FABRYKA FARB I LAKIERÓW ŚNIEŻKA S.A.

Transcription

1 FABRYKA FARB I LAKIERÓW ŚNIEŻKA S.A. INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE 6MONTH PERIOD ENDED ON 30 JUNE 2012 AND THE INDEPENDENT STATUTORY AUDITOR S REVIEW REPORT

2 Selected financial data... 3 Interim condensed statement of comprehensive income... 4 Interim condensed statement of financial position... 5 Interim condensed cash flow statement... 6 Interim condensed statement of changes in equity General information Basis for preparing the interim condensed financial statements Material accounting principles (policy) Seasonal nature of business Material figures based on professional judgment and estimates Professional judgement Estimation uncertainty Information on business segments Cash and cash equivalents Dividend payout and proposed dividend payout Income tax Property, plant and equipment Purchase and sale Impairment losses Intangible assets Purchase and sale Impairment losses Interests, shares and other longterm assets Longterm receivables Lease receivables Provisions Investment property Share capital Shortterm liabilities Interestbearing bank loans and borrowings Accruals Equity securities Discontinued operations Financial instruments Objectives and principles of financial risk management Equity management Contingent liabilities and contingent assets Investment liabilities Lease liabilities Transactions with related parties Further information Events after the balance sheet date /2

3 SELECTED FINANCIAL DATA in thousands of PLN 6month period ended on 30 June month period ended on 30 June 2011 in thousands of EUR 6month period ended on 30 June month period ended on 30 June 2011 I. Net revenue from sale of products, goods and materials II. Operating profit (loss) III. Gross profit (loss) IV. Net profit (loss) V. Comprehensive income for the period VI. Net operating cash flows VII. Net cash flow from investing activities (11 923) (5 421) (2 822) (1 366) VIII. Net cash flow from financing activities (1 946) (491) IX Total net cash flows (2 313) (583) X. Total assets XI. Liabilities and provisions for liabilities XII. Longterm liabilities XIII. Shortterm liabilities XIV. Equity XV. Share capital XVI. Number of shares XVII. Earnings (loss) per ordinary share (in PLN/EUR) XVIII. Diluted earnings (loss) per ordinary share (in PLN/EUR) XIX. Book value per share (in PLN/EUR) XX. Diluted book value per share (in PLN/EUR) XXI. Declared or paid dividend per share (in PLN/EUR) EUR exchange rates applied for converting the statements: The individual items of the condensed statement of comprehensive income have been converted according to the average EUR exchange rate applicable in the period, i.e.: over 6 months of 2012: , over 6 months of 2011: The individual items of the statement of financial position have been converted according to the EUR exchange rate at the end of the period: as at 30 June 2012: , as at 30 June 2011: The explanatory notes to the interim condensed financial statements on pages 8 to 23 are an integral part of the statements. 3/3

4 INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME Note 3month period ended on 30 June 2012 (not audited) 6month period ended on 30 June 2012 (not audited) 3month period ended on 30 June 2011 (not audited) 6month period ended on 30 June 2011 (not audited) Continued operations Revenue from sale of products Revenue from sale of goods Revenue from sale of materials Sales revenue Prime cost of sale Gross profit / (loss) on sales Other operating revenue Selling costs General administrative expenses Other operating expenses Operating profit/(loss) Financial revenue Financial costs Gross profit/(loss) Income tax Net profit/(loss) on continued operations Discontinued operations Profit/(loss) for the period on discontinued operations Net profit/(loss) for the period Other net comprehensive income COMPREHENSIVE INCOME FOR THE PERIOD Earnings/(losses) per share: basic, from profit for the reporting period basic, from profit on continued operations for the reporting period diluted, from profit for the reporting period diluted, from profit on continued operations for the reporting period The explanatory notes to the interim condensed financial statements on pages 8 to 23 are an integral part of the statements. 4/4

5 INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION as at 30 June 2012 ASSETS Note 30 June 2012 (not audited) 31 December 2011 Noncurrent assets Property, plant and equipment Investment property Intangible assets Financial assets available for sale Interests, shares and other longterm assets Longterm receivables 13, Deferred tax assets Current assets Inventory Trade and other receivables Income tax receivables _ Derivative financial instruments Other financial assets Other nonfinancial assets Cash and cash equivalents Noncurrent assets classified as held for sale TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to shareholders of the parent company Share capital Share premium Equity shares (28 966) Other reserve capitals Revaluation reserve Supplementary capital Retained earnings/losses brought forward Longterm liabilities Interestbearing loans and borrowings Provisions Other liabilities Deferred income tax provision Accruals Shortterm liabilities Trade and other liabilities Current portion of interestbearing loans and borrowings Derivative financial instruments Income tax liabilities 923 Accruals Provisions Liabilities directly related to noncurrent assets classified as held for sale Total liabilities TOTAL EQUITY AND LIABILITIES The explanatory notes to the interim condensed financial statements on pages 8 to 23 are an integral part of the statements. 5/5

