KORYCKA,BUDZIAK&AUDYTORZY Sp. Zo.o. Auditors & Tax ... · PPH Wodpol Sp. z o.o. – subsidiary of Apator Powogaz S.A. Apator Telemetria Sp. Z o.o. – subsidiary of Apator Powogaz

KORYCKA,BUDZIAK&AUDYTORZY Sp. Zo.o. Auditors & Tax Consultants NEXIA INTERNATIONAL The opinion on audit of consolidated financial statement of CAPITAL GROUP OF APATOR SA for the period from 1st January to 31st December 2009 Warsaw, April 2010

THE OPINION OF INDEPENDENT CHARTERED ACCOUNTANT To the Shareholders and Supervisory Board of APATOR Joint Stock Company in Toruń We have conducted the audit of the attached consolidated financial statement of capital group of APATOR SA ( hereinafter called; ”Capital Group” ),where the dominant entity is APATOR Joint Stock Company with the seat in Toruń, śółkiewskiego 21/29, covering: − consolidated statement on financial position made at 31st December 2009 where assets and

liabilities proved the amount of 297.505 000 PLN, − consolidated statement on total income made for the period from 1st January 2009 to 31st

December 2009 proved total income in total in amount of 31.193 000 PLN, including net profit in amount of 31.301.000 PLN,

− consolidated statement of changes in equity proved the increase of the own capital in the period from 1st January 2009 to 31st December 2009 by the amount of 16.233 000 PLN,

− consolidated statement of cash flow account in the period from 1st January 2009 to 31st December 2009 proved the decrease of net cash by the amount of 9.897 000 PLN

− principles of accounting and additional information and clarifications The Executive Board of the Company is responsible for making and reliable presentation of consolidated financial statement and report of activity of Capital Group. The Executive Board of the Company and members of the Supervisory Board are obligated to provide the financial statement and report on activity of Capital Group to meet the requirements specified in the Act dated 29th September 1994 on accounting (Dz.U. 2009 No 152 item 1223 with later amendments) here and after called “act on accounting” Our task was to make the audit of attached consolidated financial statement and based on it to give the opinion if the statement is in all significant aspects in accordance with the required rules (policy) of accounting of Capital Group and reliable and clear it proves in all significant aspects, property and financial position and also the financial result of Capital Group. We have conducted the audit of consolidated financial statement attached in accordance with the provisions of: − regulations of chapter 7 of the Act of accounting − national norms of performing of financial audit issued by the National Chamber of

Statutory Auditors We have planned and conducted the audit in such a manner in order to get rational certainty to allow giving the opinion on the statement. In particular the audit covered – checking of correctness the accounting rules (policy) applied by the entity significant estimations, checking in majority – randomly accounting documents and records which contain figures and information presented in financial statement and the complete assessment of consolidated financial statement. We consider the audit has provided enough information in order to give reliable opinion. In our opinion consolidated financial statement audited in all significant aspects: − presents reliable and clear the information significant for the evaluation of property and

financial positions of Capital Group at 31st December 2009 and its financial result in the period from1st January 2009 to 31st December 2009,

− the statement has been made in accordance with appropriate accounting rules of International Accounting Standards and International Financial Reporting Standards and

interpretations related to them and announced in form of decrees of European Commission when cases are not governed by the above documents they are referred to the Act of Accounting and executive regulations and based on accounting books correctly kept,

− it is in accordance with legal regulations related to the content of financial statement and the provisions of the Statute of the entity,

− it is in accordance with regulations obligatory to Capital Group − it present the data in accordance with the requirements defined in the regulations of

Ministry of Finance dated 19th February 2009 on current and regular information issued by security issuers and conditions to be considered as information required by law of the country not being the member of the European Union (Dz.U. No. 33 dated 28th February 2009 item 259 with amendment in Dz.U. 2009 no.131 item 1080).

No claiming regarding correctness and reliability of financial statement audited, we pay your attention that capital Group presents in its consolidated statement of financial position particular components of the equities without consideration of the effects of their conversions made in accordance with the requirements of MSR 29 “Financial reporting in hyperinflation” The effects of conversions and the reasons why they have not been not considered in the statement of financial position of the Company are presented in the note to consolidated financial statement (Note no. 15). The issue was already mentioned in opinions of consolidated financial statements for the period of 2005-2008. We have familiarized with the report on the activity of Capital Group made by the Executive Board of the dominant entity for the period from 1st January 2009 to 31st December 2009. The report on activity of Capital Group is complete in understanding of art.49 para 2 of the Act on accounting and it takes into consideration in all significant aspects, the information being mentioned in the resolution of Ministry of Finance dated 19th February 2009 on current and regular information issued by security issuers and conditions to be considered as equal information required by law of the country not being the member of European Union (Dz.U. No 33 dated 28th February 2009 item 259 with later amendment). Information included in the report of activity of the Capital Group having its origin in consolidated financial statement audited is in accordance with it. Chartered Accountant of the Group Key Chartered Accountant Ewa Orkiszewska nr 2890 Performing the audit on behalf of entity authorised for auditing of financial statements No 84 Korycka,Budziak@Audytorzy Sp. z o.o. ul.Solec 22, 00-410 Warszawa

KORYCKA,BUDZIAK&AUDYTORZY Sp. Zo.o. Auditors & Tax Consultants NEXIA INTERNATIONAL The report on audit of consolidated financial statement of CAPITAL GROUP OF APATOR SA for the period from 1st January to 31st December 2009 Warsaw, April 2010

Content 1. General part ........................................................................................................................ 6

1.1 Identification of Capital Group .................................................................................. 6 1.2 The make up of the Capital Group APATOR S.A. .................................................... 6 1.3 Information on the Parent Company .......................................................................... 6 1.4 Identification of the audited consolidated financial statement................................... 8 1.5 Scope and basis of audit ............................................................................................. 9 1.6 Consolidated financial statement for the previous year ........................................... 10

2. Analysis of financial position of capital Group ............................................................... 10 2.1 Data and ratios presenting the economic and financial positions ............................ 10 2.2 Interpretation of presented data and ratios ............................................................... 11 2.3 General conclusion................................................................................................... 12

3. Detailed part ..................................................................................................................... 13 3.1 Internal accounting control system .......................................................................... 13 3.2 Stock taking.............................................................................................................. 13 3.3 Consolidated statement on financial position........................................................... 13 3.4 Consolidated statement of income statement ........................................................... 14 3.5 Accounting principles (policy) and method of financial data presentation.............. 14 3.6 Goodwill from consolidation and its write downs...................................................14 3.7 Equity, including minority shares ............................................................................ 15 3.8 Consolidation exclusions and corrections ................................................................ 15 3.9 Conditional liabilities ............................................................................................... 15 3.10 Additional information and clarifications ................................................................ 15 3.11 Report on activity of Capital Group......................................................................... 15 3.12 Events taking place after the balance date................................................................ 16 3.13 Summarising caluse.................................................................................................. 16

4. Final provisions ................................................................................................................ 16

1. General part

1.1 Identification of Capital Group The audit concerned the consolidated financial statement of Capital Group with Parent Company APATOR S.A. (hereinafter referred: Parent Company) made at 31st December 2009 for the financial year covering the period since 1st January 2009 till 31st December 2009.

