590 3,412,245 Long-term provisions , ,903 Deferred tax liabilities 41 59,556 10,411 Other financial liabilities , ,387 Accruals and deferred income and other liabilities 33 52,130 9,107 Total non-current liabilities 5,629,722 3,876,053 Current liabilities Trade payables, accruals and deferred income and other liabilities 33 1,890,654 1,886,440 Current tax payable 11,867 8,069 Interest-bearing loans and borrowings , ,360 Short-term provisions 31 38,897 80,470 Other financial liabilities 32 19,131 43, Total current liabilities 2,719,030 2,525, Total liabilities 8,348,752 6,401,946 ========== ========== Total equity and liabilities 15,062,506 12,187,558 ========== ========== The notes to the financial statements, presented on pages , are their integral part. 6

7 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended December 31st 2009 and December 31st 2008 (PLN 000) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended Year ended Note Dec Dec (comparable data) Sales revenue 35 14,321,041 16,294,738 Cost of sales 36 (12,750,542) (15,287,258) Gross profit 1,570,499 1,007,480 Other operating income 37 74,264 29,817 Impairment losses on goodwill 17 - (12,645) Selling costs 36 (726,367) (737,368) General and administrative expenses 36 (357,914) (344,523) Other operating expenses 38 (140,689) (88,589) Operating profit/(loss) 419,793 (145,828) Finance income ,924 82,508 Finance expenses 40 (343,891) (466,931) Interest in investments in associated undertakings 18 8,227 26,551 Loss of control over subsidiary 17 30, Pre-tax profit/(loss) 1,109,608 (503,700) Corporate income tax 41 (197,796) 114, Net profit/(loss) from continuing operations 911,812 (389,415) ========== ========== Other comprehensive income Exchange differences on translating foreign operations 14,378 14,518 Other 2,471 12, Other comprehensive income, net 16,849 26,856 ========== ========== Total comprehensive income 928,661 (362,559) ========== ========== Net profit/(loss) from continuing operations attributable to: Owners of the Parent 900,761 (453,549) Non-controlling interests 29 11,051 64,134 ========== ========== 911,812 (389,415) ========== ========== Total comprehensive income attributable to: Owners of the Parent 908,083 (426,693) Non-controlling interests 20,578 64,134 ========== ========== 928,661 (362,559) ========== ========== Net earnings/(loss) from continuing operations per share (PLN) Weighted average number of shares (in thousands) , ,144 - basic 7.44 (3.74) - diluted - - The notes to the financial statements, presented on pages , are their integral part. 7

8 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended December 31st 2009 and December 31st 2008 (PLN 000) Cash flows from operating activities CONSOLIDATED STATEMENT OF CASH FLOWS Note Year ended Dec Year ended Dec (comparable data) Net profit/(loss) from continuing operations 911,812 (389,415) Adjustments: Share in net profit of subordinated undertakings accounted for using the equity method (8,227) (26,551) Depreciation and amortisation 284, ,012 Foreign exchange (gains)/losses (455,858) 366,730 Interest and dividends 36,864 13,028 (Profit)/loss on investing activities 231,013 29,564 Income tax paid (187,291) (308,695) Current income tax ,796 (114,285) (Increase)/decrease in receivables 25 (187,480) 164,938 (Increase)/decrease in inventories 25 (575,767) 141,685 Increase/(decrease) in liabilities and accruals and deferred income ,711 (109,199) (Decrease)/increase in provisions 25 (48,866) 35,511 Decrease/(increase) in prepayments and accrued income 25 19,045 (44,883) Settlement of financial instruments (216,047) 238,166 Other adjustments Net cash provided by/(used in) operating activities 694, , Cash flows from investing activities Dividends received 1,737 27,661 Interest received 4,252 30,655 Sale/ (purchase) of property, plant and equipment and intangible assets (3,072,664) (1,699,582) Sale/ (purchase) of current financial assets 2,758 1,509 Repayment of non-current loans advanced - 17 Non-current loans advanced - Acquisition of Energobaltic Sp. z o.o., net of cash acquired 17 (1,526) - Acquisition of Rafineria Nafty GLIMAR S.A., net of cash acquired - 3,987 Prepayments for tangible assets under construction (258,581) (778,953) Cash related to loss of control over subsidiary (367) - Other items, net (15,278) (2,406) Net cash provided by/(used in) investing activities (3,339,669) (2,417,112) Cash flows from financing activities Increase in loans and borrowings 2,263,790 2,352,749 Repayment of loans and borrowings (195,696) (86,449) Interest paid (126,067) (61,517) Dividend paid 29 (15) (2,578) Decrease in finance lease liabilities (1,737) (737) Settlement of financial instruments 216,047 (238,166) Other items, net (478) (157) Net cash provided by/(used in) financing activities 2,155,844 1,963, Effect of exchange rate fluctuations on cash held 2,339 3,546 ========= ========= Change in net cash (486,988) (138,751) ========= ========= Cash and cash equivalents at beginning of period , ,104 ========= ========= Cash and cash equivalents at end of period 25 (148,635) 338,353 ========= ========= - restricted cash 24 20,420 84,160 The notes to the financial statements, presented on pages , are their integral part. 8

