Opinion and Report of the Independent Statutory Auditor Fiscal Year ended December 31, 2012

Transcription

1 Apator S.A. Opinion and Report of the Independent Statutory Auditor Fiscal Year ended December 31, 2012 Opinion contains 3 pages. Report supplementing the opinion contains 10 pages Opinion of the statutory auditor and report supplementing the opinion on the audit of the separate financial statement for the year ended December 31, 2012

2 OPINION OF THE INDEPENDENT STATUTORY AUDITOR For the General Meeting of Apator S.A. Opinion on the separate financial statement We have audited the attached separate financial statement of the Apator SA, with the registered office in Toruń, ul. Gdańska 4A, room C4 ( Company ), which comprise the separate statement of financial position prepared as of December 31, 2012 and the separate statement of comprehensive income, separate statement of changes in equity and the separate statement of cash flows for the fiscal year then ended and the notes to the financial statement comprising of a summary of significant accounting principles and the other explanatory information. Responsibility of the Management and the Supervisory Board The Management Board of the Company is responsible for accuracy of the accounting records, and the preparation and fair presentation of this separate financial statement pursuant to the International Financial Reporting Standards as adopted by the European Union and other applicable regulations and for preparation the Management Report. The Management Board is also responsible for internal control as management deems it necessary to enable the preparation of the financial statements that are free of material misstatements, whether due to fraud or error. Pursuant to the Accounting Act of September 29, 1994 (Dz. U. U No. 152, item 1223 as amended) ( Accounting Act ) the Management Board of the Company and the members of the Supervisory Board are required to ensure that the financial statement and the management report are in compliance with the requirements set forth in the Accounting Act. Responsibility of the Statutory Auditor Our responsibility is, based on the audit, is to express an opinion on these separate financial statements and whether the financial statements are derived from properly maintained accounting records. The audit of the financial statement was conducted pursuant to provisions of the chapter 7 of the Accounting Act, national financial reporting standards issued by the National Board of Statutory Auditors in Poland and International Financial Reporting Standards. Those regulations require that we comply with ethical requirements and to plan and perform the audit to obtain the reasonable assurance about whether that the financial statement and accounting records from which they derived are free of material misstatements. The audit involves performing procedures to obtain audit evidence about amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risk of material misstatement of the financial statement whether due to fraud or error. In making those risk assessment, we consider the internal control relevant to the entity 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 entity s internal control. An audit also includes evaluating appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. OPINION In our opinion the attached separate financial statements of Apator S.A. have been prepared and present fairly, in all material respects, the financial position of the Company as of December 31, 2012, the results of its operations and its cash flows for the fiscal year ending this day in conformity with the

3 International Financial Reporting Standards as adopted by the European Union, are compliant with all regulations and provisions of the Articles of Association that apply to the separate financial statement and have been prepared from accounting records, that, in all material respects, have been properly maintained. Special explanations on other law requirements and regulations Management Report of the Company As required under the Accounting Act, we also report that the Management Report of the Company includes the information required by Art. 49 of the Accounting Act and of the Ordinance of the Minister of Finances dated 19 February 2009 on the current and periodic information provided by the issuers of securities and conditions of considering as equal the information required by the legal provisions of the non-member country (Dz. U No. 33, item 259 as amended) in all material respects and the information is compliant with the information contained in the separate financial statements. On behalf of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k., Registration No ul. Chłodna Warszawa Rafał Wiza Marek Gajdziński Key Statutory Auditor Statutory auditor Register No Register No Limited Partner, Proxy Limited Partner, Proxy Poznań, April 22, 2013

4 Apator S.A. Report supplementing the opinion on the audit of the financial statement Year ending December 31, 2012 Report supplementing the opinion contains 10 pages Report supplementing the opinion on the audit of the separate financial statement for the year ending on December 31, 2012

5 Table of contents Apator S.A., Raport uzupełniający z badania jednostkowego sprawozdania finansowego za rok obrotowy kończący się 31 grudnia 2012 r. 1. General General information about the Company Company s name Registered office Registration in the National Court Register Management of the entity Information about the statutory auditor and entity authorized to audit financial statements Information about the statutory auditor Information about the authorized entity Information about the separate financial statement for the previous fiscal year Scope of activities and responsibilities 4 2. Financial analysis of the Company General analysis of the separate financial statement Separate statement of financial position Separate statement of comprehensive income Selected financial ratios 9 3. Detailed report Accounting principles Additional notes to the separate financial statement Management Report of the Company 10

6 1. General part 1.1. Information about the Company Name of the Company Apator S.A Registered office ul. Gdańska 4A, room C Toruń Registration of the company in the National Court Register Registering Court: District Court in Toruń, 7th Commercial Division of the National Court Register Date: October 24, 2001 Register No.: KRS Share capital as of the end of the period: PLN Management of the Entity The position of the manager of the entity is held by the Management Board of the Company The Management Board of the Company as of December 31, 2012 consisted of: Mr Janusz Niedźwiecki- President of the Management Board Mr Tomasz Habryka- Member of the Management Board Mr Jerzy Kuś - Member of the Management Board 1.2. Information about the statutory auditor and entity authorized to audit financial statements Information about the statutory auditor Name and surname: Rafał Wiza Register No.: Information about the authorized entity Company: KPMG Spółka z ograniczoną odpowiedzialnością Sp.k. Registered office: ul. Chłodna 51, Warszawa Register No.: KRS Registering Court: District Court for the capital city of Warsaw in Warsaw 12th Commercial Division of the National Court Register, NIP [Tax Identification Number]: KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. is entered into the list of the entities authorized to audit the financial statements kept by the National Chamber of Statutory Auditors with the number Information about the separate financial statement for the previous fiscal year The separate financial statement of the parent entity for the fiscal year ending December 31, 2011 was audited by KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k., the entity authorized to audit financial statements and obtained the opinion without any reservations.

7 The separate financial statement was approved by the General Meeting on June 18, 2012, which stated that the profit for the previous fiscal year in the amount of PLN was divided as follows: Dividend- PLN Supplementary capital PLN The separate financial statement has been submitted to the Registering Court on June 22, 2012 and published in Monitor Polski B No of September 7, Scope of activities and responsibilities This report was prepared for the General Meeting of Apator S.A., seated in Toruń, ul. Gdańska 4A, room C4 and refers to the financial statement, which consists of the separate statement of financial position prepared as of December 31, 2012 and the separate statement of comprehensive income, separate statement of changes in equity and the separate statement of cash flows for the fiscal year ending this day and the additional notes on the accepted accounting principles and the other explanatory notes. The audited entity prepares the separate financial statement pursuant to the International Financial Reporting Standards, which were approved by the European Union based on resolution of the Extraordinary General Meeting of Shareholders of December 20, The audit of the separate financial statement was conducted pursuant to the agreement of April 6, 2012 concluded under Resolution of the Supervisory Board of January 23, 2012 referring to the selection of the entity authorized to audit the financial statement. The audit of the separate financial statement was carried our pursuant the provisions of the chapter 7 of the Accounting Act of September 29, 1994 (Dz. U. of 2009 No. 152, item 1223 as amended) ( Accounting Act ), National Financial Reporting Standards issued by the National Chamber of Statutory Auditors and International Financial Reporting Standards. The audit of the separate financial statement was conducted in the Company in the period from November 26-30, 2012 and February 25 to March 8, The Management Board of the Company is responsible for accuracy of the accounting books, for preparing and reliable presentation of the separate financial statement pursuant to the International Financial Reporting Standards, which were adopted by the European Union and other applicable regulations and for preparation the Management Report. Our task was, basing on carried audit, to express the opinion and to prepare the supplementing report on this separate financial statement and the correctness of the accounting books being a base for it. The Management Board of the Company on the date of issue of this report submitted the statement on fairness ad clearness of the separate financial statement presented to be audited and on lack of occurrence of the events not disclosed in the separate financial statement affecting significantly the data presented in the separate financial statement for the audited year. During the audit of the separate financial statement the Management Board submitted all the required statements, explanations and information and provided us with all documents and information necessary to issue the opinion and to prepare the report. The scope of planned and executed works was not limited in any manner. The scope and manner of the audit result from the prepared working documents, which are held in the registered office of the authorized entity. The Key Statutory Auditor and the entity authorized meet the requirement of being independent of the audited Company in the meaning of Art. 56 sec. 3 and 4 of the Act of May 7, 2009 on the

8 on Statutory Auditors, Their Self-Governing Organisation, and Entities Authorised to Audit Financial Statements and on Public Oversight (Dz. U. of 2009, No. 77 item 649 as amended). 2. Financial analysis of the Company 2.1. General analysis of the separate financial statement Separate statement of financial position ASSETS % % PLN 00 0 assets PLN 000 assets Non-current assets Intangible assets Property, Plant and Equipment Investment property Other long-term financial assets Granted long-term loans Long- term receivables Deferred tax assets Total non-current assets Current assets Inventories Trade receivables Receivables due to corporate income tax Receivables due to other taxes, subsidies, customs and social insurances Other current receivables Other short-term financial assets Granted short-term loans Cash and cash equivalents Short-term accrued and deferred assets Non-currents assets classified as held for sale Total current assets TOTAL ASSETS

9 Apator S.A. Raport uzupełniający z badania jednostkowego sprawozdania finansowego za rok obrotowy kończący się 31 grudnia 2012 r. LIABILITIES % % PLN 00 0 assets PLN 000 assets Equity Share capital Other capitals Capital from measurement of hedging transactions (1 460) 0.6 Undivided financial result Total equity Liabilities Long-term credit and loans Long-term liabilities Provision for liabilities due to employee benefits Total long-term liabilities Short-term borrowings Trade liabilities Liabilities due to corporate income tax Liabilities due taxes, customs and social insurances Other short-term liabilities Short-term provisions for liabilities due to employee benefits Other short-term provisions Liabilities related to the non-currents assets classified as held for sale Total short-term liabilities Total liabilities TOTAL LIABILITIES AND EQUITY

10 Separate statement of comprehensive income Apator S.A., Raport uzupełniający z badania jednostkowego sprawozdania finansowego za rok obrotowy kończący się 31 grudnia 2012 r % 1.01, % Revenues from sale Revenues from sale PLN 00 0 PLN 000 Revenues from sales Cost of sales (140438) 76.6 ( ) 72.9 Gross profit from sales Distribution expenses (10220) 5.6 (12 912) 8.3 Administration expenses (24 163) 13.1 (19288) 12.3 Other operating revenues Other operating costs (4084) 2.2 (1 965) 1.3 Profit from operating activities urn 7.6 Finance income Finance cost (3 144) 1.8 (4 178) 2.7 Financial revenue, net Profit before tax Current income tax (4 829) 2.6 (1 683) 1.1 Deferred income tax (376) 0.2 Profit for the year OTHER COMPREHENSIVE INCOME Hedge accounting (1 803) 1.2 Income tax referring to other comprehensive income (427) Net other comprehensive income for the fiscal year (1460) 1.0 Total comprehensive income for the fiscal year

11 2.2. Selected financial ratios Return on sales Profit for the period x 38.4% 24.2% 25.4% 100/revenues from sales 2. Return on equity Profit for the period x 100%/equity- profit for the 54.6% 29.6% 41.3% period 3. Debtor s days Average trade receivables x 365 days revenues from 57 days 75 days 61 days sales 4. Debt ratio Liabilities x 100% equity and liabilities 27.3% 35.5% 32.1% 5. Current ratio current assets/ current liabilities *Revenues from sales are comprised of revenues from sale of products, goods and materials. *Average trade receivables represent the arithmetic average of trade receivables at the beginning and at the end of the reporting period, excluding allowances for receivables.

12 3. Detailed report 3.1. Accounting principles The Company maintains current documentation describing the applied accounting principles adopted by the Management Board of the Company to the extent required by Art. 10 of the Accounting Act. During the audit of the separate financial statement we tested, on a sample basis, of the correctness of the accounting system operation. On the basis of the work performed, we have not identified any material irregularities in the accounting system, which has not been corrected and that could have a material impact on the separate financial statement. Our audit was not conducted for the purpose of expressing a comprehensive opinion on the operation of the accounting system. The Company performed a physical inventory of the assets in accordance with the requirements and time frame specified in Art. 26 of the Accounting Act and settled and accounted for in the records Additional notes to the separate financial statement All information included in the notes to the separate financial statement comprising of a summary of significant accounting principles and other explanatory notes is, in all material aspects, presented accurately and completely. This information should be read in conjunction with the separate financial statements Management Report of the Company The management report of the Company includes, in all material aspects, information required by Art. 49 of the Accounting Act and of the Ordinance of the Minister of Finances dated 19 February 2009 on the current and periodic information provided by the issuers of securities and conditions of considering as equal the information required by the legal provisions of the non-member country (Dz. U No. 33, item 259 as amended) and information is consistent with the separate financial statement. On behalf of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. Registration No ul. Chłodna Warszawa Rafał Wiza Marek Gajdziński Key Statutory Auditor Statutory auditor Reg. No Registration No Limited Partner, Proxy Limited Partner, Proxy Poznań, April 22, 2013

13 Letter of the President of Executive Board Dear Shareholders, Customers and Collaborators! It is my pleasure and satisfaction to submit you Annual Report being the summary of market and business activity with included financial results achieved in Last year was extremely important one. It will be engraved on our memory when one of the most important undertakings in the history of Apator was completed- I have in mind the construction of the modern manufacturing company in Pomeranian Special Economic Zone. Owing to the investment, Apator became more modern company with optimal manufacturing processes of products at possible lowest consumption of utility services and at the same time it became more competitive company. The wide investment plan that included both machine park, technological processes and IT systems will provide that Apator will meet not only the objectives determined in the strategy but also due to its strong foundations it will grow further intensively. The most important challenge for Apator is preparation for implementation of smart metering and smart grids processes in Poland. In spite of the delay in performance of nationwide project of implementation of smart metering in relation to the original plans, the involvement and investments of Apator in this area are continued. From one hand, we conduct intensified research and development that effect are new production lines for electricity metres, water metres, gas metres, heat metres and on the other hand we participate actively in studies and consultations regarding many projects concerning the idea of smart metering in Poland and Europe. That is just our initiative to establish the Baltic Smart Grid Meeting, sector conference that is the platform for the exchange of experience of entities participating in implementation of smart metering. We can be also proud of successful completion of AMI system implementation in distribution company - Tauron Dystrybucja. The growth of Apator s group is based both on extension of the product offer, export and acquisition. In 2012, export reached the value of 36%. We have been strengthening the position of Apator s group on British market that is resulted of the take over the shares by Apator Metrix SA in George Wilson Industries Ltd. with headquarters in Coventry. It is very important long- term investment due to the development of smart metering on that market.

14 Based on analysis of financial results achieved and the performance of the forecast for 2012, the results can be considered as very good ones. Apator s group achieved over 24% increase of revenues from sales in relations to 2011 and almost 85% increase of net profit. In activity of Apator s group we are guided permanently by the interest of shareholders. From the profit Apator will make payment of dividend in gross amount of 1,2 PLN per share from the profit for financial year The achievements of the recent year give the cause for satisfaction. Such good results of Apator s group is the effect of consequent strategy being performed where the core element of strategy like in previous years is building of the value for customers, shareholders and employees. I am convinced that Apator s group skilfully will make use of the experience achieved and face further challenges. Dear Sirs, my tenure as the President of Executive Board is coming to the end this year. After thirteen years of my management of the Company I made the decision not to apply for re-election. Taking the opportunity, I would like to thank the shareholders, Supervisory Board, business partners and all the stakeholders for great trust and support since without them my activity would be very difficult. I am convinced that Apator s group will grow dynamically by performance of the vision and meeting expectations of the shareholders. Yours faithfully, Janusz Niedźwiecki President of Executive Board of Apator SA

15 Financial statement for 2012 Annual report R Annual separate financial statement for the period since 1 st January 2012 till 31 st December 2012 Toruń, Name of entity: APATOR SA Page 1 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

16 Financial statement for 2012 MAIN FINANCIAL DATA PLN Statement Revenues from sales of products, goods and materials Revenues from sales of products, goods and materials Profit from operating activity Gross profit Net profit Weighted average number of shares Net profit per ordinary share [PLN/ 2,09 1,07 0,50 0,26 share]: Cash flows from operating activity Cash flows from investing activity (548) (124) Cash flows from financing activity (55 319) (1 150) (13 531) (260) Total cash flows (603) (137) Statement Total assets Fixed assets Current assets Equity Share capital Long term liabilities and provisions Short term liabilities and provisions Weighted average number of shares Net book value per ordinary share [PLN/ share]: 5,91 4,71 1,45 1,07 EUR The items of assets, liabilities, and the cash flows in the statement are translated pursuant to the average exchange rate as of the date of this report. The items of the statement of comprehensive income were translated pursuant to the average exchange rate constituting the arithmetic average of average exchange rates published by the National Bank of Poland applicable as at the last day of the month of the reporting periods EUR / PLN EUR / PLN Statement of comprehensive income 4,1736 4,1401 Statement of cash flows 4,0882 4,4168 Statement of financial position 4,0882 4,4168 Name of entity: APATOR SA Page 2 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

17 Financial statement for 2012 APATOR S.A. Separate financial statement for the period since 1 st January 2012 till 31 st December 2012 Name of entity: APATOR SA Page 3 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

18 Financial statement for 2012 SPIS TREŚCI 1. GENERAL INFORMATION INFORMATION ON THE ENTITY SUBJECT OF ACTIVITY OF THE ENTITY THE COMPOSITION OF THE executive board AND THE supervisory BOARD INFORMATION ON THE BASIS FOR THE FINANCIAL STATEMENT, REPORTING CURRENCY AND ROUNDING APPLIED THE BASIS FOR PREPARING THE FINANCIAL STATEMENT... 6 THE FINANCIAL STATEMENT OF APATOR S.A. HAS BEEN PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS, INTERNATIONAL FINANCE REPORTING STANDARDS AND REFERRED TO THEM INTERPRETATIONS PUBLISHED IN FORM OF DECREES OF EUROPEAN COMMISSION THE FINANCIAL STATEMENT OF APATOR SA COVERS THE YEAR 2012 AND IT CONTAINS COMPARATIVE DATA FOR REPORTING CURRENCY AND ROUNDING APPLIED... 6 THE REPORTING CURRENCY OF THE FINANCIAL STATEMENT IS THE POLISH ZLOTY AND ALL AMOUNTS ARE QUOTED IN THOUSANDS POLISH ZLOTY (IF NOT STATED OTHERWISE) DURATION OF ACTIVITY OF THE ENTITY APPROVAL OF THE FINANCIAL STATEMENT STATEMENT OF FINANCIAL POSITION STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS PRINCIPLES FOR INTERNATIONAL FINANCIAL REPORTING STANDARDS APPLIED STANDARDS AND INTERPRETATION TO BE APPROVED BY EUROPEAN UNION FIRST-TIME ADOPTED STANDARDS EARLIER ADOPTED STANDARDS AND INTERPRETATIONS ACCOUNTING PRINCIPLES APPLIED GENERAL PRINCIPLES DETAIL PRINCIPLES FOR THE MEASUREMENT OF ASSETS AND LIABILITIES INTANGIBLE ASSETS, COSTS OF RESEARCH AND DEVELOPMENTS TANGIBLE FIXED ASSETS InVestMENTS IN SUBSIDIARIES Leasing INVESTMENT PROPERTY FIXED ASSETS AND GROUPS OF NET ASSETS FOR SALE INVENTORY COSTS OF EXTERNAL FINANCING GOVERNMENT SUBSIDIES TRADE RECEIVABLES financial INSTRUMENTS BANK CREDITS trade liabilities PROVISIONS REVENUES TAXES EQUITY BASIC ACCOUNTING JUDGMENTS AND BASES FOR UNCERTAINTY ESTIMATION INFORMATION ON SEASONAL SALES EXPLANATORY NOTES TO THE FINANCIAL STATEMENT OPERATING SEGMENTS INTANGIBLES TANGIBLE FIXED ASSETS INVESTMENT PROPERTIES OTHER FINANCIAL ASSETS INVENTORIES TRADE AND OTHER RECEIVABLES GRANTED LOANS CASH AND CASH EQUIVALENTS ACCRUALS AND PREPAYMENTS FIXED ASSETS HELD FOR SALE SHARE CAPITAL OTHER CAPITALS CREDITS AND LOANS PROVISIONS FOR LIABILITIES LIABILITIES INCOME TAX Name of entity: APATOR SA Page 4 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

19 Financial statement for 2012 EXPENSES BY NATURE OTHER REVENUES AND OPERATING COSTS REVENUES AND FINANCIAL COSTS EXPLANATIONS TO THE STATEMENT OF CASH FLOWS FINANCE LEASE FUTURE PAYMENTS DUE TO THE OPERATING LEASE LIABILITIES NOT RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION FINANCIAL INSTRUMENTS FINANCIAL DERIVATIVES, HEDGE ACCOUNTING PURPOSES AND PRINCIPLES FOR FINANCIAL RISK MANAGEMENT INFORMATION ON RELATED ENTITIES CONTINGENT ITEMS AND OTHER ITEMS NOT RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION STRUCTURE OF EMPLOYMENT REMUNERATION FOR THE ENTITY AUTHORIZED TO AUDIT FINANCIAL STATEMENT SUBSIDIES AMENDMENTS TO ACCOUNTING PRINCIPLES EVENTS AFTER THE REPORTING PERIOD Name of entity: APATOR SA Page 5 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