1.2 The make up of the Capital Group APATOR S.A. The Capital Group of Apator S.A (hereinafter referred Capital group) at 31.12.2009 Covers the following entities:

• Parent Company – Apator S.A. • Subsidiaries: Apator Control Sp. zo.o. Apator Metrix S.A. Apator Kfap Sp. z o.o. – subsidiary of ApatorPowogaz S.A. Apator Mining Sp. z o.o. FAP PAFAL S.A. Apator GmbH, Germany Apator Rector Sp. z o.o. ApatorPowogaz S.A. PPH Wodpol Sp. z o.o. – subsidiary of Apator Powogaz S.A.

Apator Telemetria Sp. Z o.o. – subsidiary of Apator Powogaz S.A. Apator Metroteks, Ukraine – subsidiary of Apator Powogaz S.A. Apator Ukraine – does not run any business The make-up of Capital Group in 2009 changed in relation to the previous year by including the following subsidiaries : Apator Telemetria Sp. z o.o. with the headquarters in Słupsk and Ukrainian company – Apator Metroteks.

1.3 Information on the Parent Company The Parent Company that prepared consolidated financial statement is APATOR SA with headquarters in Toruń, ul. śółkiewskiego 21/29. The Parent Company was established on 3rd December 1992. Registration of the Company at the court was made on 14th January 1993 under number RHB 1364. On 24th October 2001 APATOR S.A. was registered in National Court Register at Regional Court in Toruń, VII Economy Department, under number KRS 0000056456. According to the Statute the essential business of Apator SA is the manufacturing and service of electrical distribution and control equipment. The Parent Company: - The Number of National Official Register of Business Entities 870037630 - Registered in NDPRF under number 87A0005H3

- Tax payer of Taxes for Goods & Services (VAT) and Tax Office has granted the Tax Identification Number 879-016-68-96 - Tax payer of VAT UE PL 8790166896 At 31st December 2009 the value of share capital of Parent Company was 3.511 000 PLN and it consists of 35.107.028 shares of nominal value of 0,10 PLN each. Share capital includes 7.796.749 registered shares of series A preferred to voting and 27.310.279 ordinary bearer shares of series A,B and C. During the financial year primary capital was decreased by the amount of 19.000 PLN due to redemption of 186.472 ordinary bearer shares based on the resolution no.17/2009 of General Shareholders meeting of Apator SA dated 8th June 2009. At 31st December 2009 the structure of ownership of share capital of Parent Company was as follows: Shareholders

Number of shares

Number of votes

Share in share capital %

Share in total votes %

Apator Mining Sp. z o.o. 6.600.000 6.600.000 18,80 11,28 Mariusz Lewicki 2.014.000 5.507.776 5,74 9,42 Tadeusz Sosgórnik 1.900.503 4.879.809 5,41 8,34 Danuta Guzowska 1.520.279 4.382.921 4,33 7,49 Zbigniew Jaworski 1.327.107 3.609.651 3,78 6,17 Janusz Marzygliński 1.060.568 3.514.844 3,02 6,01 Pozostali akcjonariusze 20.684.571 30.002.274 58,92 51,29 Total 35.107.028 58.497.275 100,00 100,00 The supervising body of parent Company is the Supervisory Board acting with the following make-up in 2009 First Name and Sure Name Function Janusz Ryszard Marzygliński Chairman of Supervisory Board Ryszrad Wojnowski Deputy Chairman of Supervisory Board Danuta Urszula Guzowska Member of Supervisory Board Mariusz Lewicki Member of Supervisory Board Krzysztof Kazimierz Kwiatkowski Member of Supervisory Board Mariusz Hubert Pawlak Member of Supervisory Board appointed based on

Resolution no. 14/2009 of Ordinary General Shareholders Meeting dated 8th June 2009

The Executive Board of Parent Company was as follows: Janusz Niedźwiecki –President of Apator SA Tomasz Habryka – Member of Executive Board Jerzy Kuś – Member of Executive Board

1.4 Identification of the audited consolidated financial statement Consolidated financial statement being the object of audit has been prepared by the Parent Company in accordance with appropriate accounting rules of International Accounting Standards and International Financial Reporting Standards and interpretations related to them announced in form of decrees of European Commission. The statement covers: − consolidated statement on financial position made at 31st December 2009 where on side of

assets and liabilities proved the amount of 297.505 000 PLN, − consolidated statement on total income made for the period from 1st January 2009 to 31st

December 2009 proved total income in total in amount of 31.301 000 PLN , − consolidated statement of changes in equity proved the increase of the own capital in the

period from 1st January 2009 to 31st December 2009 by the amount of 16.223. 000 PLN − consolidated statement of cash flow account in the period from 1st January 2009 to 31st

December 2009 proved the decrease of net cash by the amount of 9.897 000 PLN − principles of accounting and additional information and clarifications The basis for making consolidated financial statement of Capital Group of Apator SA was the consolidated documentation and consolidated financial statement of Capital group of Apator Powogaz SA and statements of other entities included in Grupa Apator. The table below presents information on consolidated financial statements: Name and headquarters of the Company

Day of preparation of financial statement

Key chartered accountant acting on behalf of authorised entity

Type of opinion on the financial statement

APATOR SA in Toruń 31.12.2009 Ewa Orkiszewska Reg.no.2890 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84

Without reservations with a comment

Apator Control Sp. z o.o. in Toruń

31.12.2009 Cezary Sierpiński Reg. no.11075 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84


Apator Metrix SA in Tczew

31.12.2009 Wojciech Mackiewicz Reg. no.11071 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84


Apator Mining Sp. z o.o. in Katowice

31.12.2009 Krystyna Lewandowska Reg.no.9306 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84


FAP PAFAL SA in Świdnica

31.12.2009 Krystyna Lewandowska Reg. no. 9306 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84


Capital Group of Apator Powogaz SA in Poznań

31.12.2009 Jan Motławski –Reg.no. 2634 on behalf of Korycka,Budziak&Audytorzy Sp. z o.o.- authorised entity Reg no. 84


Apator GmbH, Eberbach Germany

31.12.2009 Not audited

The consolidation of financial statements of all subsidiaries covered by consolidated financial statement has been made by the entire method. Apator Ukraine - subsidiary that does not run business has not been consolidated. The shares of the entity in consolidated financial statement were covered by 100% write down. In consolidated financial statement of Capital Group at 31st December 2009 were evaluated the investments in associated entities by method of ownership: Apator Elektro SA with headquarters in Moscow and Metcom KFT, Budapest. The shares in ZAO Teplovodomer were also evaluated by ownership method consoliated by Apator Powogaz SA.

Shares in Gran-Systema-Pafal Sp. z o. o. with headquarters in Mińsk (the entity associated with FAP PAFAL SA) at 31.12.2009 in audited year were sold in favor of the other companies.