9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended December 31st 2009 and December 31st 2008 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PLN 000) Note Share capital Statutory reserve funds Retained earnings Translation of foreign operations Equity attributable to owners of the Parent Non-controlling interests Total equity Jan , ,951 4,739,034 (7,458) 5,816, ,691 6,150,918 (comparable data) Total comprehensive income for the year ended Dec (441,211) 14,518 (426,693) 64,134 (362,559) Dividend to shareholders distribution of profit for (2,578) (2,578) Changes in the Group s organisational structure (169) (169) ======== ======== ======== ======= ========== ========== ========== Dec , ,951 4,297,823 7,060 5,389, ,078 5,785,612 (comparable data) ======== ======== ======== ======= ========== ========== ======== Jan , ,951 4,297,823 7,060 5,389, ,078 5,785,612 (comparable data) Total comprehensive income for the year ended Dec ,866 7, ,083 20, ,661 Dividend to shareholders distribution of profit for (19) (19) Changes in the Group s organisational structure - - (20) - (20) (238) (258) Share issue 26 16, ,173-16,173 Share premium , , ,773 Issue expenses including income tax - (376) - - (376) - (376) Changes in ownership interest ,835-22,835 (379,647) (356,812) ======== ======== ======== ======= ========== ========== ========== Dec ,873 1,311,348 5,221,504 14,277 6,677,002 36,752 6,713,754 ======== ======== ======== ======= ========== ========== ========== The notes to the financial statements, presented on pages , are their integral part. 9

10 NOTES TO THE FINANCIAL STATEMENTS 1. General Information Grupa LOTOS S.A. ( the Company, the Parent Undertaking ), the parent undertaking of the LOTOS Group ( the Group ) was established by virtue of the Notarial Deed dated September 18th On April 10th 2002, the Company was entered into the National Court Register maintained by the District Court of Gdańsk, XII Commercial Division of the National Court Register (currently the District Court for Gdańsk - Północ, VII Commercial Division of the National Court Register), under entry No. KRS The Company was assigned the Industry Identification Number (REGON) The Company s registered address is ul. Elbląska 135, Gdańsk, Poland. In 2003, by virtue of its decision of May 28th 2003, the District Court of Gdańsk, XII Commercial Division of the National Court Register, changed the Company s name from Rafineria Gdańska Spółka Akcyjna to Grupa LOTOS Spółka Akcyjna. The Group s core business consists in the production and processing of refined petroleum products and their wholesale and retail sale. The Group s business also includes exploration and extraction of crude oil and natural gas. The Parent Undertaking holds the following licences related to its core business: - Licence for production of liquid fuels, issued by the President of the Polish Energy Regulatory Office on November 28th 1998 and extended until December 31st 2025 by virtue of the decision of the President of the Energy Regulatory Office of October 5th 2007, - Licence for trade in liquid fuels, issued by the President of the Polish Energy Regulatory Office on December 23rd 1998 and extended until December 31st 2025 by virtue of the decision of the President of the Energy Regulatory Office of October 5th 2007, - Licence for storage of liquid fuels valid until October 15th 2016, issued by the President of the Polish Energy Regulatory Office on October 10th 2006, - Licence for generation of electricity in co-generation units, issued by the President of the Polish Energy Regulatory Office on September 29th 2000 and extended until September 1st 2018 by virtue of the decision of the President of the Polish Energy Regulatory Office of July 16th 2009, - Licence for trade in electricity valid until September 10th 2011, issued by the President of the Polish Energy Regulatory Office on September 5th 2001, - Licence for transmission and distribution of electricity valid until September 10th 2011, issued by the President of the Polish Energy Regulatory Office on September 5th In addition, the companies of the LOTOS Group hold the following licences: - Licences for oil and natural gas exploration in certain areas of Poland (in the Gaz Południe area valid until December 14th 2012, in the Gaz Północ, Gotlandia, Łeba, Rozewie, Sambia