20 Financial statement for GENERAL INFORMATION 1.1. INFORMATION ON THE ENTITY APATOR Joint Stock Company with the headquarters in Toruń (ul.gdańska 4a lok C4) was established by the employees of former state owned company under the name of Zakłady Aparatury Elektrycznej Apator in Toruń. The entity was registered at District Court in Toruń at V Economic Department on 14 th January 1993 under registration number RHB On 24 th October 2001 the entity was entered into Register of Entrepreneurs at District Court in Toruń, VII Economic Department of National Register Court under number of The entity runs business in the territory of Poland based on regulations of the Polish Commercial Companies Code SUBJECT OF ACTIVITY OF THE ENTITY In accordance with the Statute the main activity of the entity is manufacturing and service of electrical distribution and control equipment and sales of metering equipment and systems. Shares of APATOR S.A. are quoted on primary market sector is according to Warsaw Stock Exchange in Warsaw classification electrical machines THE COMPOSITION OF THE EXECUTIVE BOARD AND THE SUPERVISORY BOARD The Executive Board Janusz Niedźwiecki President of Executive Board Tomasz Habryka Member of Executive Board Jerzy Kuś Member of Executive Board The Supervisory Board Janusz Marzygliński Chairman of Supervisory Board Mariusz Lewicki Deputy Chairman of Supervisory Board Danuta Guzowska Member of Supervisory Board Ryszard Wojnowski Member of Supervisory Board Krzysztof Kwiatkowski Member of Supervisory Board Eryk Karski Member of Supervisory Board 2. INFORMATION ON THE BASIS FOR THE FINANCIAL STATEMENT, REPORTING CURRENCY AND ROUNDING APPLIED 2.1. THE BASIS FOR PREPARING THE FINANCIAL STATEMENT The financial statement of APATOR S.A. has been prepared in accordance with International Accounting Standards, International Finance Reporting Standards and referred to them interpretations published in form of decrees of European Commission. The financial statement of Apator SA covers the year 2012 and it contains comparative data for REPORTING CURRENCY AND ROUNDING APPLIED The reporting currency of the financial statement is the Polish zloty and all amounts are quoted in thousands Polish zloty (if not stated otherwise) 2.3. DURATION OF ACTIVITY OF THE ENTITY Duration of the activity of APATOR S.A. is indefinite. The financial statement was prepared based on the assumption that business activity will be continued in the near future that is for the period not shorter than 12 months since the end of the reporting period. No circumstances have been found that could indicate the threat of activity to be discontinued. Name of entity: APATOR SA Page 6 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

21 Financial statement for APPROVAL OF THE FINANCIAL STATEMENT The financial statement was approved and signed by the Executive Board of the entity on 22 nd April STATEMENT OF FINANCIAL POSITION NOTE DAY restated Fixed assets Intangible assets Tangible fixed assets Investment property Other long-term financial assets in related entities in other entities Long-term loans granted - to related entities Long term receivables - from other entities Deferred income tax assets Current assets Inventories Trade receivables from related entities from other entities Receivables due to income tax of legal entities Receivables due to other taxes, customs duties and social insurance Other short-term receivables from related entities from other entities Other short-term financial assets - in other entities Short-terms loans granted - to related entities Cash and its equivalents Short term prepayments Fixed assets classified as held for sales TOTAL ASSETS Name of entity: APATOR SA Page 7 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

22 Financial statement for 2012 NOTE Day restated Equity Share capital Other capitals Capital from the measurement of hedge transactions 359 (1 460) Undistributed financial result result of current period write off from the result of current year (13 243) - Liabilities Liabilities and long -term provisions Long-term credits and loans - from other entities Long-term liabilities - to other entities Long-term provisions for liabilities due to employee benefits Liabilities and short-term provisions Short-term credits and loans - from other entities Trade liabilities to related entities to other entities Liabilities due to income tax of legal entities Liabilities due to other taxes, customs duties and social insurance Other short-term liabilities to related entities to other entities Short-term provisions for liabilities due to employee benefits Other short-term provisions Liabilities related to fixed assets classified as held for sales TOTAL LIABILITIES Name of entity: APATOR SA Page 8 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

23 Financial statement for STATEMENT OF COMPREHENSIVE INCOME NOTE Period Revenues from sales Revenues from sales of products and services to related entities to other entities Revenues from sales of goods and materials to related entities to other entities Cost of products sold ( ) ( ) Cost of products and services sold ( ) (82 186) - to related entities (23 029) (24 893) - to other entities (89 135) (57 293) Cost of goods and materials sold (28 274) (31 644) - to related entities (5 761) (4 281) - to other entities (22 513) (27 363) Gross profit from sales Selling costs (10 220) (12 912) Overheads (24 163) (19 288) Profit from sales Other operating revenues (costs), including: Revenues Costs (4 084) (1 965) Profit from operating activity Financial revenues (costs),including: Revenues Costs (3 144) (4 178) Profit before tax Current income tax 17 (4 829) (1 683) Deferred income tax (376) Net profit Other comprehensive income Other net comprehensive income (1 460) Result of hedge accounting (1 803) Income tax related to other comprehensive income (427) 343 Comprehensive income in total Net profit per ordinary share: - basic 2,09 1,07 - diluted 2,09 1,07 Weighted average number of shares Name of entity: APATOR SA Page 9 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

24 Financial statement for STATEMENT OF CHANGES IN EQUITY Share capital Other capitals Capital from measurement of hedge transactions Undistributed financial result TOTAL EQUITY Balance at Changes in principles of accounting - (6 169) - - (6 169) Balance after changes Changes in equity in the period since till Hedge instruments of cash flows, including: - profits (loss) included in measurement of reporting value of hedged items Tax related to the items presented in capital or transferred from capital - - (1 803) - (1 803) - - (1 803) - (1 803) Net profit in the period since till Comprehensive income recognized in the period since till (1 460) Dividends (21 064) (21 064) Settlement of interim dividend from previous year Distribution of the result into supplementary capital (20 196) - Balance at (1 460) Balance at (1 460) Changes in equity in the period since till Hedge instruments of cash flows, including: - profits (losses) included in measurement of reporting value of hedge items Tax related to items presented in capital or transferred from capital (427) - (427) Net profit in the period since till Comprehensive income recognized in the period since till Dividends (24 830) (24 830) Interim dividend paid (13 243) (13 243) Purchase of own shares - (200) - - (200) Redemption of own shares (200) Distribution of the result into supplementary capital (12 901) - Balance at Name of entity: APATOR SA Page 10 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

25 Financial statement for STATEMENT OF CASH FLOWS NOTE Period restated Cash flows from operating activity Profit before tax Adjustments: (46 441) (22 797) Amortization of intangible assets Depreciation of tangible fixed assets (Profit) loss on sales of tangible fixed assets and intangibles (27 666) (93) (Profit) loss from the measurement of investment property under fair value 102 (64) (Profit) loss due to the amendment of fair value of derivatives (613) Interest cost Interest revenues (13) (18) Dividend revenues (28 200) (30 652) Other adjustments (1 136) Cash from operating activity before changes in current capital Changed in inventory (7 371) Change in receivables (5 001) Change in liabilities (1 920) Change in provisions Change in accruals and prepayments (350) (50) Cash generated during operating activity Income tax paid (449) (1 878) Net cash from operating activity Cash flows from investing activity Expenses for the acquisition of intangible assets (739) (1 288) Expenses for the acquisition of tangible fixed assets (17 546) (31 395) Proceeds from sales of tangible fixed assets Investment in subsidiaries - (5 000) Received repayments of loans granted Interest received Dividends received Other proceeds (expenses) 21 (2 986) Net cash used from investing activity (548) Cash flows from financing activity Proceeds due to credits and loans taken Repayment of credits and loans (41 000) (26 000) Interest paid (2 273) (1 674) Dividends paid (38 059) (12 286) Payment of liabilities due to financial lease (116) (27) Other proceeds (expenses) 21 (21) (4) Net cash from financing activity (55 319) (1 150) Increase (decrease) of cash and its equivalents (603) Cash and its equivalents at the beginning of the period Cash and its equivalents at the end of the period Name of entity: APATOR SA Page 11 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

26 Financial statement for PRINCIPLES FOR INTERNATIONAL FINANCIAL REPORTING STANDARDS APPLIED 3.1. STANDARDS AND INTERPRETATION TO BE APPROVED BY EUROPEAN UNION At the day of publication of financial statement the following standards and interpretations wait to be approved by European Union: IFRS 9 Financial instruments is applied to annual periods beginning from 1 st January 2015 or later; The Executive Board currently analyzes the consequences and the influence of adoption of the new standard on financial statement but it does not expect significant influence on financial statement of the Company FIRST-TIME ADOPTED STANDARDS APATOR SA during preparation of the financial statement adopted for the first time changes to IFRS 7 Financial instruments: disclosure of information. The adoption of the above changes did not cause any significant changes in accounting policy of the Company neither in presentation of data in the financial statements EARLIER ADOPTED STANDARDS AND INTERPRETATIONS At the day of preparation of the report the following standards and interpretations and their amendments were approved: Amendments to IAS 19 Employee benefits, that are applied to annual periods beginning on 1 st January 2013 or later; Amendments to IAS 1 Presentations of financial statements, that are applied to annual periods beginning on 1 st July 2012 or later; IFRS 10 Consolidated financial statements are applied to annual periods beginning on 1 st January 2014 or later; IFRS 11 Joint agreements are applied to annual periods beginning on 1 st January 2014 or later; IFRS 12 Disclosure of interest in other entities is applied to annual periods beginning on 1 st January 2014 or later; Amendments to IAS 27 Separate financial statement are applied to annual periods beginning on 1 st January 2014 or late; Amendments to IAS 28 Investments in associates and joint ventures are applied to annual periods beginning on 1 st January 2014 or later; Amendments to IFRS 1 First time adoption of International Financial Reporting Standards are applied to annual periods beginning on 1 st January 2013 or later; Amendments to IAS 12 Income taxes deferred income tax are applied to annual periods beginning on 1 st January 2013 or later; IFRS 13 Fair value measurement are applied to annual periods beginning on 1 st January 2013 or later; IFRIC 20 Stripping costs in the production Phase of a Surface Mine is applied to annual periods beginning on 1 st January 2013 or later. Amendments to IFRS 7 Financial instruments: disclosures compensation of financial assets and liabilities - are applied to annual periods beginning on 1 st January 2013 or later; Amendments to IAS 32 Financial instruments: presentation - are applied to annual periods beginning on 1 st January 2014 or later; Name of entity: APATOR SA Page 12 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

27 Financial statement for 2012 The Executive Board did not make use of possibility of their earlier adoption. However, it is not expected that new standards and amendments to current ones could have significant influence on the financial statement of the Company. 4. ACCOUNTING PRINCIPLES APPLIED 4.1. GENERAL PRINCIPLES Financial statement is prepared in accordance with the conception of historical cost, except for measurement of some fixed assets and financial assets that according to IFRS were valuated according to fair value. The most significant accounting principles adopted by the entity were presented in points from to Policy of accounting presented below was applied to all the periods presented in financial statement by the Company. Some comparative data were reclassified in order to obtain the conformity with presentation of current period (see Note 32 point 8.32) DETAIL PRINCIPLES FOR THE MEASUREMENT OF ASSETS AND LIABILITIES INTANGIBLE ASSETS, COSTS OF RESEARCH AND DEVELOPMENTS Intangibles are assets that meet the following criteria: - they can be excluded or separated from the entity, sold, licensed or given for payment usage to third persons both individually or with related to them contracts, elements of assets or liabilities or - they are resulted from the contracts or other regulations regardless they are transferable or it is possible to separate them from the entity or due to other reasons or liabilities. Intangibles acquired in separate transaction are included is the statement of financial position according to purchase price. Intangibles acquired in transaction regarding the takeover of the entity are recognized in balance sheet according to fair value on the day of receipt. After initial recognition, the intangibles are valuated according to purchase price or costs of manufacturing reduced by redemption and write downs due to decrease of the value. The period of use of intangibles depending on their kind is valuated and recognized as limited or not defined one. Intangibles with not defined period of use and those have not yet been used are subject every year to verification in respect of possible loss of the value at assets or at the level in relation to the particular assets or at the level of the centre earning the cash. In case of the remaining intangibles annual measurement is carried out to check if there are circumstances that can prove the loss of their values. The periods of use of particular intangibles are subject to annual verification and if necessary they are adjusted from the beginning of the next financial year. For the amortization of intangibles with specified period of use is the method of line amortization. The periods of use for particular elements of intangibles are as follows: Patents and licenses from 2 to 5 years R&D from 3 to 5 years Costs of research and developments Costs of research and developments are not subject to activation and they are represented in the statement of comprehensive income as the costs in the period they were incurred. Costs of research and developments are capitalized only in situation when: - project being performed is exactly defined (for instance the software ); - it is likely that the element of assets will bring economic profits in the future; - costs related to the project can be reliably estimated Name of entity: APATOR SA Page 13 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

28 Financial statement for 2012 Costs of research and development are amortized by the line method during expected period of their usefulness. In case when it is not possible to separate self-manufactured element of assets, the costs of research and development are recognized in income statement in the period when they were incurred TANGIBLE FIXED ASSETS Tangibles are tangible assets being in possession of the entity in order to make use of them in manufacturing, provision of goods and services, giving for renting by third persons or for administration purposes which is expected to be used for more than one period. They are valuated according to purchase price, cost of manufacturing or in calculated value (after revaluation of tangible fixed assets) reduced by depreciation write-offs or redemption and writeoffs of permanent loss of the value. According to the approach based on elements, the entity accepts different amortization rates for significant elements of tangible fixed asset. Tangible fixed assets in the entity cover tangibles with predicted period of their economic usage longer than one year. The commencement of the amortization is after a month of usage. During the establishment of annual amortization rates the economic period of the usage of tangible fixed asset is taken into consideration. In case of establishment of annual amortization rates, economical period of use of fixed asset is taken into account. The correctness of periods and amortization rates used by the entity are periodically verified by managers of manufacturing departments. For amortization purposes of fixed assets line method of amortization has been adopted. The period of use for particular fixed assets is as follows: Buildings and constructions from 3 to 70 years Machines and equipment from 2 to 25 years Transport means from 4 to 10 years Other tangible fixed assets from 3 to 10 years If during preparation of financial statement some circumstances occurred indicating that balance value of tangibles may not be recovered then the review of tangibles is carried out in respect of possible loss of value. If there are circumstances indicating that it could be the loss of value and balance value exceeds estimated value to be recovered then the value of tangibles or the centres earning the cash the tangibles belong are reduced to the level of the value to be recovered. The value being recovered corresponds to the higher one from two values: fair value reduced by sales costs or useful value. In order to establish useful value, estimated cash flows are discounted to current value using gross discount rate reflecting current market prices of the value of the money in the period and risks related to the element of assets. In case of element of assets that does not generate cash inflows significantly in independent manner the value recovered is established for the centre earning cash where this element belongs. Profits or losses resulted from sales/liquidation or discontinuation of use of tangible fixed assets are defined as the difference between revenues from sales and net value of these tangible fixed assets and they are recognized in the result of the period when the sales occurred. Tangible fixed assets under construction regard assets being in progress of construction or assembly and they are indicated according to the purchase price or the costs of manufacturing. Tangible fixed assets under construction are not subject to amortization until the construction is completed and they are transferred to use. The company has the right to perpetual usufruct of land acquired based on administrative decision. Fair value of acquired right was fixed by the expert in April 2006 therefore it is presented in balance sheet: it is not subject to amortization. The Company has in its possession tangibles being used in social activity. The tangibles together with the right to perpetual usufruct of the land on the day of transmission to IFRS were evaluated in fair value by the expert for property. Due to lack of sales plans of that property and Name of entity: APATOR SA Page 14 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

29 Financial statement for 2012 the fact of reimbursement of the costs of keeping that property from Company s Social Benefits Fund and according to the agreement with the Trade Unions the Company presents these assets in financial statement INVESTMENTS IN SUBSIDIARIES The Company has the shares that control domestic and foreign enterprises. The shares are treated as long-term investments. The shares in subsidiaries are valuated according to the purchase price reduced by write downs due to impairment LEASING Financial leasing agreements are agreements where basically all the risk is transferred to the Company and potential benefits resulting of being the owner as the lessee. All other kinds of leasing are treated as operating leasing. The assets being in use based on financial leasing agreements are treated equally with the assets of the Company and they are valuated when leasing agreement comes into life according to lower one from two presented values: fair value the element of property being the subject of leasing or the current value of minimum leasing fees. Leasing payments are divided into interest part and capital part in such a manner that interest rate from the outstanding liability was constant value. Leasing fees for operating leasing are recognized in the result of the period by line method for the duration of leasing agreement INVESTMENT PROPERTY Investment properties are considered the properties treated as the revenue from renting and/or they are kept due to expected increase of their values. Investment properties are evaluated on the fair value at balance day. Profits and losses resulting from the change in fair value of investment properties are recognized in the result in the period they occurred FIXED ASSETS AND GROUPS OF NET ASSETS FOR SALE Fixed assets classified for sale and also groups of net assets are evaluated according to the lower of two values: balance value or fair value reduced by sales costs. Fixed assets and groups of net assets are classified for sale if their balance value will be recovered more from sales transaction than in result of their further usage. This condition is considered as fulfilled only when the element of assets (or group of net assets classified for sale) is available in its current status for immediate sale and the occurrence of sales transaction is very likely to be during the year since the moment of the change of classification INVENTORY Materials and goods are valuated according to the price of acquisition (purchase price increased by transport costs, cross-border payments, customs duties, handling costs). Materials and goods are valuated according to weighted average. Products are evaluated on current basis of the cost of manufacturing but inventory of products is valuated as manufacturing costs not higher than their net sale prices, possible to obtain if the sale takes place on reporting day. Manufacturing cost includes the summary of direct costs (materials, salaries) and justified part of costs concerning indirect costs regarding manufacturing of the product covering indirect costs of manufacturing and part of fixed direct costs corresponding to the level of these costs when there is a normal use of manufacturing capacity. Name of entity: APATOR SA Page 15 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

30 Financial statement for 2012 Inventories are verified for each reporting period. The inventories unnecessary from economical point of view are given the 100% of write down. Moreover, in order to make real the values of inventories, the analysis of age structure of inventories is carried out where the decisive factors are the dates of come in and come out of the item from the warehouse COSTS OF EXTERNAL FINANCING The Company applies the principle of capitalization of the costs of external financing (interest and other costs incurred by the Company due to cash granted), regarding the purchase or construction of tangible elements of property. The principles of capitalization are not adapted to investment properties and inventories manufactured in repeatable manner with short manufacturing cycle. The scope of granting of special means by the Company in order to finance the element of assets to be obtained, the amount of external financing in the period that is allowed to be activated is the difference between real costs of external financing in the period and the revenues of entities due to temporary investment of the means granted. If the company grants the financial means and then it uses them aimed at to get the element of assets therefore the expenditures born in the period, the capitalization rate is adopted (weighted average of external financing costs that includes all the loans and borrowings remaining to be settled in the period) GOVERNMENT SUBSIDIES Subsidies from the government and non-cash subsidies indicated in fair value are taken only when there is sufficient certainty that the Company will meet the conditions concerning the subsidy and the subsidy will be really granted. In case when subsidy regards the given cost item then it is recognized as the decrease of the costs that the subsidy has to offset it. But in case when subsidy regards the element of assets at that time its fair value decreases the value of the element TRADE RECEIVABLES The Company considers each contract as financial instrument that causes the establishment of the element of financial assets at one of the parties and financial liability or capital instrument at the other party provided that the contract concluded between two or more parties will bring clear business effects. The Company classifies financial instruments based on the following division: Elements of financial assets or financial liabilities are evaluated according to fair value through the financial result assets and liabilities acquired or recognized mainly in order to sell or repurchase in the near future or they are the part of portofolio of definite financial instruments that are managed in total and for which current and actual pattern of generating of short-term profits is confirmed, the Company includes derivatives to them that provide hedging of exchange rate risk; Investments kept until the due date - financial assets not being the derivatives with agreed or possible to definite payments and fixed due date with respect to them the Company has firm intention and it is able to keep in possession until the due date; loans and receivables financial assets not being the derivatives with agreed or possible to definite the payments which are not on active market Name of entity: APATOR SA Page 16 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