1.5 Scope and basis of audit Based on the contract concluded on 14th May 2009 the Executive Board of the Parent Company has commissioned “Korycka, Budziak & Auditorzy Sp. z o.o. in Warsaw ul. Solec 22 – entity entitled to perform the audit of financial statements, registered in the list of the National Chamber of Statutory Auditors under number 84, to perform the audit of consolidated financial statement of Capital Group for the period from 1st January2009 to 31st December 2009. The basis to conclude the contract was the resolution concerning the appointment of chartered accountant to audit financial statements of the Parent Company and consolidated financial statements of Capital Group of APATOR SA in the period 2009-2010 adopted by the Supervisory Board of APATOR SA on 19th December 2008. Audit has been carried out by Ewa Orkiszewska, chartered accountant ( reg. no 2890) Both Korycka, Budziak & Audytorzy Sp. zo.o. (hereinafter referred Auditors) as well as auditor that carries out on its behalf key chartered accountant meet the requirements of impartiality and independence specified in art 56 of the Act dated 7th May 2009 on chartered accountants and their council, entities entitled to audit financial statements and public surveillance. The planned scope of audit has not been limited. The Parent Company of Capital Group of APATOR SA made available required by chartered accountant data (consolidation documents), information and documents. The Executive Board of parent Company submitted chartered accountant the statement in writing on among other things:

− completion and reliability consolidated financial statement of Capital Group and consolidation documents being the basis for making consolidated financial statement,

− disclosure all the events that occurred after the date of balance sheet and which could have the influence on rightness of the opinion and correctness and reliability of consolidated financial statement and evaluation of the property and financial positions of Capital Group,

− not use any accounting tips in order to improve artificially the image of financial position of Capital Group

Audit of consolidated financial statement and consolidation documents was carried out in 14th April till 29 th April 2010.

The audit was carried out according to: − regulations of the chapter 7 of the Act dated 29th September 1994 on accounting

(Dz.U. 2009 No. 152 item 1223 with later amendments), − national norms of financial search issued by National Chamber of Statutory Auditors

The aim of our audit was to express the opinion in writing if consolidated financial statement for the period since 1st January 2009 till 31st December 2009 is correct and reliable and it presents clearly the property and financial positions and also financial result of Capital Group in accordance with accounting rules resulting from International Accounting Standards, International Financial Reporting Standards and associated with them interpretations announced in decrees of European Commission and in case of not settled aspects in the standards – in compliance with the requirements of the Act on accountancy and based on it secondary regulations issued.

The object of auditing was property, financial positions, financial result and profitability of Capital Group but not data concerning particular consolidated entities. The object of auditing was not to detect and clarify the events wanted by law like misuse of funds and other events against the law which could occur beyond the accounting system of consolidated entities.

1.6 Consolidated financial statement for the previous year Consolidated financial statement of Capital Group for financial year ended on 31st December 2008 was audited by entitled entity:Korycka, Budziak & Audytorzy Sp. z o.o.. The opinion was made on consolidated financial statement audited without reservations with comment concerning the disclosure in the statement prepared in accordance with International Accounting Standards and International Financial Reporting Standards the effects of hyperinflation calculation of equity of capital group only clarification note. Consolidated financial statement of Capital group for 2008 was approved by ordinary general Shareholders Meeting of APATOR SA on 8th June 2009 and it was published in Monitor Polski B no 1782 item 9955 of 29th September 2009.

2. Analysis of financial position of capital Group

2.1 Data and ratios presenting the economic and financial positions Description

2009

2008

2007

Total balance sheet (000’ PLN) 297.505 312.019 195.613

Fixed assets (000’ PLN) 152.829 158.821 83.830

Current assets (000 PLN) 144.676 153.198 111.783

Equity (000’ PLN) 179.868 163.645 154.429

Revenues from sales - operation continued and discontinued (000’ PLN) 367.557 356.191 311.349

Result from sales – operation continued and discontinued (000’ PLN) 48.996 48.213 41.034

Net financial result * (000’ PLN) 31.301 22.904 34.673

Net profit per shareholders of Parent Company (000’ PLN) 30.090 21.174 34.658

Profitability of the property (%) 10,5 7,3 17,7

Net financial result*

Total assets

Return of equity (%) 17,4 14,0 22,5

Net financial result*

Equity

Sales profitability (%) 13,3 13,5 13,2

Profit from sales

Revenues from sales of products and goods

Fluidity- fluid ratio I 2,0 1,7 3,5

Current assets

Short term liabilities and reserves

Fluidity – fluid ratio II 1,2 1,1 2,3

Total current assets-reserves

Short term liabilities and reserves

Fluidity – fluid ratio III 0,1 0,2 0,3

Cash and other cash assets

Short –term liabilities and reserves

Payment rotation days 65,6 70,6 66,6

Receivables from deliveries and services x 365 days

Revenues from sales of products and goods

Ratio of repayment of liabilities (days) 26,8 27,8 25,5

Receivables from deliveries and services x 365 days

Costs of products, goods and materials sold

Inventory turnover (days) 83,6 81,7 65,7

Inventories x 365 days

Costs of products, goods and materials sold

Sustainability of financing (%) 75,6 71,3 83,8

Equity+reserves and long-term liabilities

Total liabilities

* result attributed to the shareholders of the Parent Company and minority shareholders

2.2 Interpretation of presented data and ratios The value of assets of the Capital Group at the end of 2009 in relation to the status of the beginning of the year in spite of inclusion in Grupa Apator two subsidiaries decreased by 14.514.000 PLN that is by 4,7%. The change was caused by:

• decrease of the value of fixed assets by 5.992.000 PLN • decrease of the value of current assets by 8.522.000 PLN

The decrease of the value of tangible fixed assets resulted first of all from qualification of properties in Pniewy and machines and equipment used (amount of 2.833.000 PLN) to assets held for sales. Besides tangible fixed assets the influence on the decrease of the value of fixed assets of Capital Group had significant decrease of assets due to tax deferred (decrease by 3.747.000 PLN) related to the performance of temporary differences in income tax regarded tax settlements of losses on optional transactions where the reserves were established in the previous year for that purpose. Among current assets the biggest drop in relation to the previous year showed cash (decrease by 9.974 000 PLN).The decrease of cash being in possession of Capital Group is concerned first of all with expenditure of the huge amount of financial means in 2009 to settle optional transactions concluded in previous year and also with the operation of credit debt of Capital Croup. The largest share in the structure of current assets of Grupa Apator on the closing day of financial year 2009 had:

• Trade receivables 45,66% (2008 – 44,41%) • Inventories 37,87% (2008 – 34,74%) • Cash 7,07% (2008 - 13,19%)

Most of sources of financing of the property of Capital Group at 31.12.2009 were equities. Their share in sources of financing of the activity of Grupa Apator in relation to the status at the beginning of financial year increased from 52,45% to 60,46%. It is the result of repayment in 2009 part of loan liabilities of the Parent Company and subsidiaries (decrease of the loan debt in total by 4.413.000 PLN including Parent Comapny by 2.990.000 PLN) and also repayment for the most part of financial liabilities due to

currency options (decrease of financial liabilities due to financial instruments by 22.176.000 PLN). The Companies from Capital group of APATOR SA in 2009 earned the receivables from sales in transaction price higher by 11.366.000 PLN that is by 3,19% higher than in previous year. The costs of operation activity born in 2009 were higher by 10.583 000 PLN that is by 3,44% than in previous year and they resulted in performance in 2009 higher result on sales only by 783.000 PLN that is by 1,62%. The increase of operating costs of the Capital Group was the result of:

• increase in value of goods and products sold by 1.197.000 PLN that is by 0,50% • increase of sales costs by 2.625.000 PLN that is by 11,95% • increase of overheads by 6.761.000 PLN that is by 14,6%