6 INTERIM CONDENSED CASH FLOW STATEMENT Operating cash flow Note 6month period ended on 30 June month period ended on 30 June 2011 Profit before tax Adjustments: Depreciation/amortisation of PP&E and intangible assets Impairment losses on property, plant and equipment (Profit) loss on investing activities (527) (81) (Profit) loss on sales of financial assets available for sale Profit (loss) on measurement of investment real property at fair value (Profit) loss on changes in the fair value of financial assets disclosed at fair value (Profit) loss on changes in the fair value of financial assets disclosed at fair value 31 Foreign exchange differences (604) (1 686) Unpaid interest Share in (profit) loss of affiliates Allowance for negative goodwill Interest received Net interest and dividends 134 (2 050) Other adjustments Operating cash flow before changes in working capital Movement in inventories (6 803) (14 514) Movement in receivables (43 777) Movement in liabilities Movement in provisions Movement in prepayments and accruals Cash generated by operating activities Interest costs Income tax paid (758) Net operating cash Cash flows from investing activities Expenses on acquisition of intangible assets (83) (149) Proceeds from sales of intangible assets Expenses on acquisition of property, plant and equipment and intangible assets (13 746) (9 329) Proceeds from sales of property, plant and equipment Expenses on acquisition of investment real property Proceeds from lease of PP&E Expenses on acquisition of financial assets available for sale Proceeds from sales of financial assets available for sale Proceeds from borrowings repaid 393 Expenses related to acquisition of subsidiaries (less acquired cash) Proceeds from sale of related parties Proceeds from government subsidies received Borrowings granted 29 (1 790) (35 140) Received repayments of borrowings granted Interest received Dividends received Net cash used in investing activity (11 923) (5 421) Cash flows from financing activities Net proceeds from issue of shares Purchase of equity shares (28 966) Proceeds from issue of debt securities Repurchase of debt securities Proceeds from loans and borrowings raised Repayment of loans and borrowings (3 878) Repayment of liabilities under finance lease (51) Other proceeds 230 Interest (2 328) (1 944) Other expenses Dividends and promoter certificates paid (36) (719) Net cash from financing activities (1 946) Net increase (decrease) in cash and cash equivalents (2 313) Cash and cash equivalents at the beginning of the period Movements in cash and cash equivalents due to foreign exchange differences (120) 48 Movements in cash relative to interest due Cash and cash equivalents at the end of the period The explanatory notes to the interim condensed financial statements on pages 8 to 23 are an integral part of the statements. 6/6

7 INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY Note Share capital Share premium Equity shares Other reserve capitals Supplementary capital Revaluation reserve Retained earnings/losses brought forward Total equity As at 1 January Changes in accounting policy (principles) As at 1 January 2011, restated Net profit/(loss) for the period Reclassification to supplementary capital from distribution of profit (12 217) Comprehensive income for the period Redemption of equity shares Payment of promoter certificates (720) (720) Payment of dividend (23 036) (23 036) As at 30 June 2011 (not audited) As at 1 January Net profit/(loss) for the period Reclassification to supplementary capital from distribution of profit Other net comprehensive income for the period Comprehensive income for the period Issue of shares Costs of the issue of shares Sharebased payment Purchase of equity shares 17, 21 (28 966) (28 966) Payment of promoter certificates Declared payment of dividend 8 (15 221) (1 812) (17 033) As at 30 June 2012 (not audited) (28 966) The explanatory notes to the interim condensed financial statements on pages 8 to 20 are an integral part of the statements. 7/7