31 Financial statement for 2012 Financial assets available for sale financial assets not being the derivatives that have been indicated as available for sale or not being (a) loans and receivables, (b) investments kept up to the due date, neither (c) financial assets valuated in fair value through financial result. Other financial liabilities Inclusion and exclusion of the element of financial assets and financial liability The element of financial assets or financial liability is presented in the statement of financial position when the Company becomes the party of the contract of the instrument. The element of financial assets is excluded from the statement of financial position in case when the rights to economic benefits and risk resulting from the contract have been performed, expired or the Company waived the rights. The Company excludes financial liability from the statement of financial position when the liability expired that means the liability specified in the contract is fulfilled, redeemed or expired. Measurement of financial instruments on the day of purchase On the day of purchase, assets and financial liabilities are evaluated in fair value by the Company that is mostly in fair value of payment made in case of the element of assets or amount received in case of liability. The Company includes costs of transaction in initial value of the measurement of all assets and financial liabilities except for the category of assets and liabilities evaluated in fair value through financial result FINANCIAL INSTRUMENTS As financial instrument the Company qualifies each contract that has the influence at the same time on the occurrence of the element of financial assets at one of the parties and financial liability or capital instrument at the other party provided that the contract concluded between two or more parties will bring clear business effects. The Company classifies financial instruments based on the following division: Elements of financial assets or financial liabilities are valuated according to fair value through the financial result assets and liabilities acquired or recognized mainly in order to sell or repurchase in the near future or they are the part of portfolio of definite financial instruments that are managed in total and for which current and actual pattern of generating of short-term profits is confirmed, the Company includes derivatives to them that provide hedging of exchange rate risk; Investments kept until the due date - financial assets not being the derivatives with agreed or possible to definite payments and fixed due date with respect to them the Company has firm intention and it is able to keep in possession until the due date; Loans and receivables financial assets not being the derivatives with agreed or possible to definite the payments which are not on active market Financial assets available for sale financial assets not being the derivatives that have been indicated as available for sale or not being (a) loans and receivables, (b) investments kept up to the due date, neither (c) financial assets evaluated in fair value through financial result. Other financial liabilities Inclusion and exclusion of the element of financial assets and financial liability The element of financial assets or financial liability is presented in the statement of financial position when the Company becomes the party of the contract of the instrument. Name of entity: APATOR SA Page 17 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

32 Financial statement for 2012 The element of financial assets is excluded from the statement of financial position in case when the rights to economic benefits and risk resulting from the contract have been performed, expired or the Company waived the rights. The Company excludes financial liability from the statement of financial position when the liability expired that means the liability specified in the contract is fulfilled, redeemed or expired. Measurement of financial instruments at the date of their arise At the date of acquisition of asset and financial liabilities the Company are evaluated in fair value by the Company that is mostly in fair value of payment made in case of the element of assets or amount received in case of liability. The Company includes the transaction costs in the initial value of the measurement of all assets and financial liabilities except for the category of assets and liabilities valuated in fair value through financial result. Measurement of financial instruments at the reporting date The Company evaluates: - according to amortized cost, with consideration of effective interest rate: investments kept till their due date, loans and receivables and other financial liabilities. The measurement can be in value requiring the payment if the effects of the discount are not significant, - according to fair value: financial assets and financial liabilities of categories evaluated in fair value included financial result and category of financial assets available for sale. If it is not possible to fix the fair value (such situation can occur in case of non-quoted capital instruments), such elements are evaluated according to the cost (price of acquisition). The effects of measurement of financial assets available for sale according to the fair value are recognized in equity. The effects of measurement of financial assets and liabilities qualified to other categories are included into the financial result. Hedging accounting Hedge of cash flows The Company uses the derivatives such as fx forward contracts in order to hedge the risk of the exchange rate difference. In the connection with the fact that the future expected payments due to sale are not included in the financial statement of the Company, whereas the hedging instruments fx forward without the hedge accounting are measured at fair value included in the result, the potential accounting mismatching occurred. In order to eliminate the possible accounting mismatching, the Company introduced the hedge accounting from 1 st July If the derivative is designated as the hedge for the variability of cash flows referred to the specified risk related to the recognized asset, the recognized liability or highly probable planned transaction which might affect the profit or loss of the current period, the part of profits or losses related to this hedge, which is an effective hedge, is recognized in other comprehensive income and it is presented as the separate item due to hedge in equity. Profits or losses previously recognized in equity are forwarded to the profit or loss of the current period in the same period and the same item, where the hedged cash flows are recognized in the profit and loss statement. The ineffective part of the fair value change of the derivative is recognized immediately as the profit or loss of the current period. If the hedging instrument discontinues meeting the hedge accounting criteria then it expires, is sold, released, executed or it will change its designation, the Company will discontinue applying the hedge accounting principles. The accumulated profits or losses previously recognized in other comprehensive income and presented in the equity are remained in the equity till the planned transaction is executed and recognized as the profit or loss of the current period. If the item is hedged by the non-financial asset, profits or losses previously recognized in other comprehensive income correct the carrying amount of these assets as at the recognition. If the planned transaction is not accepted to be executed, the profits or losses recognized in the statement of financial position are recognized promptly as the profit or loss of the current period. Name of entity: APATOR SA Page 18 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

33 Financial statement for 2012 In other cases the amounts previously recognized in other comprehensive income are recognized as the profit or loss of the current period in the same period or periods, when the hedged planned transaction affects the profit or loss of the current period. When the hedging is established, the Company formally establishes documents the hedge relationship as well as the purpose of risk management and the strategy of establishing the hedge. The documentation contains identification of hedging instrument, hedged item or transaction, the nature of hedged risk as well as the manner how the entity will assess the effectiveness of hedging instrument in compensation of the threat of changes in the fair value of hedged item or cash flows related to the hedged risk. It is expected that the hedge will be highly effective in compensation of changes of the fair value or cash flows resulting from the hedged risk. The efficiency of the hedging is assessed on a current basis in order to check if it is highly effective in all reporting period, for which it was established BANK CREDITS The bank credits carrying interest are recognized at purchase price corresponding to the fair value of received cash less the direct costs related to the credit. In the subsequent periods the credits are measured at amortized purchase price with the application of effective interest rate TRADE LIABILITIES After the initial recognition, all liabilities except for the liabilities measured at fair value, they are measured, pursuant to the principle, at adjusted purchase price applying the effective interest rate method PROVISIONS REVENUES The provisions are established when the Company bears the obligation (legal or custom) resulting from the past events and when it is likely that the fulfilment of this obligation will cause the necessity of outflow of assets when the reliable estimation of the liability's amount is possible to be made. The costs related to the relevant provisions are presented in the profit and loss account after reducing all returns. In case when the proceed of the money in time is significant the amount of provision is established by discounting the anticipated further cash-flows to the current value using the gross discount rate reflecting the current market assessment of the money and the possible risk related to this liability. If the method basing on discounting is applied, the increase of the provisions related to the lapse of time is recognized as the borrowing costs. The provisions are also established for the future liabilities caused by restructuring, if basing on the separate regulations the Company is obliged to carry out or to enter into the binding agreement and the restructuring plans allow estimating the value of future liabilities in a reliable manner. Pursuant to the pay-roll systems the employees are entitled to jubilee awards and retirement severance pays. The jubilee awards are paid to employees after working out the specified number of years. The retirement severance pays are paid once at the moment of going into retirement. The amount of the severance pays and jubilee awards depend on the time of employment and the fixed base specified in the corporate collective labour agreement of APATOR S.A. The Company establishes the provision for the future liabilities due to the retirement severance pays and jubilee awards in order to classify the costs to the periods to which they are related to. According to IAS 19 the jubilee awards are other long-term employee benefits and the retirement severance pays are the programs of post-employment employee benefits. Name of entity: APATOR SA Page 19 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

34 Financial statement for 2012 The provisions established for jubilee awards and retirement severance pays are determined basing on the projected unit credit method and actuarial techniques. The base for reliable estimation of the provisions is as follows: Criteria for acquiring rights to defined benefits, Actuarial assumptions. The provisions for the jubilee awards and retirement severance pays are charged against other operating activity. The Company establishes the provision for the costs of compensated absences which will have to be incurred as a result of right unused by the employees and which arisen at the reporting date. Provision for cost of accumulated compensated absences is recognized as the liability (accrued and deferred costs) after deduction all paid amounts.provision for costs of accumulated compensated absences is the short-term provision and is not subject of discount and is charged against the basic activity. The Company establishes the provision for warranty repairs because APATOR S.A. enters into the sales agreement in which the warranty is granted for the period of two and three years. And therefore the ratio of warranty repairs cost to the total sale in the period is used to calculate the provision. The provision for warranty repairs is charged against other operating activity. Revenues from sales The revenues from sale are recognized at fair value of received or payable payments and they represent the receivables for products, goods and services provided under the usual business activity less the rebates, tax on goods and services and other taxes related to the sale (excise tax). The revenues are recognized in such amount which possibly will correspond to the Company s economic benefits related to the transaction to be achieved and when the amounts of revenues may be reliable measured. Sales of goods and products The sale of goods and products is recognized when the goods and products are delivered and the risk and benefits resulting from the ownership right are transferred and when the amount of revenues may be measured in a reliable manner. Services The revenues due to rendering of services are recognized under the progress of performance, if the result of related transaction may be measured in a reliable manner. The percentage progress of service performance is determined as the ratio of costs incurred as at the relevant date to the total estimated costs of transactions. If the result of the service related transaction cannot be estimated in a reliable manner then the revenues due to this agreement is recognized only to the amount of incurred costs which Company expects to recover. Other revenues Interest Revenues due to interest are recognized consecutively when they increase, with reference to the net reporting value of the relevant asset in compliance with the effective interest rate method. Dividends Dividends are recognized when the rights of shareholders to receive them are established. Revenues due to rent The revenues due to rent of investment real properties are recognized applying the straight line method for the period of renting to the concluded agreements TRANSACTIONS IN FOREIGN CURRENCIES Name of entity: APATOR SA Page 20 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

35 Financial statement for TAXES In the financial statement of APATOR S.A. the transactions in the foreign currencies are translated pursuant to the exchange rate applicable as the transaction date. As at the reporting period the monetary assets and liabilities are translated pursuant to the exchange rate of the leasing bank applicable at the end of the reporting period (assets acc. to buy rate, liabilities- sell rate). Profits and losses resulting from translation of the currencies are charged directly against the profit or loss. Income tax includes the current and deferred part. The current and deferred income tax is recognized as the profit or loss of the current period, except for the situation when it refers to merger of entities and the items recognized directly in the equity or as the other comprehensive income. The current tax is expected amount of liabilities or receivables due to the income tax to be taxable in the relevant year, established by the application of the income tax legally or actually applicable at the end of the period and the adjustments of the income tax from previous years. The deferred tax is recognized because of the temporary differences between the carrying amount of the assets and liabilities and their value established for the tax purposes. The deferred income tax is not recognized for the following temporary differences: initial recognition of assets or liabilities from the transaction, which is not a merger of entities and does not affect neither the profit and loss of the current period or the taxable income, the differences related to the investments in subsidiaries and under the joint control to the extent, to which it is not probable that they will be disposed in the foreseeable future. Moreover, the deferred tax from the temporary differences arisen as a result of the initial recognition of the goodwill is not recognized. The deferred tax is measured at the applicable tax rate, which will be applicable, when the differences will reverse as expected, whereas the legally or actually binding tax regulations to the end of the period are considered as the basis. The deferred tax assets and deferred tax provisions are offset if the Company has an enforceable legal title to offset the current tax assets and liabilities and provided that the deferred tax provisions refer to the income tax imposed by the same tax authority on the same taxpayer or on different taxpayers, who intend to offset the income tax liabilities and receivables at net amount or simultaneously to receive receivables and settle the liability. The deferred tax assets related to the unsettled tax loss, unused tax relief and negative temporary differences are recognized to the amount, to which it is probable, that the taxable income is achieved to allow for their write-off. Deferred tax assets are subject to remeasurement at the each end of the period and they are reduced to the extent, to which it is not probable that the related benefits in the income tax will be performed ZONE RELIEF RESULTING OF ACTIVITY IN SPECIAL ECONOMIC ZONE The Company makes use of income tax shelter due to the costs incurred in new investment under permission granted on 28 th December 2010 for business activity in the area of Pomeranian Special Economic Zone. Tax shelter is related to zone income which is obtained from business activity carried out in the area of Pomeranian Special Economic Zone under permission obtained. The Company recognizes tax shelter resulting from business activity carried out in Special Economic Zone (income tax relief of legal entities) according to IAS 12 and finds it as assets due to deferred income tax to the value of possible public assistance to be obtained. Maximum value of possible assistance to be obtained is calculated as the product of intensity of the assistance obligatory for the province and value of expenditures born for the investment recognized as qualified expenses. The assets due to deferred income tax related to not used tax relief are recognized to the value it is probably that income tax will be achieved that allows for their usage. These assets are subject the valuation again at reporting every day and they are reduced in such range that it is not probably to perform associated to them benefits in income tax EQUITY Name of entity: APATOR SA Page 21 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

36 Financial statement for 2012 The Company includes to the equity: share capital, supplementary capital from the sale of own shares over their nominal value, other supplementary capital, revaluation capital, reserve capitals, hedge transactions measurement capital, undividable financial result from previous years and financial result. The items reducing the amount of the equity are as follows: own shares and write-offs of the financial result of the current year. 5. BASIC ACCOUNTING JUDGMENTS AND BASES FOR UNCERTAINTY ESTIMATION The preparation of the financial statement pursuant to IFRS requires from the Executive Board to make the professional judgements and assumptions which affect the accepted principles and presented values of assets, liabilities, revenues and costs. The estimations and related assumptions are based on the historical experience and many other factors, which are deemed as being reasonable in these circumstances. The results of these estimations are the basis for the professional judgment regarding the book value of assets and liabilities. In the material issues the Executive Board making the estimation bases on the opinions of independent experts. The actual value may vary from the estimated value. Estimations and related assumptions are subject to current verification. The change of the accounting estimations is recognized in the period when it was made. The estimations and assumptions affecting significantly the amounts disclosed in the financial statement of APATOR S.A. were recognized in the following notes: Inventories impairment (Note 6- point 8.6), receivables (Note 7- point 8.7); Provisions (Note 15- point 8.15). 6. INFORMATION ON SEASONAL SALES Further to manufacturing of investment goods by the Company, seasonal sales occur in particular quarters. The demand for the products of the Company is at the highest level in third and fourth quarters every year. 7. EXPLANATORY NOTES TO THE FINANCIAL STATEMENT 7.1. OPERATING SEGMENTS The business activity APATOR S.A. is focused in two key segments of electrical machines sector: metering and switchgear. The Company strives to the comprehensive service in the field of metering and data reading out of utility services and provides the equipment to the safe making and breaking electrical circuits. Presenting the geographic information the Company separated three areas of activity: Home - including the domestic sales; Export- export sales, outside EU member states; European Union- sales to the EU member states. In 2012, APATOR S.A. performed the sales in value of 24,2 m PLN that is over 10% of revenues from sales of products to the entity capital related to power holding. Metering equipment Switchgear equipment Others Unallocated items Financial results of operating segments for the period since till Total revenues Total Name of entity: APATOR SA Page 22 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

37 Financial statement for 2012 Metering equipment Switchgear equipment Others Unallocated items Sales outside Sales to related entities Total costs (90 265) (55 123) (5 270) - ( ) Costs outside (68 412) (48 263) (5 193) - ( ) Costs to related entities (21 853) (6 860) (77) - (28 790) Result of the segment Unallocated costs (4 549) (4 549) Profit (loss) from operating activity (4 549) Financial revenues interest Financial costs (3 144) (3 144) - interest (1 666) (1 666) Profit before tax Income tax Net profit Other information on segments at Total assets, including: Tangible fixed assets Intangible assets Inventory Trade receivables Unallocated assets Trade liabilities X Increase of tangible fixed assets and intangible assets Total Tangible fixed assets and intangible assets Unallocated expenditures Amortization/Depreciation Tangible fixed assets Intangible assets Unallocated amortization Write downs Inventory Trade receivables Metering equipment Switchgear equipment Other Items unallocated Financial results of operating segments for the period since till Total revenues Sales outside Sales to related entities Total costs (70 751) (50 509) (5 482) - ( ) Costs outside (52 618) (41 665) (2 124) - (96 407) Costs to related entities (18 133) (8 844) (3 358) - (30 335) Result of the segment Unallocated costs (17 487) (17 487) Profit (loss) from operating activity (17 487) Financial revenues interest Financial costs (4 178) (5 160) Total Name of entity: APATOR SA Page 23 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

38 Financial statement for interest (1 330) (1 330) Profit before tax Income tax (2 059) (2 059) Net profit Other information on segments at Total assets, including: Tangible fixed assets Intangible assets Inventory Trade receivables Unallocated assets Trade liabilities X Increase of tangible fixed assets and intangible assets Tangible fixed assets and intangible assets Unallocated expenditures Amortization/Depreciation Tangible fixed assets Intangible assets Unallocated amortization Write downs Inventory Trade receivables Geographical information Domestic Export European Union Revenues from sales in geographical segments for the period since till Total revenues Sales outside Sales to related entities Revenues from sales in geographical segments for the period since till Total revenues Sales outside Sales to related entities Total Name of entity: APATOR SA Page 24 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

39 Financial statement for INTANGIBLES PATENTS AND LICENSES, COMPUTER SOFTWARE COSTS OF R&D OTHER INTANGIBLE ASSETS ADVANCES FOR INTANGIBLE ASSETS TOTAL Net value at Increase due to acquisition Increase due to own manufacturing Decrease due to adjustment to taking from the own manufacturing - (112) - - (112) Increase due to the advance for intangibles X X X Decrease due to liquidation (350) (350) Amortization (523) (346) (1) - (870) Net value at Net value at Increase due to acquisition Increase due to own manufacturing Increase due to reclassification - others (146) 225 (79) - 0 Increase due to advance for intangibles X X X Settlement of advance for intangibles X X X (82) (82) Amortization (507) (284) (238) - (1 029) Other amendments - gross values - (2) - - (2) Net value at Value at Gross value Summary of up to date redemptions and write downs (1 869) (1 245) (2) - (3 116) Net value Value at Gross value Summary of up to date redemptions and write downs (2 172) (1 529) (444) - (4 145) Net value TANGIBLE FIXED ASSETS In 2011, APATOR S.A. reclassified buildings located on the perpetual usufruct right of lands into the assets held for sale. On the 5 th July 2012 APATOR SA concluded the sales contract. The detailed information on sales contract is presented in the Note 11- section The investment in Pomeranian Special Economic Zone in Ostaszewo is the most important departure on tangible fixed assets during Apator SA performed the investment by building Modern Manufacturing and Development Centre. Name of entity: APATOR SA Page 25 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

40 Financial statement for 2012 Data regarding tangible fixed assets are presented in the tables below. LANDS, BUILDINGS AND CONSTRUCTIONS MACHINES AND EQUIPMENT TRANSPORT MEANS OTHER TANGIBLE FIXED ASSETS TANGIBLE FIXED ASSETS UNDER CONSTRUCTION ADVANCES FOR TANGIBLE FIXED ASSETS Net value at Increase due to acquisition Increase due to own manufacturing Increase due to taking from financial lease Increase due to advance for tangible fixed assets and tangible fixed assets under construction X X X X Decrease due to disposal - (263) (289) (27) - - (579) Decrease due to liquidation - (203) - (26) - - (229) Decrease resulting from re-classification to assets held for sales TOTAL (8 829) (8 829) Settlement of advance for tangible fixed assets and tangible fixed assets under construction X X X X (7 452) (2 376) (9 828) Amortization (254) (1 996) (392) (2 398) - - (5 040) Decrease of update redemption due to disposal Decrease due to up to date redemption due to liquidation Decrease of up to date redemption due to re-classification to assets held for sales. Other amendments Net value at Net value at Increase due to acquisition Increased value due to modernization Increase due to own manufacturing Increase due to taking from financial lease Increase due to the advance for tangible fixed assets and tangible fixed assets under construction X X X X Decrease due to disposal (7) (1 146) (373) (34) - - (1 560) Decrease due to liquidation (221) (4 894) (14) (982) - - (6 111) Decrease resulting from re-classification to assets held for sales (1 637) (1 637) Settlement of the advance for tangible fixed assets and tangible fixed assets under construction X X X X (52 681) (2 736) (55 417) Amortization (776) (2 322) (312) (2 753) - - (6 163) Decrease of up to date redemption due to disposal Decrease of up to date redemption due to liquidation Decrease of up to dated redemption due to re-classification to assets held for sales, Other amendments Net value at Additional information regarding tangible fixed assets is presented in the table below. Name of entity: APATOR SA Page 26 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

41 Financial statement for 2012 DAY Gross value of all fully amortized tangible fixed assets still being in use The amount of costs for financing of external activation in relevant period Reporting value of tangible fixed assets being the hedge for liabilities APATOR SA established the mortgage on the properties as the credit hedging. APATOR S.A. holds tangible fixed assets that are used in social activity. These assets are used in the recreation centre in Rowy. Information on these assets is presented in the tables below. LANDS, BUILDINGS AND CONSTRUCTIONS MACHINES AND EQUIPMENT OTHER TANGIBLE FIXED ASSETS TANGIBLE FIXED ASSETS UNDER CONSTRUCTION TOTAL Net value at Increase in value due to modernization Amortization (47) (1) (49) - (97) Net value at Net value at Increase due to the advance for tangible fixed assets and tangible fixed assets under construction X X X Amortization (47) (1) (52) - (100) Net value at INVESTMENT PROPERTIES The investment property includes the purchased land with buildings which are leased by notrelated entities. Period Value at the beginning of the period Increase of fair value Decrease of fair value (102) (254) Value at the end of the period Revenues and costs due to investment properties are presented in the table below. Name of entity: APATOR SA Page 27 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