The most increase of costs by type concerned outsourcing (increase by 11,4%) and other costs (increase by 10,61%). The costs related to employee benefits increased by 3.493.000 PLN that is by 4,05%. In spite of the achievement by Capital Group in 2009 the result on net sales a bit higher than in previous year, the result on operating activity being performed in financial year was much lower than in 2008 first of all due to worse results by:

• 2.712.000 PLN of the result on write down of inventories in manufacturing and commercial ones of the companies in Grupa Apator

• 2.291.000 PLN of the result of reserves regarding severance pay of pensions, jubilee awards and leaves,

• 2.246.000 PLN of the result of other operating activity More profitable than in 2008 was the result of financial activity of Capital Group (decrease of losses by 16.050.000 PLN). It is the result first of all of establishment of reserves for expected in previous year for losses to be covered in 2009 and 2010 concerning optional transactions concluded in 2008. The financial result achieved by Capital Group in 2009 was by 8.397.000 PLN higher than in previous year. Ratios of profitability of activity showed in relation to the previous year the following changes:

• ratio of profitability of the property increased from 7,3% to 10,5% • profitability of equity increased from 14,0% to 17,4% • ratio of sales profitability maintained at the level similar to the ratio in previous year

Fluidity ratios calculated on the basis of data of consolidated balance sheet showed at 31.12.2009 small growth (except ratio III) in relation to the ratios fixed at the end of the previous year. The values of the ratios achieved at the balance day do not indicate the occurrence of any threats to financial fluidity of Capital Group treated as a whole. Not large unfavourable changes were presented by ratio of inventory turnover (rotation cycle longer by 2 days) calculated on the basis of data of consolidated financial statement, other ratios of rotation improved a little bit: payment rotation days decreased by 5 days and repayment of liabilities decreased by 1 day.

2.3 General conclusion Presented data and ratios and plans of the Executive Boards of the companies in Capital Group and other information obtained during audit do not show any threats for the possibility

to continue the activity by entities covered by consolidated financial statement for the next year due to intended give up or significant restriction by them of current activity.

3. Detailed part

3.1 Internal accounting control system The correctness of internal control system operation in Capital Group was subject to detailed audit in particular companies (excluding foreign companies not having significant influence on consolidated financial statement). No significant irregularities that might influence on the correct registration of economic operations in entities of the Capital Group were found in the functioning of the internal control system during the audit.

3.2 Stock taking The correctness of stock taking of property elements of the companies subject to consolidation concerning the scope, dates, methods used And correctness of verification and calculations of the results was subject to detailed audit in individual companies (excluding foreign companies). Chartered accountants did not have any reservations therefore we considered that property status of the companies subject to consolidation in required scope was proved by stock taking.

3.3 Consolidated statement on financial position Items of consolidated balance 31.12.2009 31.12.2008 31.12.2007 Fixed assets 158.829 158.821 83.830 Intangible assets 3.209 3.252 2.287 Goodwill 40.608 38.635 608 Property, plant and equipment 97.620 101.869 72.146 Investment property 1.394 1.381 1.253 Long-term investments 1.593 1.519 3.496 Long-term receivables 219 253 117 Long-term prepayments 97 76 25 Deferred income tax assets 8.089 11.836 3.898 Current assets 144.676 153.198 111.783 Inventories 54.789 53.238 38.408 Short-term receivables 72.470 77.295 60.556 Short-term investments 11.871 20.556 11.048 Short-term prepayments 2.713 2.067 1.503 Fixed assets held for sales 2.833 42 268 Total assets 297.505 312.019 195.613 Equity 179.868 163.645 154.429 Equity attributed to shareholders of the Parent Company

177.836 161.242 154.353

Minority capital 2.032 2.403 76 Liabilities and reserves for liabilities 117.637 148.374 41.184 Long-term reserves 17.688 18.062 9.410 Short-term reserves 5.620 5.165 3.304 Long term liabilities 27.375 40.848 24 Short-term liabilities 66.954 84.299 28.446

Total liabilities 297.505 312.019 195.613

3.4 Consolidated statement of income statement

Revenues and costs 2009 2008 2007 Revenues from sales 367.557 356.191 311.349 Operating costs -318.561 -307.978 -270.315 Profit from sales 48.996 48.213 41.034 Other operating revenues (costs) 960 8.071 1.740 Share in profits of associated entities consolidated by equity method

160 89 43

Restructuring revenues (costs) - - - Operating profit 50.116 56.373 42.817 Financial revenues (costs) -11.447 -27.497 624 Negative goodwill transferred to result - - - Income before tax 38.669 28.876 43.441 Income tax -7.368 -5.972 -8.768 Net profit from continued activity 31.301 22.904 34.673 Net profit (loss) from discontinued activity - - - Net profit ,including 31.301 22.904 34.673 Shareholders of the Parent Company 30.090 21.174 34.658 Minority shareholders 1.211 1.730 15 Other total income, including -108 -25 1 Gains and losses arising from translating the financial statements of foreign operations

-108 -25 1

Total income in total including attributed to: 31.193 22.879 34.674 Shareholders of Parent Company 29.982 21.148 34.659 Minority shareholders 1.211 1.731 15

3.5 Accounting principles (policy) and method of financial data presentation In consolidated financial statement for the financial year ended on 31st december 2009, the executive Board of Parent Company presented the principles of accounting and the methods of financial data presentation of capital group. In 2009 no significant changes were made in principles of accounting principle used but small changes were made in comparative data for 2008 in particular in relation to corrected financial statements of : Apator GmbH and associated entities ZAO Teplovodomier (Russia),METCOM KFT (Hungary) and APATOR ELEKTRO (Russia) and some minor amendments concerning presentation of some items of the statement. The changes have been presented in Note 35 to consolidated financial statement.

3.6 Goodwill from consolidation and its write downs The principles to establish the goodwill from consolidation, principles of making write downs due to decrease of value of the goodwill and write downs for the last financial year have been presented in point 5.2.3 of accounting principles and in Clarification Note no. 3 to consolidated financial statement.

3.7 Equity, including minority shares The status of own capitals presented in consolidated balance sheet at 31.12.2009 is in accordance with consolidation documents. Consolidated financial data concerning equities have been presented in Clarification Notes nos.15,16 and 17 to consolidated financial statement. Equity for minority at 31.12.2009 was in amount of 2.032.000 PLN and it regarded minority shares:

• Apator Mining Sp. z o.o. amount of 66.000 PLN • Apator Rector Sp. z o.o. amount of 1.386.000 PLN • Apator Powogaz SA amount of 85.000 PLN • Wodopol Sp. z o.o. amount of 6.000 PLN • Apator Telemetria SA amount of 278.000 PLN • Apator Metroteks amount of 1.000 PLN

3.8 Consolidation exclusions and corrections Transactions between consolidated entities were excluded from consolidation. Exclusion of mutual settlements included in assets not performed margins on transactions between entities of the Capital Group, dividends received from entities within Capital Group and also other turnovers performed within Capital Group are in accordance with consolidation documents.

3.9 Conditional liabilities Conditional liabilities of the entities of the Capital Group have been described in Clarification Note No. 21 to consolidated financial statement.