E and Sambia W areas valid until December 14th 2010, and in Wolin valid until June 14th 2011) issued by the Minister of the Environment, - Licences to conduct production on particular fields, issued by the Minister of the Environment (B6 field licence valid until November 7th 2032, B-3 field licence valid until July 29th 2016, B-8 field licence valid until September 5th 2031, and B-4 field licence valid until May 11th 2032), - Licence to conduct exploration for and production of hydrocarbons in the PL 316, PL 316B, PL 316CS, PL 316DS (from August 29th 2008) and PL 455 licence areas located on the Norwegian Continental Shelf, issued by the Norwegian Ministry of Energy and Petroleum, - Interests in the following exploration licences in the southern area of the North Sea and in the Norwegian Sea, granted by the Norwegian Ministry of Energy and Petroleum as an outcome of the pre-qualification round APA 2008: 1. Exploration licence PL 497: LOTOS Exploration and Production Norge AS 10% interest 2. Exploration license PL 498: LOTOS Exploration and Production Norge AS (Operator) 25% interest 3. Exploration license PL 503: LOTOS Exploration and Production Norge AS (Operator) 25% interest 4. Exploration license PL 515: LOTOS Exploration and Production Norge AS 20% interest - A 50% interest in and operator status with respect to licence PL 556 located in the North Sea and 10% interest in licence PL 497B (an extension of licence PL497), granted by the Norwegian Ministry of Energy and Petroleum as an outcome of the APA 2009 licence round. - Licences issued by the President of the Energy Regulatory Office for the following activities: production, storage of and trade in liquid fuels, transmission and distribution of heat, generation, transmission and distribution of electricity, and trade in electricity, - Licences for production, storage and marketing of biocomponents (methyl ester), issued by the President of the Agricultural Market Agency (Agencja Rynku Rolnego), - Licence for freight transport by rail and traction vehicles renting issued by the President of the Railway Transport Authority (Urząd Transportu Kolejowego). 10

11 2. Composition of the Group The following table presents the subsidiary undertakings of the LOTOS Group, their business profiles, consolidation method, and the Group s stakes in their share capitals. Name Parent Undertaking Grupa LOTOS S.A. Registered office Gdańsk Direct Subsidiary Undertakings LOTOS Paliwa Sp. z o.o. LOTOS Gaz S.A. (1) LOTOS Oil S.A. LOTOS Asfalt Sp. z o.o. LOTOS Ekoenergia S.A. Gdańsk Mława Gdańsk Gdańsk Gdańsk Business profile Method of consolidation / valuation of shares Percentage of share capital held by the Group Dec Dec Production and processing of refined petroleum Not applicable products (mainly fuels) and Not applicable Not applicable their wholesale Wholesale and retail sale of fuels, light fuel oil, management of the LOTOS service station network Production, wholesale and retail sale of LPG, the company does not conduct operations at the moment Production and sale of lubricating oils and lubricants, and domestic sale of base oils Production and sale of bitumens The company has not commenced operations full % % full % % full % % full % % full % % LOTOS Kolej Sp. z o.o. Gdańsk Railway transport full % % Maintenance of LOTOS Serwis mechanical and electric Gdańsk Sp. z o.o. operations and controlling devices, repairs full % % LOTOS Lab Sp. z o.o. Gdańsk Laboratory testing full % % LOTOS Straż Sp. z o.o. Gdańsk Fire protection full % % LOTOS Ochrona Personal and property Gdańsk Sp. z o.o. protection full % % LOTOS Parafiny Production and sale of Jasło Sp. z o.o. paraffin full % % (2) Wholesale of petroleum LOTOS Tank Sp. z o.o. Gdańsk products full % % LOTOS Czechowice Czechowice- Storage and distribution of S.A. (parent undertaking Dziedzice fuels of another group) full 85.04% (3) 80.04% LOTOS Jasło S.A. (parent undertaking of another group) Petrobaltic S.A. (4) (parent undertaking of another group) UAB LOTOS Baltija Jasło Gdańsk Lithuania Services related to distribution of petroleum products, storage of fuels, building and maintenance of fuel stocks; production and processing of refined petroleum products and their wholesale and retail sale Acquisition of crude oil and natural gas reserves and their exploitation Wholesale and retail sale of lubricating oils in Lithuania, Belarus, Ukraine and Latvia; from January 2009 business and legal advisory services full 85.01% (3) 80.01% full 99.32% (3) 69.00% full % % 11