8 EXPLANATORY NOTES 1. General information Fabryka Farb i Lakierów Śnieżka S.A. ("Company") is a joint stock company based in Lubzina and its shares are publicly traded. The Company's interim condensed financial statements cover the 6month period ended on 30 June 2012 and contain comparative figures for the 6month period ended on 30 June 2011 and figures as at 31 December The statement of comprehensive income and the notes to the statement of comprehensive income include data for the 3month period ended on 30 June 2012 as well as comparative figures for the 3 month period ended on 30 June 2011; the figures were neither reviewed nor audited by a statutory auditor. The company is entered in the register of entrepreneurs of the National Court Register maintained by the District Court in Rzeszów, 12th Economic Department of the National Court Register, under KRS no The company has been assigned the statistical number REGON The Company has been established for an indefinite period of time. The Company's core business is the manufacture of paints, varnishes, adhesives, solvents, etc. On 22 August 2012, these interim condensed financial statements of the Company for the 6month period ended on 30 June 2012 were approved by the Management Board for publication. The Company also prepared the interim condensed consolidated financial statements for the 6month period ended on 30 June 2012, which were approved by the Management Board for publication on 22 August Basis for preparing the interim condensed financial statements These interim condensed financial statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ), in particular with International Accounting Standard 34 and the IFRS as adopted by the EU. As at the day when these statements were approved for publication, in consideration of the IFRS implementation process taking place in the EU and the Company's business, and with regard to the accounting principles applied by the Company, there is no difference between the already effective IFRS and the IFRS approved by the EU. The IFRS include standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC). These interim condensed financial statements are presented in PLN and all figures, unless indicated otherwise, are provided in thousands of PLN. These interim condensed financial statements have been prepared based on the going concern assumption. As at the day of approving these financial statements, there are no circumstances threatening the Company s going concern status. The interim condensed financial statements do not include full information and disclosures required in the annual financial statements and they should be read in conjunction with the Company's financial statements for the year ended on 31 December 2011, which were approved for publication on 23 April The interim financial result may not fully reflect the realisable financial result for the financial year. 3. Material accounting principles (policy) The accounting principles (policy) used for preparing the interim condensed financial statements are consistent with the principles applied when preparing the Company's annual financial statements for the year ended on 31 December 2011, except for the application of new or amended standards and interpretations effective for annual periods beginning on 1 January 2012 or later. Amendments to IFRS 7 Financial Instruments: transfer of financial assets effective for annual periods beginning 1 July 2011 or later. 8/8

9 The Company did not decide to perform an early adoption of any standards, interpretations or revisions which have already been published but are not yet effective. 4. Seasonal nature of business Given the seasonal nature of the Company's business, higher operating revenues and profits are usually generated in Q2 and Q3 of every financial year. Higher sales revenue during summer is attributable mainly to a higher demand for our products. 5. Material figures based on professional judgment and estimates 5.1. Professional judgement In the application of the accounting principles (policy) to the issues discussed below, the most important aspect, apart from the accounting estimates, was the professional judgment of the management. One of the areas which require judgment on part of the management is the verification of indications for the impairment of investments in related parties. Lease is another area where, in addition to accounting estimates, the Company uses professional judgment. The Company classifies lease as operating or finance lease based on the assessment of the extent to which the risks and benefits from holding the subject of lease are attributable to the lessor and to the lessee. This assessment is based on the economic content of each transaction Estimation uncertainty The text below discusses the key assumptions concerning the future and other key sources of uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities in subsequent financial periods. Measurement of employee benefit provisions Employee benefit provisions have been estimated using actuarial methods. Deferred tax assets The Company recognises deferred tax assets based on the assumption that tax profit will be generated in the future, allowing for the assets to be used. However, a deterioration of the generated tax results in the future may deem this assumption invalid. Amortisation and depreciation rates The amortisation and depreciation rates are based on the expected economic useful life of property, plant and equipment and intangible assets. Items of PP&E or their material and separate parts are depreciated with the straightline method over their useful life. Depreciation and amortisation allowances are made as long as the residual value of an asset does not exceed its carrying value. Every year the Company verifies the adopted economic useful lives based on current estimates. Revaluation allowances for receivables As at the balance sheet date, the Company verifies whether there is objective proof of impairment of receivables. If the recoverable value of an asset is lower than its carrying value, the Company makes a revaluation allowance to the present value of the planned cash flows. 6. Information on business segments For managerial purposes, the Company has been segmented based on its geographic sales markets. Thus, there are the following reporting and operating segments: Poland 9/9

10 Ukraine Belarus Russia Moldova Other The Company's existing operating segment "Romania" was combined with the segment "Other" to create the abovementioned reporting and operating segments. The Management Board monitors separately the operating results of the segments to make decisions on the allocation of resources, evaluate the effects of allocation and the results of operations. The evaluation of operating results is based on the operating profit or loss. The Company's financing (including financial costs and revenues) and income tax are monitored at the Company level and not allocated to the segments. Transaction prices applied for transactions between operating segments are determined at arm s length, by analogy to transactions with unrelated parties. The segment result is calculated by deducting the prime cost of sale and a portion of selling costs (mainly marketing and transport costs), which are assigned to individual segments, from the sales revenue. Nonallocated costs fully comprise general administrative expenses and the portion of selling costs which cannot be directly allocated to individual segments. The calculation of the result of individual segments is intended to assess every market individually and to outline directions for growth as well as for selling and marketing activities. Individual items of assets and equity and liabilities allocated by the company to a given segment are analysed by the Management Board. 10/10