3.10 Additional information and clarifications The Parent Company provided additional information and clarifications according to the requirements of International Accounting Standards, International Financial Reporting Standards and interpretations referring to them and published in the form of directives of the European Commission and in the scope not regulated in these standards – according to the Act on Accounting and regulations issued on its basis as well as according to the regulations of Ministry of Finance dated 19th February 2009 on current and regular information transferred by issuers of securities and to be considered as information required by law of the country not being the member of the European Union (Dz.U. No. 33 dated 28th February 2009 item 259 with later amendments).

3.11 Report on activity of Capital Group The Executive Board of the Parent Company has submitted the report on activity of Capital Group for the period since 1st January 2009 till 31st December 2009. Financial data presented

in the report on activity result from audited consolidated financial statement prepared at 31st December 2009. The report on activity of Capital Group meets in all significant aspects the requirements of art 49 para 2 of the Act on Accounting and the regulations of Ministry of Finance dated 19th February 2009 on current and regular information transferred by issuers of securities and to be considered as information required by law of the country not being the member of the European Union (Dz.U. No. 33 dated 28th February 2009 item 259 with later amendments).

3.12 Events taking place after the balance date According to the statement of the Executive Board of the Parent Company there were no events after the balance date were not included into financial statement for 2009 that had a substantial influence on it. The events that took place after the date of balance and might have a substantial influence on the development of business of Apator SA and the Capital Group have been described in Clarification Note No. 37. On 31st March 2010 APATOR SA after completion of the procedure of the obligatory purchase of shares of APATOR POWOGAZ SA became the owner of 100% of that company. Up to the day of preparation of the report Apator SA concluded the contracts with minority shareholders of Apator Mining Sp. z o.o. and based on them it became the owner of all the shares of that company. Up to the day of preparation of the report financial statement of subsidiaries: Apator Control Sp. z o.o. and Apator Rector Sp. z o.o. were approved by the General Partners Meetings.

3.13 Summarising caluse

1. The reliability and correctness of data included in particular items of consolidated annual report RS-2009 for the period since 1st January 2009 till 31st December 2009 was audited and it was found that they meet appropriate requirements.

2. As a result of our audit we found that consolidation documents are complete and correct in all significant aspects and they meet all significant requirements that consolidation documents should do.

3. The synthetic assessment of the consolidated financial statement is included in opinion being the separate document.

4. Final provisions

The report has been made in six copies, four of which are received by the Parent Company. The report consists of 17 numbered pages with the signature of the auditor. Key Chartered Accountant /-/ illegible signature Ewa Orkiszewska reg. no. 2890 Acting on behalf of authorised entity for Auditing of financial statements Reg. no. 84

Korycka,Budziak&Audytorzy Sp. z o.o. Ul. Solec 22 00-410 Warszawa Chairman of the Executive Board /-/ illegible signature mgr Ewa orkiszewska Chartered accountant reg. No. 2890 Warsaw, 29th April 2010

Annual report

RS - 2009

Annual consolidated financial statement

For the period Since 1st January till 31st December 2009

Toruń, 2010-04-29

Consolidated financial statement for 2009

Name of capital group: APATOR Page 2

Reporting period: 01.01.2009 – 31.12.2009 Reporting currency: Polish zloty (PLN)

Level of round figures: All amounts are expressed in thousand Polish zloty (unless indicated different)

Content

1. GENERAL INFORMATION ................................ ....................................................................... 5

1.1. Information on dominant entity, Capital Group and consolidated financial statement ............... 5 1.1.1. THE MAKE UP OF GRUPA APATOR.................................................................................................................... 5 1.1.2. MAKE UP OF THE EXECUTIVE BOARD AND THE SUPERVISORY BOARD ...................................................... 8

2. Information on basis for preparation of financial s tatement, reporting currency and the level of rounding of figures applied. .............. ..................................................................................... 8

2.1. THE BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENT............... 8

2.2. REPORTING CURRENCY AND THE LEVEL OF ROUNDING OF FIGURES APPLIED. ........ 9

2.3. ASSMUPTION OF ACTIVITY TO BE CONTNUED .................................................................. 9

3. FINACIAL STATEMENT OF THE ENTITY................... ........................................................... 10

3.1. MAIN FINANCIAL DATA .......................................................................................................... 10

3.2. STATEMENT ON FINANCIAL POSITION ............................................................................... 11

3.3. STATEMENT ON TOTAL INCOME ......................................................................................... 13

3.4. STATEMENT ON CHANGES IN EQUITY ............................................................................... 16

3.5. CASH FLOW STATEMENT ..................................................................................................... 18

4. INTERNATIONAL STANDARDS OF FINANCIAL REPORTING APPLIED 19

4.1 STANDARDS APPROVED IN EUROPEAN UNION................................................................ 19

4.2 STANDARDS APPLIED FOR THE FIRST TIME ......................................................... 19

4.3 STANDARDS AND INTERPRETATIONS EARLIER APPLIED............................................... 21

4.4 STANDARDS ALREADY PUBLISHED THAT HAVE NOT COME INTO LIFE SO FAR ........ 21

5 ACCOUNTING PRINCPLES APPLIED....................... ............................................................ 24

5.1 GENERAL PRINCIPLES.......................................................................................................... 24 5.2.1 PRINCIPLES OF CONSOLIDATION.................................................................................................................... 24 5.2.2 INVESTMENTS IN ASSOCIATED ENTITIES....................................................................................................... 24 5.2.3 GOODWILL ......................................................................................................................................................... 25

5.3 PRECISE RULES OF ASSETS AND LIABILITIES VALUATION USED WITHIN GrupA....... 25 5.3.1 OWN CREATED INTANGIBLE ASSETS – RESEARCH AND DEVELOPMENT COSTS ..................................... 25 5.3.2 PROPERTY,PLANT AND EQUIPMENT............................................................................................................... 25 5.3.3 LEASING ............................................................................................................................................................. 26 5.3.4 INVESTMENT PROPERTIES .............................................................................................................................. 27 5.3.5 FIXED ASSETS AND NET ASSET GROUPS DESIGNATED FOR SALE ............................................................ 27 5.3.6 INVENTORY........................................................................................................................................................ 27 5.3.7 OUTSIDE FINANCING COSTS ........................................................................................................................... 27 5.3.8 STATE SUBSIDIES ............................................................................................................................................. 27 5.3.9 TRADE RECEIVABLES ....................................................................................................................................... 28 5.3.10 FINANCIAL INSTRUMENTS................................................................................................................................ 28 5.3.11 BANK LOANS...................................................................................................................................................... 29 5.3.12 TRADE LIABILITIES ............................................................................................................................................ 29 5.3.13 PROVISIONS....................................................................................................................................................... 29 5.3.14 SALE REVENUES ............................................................................................................................................... 30 5.3.15 TRANSACTIONS IN FOREIGN CURRENCY....................................................................................................... 30 5.3.16 TAXES................................................................................................................................................................. 30 5.3.17 EQUITIES............................................................................................................................................................ 31

6. CLARIFICATION NOTES TO FINANCIAL STATEMENT ......... ............................................. 32

NOTE NO. 1 .......................................................................................................................................... 32 OPERATING SEGMENTS .................................................................................................................... 32 NOTE NO. 2 .......................................................................................................................................... 34 INTANGIBLES....................................................................................................................................... 34 NOTE NO. 3 .......................................................................................................................................... 35 GOODWILL ........................................................................................................................................... 35