12 Name LOTOS Park Technologiczny Sp. z o.o. Registered office Jasło Indirect Subsidiary Undertakings RCEkoenergia Sp. z o.o. LOTOS Biopaliwa Sp. z o.o. RC Serwis Sp. z o.o. PLASTEKOL Organizacja Odzysku S.A. KRAK - GAZ Sp. z o.o. in bankruptcy by liquidation Miliana Shipping Company Ltd. LOTOS Exploration and Production Norge AS Aphrodite Offshore Services Ltd. Czechowice- Dziedzice Czechowice- Dziedzice Czechowice- Dziedzice Method of consolidation Percentage of share capital held by the Group Business profile / valuation of shares Dec Dec Business and management consultancy services/the company does not conduct full 0.29% (5) 86.91% operations at the moment Provision of services full 85.04% (6) 80.04% Production of fatty acid methyl esters (FAME) (7) full 85.04%(6) 80.04% Provision of services - (8) - (9) 86.91% Jasło Provision of services full 81.18% (6,10) 66.81% (10) Kraków Wholesale and retail sale of LPG - (1) % Cyprus Provision of services full % (6) 68.93% Stavanger Norway Netherlands Antilles Oil exploration and production at the Norwegian continental shelf, provision of services related to oil exploration and production; the company commenced operations in November 2007 full 99.32% (6) 69.00% (11) Provision of services full 99.32% (6) 69.00% Energobaltic Sp. z o.o. Gdańsk (13) Production activities full (12) 99.32% 32.16% (1) Until July 23rd 2009 LOTOS Gaz S.A. controlled KRAK-GAZ Sp. z o.o., a subsidiary. On April 30th 2009, KRAK-GAZ Sp. z o.o. filed a bankruptcy petition with the District Court for Kraków Śródmieście, VIII Commercial Division for Bankruptcy and Recovery. On July 23rd 2009, the District Court for Kraków Śródmieście, VIII Commercial Division for Bankruptcy and Recovery resolved to declare KRAK- GAZ Sp. z o.o. s bankruptcy by liquidation of the company s assets (see Note 17). (2) On August 12th 2009, the registered office of LOTOS Tank Sp. z o.o. was relocated from Jasło to Gdańsk. (3) On July 9th 2009, an agreement was signed providing for the acquisition by the State Treasury of Grupa LOTOS S.A. shares. In exchange, the State Treasury made non-cash contributions to Grupa LOTOS S.A. in the form of 30.32% of shares in Petrobaltic S.A., 5% of shares in LOTOS Czechowice S.A. and 5% of shares in LOTOS Jasło S.A. (see Note 26). (4) On March 31st 2010, change in the name of Przedsiębiorstwo Poszukiwań i Eksploatacji Złóż Ropy i Gazu Petrobaltic Spółka Akcyjna to LOTOS Petrobaltic Spółka Akcyjna (abbreviated name: LOTOS Petrobaltic S.A.) was entered in the National Court Register. (5) On November 20th 2009, the then-shareholders of LOTOS Park Technologiczny Sp. z o.o. sold their shares to LOTOS Park Technologiczny Sp. z o.o.: - Grupa LOTOS S.A. 9,400 shares out of the total of 9,500 shares held, - LOTOS Czechowice S.A. the entire stake of 12,314 shares, - LOTOS Jasło S.A. the entire stake of 9,866 shares, - LOTOS Serwis Sp. z o.o. the entire stake of 2,834 shares, - Partner Holding Management Sp. z o.o. - the entire stake of 100 shares. LOTOS Park Technologiczny Sp. z o.o. acquired its own shares with a view to their voluntary retirement by way of reduction of the share capital. Following the transaction, the shareholder structure of LOTOS Park Technologiczny Sp. z o.o. is as follows: LOTOS Park Technologiczny Sp. z o.o %, Grupa LOTOS S.A. 0.29%. Grupa LOTOS S.A. exercises control over LOTOS Park Technologiczny Sp. z o.o. given the GM powers vested in Grupa LOTOS S.A. as the only shareholder entitled to exercise rights attached to the shares held. On March 31st 2010, reduction in the share capital of LOTOS Park Technologiczny Sp. z o.o. to PLN 50 thousand was registered. The share capital of LOTOS Park Technologiczny Sp. z o.o. is divided into 100 shares. Following registration of the changes in the National Court Register, Grupa LOTOS S.A. holds a 100% stake in LOTOS Park Technologiczny Sp. z o.o. (6) The shareholding changes described in item (3) above led to changes in the Group s indirect interests in the share capitals of the subsidiaries of Petrobaltic S.A. (currently LOTOS Petrobaltic S.A.), LOTOS Czechowice S.A. and LOTOS Jasło S.A. (7) On March 1st 2009, LOTOS Biopaliwa Sp. z o.o. commenced operations. (8) Shares contributed to LOTOS Park Technologiczny Sp. z o.o. by the LOTOS Czechowice Group on January 2nd (9) On November 6th 2009, LOTOS Park Technologiczny Sp. z o.o. sold 100% of shares in RC Serwis Sp. z o.o. to a third party for PLN 1,800 thousand. As a result of this transaction, the Group realised a gain of PLN 688 thousand. (10) In May June 2008 and January December 2009, LOTOS Jasło S.A. acquired shares in PLASTEKOL Organizacja Odzysku S.A. As a result of the executed transactions, LOTOS Jasło S.A. s share in the share capital of PLASTEKOL Organizacja Odzysku S.A. increased to 95.5%. (11) On May 19th 2008, the Management Board of Petrobaltic S.A. made a decision to initiate the registration procedure concerning the increase of the share capital and the acquisition by Petrobaltic S.A. of 80% of the shares in LOTOS Exploration and Production Norge AS. Petrobaltic S.A. purchased 32 million new shares for the price equal to their par value, i.e. NOK 32m (or PLN 13,782 thousand, 12