11 Segment results for the 3month period ended on 30 June 2012 Segment revenue Continued operations Poland Ukraine Belarus Russia Moldova Other Total Discontinued operations The Company did not discontinue its operations in the presented period. Total of operations Total segment revenues Segment profit/loss Nonallocated costs Other operating revenue Other operating expenses Net loss on sales of discontinued operations Operating profit Financial revenue Financial costs Profit before tax Income tax Net profit Continued operations Segment results Poland Ukraine Belarus Russia Moldova Other Total Discontinued operations Total of operations Segment revenue The Company did not discontinue its operations in the presented period. Total segment revenues Segment profit/loss Nonallocated costs Other operating revenue 752 Other operating expenses Net loss on sales of discontinued operations Operating profit Financial revenue Financial costs Profit before tax Income tax Net profit Other information on segments Poland Ukraine Belarus Russia Moldova Other Total Segment assets Trade receivables Investments in other parties Nonallocated assets of an entity Segment equity and liabilities Trade liabilities Nonallocated liabilities of an entity /11

12 Segment results for the 3month period ended on 30 June 2011 Continued operations Poland Ukraine Belarus Russia Moldova Other Total Segment revenue Discontinued operations The Company did not discontinue its operations in the presented period. Total of operations Total segment revenues Segment profit/loss Nonallocated costs Other operating revenue Other operating expenses Net loss on sales of discontinued operations Operating profit Financial revenue Financial costs Profit before tax Income tax Net profit Segment results for the 6month period ended on 30 June 2011 Continued operations Poland Ukraine Belarus Russia Moldova Other Total Segment revenue Discontinued operations The Company did not discontinue its operations in the presented period. Total of operations Total segment revenues Segment profit/loss Nonallocated costs Other operating revenue Other operating expenses Net loss on sales of discontinued operations Operating profit Financial revenue Financial costs Profit before tax Income tax Net profit Other information on geographic segments for the 6month period ended on 30 June 2011 Poland Ukraine Belarus Russia Moldova Other Total Total separate assets Trade receivables Investments in other parties Nonallocated assets of an entity Total separate liabilities Trade liabilities Nonallocated liabilities of an entity Cash and cash equivalents For the purpose of the interim condensed cash flow statements, cash and cash equivalents include the following items: 12/12

13 2011 not audited Cash in hand and cash in bank Shortterm deposits up to 3 months Commercial papers Overdrafts Total cash Cash in hand and cash in bank allocated to discontinued operations 8. Dividend payout and proposed dividend payout The 2011 ordinary share dividend, paid on 18 July 2012, amounted to PLN 17,034 thousand (2010 dividend paid on 18 July 2011: PLN 23,036 thousand). The dividend paid from the 2011 profit amounted to PLN 1,812 thousand, and the amount of PLN 15,222 was covered using the supplementary capital. The value of 2011 dividend per share was PLN 1.35 (2010: PLN 1.7). The Company did not pay advances on dividend for 2012 and Income tax The main items of the tax burden in the profit and loss account are as follows: for the 3month period ended on 30 for the 6month period ended on 30 for the 3month period ended on 30 for the 6month period ended on 30 June 2012 June 2012 June 2011 June 2011 not audited not audited not audited not audited Income tax currently payable Burden due to income tax currently payable Adjustments regarding current income tax brought forward (44) 2 Deferred income tax (1 265) (2 633) (1 020) (1 789) Due to occurrence and reversal of temporary differences (1 265) (2 633) (1 020) (1 789) Tax burden disclosed in the statement of comprehensive income Property, plant and equipment Purchase and sale In the 6month period ended on 30 June 2012, the Company purchased property, plant and equipment in the value of PLN 13,900 thousand, including the following expenditures: PLN 5,208 thousand for buildings and structures, PLN 3,751 thousand for the purchase of machinery and equipment, PLN 789 thousand for means of transport and PLN 4,152 thousand for other PP&E (expenditures in the 6month period ended on 30 June 2011: PLN 9,225 thousand). In the 6month period ended on 30 June 2012, the Company sold property, plant and equipment in the net value of PLN 789 thousand (in the 6month period ended on 30 June 2011: PLN 98 thousand) and generated net sales loss in the amount of PLN 237 thousand (2011: PLN 108 thousand) Impairment losses In the period ended on 30 June 2012, the Company did not recognise any impairment losses on PP&E. 13/13