NOTE NO. 4 .......................................................................................................................................... 36 Property, plant and equipment .............................................................................................................. 36 NOTE NO. 5 .......................................................................................................................................... 38 INVESTMENT PROPERTY................................................................................................................... 38 NOTE NO. 6 .......................................................................................................................................... 39 Investments in associated entities......................................................................................................... 39 NOTE NO. 7 .......................................................................................................................................... 39 SHARE IN COMMON VENTURES ....................................................................................................... 39 NOTE NO. 8 .......................................................................................................................................... 39 FINANCIAL ASSETS AVAILABLE FOR SALE AND HELD FOR TRADING........................................ 39 NOTE NO. 9 .......................................................................................................................................... 40 DERIVATIVES....................................................................................................................................... 40 NOTE NO. 10 ........................................................................................................................................ 47 INVENTORY.......................................................................................................................................... 47 NOTE NO. 11 ........................................................................................................................................ 48 LONG TERM CONTRACTS.................................................................................................................. 48 NOTE NO. 12 ........................................................................................................................................ 50 TRADE RECEIVABLES AND OTHER ONES...................................................................................... 50 NOTE NO. 13 ........................................................................................................................................ 51 CASH AND ITS EQUIVALENTS ........................................................................................................... 51 NOTE NO. 14 ........................................................................................................................................ 51 FIXED ASSETS HELD FOR SALE ....................................................................................................... 51 NOTE NO. 15 ........................................................................................................................................ 52 SHARE CAPITAL .................................................................................................................................. 52 NOTE NO. 16 ........................................................................................................................................ 53 OTHER CAPITALS................................................................................................................................ 53 NOTE No. 17 ......................................................................................................................................... 55 OWN SHARES ...................................................................................................................................... 55 NOTE NO. 18 ........................................................................................................................................ 56 PROVISIONS FOR LIABILITIES........................................................................................................... 56 NOTE NO. 19 ........................................................................................................................................ 56 TRADE LIABILITIES AND OTHER ONES ............................................................................................ 56 NOTE NO. 20 ........................................................................................................................................ 57 LOANS AND BORROWINGS ............................................................................................................... 57 NOTE NO. 21 ........................................................................................................................................ 62 CONDITIONAL LIABILITIES AND ASSETS ......................................................................................... 62 NOTE NO.22 ......................................................................................................................................... 65 FINANCIAL LEASING AND OTHER FINANCIAL LIABILITIES............................................................ 65 NOTE NO. 23 ........................................................................................................................................ 65 INCOME TAX ........................................................................................................................................ 65 NOT NO. 24........................................................................................................................................... 66 DEFERRED INCOME TAX ................................................................................................................... 66 NOTE NO. 25 ........................................................................................................................................ 67 REVENUES FROM SALES EARNED IN REPORTING PERIOD ........................................................ 67 NOTE NO. 26 ........................................................................................................................................ 67 OPERATING REVENUES AND COSTS .............................................................................................. 67 NOTE NO. 27 ........................................................................................................................................ 68 FINANCIAL REVENUES AND COSTS................................................................................................. 68 NOT NO. 28........................................................................................................................................... 69 RESULT OF DISCONTINUED OPERATION........................................................................................ 69 NOTE NO. 29 ........................................................................................................................................ 69 PROFIT PER SHARE............................................................................................................................ 69 NOTE NO. 30 ........................................................................................................................................ 70 FUSION OF ENTITIES.......................................................................................................................... 70 NOTE NO. 31 ........................................................................................................................................ 74 InformaTION ON AFFILIATED ENTITIES............................................................................................. 74 NOTE NO. 32 ........................................................................................................................................ 76 OBJECTIVES AND PRICIPLES OF FINANCIAL RISK MANAGEMENT ............................................. 76 NOTE NO. 33 ........................................................................................................................................ 79 REMUNERATION OF CHARTERED ACCOUNTANT.......................................................................... 79 NOTE NO. 34 ........................................................................................................................................ 79





EXPLANATIONS CONCERNING CASH FLOW ACCOUNT................................................................ 79 NOTE NO. 35 ........................................................................................................................................ 81 CHANGES IN ACCOUNTING PRINCIPLES ........................................................................................ 81 NOT NO. 36........................................................................................................................................... 84 EMPLOYMENT ..................................................................................................................................... 84 NOTE NO..37 ........................................................................................................................................ 84 EVANTS THAT OCCURRED AFTER THE REPORTING PERIOD ..................................................... 84

7. SIGNATURES .......................................................................................................................... 86





1. GENERAL INFORMATION

1.1. INFORMATION ON DOMINANT ENTITY, CAPITAL GROUP AND CONSOLIDATED FINANCIAL STATEMENT

Capital Group APATOR („Group”) consists of dominant entity of APATOR S.A. and its subsidiaries (see point 1.1.1). Dominant entity APATOR Joint Stock Company with the headquarters in Toruń 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 Regional Court in Toruń at V Economic Department on 14th January 1993 under registration number RHB 1364. On 24th October 2001 the entity was entered into Register of Entrepreneurs at Regional Court in Toruń, VII Economic Department of National Register Court under number of 0000056456. The entity runs business on the territory of Poland based on regulations of the Polish Commercial Companies Code.

SUBJECT OF ACTIVITY OF DOMINANT ENTITY

In accordance with the Statute the main activity is manufacturing and service of electrical distribution and control equipment. Shares of APATOR S.A. are quoted on the essential market – according to Warsaw Stock Exchange in Warsaw classification „electrical engineering industry sector”. The hereby consolidated financial statement was signed by the Executive Board of the dominant entity of APATOR SA on 29th April 2010. The financial statement of APATOR S.A. covers 2009 and it includes comparative data for 2008. The period of duration of the dominant entity of APATOR S.A. and entities included in Capital Group is not defined.

1.1.1. THE MAKE UP OF GRUPA APATOR

The Goup consists of APATOR S.A. and the following subsidiaries and associated entities: � APATOR MINING Sp. z o.o. (subsidiary of APATOR SA) � APATOR CONTROL Sp. z o.o. (subsidiary of APATOR SA) � APATOR METRIX S.A. (subsidiary of APATOR SA) � APATOR POWOGAZ S.A. (subsidiary of APATOR SA) � FAP PAFAL S.A. (subsidiary of APATOR SA) � APATOR RECTOR Sp. z o.o. (subsidiary of APATOR SA) � APATOR GmbH (subsidiary of APATOR SA) � APATOR KFAP Sp. z o.o. (subsidiary of APATOR POWOGAZ SA) � WODPOL Sp. z o.o. (subsidiary of APATOR POWOGAZ S.A.) � APATOR TELEMETRIA Sp. z o.o. (subsidiary of APATOR POWOGAZ S.A.) � APATOR METROTEKS (subsidiary of APATOR POWOGAZ S.A.) � APATOR ELEKTRO (associated entity with APATOR S.A.) � Teplovodomer (associated entity with APATOR POWOGAZ S.A.) � METCOM KFT (associated entity with APATOR METRIX S.A.)





Consolidated entities in Capital Goup

Company Seat Essential subject of activity Appropriate Court /Body for registration Share in capital Remarks

APATOR MINING Sp. z o.o.

Katowice Manufacturing of distribution and control electrical equipment, electrical equipment, cranes, pumps and compressors and services

Regional Court in Katowice, Economy Department of National Court Register KRS 0000047770 99,89% Subsidiary

APATOR CONTROL Sp. z o.o.