13 translated at the mid-exchange rate for NOK quoted by the National Bank of Poland for May 19th 2008). On June 12th 2008, Grupa LOTOS S.A. entered into an agreement with Petrobaltic S.A. to sell to Petrobaltic S.A. 8 million shares in LOTOS Exploration and Production Norge AS, representing 20% of the company s share capital. The shares transferred under the agreement, with the total par value of NOK 8m (or PLN 3,376 thousand, translated at the mid-exchange rate for NOK quoted by the National Bank of Poland for June 12th 2008), conferring the right to 8 million votes, are equal and indivisible shares and represent 20% of the share capital of LOTOS E&P Norge AS. As a result of the transaction, Petrobaltic S.A. holds 40 million shares, representing 100% of the share capital of LOTOS Exploration and Production Norge AS. (12) On November 27th 2009, Petrobaltic S.A. acquired control over Energobaltic Sp. z o.o. (see Note 17). (13) The relocation of Energobaltic Sp. z o.o. s registered office from Gdańsk to Władysławowo was registered on January 25th As at December 31st 2009, the Group held an indirect equity interest of 40.31% shares in associated undertaking AB Geonafta Group (see Note 18). As at December 31st 2009 and December 31st 2008, the Group s shares in the total vote at the general shareholders meetings of its subsidiary undertakings were equal to its shares in their share capitals, except in the case of LOTOS Park Technologiczny Sp. z o.o. Changes in the Shareholder Structure of PLASTEKOL Organizacja Odzysku S.A. On January 30th 2009, LOTOS Jasło S.A. acquired 15 shares in PLASTEKOL Organizacja Odzysku S.A., representing 1.5% of the company s share capital, from Krzysztof Boniecki, who conducts business activity under the business name of Przedsiębiorstwo Wielobranżowe ROBAC. Following the transaction, LOTOS Jasło S.A. s holding in the share capital of PLASTEKOL Organizacja Odzysku S.A. increased from 83.5% to 85% (or from 835 to 850 shares). On February 13th 2009, LOTOS Jasło S.A. acquired 30 shares in PLASTEKOL Organizacja Odzysku S.A., representing 3.0% of the company s share capital, from EKO-OPEN Sp. z o.o. Following the transaction, LOTOS Jasło S.A. s holding in the share capital of PLASTEKOL Organizacja Odzysku S.A. increased from 85% to 88% (or from 850 to 880 shares). On April 6th 2009, LOTOS Jasło S.A. acquired 30 shares in PLASTEKOL Organizacja Odzysku S.A., representing 3% of the company s share capital, from Jan B. Tylisz, who conducts business activity under the business name of Przedsiębiorstwo Handlowo - Usługowe TYL-OIL. Following the transaction, LOTOS Jasło S.A. s stake in PLASTEKOL Organizacja Odzysku S.A. increased from 88% to 91% (or from 880 to 910 shares). On May 13th 2009, LOTOS Jasło S.A. acquired 30 shares of PLASTEKOL Organizacja Odzysku S.A., representing 3% of the company s share capital, from JASCHEM Zakład Petrochemiczno-Rafineryjny Sp. z o.o. Following the transaction, LOTOS Jasło S.A. s stake in PLASTEKOL Organizacja Odzysku S.A. increased from 91% to 94% (or from 910 to 940 shares). On December 30th 2009, LOTOS Jasło S.A. acquired 15 shares in PLASTEKOL Organizacja Odzysku S.A., representing 1.5% of the company s share capital, from Krzysztof Boniecki, who conducts business activity under the business name of Przedsiębiorstwo Wielobranżowe ROBAC. Following the transaction, LOTOS Jasło S.A. s holding in the share capital of PLASTEKOL Organizacja Odzysku S.A. increased from 94% to 95.5% (or from 940 to 955 shares). Share Capital Increase at LOTOS Exploration and Production Norge AS and Acquisition of New Shares by Petrobaltic S.A. (currently LOTOS Petrobaltic S.A.) On January 20th 2009, the Management Board of Petrobaltic S.A. resolved to commence the procedure for registration of another share capital increase at LOTOS Exploration and Production Norge AS and acquisition of the new shares by Petrobaltic S.A. The share capital of LOTOS Exploration and Production Norge AS was increased from NOK 190m (the equivalent of PLN 90m, translated at the NOK/PLN mid-exchange rate quoted by the National Bank of Poland for January 20th 2009) to NOK 430m (the equivalent of PLN 203m, translated at the NOK/PLN mid-exchange rate quoted by the National Bank of Poland for January 20th 2009). The new shares comprising the increased share capital, whose aggregate par value amounts to NOK 240m (the equivalent of PLN 113m, translated at the NOK/PLN midexchange rate quoted by the National Bank of Poland for January 20th 2009) are equal and indivisible, and they are treated by Petrobaltic S.A. as a long-term equity investment. Petrobaltic S.A. covered the 240 million new shares in LOTOS Exploration and Production Norge AS with cash. The purchase price for the shares was equal to their par value, i.e. NOK 240m (the equivalent of PLN 113m, translated at the NOK/PLN mid-exchange rate quoted by the National Bank of Poland for January 20th 2009) and was covered with Petrobaltic s internally-generated funds. On February 26th 2009, the Norwegian companies registrar Brønnøysundregistrene registered the share capital increase at LOTOS Exploration and Production Norge AS. 13