14 11. Intangible assets Purchase and sale In the 6month period ended on 30 June 2012, the Company purchased intangible assets in the value of PLN 83 thousand (in the 6month period ended on 30 June 2011: PLN 139 thousand). In the 6month periods ended on 30 June 2012 and on 30 June 2011, the Company did not sell any intangible assets Impairment losses In the period ended on 30 June 2012, the Company did not recognise any impairment losses on intangible assets. 12. Interests, shares and other longterm assets As at , FFiL Śnieżka S.A. held interests, shares and other longterm assets in the amount of PLN 28,881 thousand. A summary of interests in related parties in the amount of PLN 22,104 thousand is presented in the table below. The remaining portion is a borrowing granted to Śnieżka Ukraina Sp. z o.o. in the amount of USD 2,000 thousand, whose value, as at and according to the average exchange rate published by the National Bank of Poland, is PLN 6,777 thousand; the agreement is valid until Company name, legal form and location of the management office SUBSIDIARIES Carrying value of interests as at 30 June 2012 Carrying value of interests as at 31 December 2011 FFiLP Proximal Sp. z o. o. Grupa Śnieżka Lubzina Hadrokor Sp. z o. o. Włocławek Śnieżka Ukraina Sp. z o. o. Yavoriv SOOO Śnieżka BELPOL Zhodzina IP Solutions Sp. z o.o. Brzeźnica 5 5 TM Investment Sp. z o.o. Brzeźnica 5 5 Total interests held in subsidiaries Longterm receivables Longterm receivables amounting to PLN 2,625 thousand include: The receivables from the sale of interests in Farbud amounted to PLN 2,060 thousand. According to the repayment schedule included in the sale agreement, longterm receivables amount to PLN 1,641 thousand and the final instalment becomes due on As at , FFiL Śnieżka also holds longterm receivables under finance lease agreements in the amount of PLN 984 thousand. 14/14

15 14. Lease receivables Fabryka Farb i Lakierów Śnieżka Spółka Akcyjna As at 30 June 2012, FFiL Śnieżka S.A. holds finance lease receivables in the amount of PLN 1,305 thousand (including shortterm portion in the amount of PLN 321 thousand and longterm portion in the amount of PLN 984 thousand). The Company let machines for the colouring system on a finance lease. The term of the said lease is 5 years. 15. Provisions Summary of provisions as at for the 6month period ended on 30 June 2012 for the 12month period ended on 31 December Deferred income tax provision Provision for retirement and similar benefits including Longterm retirement and annuity gratuities, posthumous and anniversary benefits Shortterm unused holiday leaves retirement and annuity gratuities, posthumous and anniversary benefits In the statement of financial position, the deferred income tax provision is compensated against the deferred income tax asset. 16. Investment property As at 30 June 2012, Fabryka Farb i Lakierów Śnieżka S.A. holds the following investment real properties: in Chojnice, Pomeranian Voivodship, comprising land, perpetual usufruct of land, buildings and structures. As at 30 June 2012, the value of the real property is PLN 10,100 thousand. Revenue from rents from the abovementioned real properties in H amounted to PLN 298 thousand. in Biała Podlaska, Podlaskie Voivodship, comprising perpetual usufruct of land and buildings. As at 30 June 2012, the value of the real property is PLN 2,921 thousand. Revenue from rents from the abovementioned real properties in H amounted to PLN 154 thousand. 15/15

16 17. Share capital Purchase of equity shares Pursuant to resolution no. 4/2012 of the Extraordinary General Shareholders' Meeting of FFiL Śnieżka S.A. of 2 April 2012, the Company purchased 932,898 equity shares in the nominal value of 932,898, for an average price of PLN per share, for redemption. The purchased shares account for 6.88% of the share capital and correspond to 932,898 votes at the GSM. Following the purchase of equity shares, the shareholding structure is as follows: Entities (shareholders) holding, directly and indirectly, at least 5% of the Company s share capital and at least 5% of the total votes at the General Meeting, with the total number of shares of 13,550,676 and the total number of votes of 15,550,676: Shareholder Number of shares held Share in the share capital (%) Number of votes Share in overall number of votes at the GSM (%) Jerzy Pater* , ,63 of which directly Stanisław Cymbor** ,23 18, ,36 20,63 Piotr Mikrut Rafał Mikrut of which directly , ,36 directly , ,49 directly , ,07 AMPLICO OFE , ,00 Śnieżka S.A. equity shares , ,00 *Jerzy Pater holds the Issuer s shares indirectly via PPHU Elżbieta i Jerzy Pater Sp. z o.o. (PPHU Elżbieta i Jerzy Pater Sp. z o.o. holds 2,375,000 shares of the Issuer, giving the holder a 17.53% share in the share capital and a 15.27% share in the total votes at the General Shareholders' Meeting). **Stanisław Cymbor holds the Issuer s shares indirectly via PPHU Iwona i Stanisław Cymbor Sp. z o.o. (PPHU Iwona i Stanisław Cymbor Sp. z o.o. holds 2,375,000 shares of the Issuer, giving the holder 17.53% share in the share capital and 15.27% share in the total votes at the General Shareholders Meeting). 16/16