Toruń Manufacturing of distribution and control equipment, electrical equipment and services and research & developments of technical studies

Regional Court in Toruń, VII Economy Department of National Court Register KRS 0000016020 100,00% Subsidiary

APATOR METRIX SA Tczew Manufacturing of metering instruments and equipment, control, navigation and for other purposes

Regional Court in Gdańsk, IX Economy Department of National Court Register KRS 0000046259

100,00% Subsidiary

FAP „PAFAL” S.A. Świdnica Manufacturing of control and metering equipment, electrical and electronic one, trading and service

Regional Court for Wrocław - Fabryczna in Wrocław, IX Economy Department of National Court register KRS 0000057162

100,00% Subsidiary

RECTOR Sp. z o.o. Zielona Góra

IT technology, edition activity, printing, and copying of records in information carriers

Regional Court in Zielona Góra, VIII Economy Department of National Court Register KRS 0000297413

70,00% Subsidiary

APATOR POWOGAZ S.A.

Poznań Manufacturing of metering instruments and control, research, navigation equipment and manufacturing of other equipment of general use

Regional Court in Poznań – Nowe Miasto and Wilda in Poznań, VIII Economy Department of National Court Register KRS 0000028129

99,40% Subsidiary

APATOR GmbH Worms Sales of systems of prepayment electricity meters HRB 41496 Amtsgericht Mainz 100,00% Subsidiary

APATOR ELEKTRO Moscow Sales of electrical and electronic equipment 50,00% Associated

APATOR KFAP Sp. z o.o.

Cracow Manufacturing and sales of metering equipment and instruments and services related to legalization of metering equipment

Regional Court for Cracow-Center in Cracow, XI Economy Department of National Court Register KRS 00000203801

100,00% 99,40%

Subsidiary indirectly Indirect share





Company Seat Essential subject of activity Appropriate Court /Body for registration Share in capital Remarks

WODPOL Sp. z o.o. Poznań Service activity in the scope of repairs of products manufactured by „POWOGAZ”, projects, designs and technological designs

Regional Court in Poznań, XXI Economy Department of National Court Register KRS 0000124854

77,33% 76,87%


APATOR TELEMETRIA Sp. z o.o.

Słupsk Manufacturing of data reading and transmitting equipment, manufacturing of system IT applications

Regional Court in Gdańsk – Północ in Gdańsk, VIII Economy Department of national Court Register KRS 0000290726

50,80% 50,50%


APATOR METROTEKS

Kiev Ukraine

Distribution of water meters and heat meters 61,00% 60,63%


Teplovodomer Mytishi Russia

Manufacturing and sales of water meters and heat meters and their legalization and service

44,06%

43,80%

Associated indirectly Indirect share

METCOM KFT Hungary Sales of gas meters 24,00% 24,00%

Associated indirectly Indirect share

Dominant entity APATOR S.A. has got 81% of shares in the Company APATOR – UKRAINA. The company established in 1998 and after two years it discontinued its operation. After having consulted with Ukrainian lawyers APATOR S.A. has obtained the information that the shut down of APATOR-UKRAINA will cause high costs to be born. The dominant entity APATOR S.A. ceased any financing of APATOR – UKRAINA, and its shares have been covered by write downs. It was impossible to cover with consolidation of financial data. No person from Management and owners of the Capital Group APATOR are involved in management or supervision of this company. The subsidiary of APATOR MINING Sp. z o.o. has in its possession 6.600.000 of shares of the dominant entity APATOR S.A. Changes in Capital Group of APATOR during 2009 : On 28th January 2009 subsidiary APATOR POWOGAZ S.A. acquired 50,8% of shares in WMC Telemetria Sp. z o.o. The subsidiary APATOR POWOGAZ S.A. acquired 508 shares from 4 natural persons (127 shares from each person). Nominal value of one share is 100,00 PLN. The purchase price of share is 3.967,00 PLN. Total purchase price of the above shares with the purchase costs is 2.022 000 PLN. The deadline for payment of shares was fixed on 7 days of the conclusion of the contract. The transfer of ownership of the shares was on the day of payment. Share capital of WMC Telemetria Sp. z o.o. is 100 000 PLN and it is divided to 1.000 shares of nominal value of 100,00 PLN. The shares acquired are 50,8% of share capital and 50,8% of total number of votes. On 12th May 2009 subsidiary FAP PAFAL S.A. sold all its shares in Gran-Systema-Pafal Sp. z o.o. with headquarters in Mińsk in Byelarus to other shareholders for the amount of 17 000 USD. The company FAP PAFAL S.A. had 50% shares of nominal value 15 000 USD. In 2009 APATOR SA acquired from natural person 1 registered share of Apator Powogaz SA for the amount of 4,3 000 PLN. On 11th May 2009 the contract on sale of registered shares of Apator Powogaz S.A. was concluded. Based on the contract Apator Powogaz S.A. acquired from Apator SA 700 own shares for the amount of 3.010 000 PLN for their redemption. On 12th October 2009 Regional Court in Poznań made the decision on reducing the share capital of APATOR POWOGAZ S.A. from the amount of 788.500,00 PLN to the amount of 753.500,00 PLN and changing number of shares from 15.770 pieces to 15.070 pieces. On 4th November 2009 subsidiary APATOR POWOGAZ acquired 61% shares in APATOR METROTEKS with the headquarters in Kiev in (Ukraine) for the amount of 348 000 PLN.

1.1.2. MAKE UP OF THE EXECUTIVE BOARD AND THE SUPERVISORY BOARD

The Executive Board Janusz Niedźwiecki – President Tomasz Habryka – Member of the Executive Board Jerzy Kuś – Member of the Executive Board The Supervisory Board Janusz Marzygliński – Chairman Ryszard Wojnowski – Deputy Chairman Danuta Guzowska – Member of the Supervisory Board Mariusz Lewicki – Member of the Supervisory Board Krzysztof Kwiatkowski – Member of the Supervisory Board Mariusz Pawlak – Member of the Supervisory Board

2. INFORMATION ON BASIS FOR PREPARATION OF FINANCIAL ST ATEMENT, REPORTING CURRENCY AND THE LEVEL OF ROUNDING OF FIGURES APPLIED.

2.1. THE BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENT

The financial statement of CAPITAL GROUP APATOR 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.

Financial statement for 2009

Name of capital group: APATOR SA Page 9



2.2. REPORTING CURRENCY AND THE LEVEL OF ROUNDING OF FIGURES APPLIED .

The reporting currency of hereby consolidated financial statement is the Polish zloty and all amounts are expressed in thousand Polish zloty (if it is not pointed out different).The financial statement of the entity in Capital Group was calculated to reporting currency based on principles resulting from International Accounting Standard no. 21.

2.3. ASSMUPTION OF ACTIVITY TO BE CONTNUED

The consolidated financial statement was prepared based on the assumption that economic operation of the companies in Grupa Apator will be continued in the near future that is for the period not shorter than 12 months after the reporting period. On the day of approval of hereby financial statement no circumstances was found that could indicate the threat for the activity not to be continued by the companies in Grupa.