42 Financial statement for 2012 Period Income from rent in current result 9 16 Direct operating costs due to investment property that brought income from rent in the period Direct operating costs due to investment property that did not bring income from rent in the period At 31 st December 2012 the fair value of investment properties of APATOR S.A. was calculated based on the measurement as at this date made by Wiesław Wolant - expert in real estate (independent expert in real estate). The expert has the proper qualifications and experience to carry out the measurement of real property. The measurements of the investment properties of the Company were made by the reference to the market transaction prices related to the similar properties. Owing to the low value of revaluation, it is being made once a year. All investment properties of APATOR S.A. are its ownership OTHER FINANCIAL ASSETS Data on the other financial assets are presented in the table. Day Other long-term financial assets Other shares (not officially listed) Derivatives Other short-term financial assets Derivatives Other financial assets in total, including: in related entities in other entities The long-term financial assets include the shares and stocks of the following companies: Day Shares in subsidiaries and associates Shares in Apator Control Sp. z o.o. (Toruń) Shares of Apator Metrix S.A. (Tczew) Shares in Apator Mining Sp. z o.o. (Katowice) Shares in Apator Powogaz S.A. (Poznań) Shares in Apator Rector (Zielona Góra) Shares of FAP Pafal S.A. (Świdnica) Shares in Apator GmbH (Berlin) 0 0 Shares in Apator Elektro (Moscow) 8 8 Shares in Apator- Electro LLC (Moscow) 1 - Name of entity: APATOR SA Page 28 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

43 Financial statement for 2012 On 26 th November 2012 in Moscow, the entity - Apator- Electro LLC was registered, where Apator S.A. has 50% of stocks. Value of stock indicated in accounting books of Apator S.A. is the half of primary capital in new established associated company. The capital on the reporting date has not been paid. Established company will take the role of trade go-between in target on Russian market and it will replace current entity - Apator Elektro S.A. The commencement of activity as the company limited is caused by legal reasons and it is connected with smaller charges in Russian Federation. Data regarding subsidiaries and associates are presented in the table below. % shares Book value Equity % share *equity Difference Shares in Apator Mining Sp. z o.o. (Katowice) 100,00% Shares in Apator Control Sp. z o.o. (Toruń) 100,00% Shares of FAP Pafal S.A. (Świdnica) 100,00% Shares of Apator Metrix S.A. (Tczew) 100,00% Shares in Apator Elektro (Moscow) 50,00% Shares in Apator- Electro LLC (Moscow) 50,00% Shares in Apator Rector (Zielona Góra) 70,00% (15 716) Shares in Apator Powogaz S.A. (Poznań) 100,00% Shares in Apator GmbH (Berlin) 100,00% - (140) (140) (140) Total x Data regarding subsidiaries and associates are presented in the table below. APATOR ELECTRO SA APATOR ELECTRO LLC TOTAL Value at Fixed assets Current assets Short-term liabilities (8 374) (2 153) (10 527) Net assets Total revenues Net profit INVENTORIES Information on reporting value of the inventories was presented in the table. Day Materials Manufacturing in progress Finished products Goods Advances for deliveries Total value of inventories Name of entity: APATOR SA Page 29 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

44 Financial statement for 2012 Day Value of inventories recognized as the cost in the period Write downs of inventories are presented below. Period Total value of write downs of inventories Value of write downs at the beginning of the period Increase- establishment of write-down charged against the current result Decrease- unused amounts debited the account: revenues (163) (596) Value of write downs at the end of the period TRADE AND OTHER RECEIVABLES Information on trade receivables and other receivables was presented in the table. Day Long-term receivables Receivables due to tangible fixed assets sold and intangibles Deposits, bid bonds, securities located Others Short-term receviables, including: Trade receivables Current receivables Overdue receivables up to 1 month Overdue receivables from 1 month to 3 months Overdue receivables from 3 months to 6 months Overdue receivables from 6 months to 1 year Overdue receivables over 1 year Write down of trade receivables (282) (160) Receivables due to income tax from legal entities Receivables due to other taxes, customs duties and social insurance Receivables due to other taxes, customs duties and social insurance Receivables due to other public liabilities Write down of receivables due to taxes (1 623) - Other short-term receivables Receivables due to tangible fixed assets sold and intangibles Deposits, bid bonds, securities located Prepayments advances for the purchase of services Other receivables Write down of other short-term receivables (457) (499) Total receivables, including: from related entities Name of entity: APATOR SA Page 30 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

45 Financial statement for from other entities Data regarding the write downs of receivables were presented below. Period Write down of total receivables Write downs at the beginning of the period Increase- establishment of write-down charged against the current result Decrease- unused amounts debited the account: revenues (176) (72) Use of write down- write off (13) (199) Write downs at the end of the period Additional information regarding receivables was presented in the table. Day Receivables being the hedging of liabilities Moreover, there is also a silent assignment of receivables (as hedging of credits) in the amount at least 40% of the total trade turnover in Apator S.A GRANTED LOANS At the date of the financial statement, APATOR S.A. held receivables due to two granted loans to subsidiary - Apator GmbH. Information on granted loans was presented in the table below: Day Long-term loans granted, including: Payable over 1 year to 2 years Payable over 2 years to 5 years - 91 Short-term loans granted Gross value Total loans granted, including: to related entities Apator S.A. granted three loans to the subsidiary Apator GmbH at the total value EUR. The first loan was repaid in December 2011, the repayment term of the second loan was specified as 30 th June 2013 but as to the third one repayment term was specified on 31 st May The status of loans as at the date of the financial report is CASH AND CASH EQUIVALENTS The cash in bank bears interest pursuant to the change of interest rate. The short-term deposits are established for various periods from one day to three months depending on the current need of the Company for financial assets and bear the interest pursuant to the agreed interest rates. Name of entity: APATOR SA Page 31 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

46 Financial statement for 2012 The specification of cash and cash equivalents is presented in the table below: Day Cash in hand 43 8 Cash on bank accounts Total cash and its equivalents ACCRUALS AND PREPAYMENTS Information related to accruals and prepayments are presented in the following table. Day Short-term accruals and prepayments Insurance IT services Marketing services Training Other accruals and prepayments FIXED ASSETS HELD FOR SALE On 5 th July 2012 APATOR SA and Galeria Copernicus Toruń 2 Sp. z o.o., having its registered office in Warsaw, concluded the final contract of sale of the perpetual usufruct right of land and buildings and constructions which are the separate property subject, located in Toruń, ul. Żółkiewskiego 21/29. The sales price for the real property was determined as 36, PLN and it includes 2, PLN, due to the performance by Apator SA the road investment in the area of the property. Galeria Copernicus Toruń 2 Sp. z o.o. made the advance payment in the amount of PLN on 21 April The outstanding amount of 29, PLN was deposited in the escrow account on 22 nd April 2011 under the contract. The schedule of payments from escrow account PLN payment after conclusion of the contract and acceptance protocol of the release of the property is submitted; PLN payment after the submission of extracts from land and mortgage register indicating the buyer as perpetual usufruct user of property; PLN payment in instalments (till 31st October 2012) according to the schedule of demolition of buildings and constructions in the territory of the property; PLN payment after submission of final decision transferring to the buyer the permit for construction; PLN payment after acceptance protocol confirming the performance of road investment in the area of property that is till 28 th February 2013 is presented On 5 th July 2012 the property was handed over to the Buyer. Name of entity: APATOR SA Page 32 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

47 Financial statement for 2012 At 31 st December 2012 all receivables resulting from sales transactions of the property was settled. Data regarded fixed assets held for sale is presented below. Period Value at the beginning of the period Increase due to re-classification Decrease due to disposal (8 751) - Value at the end of the period SHARE CAPITAL Information on share capital is presented in the tables. Day Number of shares Nominal value of share 0,10 0,10 Share capital On 13 th April 2012, APATOR S.A. acquired without remuneration from subsidiary - Apator Mining Sp. z o.o., bearer shares of APATOR S.A. of nominal value 0,10 PLN each, for their redemption and reduction of share capital. According to the Resolution No 17/VI/2012 of General Shareholders Meeting of APATOR S.A. dated 18 th June 2012, it was decided to redeem bearer shares of APATOR S.A. of nominal value 0,10 PLN each. According to the Resolution No 18/VI/2012 of General Shareholders Meeting of APATOR S.A. dated 18 th June 2012 the share capital was reduced from the amount of ,80 PLN to the amount of ,80 PLN, that is by the amount of ,00 PLN. On 16 th July 2012 the Company received the decision of the District Court in Toruń, VII Economy Department of the National Court Register and based on it on 12 th July 2012, the registration of reduction of share capital of APATOR S.A. from the amount of ,80 PLN to the amount of ,80 PLN that is by ,00 PLN was made. Period Share capital at the beginning of the period Decrease of share capital in the period Redemption of own shares (200) - Share capital at the end of the period Name of entity: APATOR SA Page 33 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

48 Financial statement for 2012 Structure of shareholders at 31 st December 2012 was presented in the table. Name and surname Registered shares Bearer shares Number of shares Number of votes Share in capital Share in votes Apator Mining sp. z o. o ,87% 6,38% Mariusz Lewicki ,15% 9,80% Tadeusz Sosgórnik ,74% 8,65% Danuta Guzowska ,59% 7,77% Zbigniew Jaworski ,01% 6,40% Janusz Marzygliński ,16% 6,21% AVIVA OFE ,78% 5,15% Others ,69% 49,65% TOTAL % 100% OTHER CAPITALS Information on other capitals was presented in the tables. Day Supplementary capital from sales of own shares over their nominal value Other supplementary capital Reserve capitals Total other capitals SUPPLEMENTARY CAPITAL FROM SALES OF OWN SHARES OVER THEIR NOMINAL VALUE OTHER SUPPLEMENTARY CAPITAL OWN SHARES RESERVE CAPITALS TOTAL Status at Increase in the period since till Distribution of the profit Closing share acquisition programme Opening share acquisition programme Decrease in the period since till (17 973) - (17 986) (35 959) Closing share acquisition programme - (17 973) - - (17 973) Opening share acquisition programme (17 986) (17 986) Status at Status at Name of entity: APATOR SA Page 34 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

49 Financial statement for 2012 SUPPLEMENTARY CAPITAL FROM SALES OF OWN SHARES OVER THEIR NOMINAL VALUE OTHER SUPPLEMENTARY CAPITAL OWN SHARES RESERVE CAPITALS TOTAL Increase in the period since till (200) Distribution of the profit Purchase of own shares - - (200) - (200) Closing share acquisition programme Decrease in the period since till (17 973) (17 773) Closing share acquisition programme (17 973) (17 973) Redemption of own shares Status at Pursuant to the Resolution No. 16/VI/2012 of General Shareholders Meeting of APATOR S.A. dated 18 th June 2012 the following net profit distribution for the financial year 2011 in the amount of 37, ,16 PLN was made: Dividend 24,830, PLN Supplementary capital 12, ,16 PLN Due to the redemption of bearer shares for the payment of dividend, the number of 33,107,028 registered shares of A series and bearer shares of A, B, and C series were entitled. The right for payment of dividend was granted the shareholders holding the shares of APATOR SA on 6 th July The date of payment of dividend in amount of 0,75 PLN per share was fixed on 23 rd July Pursuant to the Resolution No 19/VI/2012 of General Shareholders Meeting of APATOR SA dated 18 th June 2012 the programme for acquisition of shares for their redemption was closed. Information on reserve capitals is presented in the table. Day Capital for the payment of dividend Capital for acquisition of shares - programme 2011/ Total reserve capitals CREDITS AND LOANS Information on credits and loans is presented below. Day Long-term credits and loans Payable over 1 year to 2 years Short-term credits and loans Total credits and loans, including from other entities Name of entity: APATOR SA Page 35 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

50 Financial statement for 2012 At 31 st December 2012 APATOR S.A. had the debt due to credits in amount of PLN under credit agreements which conditions are presented below: Credit (2) Name of bank Date of agreement and possible annex to the agreement Bank Handlowy w Warszawie S.A. 27 May 2004, the last annex to the agreement of 19 September 2012 Credit amount 30, PLN - credit on current account Term of the credit payment 9 September 2014 Type of collateral Interest rate Assignment of receivables in the amount of 6, PLN Mortgage on property to the amount of PLN WIBOR 1M + margin year to year Credit (3) Name of bank Date of agreement and possible annex to the agreement Credit amount Term of the credit payment Type of collateral Interest rate RAIFFEISEN BANK POLSKA S.A. 16 June 2005, the last annex to the agreement of 18 December , PLN: - 7, on current account - 5, revolving credit (1) - 5, revolving credit (2) and the limit of 12, PLN to be used - 12,000 PLN limit for credit letter without payments in advance" - 12, PLN limit for bank guarantees 10 April credits on current account 9 April 2014 revolving credits 10 April 2014 letter of credits and guarantees Power of attorney to the current account Silent assignment of dues in the amount of at least 40% of total trade turnover WIBOR 1M + margin year to year Name of entity: APATOR SA Page 36 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

51 Financial statement for 2012 In the reporting period there were no events causing not fulfilment of APATOR SA of the liabilities resulting of the credit agreements concluded. All credits were granted in Polish zloty, the list of liabilities due to credits granted is presented in the table below. LIABILITY COSTS LIABILITY COSTS at the date at the date Credits Credit Credit Credit Credit PROVISIONS FOR LIABILITIES PROVISIONS FOR LIABILITIES EMPLOYEE BENEFITS OTHER PROVISIONS SEVERANCE PAYMENTS, JUBILEE AWARDS BONUSES LEAVES GUARANTEES TOTAL Value of provisions at (+) Increase- establishment of provision charging current profit (+) Decrease- write off the revenues of unused amounts (-) (87) (87) Provision used - settlement with costs (-) - (332) - - (332) Value of provisions at , including: long-term provisions short-term provisions Name of entity: APATOR SA Page 37 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

52 Financial statement for 2012 PROVISIONS FOR LIABILITIES EMPLOYEE BENEFITS OTHER PROVISIONS SEVERANCE PAYMENTS, JUBILEE AWARDS BONUSES LEAVES GUARANTEES TOTAL Value of provisions at Increase- establishment of provision charging current profit (+) Provision used - settlement with costs (-) - (430) - - (430) Value of provisions at , including: long-term provisions short-term provisions Employees benefits actuarial assumptions The main actuarial assumptions adopted at the reporting date (quoted in the weighted average values): - Discount rate at 31 st December % - Future increase of salaries 0,00 % - Number of employed 468 The assumptions referred to the future mortality and disabilities are based on the published mortality statistics and tables. The mobility parameters are also applied: - For the person to 40 years old 5% - For the person from 41 to 45 years old 4% - For the person from 46 to 50 years old 3% - For the person over 51 years old 1% LIABILITIES Information on liabilities is presented in the table. Day Long-term liabilities Investment liabilities Liabilities due to financial lease agreements Liabilities due to derivatives Short-term liabilities, including: Trade liabilities Current liabilities Overdue liabilities Liabilities due to taxes, customs duties and social insurance 4009 Liabilities due to income tax from legal entities Liabilities due to other taxes, customs duties and social insurance Other short-term liabilities Liabilities due to remuneration Liabilities due to dividend Liabilities due to derivatives Name of entity: APATOR SA Page 38 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

53 Financial statement for 2012 Liabilities due to financial lease agreements liabilities Prepayments- advances received for deliveries Other liabilities Total liabilities, including: to related entities to other entities INCOME TAX Specification of income tax for the reporting period is presented in the table. Period Statement of comprehensive income Current income tax Current burden due to income tax Deferred income tax (20 853) 376 Due to establishment and reverse of temporary differences (847) 376 Tax shelter due to activity in the area of Pomeranian Special Economic Zone (20 006) - Tax burden indicated in the statement of comprehensive income (16 024) Statement of changes in equity Deferred income tax 427 (343) Net deferred income tax of hedging of cash flow settled during financial year 427 (343) Tax benefit (burden) indicated in equity 427 (343) The reconciliation of the effective interest rate is presented below. Period Basis for taxation Tax rate applied 19,00% 19,00% Income tax calculated according to obligatory tax rate Possible tax from revenues exempted from tax (permanent differences) (6 925) (5 969) - from dividend of related entities (5 358) (5 805) - from income with tax shelter (1 354) - Tax from costs not being tax deductible expenses (permanent differences) Asset on tax due to activity in Pomeranian Special Economic Zone (20 006) - Adjustment of tax losses from previous year - (105) Other tax deductions (89) - Income tax (16 024) Effective tax rate -29,50% 5,17% Name of entity: APATOR SA Page 39 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

54 Financial statement for 2012 Deferred income tax is presented in the table. Opening balance Crediting (charging) the profit due to change of the temporary differences and tax loss Decrease (increase) of equity due to change of temporary differences Closing balance Deferred income tax in the period since till Assets due to deferred income tax (19) Provision for employee benefits (65) Provision for bonuses 63 (6) - 57 Sales recognized in the following reporting period Provisions for warranty repairs Future costs (liabilities) Remunerations, insurance contributions not paid Inventory write downs 184 (80) Receivables write downs Measurement to fair value- derivatives Measurement to fair value- other financial assets Tax loss 106 (106) - - Other non-tax revenues in the period Provisions due to deferred income tax Measurement to fair value - property Measurement to fair value- derivatives 225 (225) - - Book depreciation different to tax one Excess of nominal value over book value of contribution in kind Compensations received Other non- tax revenues in the period Tax due to profit in the period/ capitals X (376) 343 X Total assets due to deferred income tax 62 X X 29 Total provision due to deferred income tax - X X - Deferred income tax in the period since till Assets due to deferred income tax (329) Provision for employee benefits Provision for bonuses Sales recognized in the following reporting period 24 (24) - - Provision for warranty repairs Future costs (liabilities) 30 (5) - 25 Remunerations, insurance contributions unpaid 175 (5) Inventory write downs Receivables write downs Measurement to fair value - derivatives 423 (61) (329) 33 Measurement to fair value - other financial assets Tax relief due to activity in Special Economic Zone Other non-tax costs in the period Provisions due to deferred income tax (766) Measurement to fair value - property 29 (19) - 10 Measurement to fair value derivatives Book depreciation other than tax one (564) Name of entity: APATOR SA Page 40 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

55 Financial statement for 2012 Opening balance Crediting (charging) the profit due to change of the temporary differences and tax loss Decrease (increase) of equity due to change of temporary differences Closing balance Excess of nominal value over book value of contribution in kind Compensations received 380 (155) Other non- tax revenues in the period 123 (83) - 40 Tax due to profit in the period/ capitals X (427) X Total assets due to deferred income tax 29 X X Total provision due to deferred income tax - X X - Activity in the Special Economic Zone On 28 th December 2010 the Company received the License No. 69/PSSE for conducting the business activity within Pomeranian Special Economic Zone. This license specifies the following terms and conditions for business activity in the zone: Incurring the investment expenses amounting to at least 50 m PLN within territory of Pomeranian Special Economic Zone to 31 st December 2014, Employment of at least 100 employees to 31 st December 2014 and maintenance of such employment level to 31 December 2015 for the business activity upon the license is obtained; Completion of the investment to 31 st December 2014; Running business activity for the period not shorter than 5 years from the moment, when the entire investment is completed. The Company commenced its business activity in Pomeranian Special Economic Zone on the 1 st June The income earned from the business activity run within Pomeranian Special Economic Zone, under the obtained licence, will be a subject to the relief from the income tax due to the new investment costs. The amount of relief for the Company is calculated as the product of the intensity of the support (for Kujawsko-Pomorskie province is 50%) and the amount of the investment's costs. The maximum amount of the qualified costs of investment, specified in the license is 75 m PLN. On the date of commencement of business activity in Pomeranian Special Economic Zone the assets for deferred income tax were calculated in amount of PLN due to possible use of tax shelter. At 31 st December 2012 the value was adjusted by qualified expenses and the amount of the assistance used in At 31 st December 2012 the value of the sum available of public assistance was PLN. The value of assets for deferred income tax at 31 st December 2012 was PLN and it was calculated based on approved plan of activity of the Company for the period Name of entity: APATOR SA Page 41 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

56 Financial statement for 2012 EXPENSES BY NATURE Period Costs of operating activity ( ) ( ) Amortization (7 192) (5 910) Materials and energy consumption (74 627) (58 891) Outsourcing (27 890) (18 389) Employee benefits (33 022) (27 532) Other costs (7 159) (9 113) Manufacturing costs of products for the own needs of entity Change of the status of finished products and manufacturing in progress Cost of goods and materials sold (28 274) (31 644) Name of entity: APATOR SA Page 42 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

57 Financial statement for OTHER REVENUES AND OPERATING COSTS Other revenues and operating costs were presented in the table. Period Operating revenues Profit on sales of tangible fixed assets Measurement of investment property Release of inventory write downs Use or release of provisions for employee benefits - 87 Stock-taking surplus Reimbursement of costs (fairs and conferences) Compensations received due to tangible fixed assets pursuant to IAS Compensations received and liquidated damages Donations received 7 6 Reimbursement of court proceedings costs and court representation costs Other revenues Operating costs (4 084) (1 965) Cost of liquidated tangible fixed assets (480) - Cost of liquidated intangible assets - (350) Costs related to liquidation of tangible assets and intangible assets (51) - Measurement of investment property (102) (254) Establishment of inventory write downs (34) - Establishment of receivable write downs - dispute about tax with Social Insurance Institution (1 623) - Establishment of receivables write downs (103) (163) Establishment of provisions for employee benefits (534) - Establishment of provisions for warranty repairs (123) (53) Scrapping of inventories (311) (776) Casualty losses and other damages to the property (65) (30) Donations granted (505) (109) Penalties, fine and compensations paid (144) (152) Court fees, bailiff fees, court representation costs (1) (69) Other costs (8) (9) Net operating revenues Name of entity: APATOR SA Page 43 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