14 Reduction of the Share Capital of UAB LOTOS Baltija On September 21st 2009, the reduction of the share capital of UAB LOTOS Baltija from LTL thousand to LTL thousand was registered. Following the reduction, the Company s share capital is divided into 5,876 ordinary registered shares with a par value of LTL 65 per share. Increase of the Share Capital of LOTOS Gaz S.A. On December 14th 2009, an Extraordinary General Shareholders Meeting of LOTOS Gaz S.A. was held, during which the share capital of LOTOS Gaz S.A. was increased from PLN 3,680 thousand to PLN 10,080 thousand, i.e. by PLN 6,400 thousand, by way of raising the par value of the existing 160,000 shares from PLN 23 to PLN 63 per share. Grupa LOTOS S.A. will acquire the increased par value of the shares in exchange for cash. Payment for the shares was made in full before the registration of the share capital increase at LOTOS Gaz S.A. As at the date of approval of these interim consolidated financial statements, the share capital increase described above has not been registered. Acquisition of an Organised Part of Business by LOTOS Paliwa Sp. z o.o. On December 14th 2009, LOTOS Paliwa Sp. z o.o. acquired from LOTOS Gaz S.A. an organised part of business in the form of the LPG Trading Division of LOTOS Gaz, comprising mainly: - ownership title to movable property, including plant and materials and rights in rem in movable property, - rights under movable property lease agreements and rights to use movables, - business contracts with customers, - business contracts with fuel suppliers and service providers. The acquisition cost of the organised part of business in the form of the LPG Trading Division of LOTOS Gaz amounted to PLN 15,000 thousand. Acquisition of Assets by LOTOS Serwis Sp. z o.o. Pursuant to the agreement of October 29th 2009 between Petrobaltic S.A. (currently LOTOS Petrobaltic S.A.) and LOTOS Serwis Sp. z o.o., movable property (comprising tangible assets and low-value assets) making up the Land Transport Department and the Warehouse Section of Petrobaltic S.A., worth PLN 3,454 thousand, was sold. Concurrently, the companies entered into an agreement on the provision of warehouse management services and internal transport, storage and similar services. In connection with the above transaction, on November 1st 2009, 23 employees of the Land Transport Department and the Warehouse Section were moved to LOTOS Serwis Sp. z o.o. under Art. 23 (1) of the Polish Labour Code. 14

15 3. Composition of the Management and Supervisory Boards of the Parent Undertaking In the period from January 1st 2009 until the expiry of the sixth term of office, the composition of the Management Board of Grupa LOTOS S.A. was as follows: Paweł Olechnowicz President of the Management Board, Chief Executive Officer, Mariusz Machajewski Vice-President of the Management Board, Chief Financial Officer, Marek Sokołowski Vice-President of the Management Board, Chief Operation Officer. On June 25th 2009, the Supervisory Board of Grupa LOTOS S.A. appointed the Management Board of Grupa LOTOS S.A. of the seventh term of office, including: Paweł Olechnowicz President of the Management Board, Chief Executive Officer, Mariusz Machajewski Vice-President of the Management Board, Chief Financial Officer, Marek Sokołowski Vice-President of the Management Board, Chief Operation Officer, Maciej Szozda Vice-President of the Management Board, Chief Commercial Officer. As at December 31st 2009 and the date of approval of these consolidated financial statements, the composition of the Management Board of Grupa LOTOS S.A. was as follows: Paweł Olechnowicz President of the Management Board, Chief Executive Officer, Mariusz Machajewski Vice-President of the Management Board, Chief Financial Officer, Marek Sokołowski Vice-President of the Management Board, Chief Operation Officer, Maciej Szozda Vice-President of the Management Board, Chief Commercial Officer. As at January 1st 2009, the composition of the Supervisory Board of Grupa LOTOS S.A. was as follows: Wiesław Skwarko Chairman of the Supervisory Board, Leszek Starosta Deputy Chairman of the Supervisory Board, Mariusz Obszyński Secretary of the Supervisory Board, Radosław Barszcz