17 As at , the shareholding was as follows: Fabryka Farb i Lakierów Śnieżka Spółka Akcyjna Entities (shareholders) holding, directly and indirectly, at least 5% of the Company s share capital and at least 5% of the total votes at the General Meeting, with the total number of shares of 13,550,676 and the total number of votes of 15,550,676: Shareholder Number of shares held Share in the share capital (%) Number of votes Share in overall number of votes at the GSM (%) Jerzy Pater* , ,63 of which directly Stanisław Cymbor** ,23 18, ,36 20,63 Piotr Mikrut Rafał Mikrut of which directly , ,36 directly , ,49 directly , ,07 AMPLICO OFE , ,00 *Jerzy Pater holds the Issuer s shares indirectly via PPHU Elżbieta i Jerzy Pater Sp. z o.o. (PPHU Elżbieta i Jerzy Pater Sp. z o.o. holds 2,375,000 shares of the Issuer, giving the holder a 17.53% share in the share capital and a 15.27% share in the total votes at the General Shareholders' Meeting). **Stanisław Cymbor holds the Issuer s shares indirectly via PPHU Iwona i Stanisław Cymbor Sp. z o.o. (PPHU Iwona i Stanisław Cymbor Sp. z o.o. holds 2,375,000 shares of the Issuer, giving the holder 17.53% share in the share capital and 15.27% share in the total votes at the General Shareholders Meeting). 17/17

18 18. Shortterm liabilities The increase in shortterm liabilities as at 30 June 2012 results from FFiL Śnieżka S.A.'s obligation to pay the dividend; the dividend was paid on 18 July The said liability amounted to PLN 16,906 thousand. The increase in loan liabilities is due to, among other things, the expenditure on the purchase of equity shares for redemption, in the amount of PLN 28,966 thousand. 19. Interestbearing bank loans and borrowings LOANS AND BORROWINGS Loans As at 30 June 2012 Interest rate As at 31 December 2011 (not audited) Loan taken with Pekao S.A. O/Dębica IM WIBOR + margin Loan taken with BPH O/Dębica 755 IM WIBOR + margin 575 Loan taken with PKO BP O/Rzeszów IM WIBOR + margin Loan taken with Bank Handlowy S.A. Warszawa IM WIBOR + margin 374 Loan taken with Bank Handlowy S.A. Warszawa IM LIBOR + margin Loan taken with PBS O/Dębica 90 IM WIBOR + margin 511 Loan taken with ING Bank Śląski O/Katowice IM WIBOR + margin Loan taken with ING Bank Śląski O/Katowice IM LIBOR + margin Loan taken with DnB NORD Polska Warszawa 625 IM WIBOR + margin 253 Loan taken with DnB NORD Polska Warszawa IM LIBOR + margin Total loans Borrowings Borrowing from a related company, TM INYESTMENT Total loans and borrowings As at 30 June 2012, loans and borrowings amount to PLN 140,137 thousand, including longterm loans and borrowings in the amount of PLN 5,000 thousand. In 2012, the Company concluded the following addenda and loan agreements: On 11 January 2012 addenda to the loan agreement with the bank DnB NORD Polska S.A., allowing for the use of a loan in the amount of up to PLN 6 million and up to USD 5 million by 17 January 2013, On 17 January, with the bank PKO BP S.A.: a. Addendum to the Working Capital Facility Agreement with variable interest, depending on the currency in which the loan is used, no /1/I/17/2002, of The addendum extends the term of use of the loan in the amount of PLN 10.0 million to 18 January 2013, b. Addendum to the MultiPurpose Facility Agreement no /LW/I/2/2007 of The addendum extends the term of use of the loan in the amount of PLN 20.0 million to 18 January 2013, Addendum to the agreement with Podkarpacki Bank Spółdzielczy, extending the loan in the amount of PLN 1 million to 31 March 2013, Addendum to the MultiProduct Agreement with ING Bank Śląski S.A. of 27 April The addendum extends the term for the use of the loan to 30 April 2014 and increases the available loan limit to PLN 36 million. Addendum to the Working Capital Facility Agreement with the bank PKO BP S.A. with variable interest, depending on the currency in which the loan is used, no /1/I/17/2002, of The addendum, dated 10 April 2012, extends the term for the use of the loan to 31 December 2012 and increases the available loan limit to PLN 20 million, 18/18