58 Financial statement for REVENUES AND FINANCIAL COSTS Revenues and financial costs are presented in the table. Period Financial revenues Dividends and shares in profits Interest on loan Interest on cash on bank accounts Interest on receivables Other interest - 1 Revenues due to currency transactions (including derivatives) Release of receivable write downs 10 - Decrease of liabilities discount 83 1 Liabilities discount - 29 Other revenues Financial costs (3 144) (4 178) Interest on credits and loans (1 620) (1 290) Interest paid to budget - (7) Other interest (46) (33) Establishment of shares values write downs - - Negative exchange rate differences (1 161) (2 134) Establishment of receivables write downs - (3) Receivables discount (70) (12) Commissions on credits and loans (160) (257) Bank guarantees and commissions (except for commissions on credits) (87) (442) Net financial revenues Revenues and costs regarding currency transactions in derivatives are presented in the table. Period Revenues Performance of currency exchange spot transaction Performance of hedging transactions Measurement at the end of period Measurement at the beginning of period - (1 184) Costs 145 (982) Performance of currency exchange spot transaction (35) - Performance of hedging transactions (143) (595) Measurement at the end of period (101) (424) Measurement at the beginning of period Profit on derivatives Name of entity: APATOR SA Page 44 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

59 Financial statement for EXPLANATIONS TO THE STATEMENT OF CASH FLOWS APATOR S.A. presents the statement of cash-flows using the indirect method in the part referring to the operating activity, adjusting the profit with the non-cash transactions, amendment to inventories, amendment to receivables and liabilities and other items, in which the cash effects are the cash flows from financial or investment activity. The table below presents the explanations of inconsistency between the amendments from the statement of financial position and amendments of these items presented in the statement of cash flows. Amendment to inventories Period Amendment to inventories (7 371) Amendment to presented in cash flows account (7 371) Amendment to receivables Amendment to long-term receivables 174 (912) Amendment to trade receivables Amendment to receivables due to taxes, customs duties and social insurance (3 956) Amendment to other receivables 844 (676) Adjustment to receivables due to income tax (372) 195 Adjustment to investment receivables 18 (10) Amendment to presented in cash flows account (5 001) Amendment to liabilities Amendment to long-term receivables (1 166) Amendment to trade receivables (1 314) (2 605) Amendment to receivables due to taxes, customs duties and social insurance (443) Amendment to other receivables Adjustment to reliabilities due to dividend (14) (2) Adjustment to liabilities due to financial lease (234) 28 Adjustment to liabilities due to derivatives (2 190) Adjustment to liabilities due to purchase of the software - 15 Adjustment to liabilities due to income tax (4 009) - Adjustment to investment liabilities (97) (5 731) Other amendments -1 - Amendments to presented in cash flows account (1 920) Amendment to inventory Amendment to long-term provisions due to employee benefits 29 (217) Amendment to short-term provisions due to employee benefits Amendment to other short-term provisions Amendment to presented in cash flows account Proceeds from sales of tangible fixed assets consist of the following items: Period Proceeds from sales of tangible fixed assets Revenues from sales of fixed assets Name of entity: APATOR SA Page 45 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

60 Financial statement for 2012 Amendment to net receivables due to sales of fixed assets (18) 10 Amendment to receivables discount 2 (1) Settlement of down payment for the sale of the land (7 000) - Total The table below presents the explanations of amounts recognized as other adjustments. Period Other adjustment (1) of cash flows from operating activity Liquidation of tangible fixed assets and intangible assets Settlement of subsidies (25) (9) (Profit) loss due to settlement of derivatives 116 (1 416) Others (169) (61) Total 403 (1 136) The table below presents the explanations of the amounts recognized as other proceeds (expenses). Other proceeds (expenses) of investing activity Period Advances for tangible fixed assets under construction (2 711) (2 195) Advances for intangible assets (177) (39) Proceeds and expenses related to hedging transactions and options (116) Payment of commissions and other costs related to sale and liquidation of tangible fixed assets (6) (8) Advances for tangible fixed assets held for sale Others 24 - TOTAL (2 986) Other proceeds (expenses) of financing activity Interest on lease (21) (4) TOTAL (21) (4) The cash flows from the investment activity, the item expenses for purchase of tangible fixed assets include the expenses related to the investment in Pomeranian Special Economic Zone- a construction of Modern Manufacturing and Development Centre of Apator S.A FINANCE LEASE At 31 st December 2012 APATOR S.A. had the lease agreements concluded on lease of IT equipment, telephone switchboard and personal vehicles classified for reporting purposes as the finance lease. The total liabilities due to financial lease are presented in the table below Name of entity: APATOR SA Page 46 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

61 Financial statement for 2012 Payments Current value of payments Payments Current value of payments Payable in the period up to 1 year Payable in the period from 1 year to 5 years Total future minimal payments due to financial lease agreements Future financial charges (-) (45) X (2) X Current value of minimal lease payments FUTURE PAYMENTS DUE TO THE OPERATING LEASE LIABILITIES NOT RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION At 31 st December 2011, APATOR S.A. held the liabilities due to agreements on leasing the IT equipment and cars. Moreover, the operating lease included the perpetual usufruct right to the lands, which were received free of charge under the administrative decision. The data related to future minimum leasing fees are presented in the table below. Less 1 year from 1 year to 5 years More than 5 years TOTAL Status at Status at The payment due to the right of usufruct of the land was recognized in future liabilities in the value indicated by decision of local government authority. However, Apator SA appealed from the decision of the Mayor of Toruń charging the Company by annual payment in amount of PLN for the use of the property located in Toruń. The basis for the appeal was the question of above mentioned measurement of property by the Office of City of Toruń. The Company has been waiting for the resolution of Local Government Appeal Council that is to be in May Data regarding lease payments recognized in financial result are presented in the table. Period Payments included in financial profit FINANCIAL INSTRUMENTS The table below presents the categories and classes of financial instruments at carrying value. Name of entity: APATOR SA Page 47 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

62 Financial statement for 2012 Loans and receivables Financial liabilities measured according to amortized cost Hedging instruments TOTAL Status at (56 272) 633 (25 025) Derivatives (assets) Loans granted Trade receivables Investment receivables Cash and deposits Trade liabilities - (13 092) - (13 092) Investment liabilities - (7 524) - (7 524) Credits and loans taken - (35 358) - (35 358) Derivatives (liabilities) - - (15) (15) Liabilities due to lease agreements - (273) - (273) Liabilities due to dividend - (25) - (25) Status at (80 048) (2 227) (50 056) Loans granted Trade receivables Investment receivables Cash and deposits Trade liabilities - (14 406) - (14 406) Investment liabilities - (8 445) - (8 445) Credits and loans taken - (50 147) - (50 147) Derivatives (liabilities) - - (2 227) (2 227) Liabilities due to lease agreements - (39) - (39) Liabilities due to dividend - (11) - (11) Down payment received due to sale of the land - (7 000) - (7 000) Financial assets and liabilities held for trading, where the Company classified the derivatives are measured at fair value. The book value is accepted as the fair value of loans and receivables, and liabilities measured at amortized costs because of the short-terms of performance. The book value of these assets is close to the fair value. The items of revenues, costs, profits and losses recognized in the profit and loss statement with the division into categories are presented in the table below. Financial assets measured in fair value through the profit or loss held for trading Loans and receivables Financial liabilities measured pursuant to amortized cost Financial assets measured in fair value through the profit or loss held for trading Hedging instruments TOTAL Status at (1 047) (1 603) (2 153) Revenues (costs) due to interest (1 666) - - (1 459) Profits (losses) due to exchange rate differences - (1 224) (1 161) Revenues due to performance of derivatives Costs due to performance of derivatives (143) (143) Name of entity: APATOR SA Page 48 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

63 Financial statement for 2012 Financial assets measured in fair value through the profit or loss held for trading Loans and receivables Financial liabilities measured pursuant to amortized cost Financial assets measured in fair value through the profit or loss held for trading Hedging instruments TOTAL Revenues due to measurement of derivatives Costs due to measurement of derivatives Establishment of write downs - (103) (103) Reversal of write downs Profits (losses) due to performance of spot exchange currency transaction Status at (2 653) 27 (1 214) (2 201) Revenues (costs) due to interest (1 324) - - (1 122) Profits (losses) due to exchange rate differences - (805) (1 329) - - (2 134) Revenues due to performance of derivatives Costs due to performance of derivatives (595) (595) Revenues due to measurement of derivatives (661) (523) (1 184) Costs due to measurement of derivatives (414) (387) Establishment of write downs - (238) (238) Reversal of write downs Profits (losses) due to performance of spot exchange currency transaction The table below presents the analysis of financial instruments measured at fair value, classified pursuant to three-steps order, where: Step 1- fair value based on stock exchange prices (not adjusted) Step 2- fair value determined basing on market values but not being a direct market quoting Step 3- fair value determined basing on various measurement methods not based on any market data LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 Derivatives (assets) Derivatives (liabilities) - (15) - - (2 227) - Total (2 227) - There were no transfers between levels 1 and FINANCIAL DERIVATIVES, HEDGE ACCOUNTING Name of entity: APATOR SA Page 49 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

64 Financial statement for 2012 The agreements on derivatives of APATOR S.A. are concluded under the exchange rate risk hedging policy. The Company hedges the export proceeds exceeding the import expenses. At 31 st December 2012 the Company applies the hedge accounting for the cash flows. Since 21 st July 2011 the Company designated the derivatives FX forward hedging against the threat of variability of cash flows due to the future planned cash flows from the sale denominated in the foreign currency. The below table presents the details referred to hedging connection in the hedge accounting of cash flows. Type of hedge Hedged item Hedge instruments Hedged risk Recognition in the financial statement Period, when the cash flows are expected The hedge of the variability of the cash flows due to the future cash flows in EUR. The hedged item is a part of highly probable cash flows due to the sale denominated in EUR. The cash flows hedges are FX forward transactions, where the Company undertakes to sell EUR for PLN. The Company hedges the variability of cash flows due to the currency risk. Part of the change of measurement to the fair value of hedge instruments, corresponding to the effective hedge, is recognized in revaluation reserve (statement of changes in equity). The noneffective part of the change of the measurement to the fair value of hedge instruments is recognized in the revenues or financial costs (Note 20- point 8.20). It is expected that the hedged item will generate the cash flows to 31 st December Nominal value Eur The table below presents fair value of derivatives. Long-term assets Day Hedging instruments Short-term assets Hedging instruments Total assets Long-term liabilities Hedging instruments Short-term liabilities Hedging instruments Total liabilities The below table presents the amounts due to cash flows hedge accounting, which were recognized in the profit and loss and also in equity by the Company in 2012: Name of entity: APATOR SA Page 50 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

65 Financial statement for 2012 Day Measurement of instruments, including: 633 (2 227) Capital from measurement of hedging transactions (amendments to measurement to fair value of derivatives hedging due to hedged risk responding to effective hedging) 444 (1 803) Financial profit of the period (amendments to measurement of hedging derivatives due to risk being hedged responding to not effective hedging) 189 (424) The below table presents the amounts in equity from measurement of hedge transactions due to cash flows hedge accounting in 2012: Period Status at the beginning of the period (1 803) - Reversal of measurement from previous period Measurement at the end of the period 444 (1 803) Status at the end of the period 444 (1 803) PURPOSES AND PRINCIPLES FOR FINANCIAL RISK MANAGEMENT Except for the derivatives, the main instruments used by the Company include the bank credits and overdrafts. The Company has also the financial assets such as trade receivables and cash which arise directly during the business activity and other receivables and granted loans. The Company concludes the derivatives transactions which include the forward contracts and currency options. The purpose of these transactions is to manage the currency risk arisen during the business activity. The forward contracts are concluded based on the forecasts of currency exchange rates, pursuant to the corporation guideline and the Resolution of the Executive Board. The principle applied by APATOR S.A. is not to conclude the transactions for the derivatives for the speculation purposes. The risk, to which APATOR S.A. is exposed, includes the market risk (currency risk and lesser interest rate risk) as well as credit risk and liquidity risk. Currency risk The Company is exposed to currency risk due to transactions being concluded. Such risk arises as a result of any selling or buying in the other currency than its functional currency (PLN). The level of exposure of APATOR SA to currency risk is presented in the table below Foreign PLN Foreign PLN Name of entity: APATOR SA Page 51 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

66 Financial statement for 2012 currency currency Items in Eur ( EUR) Trade receivables Advances submitted for the purchase of materials and services Loans granted Cash Trade liabilities (590) (2 485) (197) (903) Advances received for deliveries (1) (2) (2) (8) Items in American Dollars (USD) (840) (2 708) Trade receivables Advances submitted for the purchase of materials and services Cash Trade liabilities (612) (1 954) (392) (1 389) Advances received for deliveries (351) (1 141) (10) (26) Items in Czech Crowns (CZK) Cash At 31 st December 2012 Apator S.A. had currency forward contracts. Foreign currency flows Zloty flows on the day of conclusion of the contract Measurement on reporting day Items in Eur (EUR) (5 000) (20 722) 633 Hedging transactions (5 000) (20 722) 633 Pursuant to the guideline Regulations in the field of forwards agreements" (edition V) accepted on 10 th August 2012 to hedge the export proceeds exceeding the import expenses the forward contracts and cost options are applied. In order to conclude the forward contracts the consent of the Executive Board in a form of the resolution, where the maximum nominal of hedges is specified, defined based on the foreign trade balance plan and level of current hedges, is required The conclusion of comprehensive hedging structure is made upon the positive opinion of the Supervisory Board, which makes the decision after the Executive Board presented the intent to use of such hedge and its potential influence on financial results. The table below presents the sensitivity of gross financial result and equity on the reasonable possible fluctuations of currencies exchange rates. The Company expects that all currencies may fluctuate by 10% (at no variability of other parameters). EUR / PLN In the period since till Influence on Influence on gross financial equity profit In the period since till Influence on Influence on gross financial equity profit +10% % (1 013) (1 076) (1 069) (847) USD / PLN +10% (271) (271) % (126) (126) Risk of interest rate Name of entity: APATOR SA Page 52 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

67 Financial statement for 2012 APATOR S.A. is exposed to the risk of interest rate, because it has liabilities in a form of credits bearing interest pursuant to the variable interest rate. The Company does not apply any hedges in a form of swaps and forwards of interest rates due to small variability of WIBOR rates, on which the credit interest rates are based. The table below presents the financial instruments due to the interest rate. Day Financial instruments with fixed interest rate Financial assets Financial liabilities (24 721) (23 126) Financial instruments with variable interest rate (31 108) (50 114) Financial assets Financial liabilities (35 631) (50 186) Total (28 499) (38 776) The table below presents the sensitivity of gross financial result and equity on the reasonable possible fluctuations of WIBOR rates. For the analysis purposes it is assumed that all amount of unpaid liabilities at the end of reporting period remained unpaid for all year. WIBOR In the period since till Influence on Influence on gross financial equity profit In the period since till Influence on Influence on gross financial equity profit base points (311) (311) (501) (501) base points Credit risk The credit risk means that the contractor will not fulfil its liabilities following the financial instrument or agreement that will cause that the other party will suffer the financial loss. APATOR S.A. is exposed to the credit risk resulting from operating activity, mainly from trade receivables. The Company concludes the transactions only with reputable companies with good credit capacity. All customers, who want to apply the postponed terms of payments, are a subject to initial verification. The financial inspection of sale orders operates in the company. The Company strives to cooperate with all clients is based on the trade agreements. Moreover, owing to current monitoring of receivables, the exposure of the Company to the risk of uncollectible receivables is small. The trade receivables include the due amounts from huge number of customers, distributed between various sectors and geographical areas. At the end of 2012, two customers presented the receivables balance over 10% of the total balance of trade receivables. These receivables referred to Cechtar Sp. z o.o. (12.24% PLN ) and Energa Operator SA. The credit risk related to cash and derivatives is limited because the contractors of Apator SA are the banks with high rating awarded by international rating agencies. Liquidity risk Name of entity: APATOR SA Page 53 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

68 Financial statement for 2012 APATOR S.A. has been monitoring the risk of no funds, establishing the monthly expenditures plans and it analyses the financial conditions on a current basis. The objective of the Company is to keep the balance between the continuity and flexibility of financing. In order to finance the current business activity Apator SA, it uses mainly the overdraft. The table below presents information on liabilities of maturity dates. Value on reporting day less than 6 months Cash flows resulting of the contract from 6 to 12 months from 1 year to 2 years from 2 to 5 years TOTAL Status at Credits and loans Liabilities due to lease agreements Payment due to derivatives Trade liabilities Other financial liabilities Status at Credits and loans Liabilities due to lease agreements Payment due to derivatives Trade liabilities Other financial liabilities Capital management The main target of the capital management of APATOR S.A. is to keep the good credit rating and secure capital ratios which would support the operating activity of the Company and would increase the value for shareholders. APATOR S.A. manages the capital structure and as a result of changes in economic conditions enters the changes to this structure. In order to adjust the capital structure, the Company may pay dividend for shareholders, return the capital to shareholders or issue new shares. APATOR S.A. has been monitoring the capitals using leverage ratio which is calculated as net debts to sum of capitals increased by net debts. The net debts include the credits bearing interests and loans, trade liabilities and other liabilities excluding the derivatives reduced by cash and cash equivalents. Equity includes the equity presented in the statement of financial position INFORMATION ON RELATED ENTITIES Information on benefits for managing staff is presented in the table below. Period Short-term employee benefits Other employee benefits Total Name of entity: APATOR SA Page 54 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

69 Financial statement for 2012 Data related to transactions with related entities and information on unsettled balances are presented in the table below. Name of entity: APATOR SA Page 55 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

70 Financial statement for 2012 Apator Control Sp.z o.o. Apator Metrix S.A. Apator Mining Sp.z o.o. Apator Powogaz S.A. Apator Rector Sp.z o.o. Newind Sp.z o.o. FAP Pafal S.A. Name of entity: APATOR SA Page 56 Period included in reporting period: Reporting currency: Polish zloty (PLN) Apator Telemetria Sp.z o.o. Apator GmbH Apator Electro S.A. Apator- Electro LLC OTHER RELATED ENTITIES Transactions in the period since till Sales of products and services Sales of goods and materials Sales of tangible fixed assets and intangible assets Trade receivables Other receivables Repayments received of loans granted Interest received on loans granted Receivables due to loan granted Dividend paid Dividend included in financial revenues Purchase of products, services, goods and materials Purchase of tangible fixed assets and intangible assets Trade liabilities Advances received Investment liabilities Other liabilities Transactions in the period since till Sales of products and services Sales of goods and materials Trade receivables Other receivables Received repayments of loans granted Interest received on loans granted Liabilities due to loan granted Dividend paid Dividend included in financial revenues TOTAL Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

71 Financial statement for 2012 Apator Control Sp.z o.o. Apator Metrix S.A. Apator Mining Sp.z o.o. Apator Powogaz S.A. Apator Rector Sp.z o.o. Newind Sp.z o.o. FAP Pafal S.A. Apator Telemetria Sp.z o.o. Apator GmbH Apator Electro S.A. Apator- Electro LLC OTHER RELATED ENTITIES Purchase of products, services, goods and materials Purchase of tangible fixed assets and intangible assets Trade liabilities Advances received Investment liabilities TOTAL Name of entity: APATOR SA Page 57 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

72 Financial statement for 2012 The Company identified the related entities. The related entities are as follows: a. Subsidiaries Apator Control Sp. z o.o. (Toruń) Apator Mining Sp. z o.o. (Toruń) FAP Pafal S.A. (Świdnica) Apator Metrix S.A. (Tczew) Apator GmbH (Berlin, Germany) Apator Rector (Zielona Góra) Apator Powogaz S.A. (Poznań) b. Indirect subsidiaries Apator Telemetria Sp. z o.o., (Słupsk) subsidiary of Apator Powogaz S.A. Apator Metroteks (Kiev, Ukraine) subsidiary of Apator Powogaz S.A. Apator Metra (Supmerk, Czech Republic) subsidiary of Apator Powogaz S.A. Newind Sp. z o.o. (Wrocław) - subsidiary Apator Rector Sp. z o.o. c. Associates Apator Elektro (Moscow, Russia) Apator-Electro LLC (Moscow,Russia) d. Indirect associates Teplovodomer (Mytishi, Russia) entity associated with Apator Powogaz S.A. George Wilson Industries (Coventry, the United Kingdom) co-subsidiary with Apator Metrix S.A. e. Members of the Supervisory Board f. Key managing staff g. Relatives of the member of Supervisory Board and Key managing staff in joint households h. Entities controlled by the persons defined in points e. and f. The Executive Board of APATOR S.A. states that the composition of the managing staff of the Company include the following persons: Janusz Niedźwiecki - President of the Executive Board, Tomasz Habryka - Member of the Executive Board, Strategic Development and Marketing Director Jerzy Kuś, Member of the Executive Board, Metering Equipment and Systems Director Other members of the managing staff: Janina Karaszewska- Zandrowicz, Proxy, Financial Director Krzysztof Malec - Proxy, Manufacturing Director. Mirosław Klepacki- Switchgear Equipment Director Transactions with other related entities specified in points e-h, except for payment of remunerations due to held positions and work benefits, presented in the table above (other related entities). Transactions with related entities were held on market conditions CONTINGENT ITEMS AND OTHER ITEMS NOT RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION Guarantees At 31 st December 2012, the Company had the active guarantees issued by: 1. Bank Handlowy w Warszawie S.A. a. Due to duly performance bond in the amount of PLN maximum till 19 th September 2015; 2. TU Euler Hermes S.A.: a. Due to duly performance bond in the amount of PLN maximum till Name of entity: APATOR SA Page 58 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