Member of the Supervisory Board, Piotr Chajderowski Member of the Supervisory Board, Małgorzata Hirszel Member of the Supervisory Board, Jan Stefanowicz Member of the Supervisory Board. On March 10th 2009, the Company received a resignation, with effect from March 10th 2009, by Mr Piotr Chajderowski, Member of the Supervisory Board of Grupa LOTOS S.A. of the seventh term of office, from his position as Member of the Company s Supervisory Board of the seventh term of office. On April 27th 2009, the General Shareholders Meeting of Grupa LOTOS S.A. adopted a resolution to appoint Mr Ireneusz Fąfara to the Company s Supervisory Board of the seventh term of office. As at December 31st 2009, the composition of the Supervisory Board of Grupa LOTOS S.A. was as follows: Wiesław Skwarko Chairman of the Supervisory Board, Leszek Starosta Deputy Chairman of the Supervisory Board, Mariusz Obszyński Secretary of the Supervisory Board, Radosław Barszcz Member of the Supervisory Board, Małgorzata Hirszel Member of the Supervisory Board, Jan Stefanowicz Member of the Supervisory Board, Ireneusz Fąfara Member of the Supervisory Board. On February 11th 2010, the Extraordinary General Shareholders Meeting of Grupa LOTOS S.A. adopted a resolution to remove Mr Mariusz Obszyński, Mr Radosław Barszcz and Mr Jan Stefanowicz. Next, Messrs Oskar Pawłowski, Michał Rumiński and Rafał Wardziński were appointed as members of the Supervisory Board of the seventh term of office. On March 29th 2010, the Company received a resignation by Mr Ireneusz Fąfara, Member of the Supervisory Board of Grupa LOTOS S.A., from his position as Member of the Company s Supervisory Board. 15

16 As at the date of approval of these consolidated financial statements, the composition of the Supervisory Board of Grupa LOTOS S.A. was as follows: Wiesław Skwarko Chairman of the Supervisory Board, Leszek Starosta Deputy Chairman of the Supervisory Board, Oskar Pawłowski Secretary of the Supervisory Board, Małgorzata Hirszel Member of the Supervisory Board, Michał Rumiński Member of the Supervisory Board, Rafał Wardziński Member of the Supervisory Board. 4. Approval of the Consolidated Financial Statements These consolidated financial statements were approved for publication by the Management Board on April 26th Going Concern These consolidated financial statements were prepared on the assumption that the Group companies would continue their business activities in the foreseeable future. As at the date of approval of these consolidated financial statements no facts or circumstances have been identified that might pose a threat to the Group s companies continuing as going concerns in the 12 months following the balance-sheet date. 6. Duration of the Group The duration of the Parent Undertaking and its subsidiary undertakings is unlimited. 7. Balance-Sheet Date and the Period Covered by the Financial Statements These consolidated financial statements of the LOTOS Group comprise the balance-sheet data as at December 31st 2009 and comparable data as at December 31st The statement of comprehensive income, statement of cash flows and statement of changes in the Group s equity present the data for the period January 1st December 31st 2009 along with the comparable data for January 1st December 31st The financial information as at December 31st 2009 and December 31st 2008, and for the years then ended, contained in these consolidated financial statements, was audited. The financial information as at December 31st 2008 and for the year then ended was audited and an opinion on it was issued by the auditor on April 27th 2009 (this does not refer to selected comparable financial information, as mentioned in Note 9). 8. Measurement Currency and Reporting Currency The measurement and reporting currency of these consolidated financial statements is the Polish złoty (PLN). These consolidated financial statements are presented in the złoty (PLN), and all the figures are presented in thousands of złoty, unless indicated otherwise. 9. Basis of Preparation of the Consolidated Financial Statements These consolidated financial statements were prepared in accordance with the EU-endorsed International Financial Reporting Standards ( IFRS ) which have been published and are in effect as at December 31st The IFRS include the standards and interpretations adopted by the International Accounting Standards Board ( IASB ) and the International Financial Reporting Interpretation Committee ( IFRIC ). With the exception of the Parent Undertaking, the foreign undertakings, Petrobaltic S.A., LOTOS Asfalt Sp. z o.o., LOTOS Oil S.A. and LOTOS Paliwa Sp. z o.o., the Group companies maintain their accounting books in accordance with the accounting standards defined in the Polish Accountancy Act of September 29th These consolidated financial statements include adjustments which are absent from the accounting books of the Group s 16