19 Loan agreement with Bank Handlowy w Warszawie S.A. of 12 April Based on the short term loan agreement of 10 April 2012, the Bank granted a loan in the amount of PLN 10 million to the Company for purposes other than working capital, in particular for investments in the borrower's noncurrent assets and the repurchase of equity shares, with the following repayment deadlines: PLN 2.5 million by , PLN 2.5 million by , PLN 2.5 million by , PLN 2.5 million by , The loan is secured by: a joint capped mortgage of up to PLN million on the issuer s real property in Chojnice (commercial and service premises), land and mortgage register no , and 29665, a registered pledge on the inventory of finished products in the amount of PLN 8 million and the assignment of rights under an insurance agreement, civil law sureties of the issuer s subsidiaries: TM Investment Sp. z o.o. and IP Solutions Sp. z o.o. Addenda to loan agreements with the bank DnB NORD Polska S.A. The addenda dated 26 April 2012 provide for the use of a loan amounting up to PLN 19 million and up to USD 4 million by 17 January On 26 April 2012, the Company concluded an addendum to the borrowing agreement between Śnieżka S.A. (borrower) and the issuer s subsidiary TM Investment Sp. z o.o. (lender), with its registered office in Brzeźnica. The addendum extends the term of the borrowing in the amount of up to PLN 25 million to 25 April The borrowing is intended for the issuer s current operating activity. The borrowing interest is calculated based on WIBOR 1M plus margin. On , TM Investment Sp. z o.o. acquired all assets of IP Solutions Sp. z o.o. and, as a result, it became a party to the agreement for the borrowing granted by IP Solutions Sp. z o.o. (lender) to FFiL Śnieżka (borrower). 20. Accruals ACCRUALS for the 6month period ended on 30 June 2012 not audited for the 12month period ended on 31 December Negative goodwill 2. Other accruals Longterm 2.2 Shortterm Audit of the balance sheet Bonus for the Management Board and managerial staff Other Deferred revenue Total accruals As at , the Company established provisions for expenditures to be incurred in subsequent reporting periods, according to the foregoing summary. 19/19

20 21. Equity securities In H1 2012, the Company purchased 932,898 equity shares for redemption, at PLN per share, plus commission on the purchase of WSE shares in the amount of PLN 46 thousand, for the total price of PLN 28,966 thousand. The Company plans to redeem these shares during the next General Shareholders' Meeting. The Extraordinary General Shareholders' Meeting held on 2 April 2012 expressed its consent for the Management Board to purchase up to 1,570,620 equity shares for redemption. The maximum share purchase price was set at PLN 34 per share and the maximum amount for the repurchase at PLN 53,500,000. The repurchase was to be completed by 31 December In this period, the Company has not issued any equity securities. 22. Discontinued operations In H1 2012, the Company did not discontinue any operations. 23. Financial instruments In the reporting period ended on 30 June 2012, there were no material changes in the value and type of financial instruments compared to the annual statements 24. Objectives and principles of financial risk management In H1 2012, no important changes occurred in the method of managing financial risk. 25. Equity management In H1 2012, no important changes occurred in equity management objectives, principles and procedures. 26. Contingent liabilities and contingent assets As at 30 June 2012, the Company held sureties granted to the following companies: Agreement of surety for the blank bills of exchange issued by Farbud in the amount of PLN 190 thousand to secure claims against S.D. Pack Plast International Sp. z o.o. in the amount of PLN 40 thousand and to secure claims against Zakłady Płyt Wiórowych PROSPAN S.A. in the amount of PLN 150 thousand under a commercial partnership agreement. Agreement of surety granted to Benmar Sp. z o.o. based in Białystok, amounting to PLN 5,000 thousand as a security for a loan agreement; as at 30 June 2012, the debt of Benmar Sp. z o.o. due to the loan secured with the surety amounts to PLN 2382 thousand. Guarantee granted to Rafiz for the construction of a process line in Śnieżka BelPol Sp. z o.o. in the amount of PLN 1,790 thousand. As at 30 June 2012, FFiL Śnieżka S.A. also held a contingent liability to Bank Handlowy w Warszawie S.A. due to a surety for the Paylink agreement amounting to PLN 9,776.4 thousand. The Paylink card agreement involves the granting of loan limits to distributors, based on which the distributors can make 20/20

21 payments for invoices issued by Śnieżka, and in exchange the distributor benefits from payment deadlines for the invoices being extended by up to 4 months and 14 days. As at 31 December 2011, the Company held sureties granted to the following companies: Agreement of surety for the blank bills of exchange issued by Farbud in the amount of PLN 190 thousand to secure claims against S.D. Pack Plast International Sp. z o.o. in the amount of PLN 40 thousand and to secure claims against Zakłady Płyt Wiórowych PROSPAN S.A. in the amount of PLN 150 thousand under a commercial partnership agreement. Agreement of surety granted to Benmar Sp. z o.o. based in Białystok, amounting to PLN 5,000 thousand as a security for a loan agreement; as at 31 December 2011, the debt of Benmar Sp. z o.o. due to the loan secured with the surety amounts to PLN 2,739 thousand. As at 31 December 2011, FFiL Śnieżka S.A. also held a contingent liability to Bank Handlowy w Warszawie S.A. due to a surety for the Paylink agreement amounting to PLN 11,602 thousand. Guarantee to Nowy Ląd Sp. z o.o. for the supply of gypsum for Śnieżka BelPol Sp. z o.o. in the amount of USD 450 thousand; as at 31 December 2011, the used amount of the guarantee is USD 351 thousand (PLN 1,201 thousand). Guarantee granted to Rafiz for the construction of a process line in Śnieżka BelPol Sp. z o.o. in the amount of PLN 1,603 thousand. Security deposit to Sped Kampania Sp. z o.o. for the performance of obligations by Śnieżka Belpol Sp. z o.o.; as at 31 December 2011, the security deposit amounted to PLN 175 thousand. The Company granted the guarantees and sureties against remuneration and recognised the corresponding financial revenue. All sureties were granted based on the resolutions of the Management Board of Fabryka Farb i Lakierów Śnieżka S.A. approved by the Supervisory Board. 27. Investment liabilities As at 30 June 2012, the Company obliged to make expenditures on PP&E in the amount of PLN 2,687 thousand (as at : PLN 3,170 thousand). These amounts will be earmarked mainly for liabilities related to construction works and for the purchase of new machinery and equipment. 28. Lease liabilities As at 30 June 2012, Śnieżka S.A. holds finance lease liabilities in the amount of PLN 261 thousand (including shortterm portion in the amount of PLN 116 thousand and longterm portion in the amount of PLN 145 thousand). The Company uses means of transport under a finance lease agreement. The term of the said lease is 3 years. 29. Transactions with related parties The following table presents total amounts of transactions with related parties during the sixmonth periods ended on 30 June 2012 and 30 June 2011: 21/21