73 Financial statement for th June 2017; b. Bid bond in the amount of PLN till 18 th February Contingent liabilities On 30 th December 2010 the contract was concluded under which Apator S.A. after the lapse of the subsequent 3 fiscal years (not earlier than 31 st December 2013) is entitled to acquire the remained 30% of the shares of Apator Rector Sp. z o.o. (call option) that means that the present shareholders of Apator Rector Sp. z o.o. irrevocably undertook to sell the shares for Apator S.A. At the same the present shareholders of Apator Rector Sp. z o.o. are entitled to sell the remained 30% of shares (put option) to Apator S.A. that means that the Apator S.A. irrevocably undertook to acquire the shares from the present shareholders of Apator Rector Sp. z o.o. The price depends on the results of the Company within STRUCTURE OF EMPLOYMENT The employment in APATOR S.A. is presented in the table. Period Average employment in persons Blue-collar workers White collar workers Employment in persons at the end of the period Blue-collar workers White collar workers REMUNERATION FOR THE ENTITY AUTHORIZED TO AUDIT FINANCIAL STATEMENT On 6 th June 2012, KPMG Audyt Spółka z o.o. sp. k. and Apator S.A. concluded the contract of auditing covering the audit of interim and annual financial statement of APATOR S.A. and the review of interim and audit of the annual consolidated financial statement of APATOR SA for The auditing that concerns 2011 was carried out also by KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp. k. The remuneration for the statutory auditor is presented in the table below. VALUE Auditing / Interim statement review Auditing / Annual statement review Total Except for the remuneration above, APATOR S.A. covers also the documented costs of staying of auditing team outside of its headquarters (travel, accommodation) and costs of courier shipments SUBSIDIES APATOR S.A. participates in Research of data transmission effectiveness in PLC technology in low voltage and medium voltage networks project as co-contractor based on the contract concluded on 2 nd August 2012 between National Centre for the Research and Development and Wrocław University of Technology. Based on the contract concluded, APATOR SA as co- Name of entity: APATOR SA Page 59 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

74 Financial statement for 2012 contractor received on 19 th December 2012 the amount of PLN as subsidy to make prototypes of communication equipment in PLC technologies. The period of performance of the project is 36 months AMENDMENTS TO ACCOUNTING PRINCIPLES Apator S.A. has changed the presentation of the relevant items in the statement of financial position and the statement of comprehensive income. The amendments introduced, allowed to present better real financial position of the Company. The above amendments do not affect the value of net result and equities of the Company for the period ending on 31 st December ITEMS IN THE STATEMENT AMENDMENT (1) AMENDMENT (2) AMENDMENT (3) The amendment: Approved financial statement Netting of assets and provisions due to deferred income tax Netting of financial revenues and costs Netting of other revenues and operating costs Financial statement amended Statement of financial position Fixed assets (2 305) Deferred income tax assets (2305) TOTAL ASSETS (2 305) Liabilities (2 305) Long-term liabilities and provisions (2 305) due to deferred income tax (2 305) TOTAL LIABILITIES ) Statement of comprehensive income Other operating revenues (costs), including: Revenues (33) Costs (1 998) (1 965) Profit from operating activity Financial revenues, including: Revenues (3 924) Costs (8 102) (4 178) Profit before tax Name of entity: APATOR SA Page 60 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

75 Financial statement for EVENTS AFTER THE REPORTING PERIOD The Executive Board of APATOR S.A. has declared that the dividend from the profit for financial year 2012 was in gross amount of 1,20 PLN per share. Towards the dividend from the profit for 2012 the interim dividend for 2012 in amount of 0,40 PLN per share was paid in December Other part of amount of declared dividend in gross value of 0,80 PLN per share will be paid after its approval by General Shareholders Meeting of Apator SA On 15 th January 2013 associated entity- Apator Elektro SA was liquidated. On 13 th March 2013, the Province Administration Court refused the complaint filed by Apator S.A. against the decision of Tax Chamber Director in Bydgoszcz charging the Company with liability due to income tax of legal entities for 2009 in amount of PLN (type of hedging of transactions for derivative financial instruments was questioned that the Company concluded in 2008 and performed in 2009 which brought the loss). On 12 th April 2013, plenipotentiary of APATOR S.A. received the justification in writing of the verdict of the court. APATOR SA is going to submit the cassation appeal to the Supreme Administration Court in Poland Janusz Niedźwiecki President of Executive Board, Managing Director Tomasz Habryka Member of Executive Board, Strategic Development and Marketing Director Jerzy Kuś Member of Executive Board, Metering Equipment and Systems Director Signature of person responsible for accounting books Janina Karaszewska - Zandrowicz Finance Director Name of entity: APATOR SA Page 61 Period included in reporting period: Reporting currency: Polish zloty (PLN) Rounding: All amounts are quoted in thousands of Polish zloty (if not stated otherwise)

76 MANAGEMENT REPORT OF APATOR SA IN 2012 TABLE OF CONTENTS: 1. GENERAL INFORMATION MISSION OF THE ISSUER S CAPITAL GROUP ORGANIZATION THE MANAGEMENT BOARD OF APATOR SA S STATEMENT CONCERNING THE PREPARATION OF A FINANCIAL STATEMENT AND THE MANAGEMENT REPORT THE STATUTORY AUDITOR S INDICATIONS AND THE STATEMENT OF THE MANAGEMENT BOARD OF APATOR SA CONCERNING THE STATUTORY AUDITOR STATEMENT REGARDING THE APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES THE SET OF CORPORATE GOVERNANCE PRINCIPLES, BY WHICH THE ISSUER ABIDES, AND THE PLACE WHERE THEY ARE AVAILABLE TO THE PUBLIC APPLICATION OF THE CORPORATE GOVERNANCE PRINCIPLES OF THE BASIC FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT, IN RELATION TO THE PROCESS OF PREPARING FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS, APPLIED BY APATOR SA SPECIFICATIONS OF THE SHAREHOLDERS HOLDING, DIRECTLY OR INDIRECTLY, SIGNIFICANT BLOCKS OF SHARES, GIVING THE NUMBER OF SHARES HELD BY THESE SHAREHOLDERS, THEIR PROPORTIONAL INTEREST IN THE SHARE CAPITAL, NUMBER OF VOTES AND THEIR PROPORTIONAL INTEREST IN THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING SHAREHOLDERS HOLDING OVER 5% OF THE VOTES AT THE GENERAL MEETING INTEREST OF THE RELEVANT GROUPS OF SHAREHOLDERS IN THE TOTAL NUMBER OF SHARES STOCK PRICE DIVIDEND DIVIDEND FROM PROFIT FOR DECLARATION OF THE DIVIDEND FROM THE PROFIT FOR DIVIDEND POLICY SPECIFICATION OF THE HOLDERS OF ANY SECURITIES GIVING SPECIAL CONTROL RIGHTS, INCLUDING THEIR LIMITATIONS TO THE EXECUTION OF VOTING RIGHTS INDICATION OF ANY LIMITATIONS REGARDING THE TRANSFER OF THE OWNERSHIP RIGHTS OF APATOR SA SHARES OF THE RULES FOR APPOINTING AND RECALLING THE MEMBERS OF THE MANAGING BODIES AND THEIR RIGHTS, IN PARTICULAR THE RIGHT TO MAKE A DECISION REGARDING THE ISSUANCE OR BUY-OUT OF SHARES SUPERVISORY BOARD MANAGEMENT BOARD OF THE CHANGES TO THE ARTICLES OF ASSOCIATION OF APATOR SA THE MANAGEMENT STRUCTURE AS OF DECEMBER 31 ST, 2012: GENERAL SHAREHOLDERS MEETING GENERAL SHAREHOLDERS MEETING OPERATION PRINCIPLES GENERAL MEETINGS IN THE COMPOSITION OF THE MANAGING AND SUPERVISING BODIES OF APATOR SA, ALONG WITH ITS CHANGES DURING THE LAST FISCAL YEAR AND A OF ITS ACTIVITY SUPERVISORY BOARD THE AUDITING COMMITTEE OF THE SUPERVISORY BOARD OF APATOR SA MANAGEMENT BOARD AGREEMENTS CONCLUDED BY THE COMPANY AND THE MANAGEMENT BOARD INFORMATION ON AGREEMENTS WHICH MAY RESULT FROM CHANGE OF THE PROPORTION OF THE SHARES HELD BY THE PRESENT SHAREHOLDERS CORPORATE SOCIAL RESPONSIBILITY EMPLOYMENT INVESTMENTS INVESTMENTS IN NON-FINANCIAL ON-GOING ASSETS ASSESSMENT OF THE POSSIBILITY OF THE EXECUTING THE INVESTMENT PLANS, INCLUDING EQUITY INVESTMENTS IN COMPARISON TO THE AMOUNT OF POSSESSED ASSETS, TAKING INTO CONSIDERATION THE POSSIBLE CHANGES TO THE FINANCIAL STRUCTURE OF THIS ACTIVITY PURCHASE PROCESS, SUPPLY SOURCES INFORMATION ON MARKETS BASIC TRENDS IN THE ECONOMY AND THE TEMPO OF ECONOMIC GROWTH INVESTMENT ATTRACTIVENESS OF THE BRANCHES WHERE APATOR SA OPERATES SALES STRUCTURE - COUNTRY AND EXPORT MEASURING SEGMENT - COUNTRY AND EXPORT SWITCHGEAR SEGMENT - COUNTRY AND EXPORT OF THE BASIC ECONOMIC AND FINANCIAL FIGURES DISCLOSED IN THE ANNUAL FINANCIAL STATEMENT

77 MANAGEMENT REPORT OF APATOR SA IN ASSESSMENT OF THE FACTORS AND UNUSUAL EVENTS AFFECTING THE OPERATIONAL PROFIT IN THE FISCAL YEAR WITH THE DETERMINATION OF THE LEVEL OF INFLUENCE OF THESE FACTORS OR UNUSUAL EVENTS ON THE ACHIEVED RESULT COMPREHENSIVE INCOME STATEMENT - PERFORMANCE OF THE INCOME RESULTING FROM BUSINESS ACTIVITY STATEMENT OF FINANCIAL CONDITION INFORMATION ON DRAWN AND TERMINATED BORROWING AGREEMENTS INFORMATION ON GRANTED LOANS IN THE CURRENT FISCAL YEAR INFORMATION ON GRANTED AND RECEIVED WARRANTIES AND GUARANTEES IN THE RELEVANT FISCAL YEAR CONTINGENT LIABILITIES LEASE AND RENT STATEMENT OF CASH FLOWS FORWARD CONTRACTS ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT, IN PARTICULAR CONSIDERING THE ABILITY TO MEET LIABILITIES TAKEN AND A DETERMINATION OF THE POSSIBLE THREATS AND ACTIONS, WHICH WERE TAKEN OR ARE TO BE TAKEN BY THE ISSUER IN ORDER TO COUNTERACT SAID THREATS OTHER INFORMATION BY WHICH TO ASSESS STAFF, ASSETS, FINANCIAL STANDING, FINANCIAL RESULT AND ITS CHANGES, AND THE INFORMATION WHICH IS IMPERATIVE TO THE ASSESSMENT OF APATOR SA'S ABILITY TO PERFORM ITS LIABILITIES CHANGES IN THE BASIC MANAGEMENT PRINCIPLES OF THE ISSUER S ENTITY AND ITS CAPITAL GROUP INFORMATION ON EMPLOYEE STOCKOWNERSHIP PLAN CONTROL SYSTEM BRIEF OF SIGNIFICANT ACHIEVEMENTS AND FAILURES OF THE ISSUER INCLUDING THE SPECIFICATION OF THE MOST IMPORTANT EVENTS IN CHARACTERISTIC OF EXTERNAL AND INTERNAL FACTORS IMPORTANT FOR THE DEVELOPMENT OF APATOR SA AND GRUPA APATOR, INCLUDING THE SIGNIFICANT RISK AND THREAT FACTORS AND OF THE BUSINESS ACTIVITY DEVELOPMENT PROSPECTUS ZONE PERMIT AND LOCATION OF THE BUSINESS ACTIVITY IN PSEZ EXTERNAL AND INTERNAL FACTORS IMPORTANT FOR GRUPA APATOR S DEVELOPMENT RISKS AND THREATS DEVELOPMENT PROSPECTUS SIGNIFICANT EVENTS AFTER DECEMBER 31, 2012 IN THE BUSINESS ACTIVITY OF APATOR SA INFORMATION ON PROCEEDINGS BEFORE COURT, COMPETENT AUTHORITY FOR ARBITRAGE PROCEEDINGS OF PUBLIC ADMINISTRATION AUTHORITY PERTAINING TO THE LIABILITIES OF RECEIVABLES OF APATOR SA INFORMATION ON CONCLUDED AGREEMENTS SIGNIFICANT TO THE ISSUER S BUSINESS ACTIVITY, INCLUDING THE AGREEMENTS CONCLUDED BETWEEN THE SHAREHOLDERS KNOWN TO THE ISSUER, INSURANCE AGREEMENTS AND COOPERATION AGREEMENTS INFORMATION PERTAINING TO APATOR SA, OR ITS SUBSIDIARY, CONCLUDING ONE OR MORE TRANSACTIONS WITH AFFILIATES, IF THEY ARE IMPORTANT INDIVIDUALLY OR AT ALL AND WERE CONCLUDED UNDER CONDITIONS DIFFERING FROM THOSE OF THE MARKET EXPLANATION OF THE DIFFERENCES BETWEEN THE FINANCIAL RESULTS PRESENTED IN THE ANNUAL REPORT AND THE PUBLISHED FORECASTS OF THE RESULTS FOR THE RELEVANT YEAR

78 MANAGEMENT REPORT OF APATOR SA IN General information The Apator Company was founded in Since 1993 it has operated as a joint-stock company [spółka akcyjna] established by the employees of the liquidated state enterprise. The subject of Apator S.A. s business activity includes designing, manufacturing and selling control and switch gear systems and instruments. Apator SA is entered into the National Court Register, Entrepreneurs Register with KRS number All production and commercial activities, offices and the Management Board are located in the Pomeranian Special Economic Zone in Ostaszewo, but, as of August 20, 2012, the registered address of this company has been established as Toruń, Gdańska Street No. 4a room.c4. As of April 24, 1997, Apator SA has had their stock listed at the Warsaw Stock Exchange. This trading is performed via continuous trading. The Company is classified under the electromachinery industry sector. The company s stock participates in the RESPECT Index and, until December 28, 2012, participated in the swig80 index. However, since December 28, 2012 they have been classified under the mwig40 index. Since March 29, 2013 the Apator SA stock has once again been incorporated into the WIGdiv dividend index at WSE. 2. Mission Grupa Apator (Group) aims at becoming the leader of East-Central Europe in the field of the development and sale of: measuring equipment and systems, switchgear equipment. 3. Description of the Issuer s capital group organization As at December 31, 2012 Grupa Apator s parent company is the Apator SA Company, which holds stock in the following six domestic and foreign companies. *) *On October 17, 2012, the General Meeting of ZAO Apator Elektro (joint-stock company) decided to reorganize the company by its liquidation and the ensuing establishment of a new company named OOO Apator Elektro. On November 26, 2012, the new company OOO Apator Elektro (limited liability company) was established, where Apator holds 50% of the shares. On January 15, 2013, the jointly-controlled company ZAO Apator Elektro was liquidated. 3

79 MANAGEMENT REPORT OF APATOR SA IN 2012 No capital relations exist between the subsidiaries, nor do they exist between the subsidiaries and the jointlycontrolled companies. As at December 31, 2012: 1) Apator Powogaz SA holds: 100% of the capital of Apator Metra s.r.o. (Czech Republic), 61.60% of the capital of Apator Telemetria Sp. z o.o. (Słupsk), 61% of the capital of TOV Apator Metroteks (Ukraine), 50% of the capital of ZAO Teplovodomer (Russia), 2) Apator Rector Sp. z o.o. holds 60% of the capital of the Newind Grupa Apator Sp. z o.o. with headquarters located in Wrocław. 3) Apator Metrix SA owns 50% of the shares in George Wilson Industries (GWi) Ltd. (Coventry, Great Britain). The subject of the activity of Grupa Apator s companies is presented below: Metering segment Switchgear segment Other sales FAP Pafal SA Apator Mining Sp. z o. o. Apator Metrix SA and GWi Ltd. Apator Control Sp. z o. o. Apator Powogaz and entities: Apator Metra, Metroteks, Teplovodomer, Apator Elektro Apator Telemetria Apator Rector Sp. z o. o. Apator SA Apator GmbH Newind Sp. z o. o. As part of its measurement segment, Grupa Apator offers smart meters : 1) Electrical energy meters, 2) Gas meters, 3) Water meters, 4) Heat meters, 5) Installation and service of AMI/AMM (Automated Meter Management) systems, 6) Installation and service of pre-paid systems. Grupa Apator s offer includes both hardware and software incorporated into the smart metering and smart girds systems. It is comprehensive and covers the entire value chain, from metering equipment production to the analytics, visualization and sharing of the meter data. As part of its switchgear segment, Grupa Apator provides equipment for the safe connection and disconnection of electric circuits. Contrary to measuring companies the companies working as part of this segment conduct their activity in independent market segments. 4. The Management Board of Apator SA s statement concerning the preparation of a financial statement and the Management Report. The Management Board of Apator SA, being composed of: Janusz Niedźwiecki - President of the Management Board Tomasz Habryka - member of the Management Board Jerzy Kuś - member of the Management Board, states that pursuant to its best knowledge, the Apator SA Company s 2012 financial statement and comparable data were prepared pursuant to the International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS) and the related interpretations published in the form of the regulations of the European Commissions. Apator SA applies the provisions of the Accounting Act and the executive regulations under this Act in the field not regulated by the IAS/IFRS. The financial statement reflects the assets and financial condition of Apator SA and its financial results in a reliable, accurate and clear manner. The detailed principles of preparing this statement are included in the explanatory notes. The Management Report of Apator SA contains an accurate description of the development, achievements and standing of the Company, including a description of the basic risks and threats. 4

80 MANAGEMENT REPORT OF APATOR SA IN The statutory auditor s indications and the statement of the Management Board of Apator SA concerning the statutory auditor. The audit of the separate annual financial statement was carried out by the entity authorized to audit the financial statements- KPMG Audyt Spółka z ograniczoną odpowiedzialnością Sp. k., with its registered office in Warsaw. On June 6, 2012, Apator SA concluded agreements with the entity authorized to audit financial statements: An agreement regarding the audit of the separate financial statement and the review of the interim financial statement for the first half of under this agreement the remuneration for the authorized entity is PLN 44 k plus VAT (1st six months of 2011: PLN 37 k plus VAT); An agreement regarding the audit of the separate financial statement and the audit of the consolidated financial statement for under this agreement the remuneration for the authorized entity is PLN 66 k plus VAT (for 2011: PLN 55 k plus VAT). Moreover, Apator SA bears the cost of travelling, meals and accommodation of the employees performing the audit. Pursuant to the agreement, the amount owed for the audit and review of the interim consolidated statements cannot exceed PLN 9.5 k plus VAT (amounted to PLN 2 k) and for the audit of the separate and consolidated financial statement - PLN 15 k plus VAT. Apator SA has been using the services of KPMG Audyt spółka z ograniczoną odpowiedzialnością sp. k., starting with the audit of interim financial statements for The Management Board of Apator SA declares that the entity authorized to audit the financial statement, KPMG Audyt spółka z ograniczoną odpowiedzialnością Sp. k., which performed the audit of the consolidated financial statement, was selected in compliance with applicable law. The Supervisory Board of Apator SA elected the entity to audit and review the financial statements on March 23, 2012 pursuant to 20 of the Articles of Association of Apator SA i.e. in a manner that assures its independence to perform its tasks. The election of the entity authorized to audit financial statements was performed pursuant to the applicable regulations and professional standards. In order to provide the due independence of the opinion, the Supervisory Board changes the entity authorized to audit financial statements at least once every seven years ( 20 item 2 of the Articles of Association of Apator SA). KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. -entered into the register of the entities authorized to audit financial statements with KIBR number 3546, as well as members of its Management Board and statutory auditors carrying out the financial audit for Apator SA and its subsidiaries, meet the requirements of fairness and independency specified in Art. 56 of the Act of May 7, 2009 on the Statutory Auditors, Their Self-Governing Organisation and Entities Authorised to Audit Financial Statements and on Public Oversight. 6. Statement regarding the application of corporate governance principles 6.1 The set of corporate governance principles, by which the issuer abides, and the place where they are available to the public The corporate governance principles are available on the WSE s website: and on the website of Apator SA: Application of the corporate governance principles In 2012, Apator SA observed the principles declared by the Management Board of Apator SA on December 22, 2011 (incorporated in Code of Best Practice for WSE Listed Companies ", attached as the Appendix to the Resolution of the Stock Exchange Board No. 20/1287/2011 of October 2011); except for: Rule I.1 in the field of broadcasting the General Meeting session using the Internet; Rule IV.10 in the field of shareholders' participation in the General Meeting via electronic communication means. Changes in principle application after : 5