17 undertakings, and which have been introduced to ensure consistency of the undertakings financial information with the IFRS. The accounting policies and calculation methods adopted in the preparation of these consolidated financial statements are the same as those used in the preparation of the consolidated financial statements for the year ended December 31st 2008, except for the retrospective disclosure of valuation of shares in associated undertaking AB Geonafta (previously AB Naftos Gavyba) in connection with the change in accounting policies for jointly-controlled undertakings made by AB Geonafta and its group and in connection with an error identified in the non-consolidated and consolidated financial statements of those undertakings as at and for the year ended December 31st Accordingly, the Group restated the value of shares in associated undertaking AB Geonafta (previously AB Naftos Gavyba) as at December 31st 2008 by PLN (14,440) thousand and the corresponding equity items attributable to the Parent Undertaking as at December 31st 2008 (retained earnings: PLN 13,307 thousand, currency-translation differences: PLN 1,294 thousand) and non-controlling interests by PLN (161) thousand. The Group also retrospectively adjusted the individual items of equity as at December 31st 2007: retained earnings by PLN (7,187) thousand and currency-translation differences by PLN 7,187 thousand. This retrospective adjustment had no effect on the value of shares in associated undertaking AB Geonafta (previously AB Naftos Gavyba) as at December 31st The Group decided to early apply as of January 1st 2009 the revised IFRS 3 Business Combinations and the revised IAS 27 Consolidated and Separate Financial Statements. Application of the revised IFRS 3 and the revised IAS 27 did not have any material bearing on the previous periods. The Group has reviewed the new interpretations, standards and amendments to the existing standards. Except for the Revised IAS 1 Presentation of Financial Statements and IFRS 8 Operating Segments, the new interpretations, standards and amendments to existing standards which are in effect and have been adopted by the European Union, have no material impact on the accounting policies applied by the Group. The following interpretations, standards and amendments to the existing standards have been adopted or are pending adoption by the European Union, and are effective in periods beginning on or after January 1st 2009: Amendment to IAS 23 Borrowing Costs (adopted by the European Union) Amendment to IAS 1 Presentation of Financial Statements (adopted by the European Union) IFRS 8 Operating Segments (adopted by the European Union) Amendment to IFRS 2 Share-Based Payments Vesting Conditions and Cancellations (adopted by the European Union) Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements Puttable Instruments and Obligations Arising on Liquidation (adopted by the European Union) Improvements to the International Financial Reporting Standards a collection of amendments to the IFRS (endorsed by the European Union) Amendments to IFRS 1 First-Time Adoption of IFRSs and IAS 27 Consolidated and Separate Financial Statements Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (endorsed by the European Union) IFRIC 13 Customer Loyalty Programmes (applies to annual periods beginning on or after July 1st 2008, endorsed by the European Union) IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (applies to annual periods beginning on or after January 1st 2009, endorsed by the European Union) IFRIC 15 Agreements for the Construction of Real Estate (applies to annual periods beginning on or after January 1st 2009, endorsed by the European Union) IFRIC 16 Hedges of a Net Investment in a Foreign Operation (applies to annual periods beginning on or after October 1st 2008, endorsed by the European Union) Amendments to IAS 39 Financial Instruments: Exposures Qualifying for Hedge Accounting (apply to annual periods beginning on or after July 1st 2009, endorsed by the European Union) Revised IFRS 1 First-Time Adoption of IFRSs (applies to annual periods beginning on or after July 1st 2009, endorsed by the European Union) IFRIC 17 Distributions of Non-Cash Assets to Owners (applies to annual periods beginning on or after July 1st 2009, endorsed by the European Union) Amendment to IFRS 7 Improving Disclosures about Financial Instruments (applies to annual periods beginning on or after January 1st 2009, endorsed by the European Union) IFRIC 18 Transfers of Assets from Customers (applies to annual periods beginning on or after July 1st 2009, endorsed by the European Union) 17