22 Related party Subsidiary: Sales to related parties Purchases from related parties not audited Receivables from related parties Liabilities due to related parties F. F. i L. P. PROXIMAL Sp. z o. o. Grupa Śnieżka HADROKOR Sp. zo.o SNIEZKAUKRAINA SP Z O.O SOOO Śnieżka BELPOL SP. z o.o Śnieżka Romania S.RL IP SOLUTIONS Sp. z o.o TM INVESTMENT Sp. z o.o Affiliated party: Plastbud Sp. z o.o As at , the value of borrowings granted to related parties is as follows: to Hadrokor Sp. z o.o. PLN 600 thousand, to Śnieżka Ukraina Sp. z o.o., in the amount of USD 2,000 thousand, whose value as at was PLN 6,777 thousand according to the average exchange rate of the National Bank of Poland, to Śnieżka Belpol Sp. z o.o., in the amount of PLN 1,790 thousand, granted from to On , TM Investment Sp. z o.o. acquired all assets of IP Solutions Sp. z o.o. and, as of that moment, it became the owner of the trademarks licensed for use by FFiL Śnieżka. As at , FFiL Śnieżka S.A. holds a liability due to a borrowing raised with TM Investment, in the amount of PLN 17,780 thousand, plus interest amounting to PLN 79 thousand. Transactions between related parties were concluded at arm's length. 30. Further information The increase in receivables as at 30 June 2012 compared to is due to high sales results generated by the company in H The increase in loan liabilities is due to, among other things, the expenditure on the purchase of equity shares for redemption, in the amount of PLN 28,966 thousand. Thus, current liabilities have exceeded current assets (negative net working capital). In the opinion of the Management Board, in the subsequent quarters, the relation of current assets to current liabilities should improve and no negative net working capital should be observed. Therefore, the Management Board does not see any risk because this situation is temporary. The recognition of estimated customer bonuses due at later dates and the creation of provisions for future marketing and advertising costs to be incurred in subsequent reporting periods have influenced the value of the deferred income tax asset. The deferred income tax asset and provision in the statement of financial position are compensated and amount to PLN 1,169 thousand (deferred tax asset). 22/22

23 On 5 March 2012, Fabryka Farb i Lakierów Śnieżka SA purchased 12% of interests in the subsidiary Śnieżka Belpol Sp. z o.o., with its registered office in Zhodzina, Belarus. The interests were purchased from the previous shareholder, Mr Anatoly Szeleg, for USD 150,000. The payment in the amount of PLN 473 thousand was made on 2 May On 18 April 2012, FFiL Śnieżka S.A. purchased 1.25% of interests in its subsidiary Śnieżka Ukraina Sp. z o.o. in Yavoriv. The interests were purchased from the previous shareholder, Ms Elvira L. Gołod, for USD 234,375. The payment in the amount of PLN 787 thousand was made on 16 May The Company has recorded proceeds from the sale of related parties in the total amount of PLN 2,566 thousand, including: sale of the interests in Śnieżka Belpol Sp. z o.o. for PLN 42 thousand, sale of the interests in Farbud Sp. z o.o. for PLN 1,008 thousand, sale of the interests in Śnieżka Sp. z o.o. for PLN 1,428 thousand, sale of the interests in Spedfarb Sp. z o.o. of 2008 for PLN 88 thousand. The income tax paid in the amount of PLN 2,601 thousand, disclosed in the interim condensed cash flow statement, includes: withholding tax paid PLN 216 thousand, CIT surplus for 2011 compensated against current tax liabilities PLN 2,817 thousand. 31. Events after the balance sheet date No material events that are not reflected in these financial statements occurred after the balance sheet date, i.e. 30 June /23