81 MANAGEMENT REPORT OF APATOR SA IN 2012 On December 18, 2012 the Management Board of Apator SA declared that from January 1, 2013, it will observe the rules outlined in the document entitled Code of Best Practice for WSE Listed Companies" (the Appendix to the Resolution of the WSE Board No. 19/1307/2012 of October 21, 2012) except for: Rule I.12 in the field of enabling its shareholders to exercise their voting rights during a General Meeting either in person or through a plenipotentiary outside the venue of the General Meeting using by means of electronic communication; Rule IV.10 in the field of the shareholders' participation in the General Meeting using electronic communication means through: 1) the real-time broadcast of General Meetings, 2) real-time bilateral communication where shareholders may take the floor during a General Meeting from a location other than that of the General Meeting. The Management Board of Apator SA took the aforementioned decision because the shareholders were not interested in the aforementioned solutions and the company needed to incur additional costs to meet it. In order to allow shareholders to become acquainted with the events of the session, the company records the session in video format and publishes it on its website: 7. Description of the basic features of the internal control and risk management, in relation to the process of preparing financial statements and consolidated financial statements, applied by Apator SA. The financial statements are prepared by the Accounting Division of Apator SA, operating under the Director of the Financial Division. The consolidated and separate financial statements are prepared pursuant to the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS). IAS and IFRS include the interpretation recommended by the Commission for International Financial Reporting Interpretations. Moreover, the prepared financial statements are based on the Ordinance of the Ministry of Finance of February 19, 2009 (as amended) on the current and periodic information provided by the issuers of securities and the conditions of considering the information required by the legal provisions of the nonmember country as equally important. Financial reporting and accountancy in the companies of Grupa Apator i.e. Apator SA, FAP Pafal SA, Apator Metrix SA, Apator Powogaz SA and Apator Control sp. z o. o. is performed using the Integrated Management System Baan IV. Each company has an accounting policy that is based on the commonly accepted principles of Grupa Apator. They determine the main principles for recording events. But the basic elements of the statement preparation process are the common accounting principles that are accepted by all entities of Grupa Apator, based mainly on the solutions applied by the parent entity Apator SA. As a consequence of these records, the accounting books of the relevant companies, which further serve as a base for the separate financial statements of all entities of the group, are created. The separate financial statements serve as a base for the preparation of the consolidated financial statements of Grupa Apator. The following risks are defined in the process of preparation of the financial statements: Incorrect input data, Improper presentation of data, Effects of error estimations made by independent consultants (actuaries, appraisers), At the financial data consolidation stage - improper integration of data from the companies, which did not implement the integrated management system Baan IV, with the data of the companies, which have said system. All the aforementioned risks are minimized by the internal and external control systems and by the common accounting principles. The party responsible for minimizing risk and identifying new risks is the Management Board of Apator SA, in cooperation with the Financial Director, who assesses the efficiency of the internal control system in the process of preparing financial statements on an on-going basis. The installation of an effective internal control system for financial reporting ensures the correctness of the financial information contained in the financial statements and their proper presentation. This correctness is ensured by verifying compliance with the regulations and guidelines of the financial law and the internal regulations, as well as through audit based on EN ISO 9001:2008. The internal control is performed directly by each employee (using the self-assessment system), his supervisor and cooperating persons as well as by the managers of the organizational unit working in the field of the quality and correctness of the activities performed by the relevant employees. The aim is to assure the compliance of these activities with the procedures and mechanisms of internal control. At each stage of the financial statement preparation, one of the basic control mechanisms (external) is periodic verification of the financial statements carried out by the independent statutory auditor and, in particular, a review of the interim financial statements and an audit of the annual financial statements. The 6

82 MANAGEMENT REPORT OF APATOR SA IN 2012 entity which will be the statutory auditor of the Apator SA company and Grupa Apator is elected in such a manner as to assure independency in the performance of its tasks. Statutory auditor selection is performed by the Supervisory Boards of the relevant companies, among the known auditing companies warranting high standards and independency. All companies of the Grupa Apator are audited by the same entity authorized to audit the financial statements. The Auditing Committee of the Supervisory Board of Apator SA participates in the process of monitoring the efficiency of the internal control system. Its essential task is to advise the Supervisory Board on the following issues: Separate and consolidated financial reporting, Internal control, Risk management and cooperation with the statutory auditors. The financial data, which serve as the base for financial statements and periodic reports, are used also in the monthly financial and operating reporting. Upon closing the monthly settlement period, the senior management (management board, directors), under the supervision of the Supervisory Board, performs a monthly analysis of the financial results of the Apator SA company, the relevant companies of Grupa Apator and the consolidated results of Grupa Apator. The analysis of the results attained is made by comparing these results with the accepted business assumptions contained in the annual budget and development strategy. The identified deviations are analysed on an on-going basis to view their influence on the current results of Grupa Apator, after which possible corrective measures are taken. Moreover, Grupa Apator performs an annual review of the business plans, pertaining to both all entities of the capital group and the entire Grupa Apator. All of senior and middle management is engaged in the budgeting process, which includes all operating areas. The prepared budget is accepted by the management board of the company and approved by the supervisory board. Based on the assessment of the applied procedures, the Management Board of Apator SA states that as of December 31, 2012, there were not any circumstances which could have negatively affected the efficiency of the internal control regarding the preparation of the financial statements. 8. Specifications of the shareholders holding, directly or indirectly, significant blocks of shares, giving the number of shares held by these shareholders, their proportional interest in the share capital, number of votes and their proportional interest in the total number of votes at the general meeting. 8.1 Shareholders holding over 5% of the votes at the general meeting The table below presents the specifications of the shareholders holding over 5% of the votes at the General Shareholders Meeting: Name and Surname Registered shares Bearer shares As at 31 December 2012 Total shares Number of votes Share in capital Share in votes Mariusz Lewicki ,15% 9,80% Tadeusz Sosgórnik ,74% 8,65% Danuta Guzowska ,59% 7,77% Zbigniew Jaworski ,01% 6,40% Apator Mining sp. z o. o ,87% 6,38% Janusz Marzygliński ,16% 6,21% AVIVA OFE ,78% 5,15% Others ,70% 49,64% Total ,00% 100,00% For natural persons the above table presents the number of shares held by significant shareholders with spouses. 8.2 Interest of the relevant groups of shareholders in the total number of shares 7

83 MANAGEMENT REPORT OF APATOR SA IN 2012 The diagram below presents the interest of the relevant groups of shareholders in the share capital (as of the date for the dividend right: December 6, 2012). The institutional investors interest increased in 2012, achieving a level of 41%. The funds purchase ordinary bearer shares, and, due to this fact, their interest in the share capital is higher than in votes. The diagram below presents the interest of the institutional investors in the share capital of the Company for the last 9 years. 9. Stock price Despite the recession of the financial markets for the majority of the year, the main indices have finished the year 2012 with the most proportional increases since The annual change (increase) in WIG index amounted to 26.2%, WIG20: 20.4%; swig80: 22.9% and mwig40: 17.4%. From June 2012 the stock market indices tended to increase and were resistant to all negative information pertaining to the condition and prospectus of the economy. The stock exchange rate of Apator SA s stock in 2012 had a similar tendency. For the entire year it was growing - starting the first six months at the level of PLN (it was the lowest stock exchange rate in 2012) and finishing at the level of PLN 25. In the second half of the year the prices of Apator SA stock increased from PLN 25 to maximum price of PLN on December 11, It is the maximum stock exchange rate ever achieved by the Company in its entire listing history since 8

84 MANAGEMENT REPORT OF APATOR SA IN Apator SA closed the year 2012 slightly below the maximum, at PLN and the average for the entire year was PLN In the period from January to December 2012, the stocks of the Company gained 80.8% toward an increase at the level of 22.9% of the swig80 index. In the stock price of Apator SA was correlated with the swig80 index in which the Company's shares participated. Since December 28, 2012, the Company s stock participated in mwig40. Share price of Apator SA in versus swig80 index The table below presents selected stock exchange data for Apator SA for Unit Description Date Value Date Value Closing share price on the first day of quotation PLN , ,05 Evaluation of the goodwill of the Company at the beginning of the period. 000'PLN Closing share price on the last day of quotation PLN , ,63 Evaluation of the goodwill of the Company at the end of the period. 000'PLN The lowest share price PLN , ,05 The highest share price PLN , ,69 Average share price PLN year 18,59 year 25, Dividend 10.1 Dividend from profit for 2011 On June 18, 2012 the Ordinary General Meeting of Shareholders adopted the resolution on the dividend from the profit for 2011 in the total amount of PLN , so PLN 0.75 gross per share. The dividend was paid in full on July 23, The right to dividend will be gained by the shareholders holding Apator SA shares as of July 6, registered shares, including of the A series and bearer shares of the A, B and C series were entitled to receive the dividend. 9

85 10.2 Declaration of the dividend from the profit for 2012 MANAGEMENT REPORT OF APATOR SA IN 2012 On October 23, 2012 the Management Board of Apator SA made a decision pertaining to the payment of the advance payment for the expected dividend from the profit of 2012 in the total amount of PLN , so PLN 0.40 gross per share registered shares of the A series and bearer shares of the A, B and C series were entitled to the advance payment for the expected dividend in The right to receive the advance payment for the expected dividend was granted to the shareholders holding Apator SA shares on December 6, 2012 and the payment was made on December 13, The Management Board of Apator SA declares that it will recommend to the General Meeting of Shareholders the payment of the second part of the dividend for the fiscal year 2012 in the amount of PLN 0.80 per share that jointly constitutes PLN 26.5 M. The total declared level of divided is PLN 1.20 gross per share, so PLN 39.7 M Dividend policy On March 16, 2007 the Management Board of the Company determined the dividend policy for Apator SA, where the annual payment of dividend in the amount of 75% of the net profit of Apator SA generated for the relevant fiscal year was declared. The dividend will be payable in two parts: in the form of advance payment in the relevant fiscal year and the remaining part of the final amount of the dividend to be paid upon approval by the General Meeting of Shareholders. At the same time the Management Board of Apator SA stipulated that in event of the performance of significant investment plans, the company is entitled to decide on a different profit division for the relevant year. In 2012 the net income of Apator SA amounted to PLN , but the total declared level of dividend is PLN k. It constitutes 56.48% of net income. As of June 1, 2012 (the commencement date of business activity in PSEZ) the asset for deferred corporate income tax was recognized in the amount of PLN k due to usable tax credit. As of December 31, 2012 this asset amounted to PLN k and increased the net income of Apator SA by this amount. However, this asset is only a potential amount in the accounting books, which do not affect the actual financial liquidity of the Company. The level of total declared dividend for 2012, excluding this asset, is 78.92%. 97,7% 93,3 % 98,7 % 55,9 % 40,6 % 96,7 % 78,2 % 49,5 % 35,5 % 82,3 % 51,1 % 65,8 % 56,5% (78,9 %) 10

86 MANAGEMENT REPORT OF APATOR SA IN 2012 Share of dividend in the profit *) declared dividend level 11. Specification of the holders of any securities giving special control rights, including their description. No holder of the securities issued by Apator SA has special control rights over the Company. Each bearer share carries one voting right; however the registered shares are preference shares in such a manner that one share carries four voting rights at the General Meeting of Shareholders. The principles of disposal of the registered shares or their conversion are specified in the Articles of the Association of Apator SA. As of December 31, 2012, the Company s share capital consisted of shares of the nominal value equal to PLN 0.10 each. In 2012 this capital fell by 2 M own bearer shares acquired to be redeemed without any remuneration (description in item 12). The table below presents Apator SA s shareholding at the end of Shares and votes Number of shares As at 31 December 2012 Structure of Structure of shares Number of votes votes % % Registered shares ,48% ,11% Bearer shares ,52% ,89% Total shares ,00% ,00% As of the date of this financial statement, i.e. April 22, 2013, upon conversion of registered shares on January 11, 2013, the preference shares constitute 23.42% of the share capital and 55.02% votes at the General Meeting of Shareholders of Apator SA. 11

87 MANAGEMENT REPORT OF APATOR SA IN Limitations to the execution of voting rights There are no limitations regarding the execution of voting rights, such as: Limitation to the execution of voting rights by the shareholders of a specified part or number of votes, Time limitations pertaining to the execution of voting rights, Provisions under which, with the cooperation of the company, the securities-related equity rights are separated from the holding of securities. On January 23, 2012, the Extraordinary General Meeting of the company adopted the free share redemption and cancellation program and the reduction of the share capital. The aim of the Program is the free acquisition, outside of the regulated market, of 2 M own bearer shares (5.70% of the capital) with the nominal value of PLN 200 k from Apator Mining Sp. z o.o. On April 13, 2012 Apator SA acquired 2 million of own bearer shares, free of charge, marked with the code PLAPATR00018 from the subsidiary Apator Mining Sp. z o.o. And thus the Program was completed. The voting right from the shares acquired under this Program will not be executed and these shares will not participate in the profit division for The decision pertaining to the possible redemption and cancellation of these shares will be made at the Ordinary General Meeting on June 18, On July 16, 2012 Apator SA received the decision of the District Court in Toruń, under which on July 12, 2012 the decrease of the share capital from PLN to PLN , as a result of the redemption and cancellation of these shares, was registered. 13. Indication of any limitations regarding the transfer of the ownership rights of Apator SA shares The registered preference shares are subject to limitation to their disposal. These shares may be disposed of by the shareholders and their heirs or legal successors only in favour of the shareholders holding the registered shares. The disposal of the registered shares in favour of persons other than the shareholders holding the registered shares requires the consent of the Management Board. If the Management Board does not express consent for the transfer of shares, it should, within 60 days, determine another purchaser; determine the price pursuant to the bearer share price of the date of application. If, within 60 days of the date of written application for the consent for the shares disposal, the Management Board does not express their opinion, the disposal will not be limited. The bearer shares are not subject to any limitations regarding the transfer of their ownership. 14. Description of the rules for appointing and recalling the members of the managing bodies and their rights, in particular the right to make a decision regarding the issuance or buy-out of shares Pursuant to the Articles of the Association of Apator SA, the sole competence of the General Meeting of Apator SA is to decide on the: Issuance of shares, convertible bonds or senior bonds, Acquisition of shares to be cancelled, Increase or decrease of the share capital Supervisory Board The Supervisory Board of Apator SA acts under the provisions of the Code of Commercial Companies, the Articles of Association and the Supervisory Board Regulations. The Articles of Association and the Supervisory Board Regulations are available on Apator SA s website: in the folder Investor s Relations. The Supervisory Board supervises all fields of the business activity of the Company. It does not have the right to instruct the Management on the management of the Company s matters. The Supervisory Board performs its duties collegially, but it may appoint their members to perform the relevant supervision tasks individually. 12

88 MANAGEMENT REPORT OF APATOR SA IN 2012 The members of the Supervisory Board of Apator SA are appointed and recalled by the General Meeting, which establishes the number of members of the Supervisory Board and their remuneration. The members of the Supervisory Board should have proper knowledge and experience. The Supervisory Board may be composed of 5 to 7 members, elected by the General Meeting for the joint term in office of 5 years. Reduction of the number of Supervisory Board members during the term of office to not less than 5 members does not cause the necessity to complete the composition of the Supervisory Board. The Supervisory Board elects a Chairman and Deputy Chairman at the first meeting. The members of the Supervisory Board are obliged to non-compete. The members of the Supervisory Board cannot be: Members of the Management Board, Proxy, Liquidator, and Managers of the unit or plant, Chief Accountants employed by the company, Legal Advisers or Lawyers of a person who is subordinate to the member of the Management Board. Moreover, the members of the Management Board and/or subsidiary Liquidators cannot be members of the Supervisory Board. In order to have a valid resolution of the Supervisory Board, all members must be invited, and the following must be in attendance:, at least 3 members of a five person composition, at least 4 members of a composition of more than five persons. The resolutions of the Board are adopted by the absolute majority of the present votes. In case of equality in the votes, the vote of the Chairman of the Supervisory Board is decisive. The General Meeting adopts the Supervisory Board Regulations. The Supervisory Board is not authorized to make a decision on the issuance or buyout of shares Management Board The Management Board of the Company acts under the provisions of the Code of Commercial Companies and the Management Board Regulations. The Articles of Association and the Regulations of the Management Board of Apator SA are available on Apator SA s website: in the folder entitled Investor s Relations. The members of the Management Board of Apator SA are appointed and recalled pursuant to the provisions of the Code of Commercial Companies and the provisions of the Articles of Association. The Management Board of Apator SA is composed of one to three members appointed by the Supervisory Board for three years of the joint term of office. The Supervisory Board adopts resolutions on: Determining the number of members of the Management Board of the Company, Appointing and recalling the Management Board of the Company, Appointment of the President of the Management Board, Suspending the performance of tasks by all or relevant members of the Management Board, for important reasons, Delegation of members of the Supervisory Board to temporary execution of the activities of the members of the Management Board, Determining the remuneration for the Management Board, including the nature of its motivation. The members of the Management Board may be recalled by the Supervisory Board or General Meeting any time. It has no prejudice to their claims under the employment contract. The Management Board manages the entire business activity of the Company, represents the Company to third parties, manages its assets and all issues not reserved for other bodies, is responsible for the proper keeping of accounting books and strictly observes the provisions of the Articles of Association, Management Board Regulations as well as the resolutions of the Company s bodies. Whence performing its activities, the Management Board takes the Company s interests into consideration. The tasks of the Management Board are controlled by the President. The resolutions of the Board are adopted by the absolute majority of votes. In the event of a tie, the President s vote is decisive. Each member of the Management Board is independently, or by proxy, entitled to submit statements pertaining to the property rights and duties of the Company as well as to sign documents. Each member of the Management Board is entitled and obliged to handle the issues of the Company, not exceeding the usual activity of the Company. The members of the Management Board and Proxies are obliged to non-compete. The Supervisory Board adopts the Management Board Regulations. The Management Board is not authorized to make decisions pertaining to the issuance or buyout of shares. 13

89 MANAGEMENT REPORT OF APATOR SA IN Description of the changes to the Articles of Association of Apator SA The change to the Articles of Association of Apator SA, under par. 14 item 14 of the Articles of Association, is in the competences of the General Meeting and may be adopted by the majority of 3 votes. In case of intention to change the Articles of Association, the notice on convening the General Meeting of Shareholders will include the current provisions and the content of the proposed changes. The General Meeting of Shareholders may authorize the Supervisory Board, under the resolution on change in the Articles of Association, to establish a consolidated text of the changed Articles of Association or to introduce any other editorial changes. Changes to the Articles of Association become effective upon their entry into the National Court Register. The obligation to report the changes to the Articles of Association is the responsibility of the Management Board. Under par. 430 of the Code of Commercial Companies, the Management Board is obliged to report the change to the Articles of Association within 3 months of the date of adopting the relevant resolution by the General Meeting, but Art. 22 of the Act on the National Court Register obliges to submit the application for entry to the Register no later than within 7 days of the event that justifies such an entry. 16. The management structure as of December 31 st, 2012: GENERAL SHAREHOLDERS MEETING Supervisory Board Janusz Marzygliński, Mariusz Lewicki, Ryszard Wojnowski, Danuta Guzowska, Krzysztof Kwiatkowski, Eryk Karski Executive Board Janusz Niedźwiecki, Tomasz Habryka, Jerzy Kuś 17. General Shareholders Meeting 17.1 General Shareholders Meeting operation principles The manner of operation of the general meeting, its basic rights and description of the shareholders rights, and the way of their execution, in particular the rules following the regulation of the general meeting, unless this information follows directly from the law, are specified below. The General Meeting of Shareholders of the Company operates under the provisions of the Code of Commercial Companies and the General Meeting Regulations. The General Meetings can be ordinary and extraordinary. The Ordinary General Meeting is convened once per year, at the latest at the end of June. The General Meetings are convened by announcement in the manner specified by the Code of Commercial Companies for public companies, at least 26 days in advance of the General Meeting. The right to participate in the General Meeting is only for persons who are shareholders of the company 16 days before the date of the General Meeting (as of the registration date of participation in the meeting): The persons authorized by registered shares and share certificates, and the pledgees and users, who are entitled to vote by shares, have the right to participate in the General Meeting if they are listed in the share register on the registration date of the General Meeting. 14

90 MANAGEMENT REPORT OF APATOR SA IN 2012 The list of persons authorized by bearer shares to participate in the General Meeting is determined by the Company based on the list drawn up by the National Depository of Securities SA under the conditions specified by the Commercial Companies Code. The shareholders representing at least half of the share capital or at least half of the total votes are entitled to convene the Extraordinary General Meeting by appointing the chairman of this meeting. The shareholder or shareholders representing at least 1/20 of the share capital are authorized to: Request to convene the Extraordinary General Meeting and incorporate the specified issues into the agenda of this meeting. The request to convene the Extraordinary General Meeting should be submitted to the Management Board in writing or by ; Request to incorporate the specified issues into the agenda of the next General Meeting. This request should be reported to the Management Board not later than 21 days in advance of the date of the General Meeting. The Management Board is obliged to announce agenda changes, introduced at the shareholders request, immediately, but not later than within 18 days in advance of the date of the General Meeting. The announcement is made in a manner appropriate for convening the General Meeting; Before the date of the General Meeting, to submit to the Company in writing or by , the drafts of the resolutions referring to the issues incorporated into the agenda or issues to be incorporated to the agenda. The Company immediately presents the resolution drafts on its website. Each shareholder is entitled to submit the resolution draft concerning the issues from the agenda during the General Meeting. The following persons should participate in the General Meeting: Members of the Supervisory Board and the Management Board, in a composition that enables the substantial answering of the questions asked during the meeting, Statutory auditor, if the financial matters of the Company are subject matter of this meeting. Unless the provisions of the Code of Commercial Companies state otherwise, the general meeting is valid regardless of the number of presented shareholders. The General Meeting may adopt the resolutions only for the issues included in the agenda, except for the resolutions on order issues, which may refer only to the issues related with the meeting. The resolution on discontinuing to resolve an issue from the agenda may be passed only when there are important reasons. In such case the request must be explained in detail. The General Meeting may not adopt the resolution on excluding from the agenda or discontinuing the consideration of the issues which are incorporated into the agenda upon the request of the shareholders. The resolutions are passed by the absolute majority of votes, unless the provisions of the Articles of Association or the Commercial Companies Code state otherwise. The voting is open, except for the situation specified in Art. 420 of the Code of Commercial Companies i.e. secret voting is ordered: For elections and in case of motions on recalling the members of the Company's bodies, Motions on holding them liable, On personal matters, At the request of but one shareholder or proxy present at the General Meeting. The resolutions of the General Meeting are binding for all shareholders General Meetings in 2012 On January 23, 2012 the Extraordinary General Meeting of Shareholders was held, which: closed the share redemption, cancellation and reduction of share capital program of June 20, 2011; (no shares were acquired), Liquidated the Shares Cancellation Fund, Expressed consent for free redemption and cancellation of 2 M shares without remuneration, Established the Free share redemption, cancellation and share capital decrease program - this program refers to the free redemption of 2 M own shares from the subsidiary Apator Mining Sp. z o.o. On June 18, 2012 the Ordinary General Meeting of Shareholders of Apator SA was held, which: Approved the Management Report of the Company and Capital Group for the year 2011; Approved the financial statement of Apator SA and Capital Group for the year 2011; Discharged the members of the Company s Management Board of their duties in 2011; Approved the Supervisory Board Report for 2011; Discharged the members of the Company s Supervisory Board of their duties in 2011; Adopted the resolution pertaining to the profit division for 2011 and dividend payment; 15

91 MANAGEMENT REPORT OF APATOR SA IN 2012 Adopted the resolution pertaining to the redemption and cancellation without remuneration of 2 M own bearer shares of Apator SA acquired free-of-charge from the subsidiary Apator Mining Sp. z o.o. Adopted the resolution pertaining to the decrease of the share capital of Apator SA as a result of the redemption and cancellation of 2 M own shares; Adopted the resolution pertaining to closing the Share redemption, cancellation and share capital decrease program of January 23, 2012; Adopted the resolution pertaining to the change of 7 of the Articles of Association of Apator SA; Adopted the resolution pertaining to passing the consolidated text of the Articles of Association; Did not adopt the resolution pertaining to consent for the acquisition of 3.6 M shares to be cancelled without remuneration from the subsidiary Apator Mining Sp. z.o.o.; The resolution on free share redemption and cancellation program and reduction of the share capital was not adopted. 18. The composition of the managing and supervising bodies of Apator SA, along with its changes during the last fiscal year and a description of its activity 18.1 Supervisory Board At the end of 2012 the composition of the Supervisory Board of Apator SA was as follows: Janusz Marzygliński - Chairman of the Supervisory Board Mariusz Lewicki - Deputy Chairman of the Supervisory Board, Ryszard Wojnowski - Member of the Supervisory Board Danuta Guzowska - Member of the Supervisory Board Krzysztof Kwiatkowski - Member of the Supervisory Board Eryk Karski - Member of the Supervisory Board. The term of office of the present Board ends on the day of the Ordinary General Meeting of Shareholders to be held in The shareholding structure of the members of the Supervisory Board was as follows: Description As at 31 December 2012 shares votes % shares % votes Janusz Marzygliński ,16% 6,21% Mariusz Lewicki ,15% 9,80% Ryszard Wojnowski ,63% 1,54% Danuta Guzowska ,59% 7,77% Krzysztof Kwiatkowski 0 0 0,00% 0,00% Eryk Karski 0 0 0,00% 0,00% Total ,53% 25,32% The table above presents the number of shares held by significant shareholders with spouses. The members of the Supervisory Board of Apator SA hold the positions in the supervising bodies of the subsidiaries: Mariusz Lewicki - Chairman of the Supervisory Board of Apator Mining Sp. z o.o., Chairman of the Supervisory Board of Apator Metrix SA; Janusz Marzygliński - Chairman of the Supervisory Board of Apator Rector Sp. z o.o., Chairman of the Supervisory Board of Apator Powogaz SA Chairman of the Supervisory Board of Newind Sp. z o. o, Ryszard Wojnowski - Chairman of the Supervisory Board of Apator Control Sp. z o.o., The remuneration of the members of the Supervisory Board was not a significant portion of the costs of the Company and did not affect its financial result in a significant manner. The remuneration obtained in 2012 is as follows: 16

92 MANAGEMENT REPORT OF APATOR SA IN 2012 Name and Surname Remuneration Apator SA Remuneration subsidiaries Total remuneration 000 PLN 000 PLN 000 PLN Janusz Marzygliński Mariusz Lewicki Ryszard Wojnowski Danuta Guzowska Krzysztof Kwiatkowski Eryk Karski Total Pursuant to the provisions of the Articles of Association, the Board meets once per quarter or more often, if needed, upon the invitation of the Chairman. In 2012, 10 meetings of the Supervisory Board of Apator SA were held. The members of the Management Board of Apator SA participated in these meetings. The Management Board provided the Supervisory Board with sufficient information on all important matters referring to the business activity of Apator SA and Grupa Apator. At the meetings of the Supervisory Board the resolutions in matters, which were specified by the agenda sent to the members of the Supervisory Board in the notice, were passed. The business activity of the Supervisory Board focused on the matters significant for the business activity of the Apator SA company and the Grupa Apator. The Auditing Committee operates within the Supervisory Board, but the Nomination Commission and Remuneration Commission were not appointed The Auditing Committee of the Supervisory Board of Apator SA On September 23, 2009 the Supervisory Board of Apator SA appointed the Auditing Committee, which is composed of at least three members including the Chairman who is appointed among its members. The goal of the Auditing Committee is collaboration with the statutory auditors and consultancy for the Supervisory Board on the following issues: Separate and consolidated financial reporting, Internal control and risk management. The main tasks of the Auditing Committee include: Monitoring the financial reporting process (audit of the accepted accounting standards, information circulation, prepared documents and planned changes); Monitoring the efficiency of the internal control systems, internal audit and risk management systems; Monitoring the performance of audit activities; Monitoring the independency of the statutory auditor to audit the financial statements. The detailed principles of the Auditing Committee operation are specified by the Regulations of the Auditing Committee of the Supervisory Board of Apator SA, which is available on its website: in the folder Investor s relations. The composition of the Auditing Committee 2012 includes: Mariusz Lewicki - Chairman of the Committee, Ryszard Wojnowski - Member of the Committee, Krzysztof Kwiatkowski - Member of the Committee. Krzysztof Kwiatkowski meets the criterion of independency from Apator SA. Pursuant to the Regulations, the meetings of the Committee are held at least twice a year, before the Company publishes the financial statement (interim and annual). In 2012, seven meetings of the Committee were held Management Board In 2012 the composition of the Management Board of Apator SA was as follows: Janusz Niedźwiecki - President of the Management Board Tomasz Habryka - Member of the Management Board Jerzy Kuś - Member of the Management Board. The present term of office of the Management Board ends on June 24, 2013 when the Ordinary General Meeting of Shareholders will take place. 17

93 MANAGEMENT REPORT OF APATOR SA IN 2012 On June 18, 2012 the President of the Management Board of Apator SA, Janusz Niedźwiecki, submitted a written statement pertaining to him not standing as a candidate for the Management Board of Apator SA for the next term of office. The Supervisory Board proposed that Janusz Niedźwiecki stand as a candidate for the Supervisory Board, upon completing his term of office as the President of the Management Board, and declared its support. On October 23, 2012 the Supervisory Board of Apator SA elected Mr Andrzej Szostak as a candidate for the President of the Management Board of Apator SA for the next term of office within The members of the Management Board are members of the supervising bodies of the subsidiaries (as of December 31, 2012): Janusz Niedźwiecki - Member of the Supervisory Board of FAP Pafal SA, Member of the Supervisory Board of Apator Rector Sp. z o.o., Member of the Supervisory Board of Apator Powogaz SA, Tomasz Habryka - President of the Management Board of FAP Pafal SA, President of the Management Board of Apator GmbH Member of the Supervisory Board of Apator Control Sp. z o.o., Member of the Supervisory Board of Newind Sp. z o. o, Jerzy Kuś - Member of the Supervisory Board of Apator Metrix SA. The remuneration of the Members of the Management Board is determined on the basis of the clear procedures and principles considering its motivation nature and to provide the effective and fluent management of the Company. The remuneration corresponded to the responsibility criteria pertaining to the position held, staying reasonably proportionate to the level of remuneration in similar companies in a comparable market. The remuneration obtained by the Members of the Management Board in 2012 is as follows: Name and Surname Apator SA Base remuneration bonuses / awards Remuneration from other entities in the group of Apator Total remuneration 000 PLN 000 PLN 000 PLN 000 PLN Janusz Niedźwiecki Jerzy Kuś Tomasz Habryka Total Name and Surname As at 31 December 2012 shares votes % shares % votes Janusz Niedźwiecki ,32% 3,07% Tomasz Habryka 0 0 0% 0% Jerzy Kuś ,00060% 0,00035% Total ,32060% 3,07035% The shareholding structure of the members of the Management Board of Apator SA is as follows: While making decisions on company issues, the members of the Management Board act within the limits of justified economic risk, i.e. after considering all information, analyses and opinions, which should be considered by this issue because of the company's interests. While determining the interests of the Company, they considered, as justified by a long-term prospectus, the business of the shareholders, debtors, employees and other entities and persons collaborating with the Company s business activity, as well as the interest of the local society. The Management Board operated with due diligence in order to make any 18

94 MANAGEMENT REPORT OF APATOR SA IN 2012 transactions with the persons, whose interests affected the interest of the Company under the market conditions. 19. Agreements concluded by the company and the Management Board There are no unusual agreements between the Company and managing persons, in the field of compensation, in the event of: Resignation or dismissal from the position held, without an important reason, When the recalling or dismissal is caused by a business combination via acquisition. The members of the Management Board are the employees of the Company under the contract for employment. In case of resignation or dismissal from the position held, the parties settle their obligations under the applicable regulations, in particular the labour law. 20. Information on agreements which may result from change of the proportion of the shares held by the present shareholders Apator SA does not have any information on any agreements, including these to be concluded after the end of the period, resulting in changes to the proportion of shares held by the present shareholders and bond holders (Apator SA has never issued bonds). 21. Corporate Social Responsibility Apator SA publishes on its website ( a separate report on CSR. Since February 1, 2013, Apator SA has been participating in the next 6 th edition of the Respect Index for the fifth time. In 2010 (in the 2nd edition) the Company did not report its participation in this project. 22. Employment As of December 31, 2012 the company s employment amounted to 474 persons and increased by 31 persons in comparison to December 31, The increase of employment was caused mainly by the increase of direct production workers (by 28 persons) due to partially taking-over the assembly of electronic electric energy meters from the subsidiary Pafal SA and due to the increase of sales. The diagram below presents the employment structure (by persons). 19

95 MANAGEMENT REPORT OF APATOR SA IN 2012 The cost of remuneration for 2012 amounted to k PLN, which means an increase of 18.7% in comparison to This increase is a consequence of: Increase of employment; Payment of the employee quarterly motivation bonuses that were higher than in 2011; Payment of the one-time bonus for employees due to the transfer of the company's business to the economic zone, Upon transfer of Apator SA s activity to PSEZ - every employee was granted an addition for commuting in the form of higher salary. 23. Investments 23.1 Investments in non-financial on-going assets The investment expenses in 2012 reached the level of PLN k and were as follows: Description Performance (000'PLN) Performance Change year/year Dynamics (000'PLN) (%) (000'PLN) machines and equipment ,33% devices ,82% intangibles ,82% investment tasks, others ,38% Total ,39% The most important investment performed by Apator SA in 2012 was the construction of a new company (offices and production plant) in the Pomeranian Special Economic Zone in Ostaszewo and the investments accompanying this construction. The completion of work was compliant with the planned date, i.e. March The transfer of total business activity in the second quarter of 2012 was performed fluently. During the transfer of the production processes, the company incurred higher costs such as e.g. costs of assets 20

96 MANAGEMENT REPORT OF APATOR SA IN 2012 amortization in two locations, financing of temporarily increased inventories. Collectively the purchase of the plot of land, changing the status of farm land, and the construction of the plant cost PLN 38 M that also affected the financial costs due to the temporary higher levels of crediting. The main burden of these expenses was performed in 2011 (PLN 34.2 M). However, in 2012 the company operating in the zone incurred additional capital expenses for the improvement of the production process. Collectively from the moment of the building permit (permit No. 69/PSSE for conducting the business activity within PSEZ in Ostaszewo of December 28, 2010) to December 31, 2012 the investment expenses amounted to PLN k (after discounting PLN k). In 2012 the highest expenses were incurred by purchasing an SMD line for the installation of electronic tiles and an injection moulding machine (a group of machinery and equipment in the table above) Assessment of the possibility of the executing the investment plans, including equity investments in comparison to the amount of possessed assets, taking into consideration the possible changes to the financial structure of this activity The investment plan of the Apator SA company for 2013 refers only to the expenditures for property investments. They are planned at the level of PLN 11.2 M, including: PLN 5.3 M - investments in new machines and devices, PLN 3.4 M - equipment (mainly for switchgear instruments), PLN 1.4 M - intangible assets (mainly software for CRM, and other licenses and software). In 2013 the further development of technology related to the improvement and automation of the production in the new plant in Ostaszewo will be continued. 1. In Q2 2013: New injection moulding machines will be purchased, A new measurement station for ARS 00 will be purchased. 2. In Q the purchase of the next electric energy meters assembly line, along with testers and calibrators for these meters, is planned. 3. In Q the purchase of equipment for ARS 00, other switchgear instruments and also for split heat meters. The source of financing for these items will be the Company s own funds. Due to the low level of the share capital of Apator Powogaz SA (PLN 753.5), an increase of this capital, via the issuance of shares, has been planned. These shares will be taken over by the parent entity Apator SA and paid for by its own funds. Moreover, Apator SA does not plan on any expenditures arising from financial assets in Purchase process, supply sources The biggest suppliers of Apator SA in the field of materials, services and goods were as follows: Pafal SA - goods (electric energy meters), EBV Elektronik GmbH & Co.KG - in the field of electronic components, Walcownia Metali Nieżelaznych- non-ferrous metal. The biggest goods production supplier was Radmor SA, which performed galvanic covering services. Because the biggest share in the total value of the purchase of materials, services and goods, i.e. 18% is the purchase of goods (electric energy meters purchased from the subsidiary Pafal SA and designated to be resold), this turnover is excluded from the diagrams and descriptions below. 21

97 MANAGEMENT REPORT OF APATOR SA IN 2012 Referring to the material prices in the world economy, it should be indicated that in 2012: there was a further decrease of prices and an improvement in the availability of electronic components, the prices of plastic and derivatives were stabilized, Copper prices were kept at a very high level and the changes during the year were dynamic. Referring to 2013, we can expect: the maintenance of electronic components prices, with a tendency to extend the delivery terms, the maintenance of high plastic prices of, copper prices to remain high, but with a tendency to fall. 22

98 MANAGEMENT REPORT OF APATOR SA IN Information on markets 25.1 Basic trends in the economy and the tempo of economic growth In 2012 the economic situation of Poland was less favourable than in the previous year. In 2012 the economic activity fell. In 2012 the GDP growth amounted to 2.0% in comparison with 4.3% in the previous year. The more and even larger fall pertains to the gross value added generated in the industry. In 2012 its growth was 1.2%, and in the previous year 10.0%. The sold production of industry increased by 1.0% in 2012, in comparison with 7.7% in the previous year. At the same time, in the period January-December 2012, the amount of export, as counted by current prices, was higher by 3.8% than in Import value was lower by 0.6% YOY. The biggest shares in the Polish export belonged to Germany (25.1%), Great Britain (6.7%) and Czech Republic (6.3%), and the import presented as follows: Germany (21.1%), Russia (14.3%) and China (9.0%). The employment in the industry decreased by 1.0%, in comparison to the 2.1% increase in the previous year. The total economy noted a slight increase of employment (by 0.1%). The labour performance increased by 2.0% in comparison to 5.5% in the previous year. Among the main industrial groups, the increase of the sold production was noted by the entities producing the consumer non-durables (by 5.6%), and by those producing intermediate goods (by 0.7% YOY). The decrease of production had to do with the entities producing energy-related goods (by 1.0%), capital goods (by 0.6%) and consumer durables (by 0.5% YOY). The prices of sold production of industry increased by 3.3% in 2012 in comparison with 7.6% in the previous year Investment attractiveness of the branches where Apator SA operates Switchgear equipment sector The number of building permits issued in 2012 amounted to and was lower by more than 10% in comparison to These data show the possible sales slump in construction in In 2012, the number of apartments put into use was higher than in 2011 by 16%; however the forecast for 2013 is lower than said performance in 2012 by 23%. In 2012 the industrial production dynamics ratio was higher by 1.3%. The construction and assembly production dynamics in the same period declined by 1%. The economic indicator value in the electrotechnical instruments production was higher by 0.8% at the end of December 2012 than in November, but in January and February 2013 the decreases exceeded 2% per month. In 2012 electric wholesales noted an 8% increase in sale, in comparison to Measurement equipment sector Pursuant to GUS data, the increase of sold production was noted in the segment of electric energy meters (37% in comparison to 2011). Generally export contributed to this increase, because domestic sales slowdown at the end of the year due to lack of a technical standard for smart metering (waiting). After the first big pilotage implementation of smart metering in 2012 (Energa, Tauron), the year 2013 may appear to be a period of waiting for technical specification. The increasing interest of both energy plants and the Polish Energy Regulatory Office (URE) in intelligent meters is noted. The development of this market is stopped by a lack of technical standard for smart metering in Poland. Within the commencement of many European SM projects is expected. Apator SA participates in consultations regarding many projects tied to the idea of smart grids and smart metering in Poland and abroad. The exemplary organization aimed at speeding up the works on implementation of a Smart Grids network in Poland is: the Smart Power Grid Polska Consortium and the Intelligent Energetic Networks Section at the National Chamber of Electronics and Telecommunication and collaboration with organizations associating the Polish distributors - the Polish Power Transmission and Distribution Association [PTPiREE]. At the beginning of 2013 the organizations KIGEiT and PTPiREE established a working group dealing with technical specification for the Smart Metering in Poland in collaboration with the regulatory body (URE) Sales structure - country and export Revenues from the sales of Apator SA in 2012 amounted to PLN k, which means growth by PLN k, so by 17.50% in comparison to 2011, including: Sale of the products amounted to PLN k (increase by PLN k YOY), Sale of goods and materials: PLN k (decrease by PLN k YOY). 23

99 MANAGEMENT REPORT OF APATOR SA IN 2012 Structure of revenues from sale in total in 2011 Goods and materials 23% Products 77% The decrease of revenues from the sale of goods and materials is a result of moving the production of the electric energy meters from the subsidiary Pafal SA to Apator SA. Previously they were bought from Pafal SA and sold by Apator SA as goods. 24

100 MANAGEMENT REPORT OF APATOR SA IN 2012 Apator SA runs both domestic and export sales. In 2012 the Company generated the following amounts resulting from the sale of products, goods and materials: On foreign markets, the revenues amounted to PLN k (increase by PLN k YOY), On domestic markets, the revenues amounted to PLN k (increase by PLN k YOY), Both domestic and export sale is performed by Apator SA in the measurement and switchgear segment, as well as other sales. In 2012 these sales amounted to: Measuring instruments: PLN k (increase by k YOY), Switchgear instruments: PLN k (increase by k YOY), Other sales: PLN k (increase by 127 k YOY). 25

101 MANAGEMENT REPORT OF APATOR SA IN 2012 The table below presents the sale structure of products by the assortment groups (domestic and export) and value: 26