3. FINACIAL STATEMENT OF THE ENTITY

3.1. MAIN FINANCIAL DATA

2009 PLN

2008 PLN

2009 EUR

2008 EUR

Revenues from sales of products, goods and material s (continued and discontinued operation) 367 557 356 191 84 679 100 844 Revenues from sales of products, goods and materials (operation continued) 367 557 356 191 84 679 100 844 Revenues from sales of products, goods and materials (operation discontinued)) 0 0 0 0 Profit (loss) from operating activity (continued operation) 50 116 56 373 11 546 15 960 Gross profit (loss) (continued operation) 38 669 28 876 8 909 8 175 Net profit (loss) (continued operation) 31 301 22 904 7 211 6 485 profit (loss) from discontinued operation) 0 0 0 0 Net profit (loss) (continued and discontinued opera tion) 31 301 22 904 7 211 6 485 Net profit (loss) per shareholders of dominant enti ty in Grupa 30 090 21 174 6 932 5 995 Net profit (loss) per minority shareholders

1 211 1 730 279 490 Cash flow from operating activity 45 928 54 360 11 180 13 028 Cash flow from investment activity -32 493 -81 716 -7 909 -19 585 Cash flow from financial activity -23 332 37 869 -5 679 9 076 Total cash flow -9 897 10 513 -2 409 2 520 Total assets 297 505 312 019 72 417 74 782 Fixed assets 152 829 158 821 37 201 38 065 Current assets 144 676 153 198 35 216 36 717 Equity with the shares of minority 179 868 163 645 43 783 39 221 Minority shares 2 032 2 403 495 576 Share capital 3 511 3 529 855 846 Non –current liabilities and long-term reserves 45 063 58 910 10 969 14 119 Current liabilities and short-term reserves 72 574 89 464 17 666 21 442 Weighted average number of shares 28 516 158 28 653 261 28 516 158 28 653 261 Profit (loss) per share (continued operation) (in PLN/Eur) 1,06 0,74 0,25 0,23 Profit (loss) per share (continued and discontinued operation) (in PLN/Eur) 1,06 0,74 0,25 0,23 Book value per share (PLN/Eur) 6,31 5,71 1,54 1,37

Items of assets and liabilities and cash flow account were translated according to average foreign exchange rate obligatory for the day of statement. Items in income statement were calculated according to average foreign exchange rate being the average of average foreign exchange rates being announced by the National Bank of Poland being obligatory on the last day of the month.

Statement on financial position, cash flow account

2009 4,1082 2008 4,1724 Statement on total income

2009 4,3406 2008 3,5321





3.2. STATEMENT ON FINANCIAL POSITION

Day Description Note

31.12.2009 31.12.2008

FIXED ASSETS 152 829 158 821

Intangibles 2 3 209 3 252

Goodwill 3 40 608 38 635

Property, plant and equipment 4 97 620 101 869

Investment property 5 1 394 1 381

Investments in associated entities consolidated by equity method 6 1 593 1 519

Long-term financial assets available for sale 8 - -

Other long-term investments in related entities 8 - -

Long-term loans granted - -

Long-term account receivables 219 253

Other long-term accruals 97 76

Deferred income tax assets 8 089 11 836

CURRENT ASSETS 144 676 153 198

Inventory 10 54 789 53 238

Trade receivables 12 66 062 68 943

Tax, duties and insurance dues 12 2 040 2 223

Prepayments – advance payments for the purchase of services 12 561 1 526

Other short-term liabilities 12 3 807 4 603

Short-term financial assets available for sale 8 - -

Short-term financial assets held for trading 8 1 637 348

Other short-term financial assets - -

Short-term loans granted - -

Cash and cash equivalents 13 10 234 20 208

Short-term prepayments and accrued income 2 713 2 067

Fixed assets classified as held for sale 14 2 833 42 TOTAL ASSETS 297 505 312 019

EQUITY 179 868 163 645 Equity per shareholders of dominant entity 177 836 161 242

Primary capital 15 3 511 3 529 Nominal share premium capital 16 15 142 15 142

Other supplementary capital 16 93 105 50 752

Revaluation reserve capital 16 6 169 6 169

Own shares 17 (5 914) (7 389)

Reserve capitals 16 19 348 21 362

Hedging reserve and foreign exchange differences from consolidation (221) (113)

Direct amounts in capital regarding fixed assets for sale - -

Undistributed profit/loss from previous periods 22 308 53 475

Net profit (loss) 30 090 21 174

Write-off from net profit in the financial year (5 702) (2 859)

LIABILITIES 2 032 2 403

Minority shares 117 637 148 374

Long-term liabilities 45 063 58 910

Interest bearing loans and borrowings 20 27 000 36 000

Other long-term financial liabilities 9,19 375 4 848

Other long-term liabilities - -

Deferred income tax liabilities 6 972 7 265

Provisions for liabilities due to employee benefits 18 10 671 10 797

Other long-term reserves 45 -





Day Description Note

31.12.2009 31.12.2008

Short-term liabilities 72 574 89 464

Short-term loans and borrowings 20 33 614 29 027

Other short-term financial liabilities 9,19 3 523 21 079

Trade liabilities 19 17 571 18 092

Tax, customs, social security creditors 19 7 999 9 908

Wages and salaries creditors 19 1 915 2 301

Advance payments received 19 148 262

Other short-term liabilities 19 2 171 3 311

Prepayments 13 319

Provisions for liabilities due to employee benefits 18 4 015 3 440

Short-term provisions 18 1 605 1 725

Liabilities concerning fixed assets classified as held for sale - - TOTAL LIABILITIES 297 505 312 019





3.3. STATEMENT ON TOTAL INCOME

� CALCULATION VARIANT

Period Description Note 01.01.2009

31.12.2009 01.01.2008 31.12.2008

Continued operation Revenues from sales 1 367 557 356 191

Revenues from sales of products and services 330 360 319 280

Revenues from sales of goods and materials 37 197 36 911

Own sales cost (239 129) (237 932)

Cost of products and materials sold (208 571) (208 388)

Cost of good and materials sold (30 558) (29 544)

Gross profit (loss) from sales 128 428 118 259

Sales costs (24 584) (21 959)

Overheads (54 848) (48 087)

Profit (loss) from sales 48 996 48 213

Other operating revenues (costs) 26 960 8 071

* result on sales of fixed assets 1 508 1 563

* result on revaluation of non financial fixed assets 562 62

* result on revaluation of non financial current assets 1 118 3 830

* result on reserves on pensions, jubilee awards 334 2 625

* result of evaluation of the property 13 128

* write off due to depreciation of the Company (192) -

* result on other operating activity (2 383) (137)

Share in profit of entities consolidated by equity method 160 89

Restructuring costs - -

Profit (loss) on operating activity 50 116 56 373

Financial revenues (costs) 27 (11 447) (27 497)

* dividends and share in profits - -

* interest received on loans and borrowings (3 000) (3 738)

* result on other interest 1 281 1 525

* result on sales of financial assets available for sale 13 39

* result on financial assets as held for trading - -

*result on exchange rate differences (2 871) 552

* result on derivatives (5 794) (24 628)

* result on revaluation of financial fixed assets - -

* result on revaluation of financial current assets (529) (356)

* other financial revenues (costs) (547) (564) * expenditures on purchase of shares in subsidiary after having taken over the control - (327)

Taking the control over subsidiary (negative goodwill) - -

Profit (loss) before tax 38 669 28 876

Income tax 23,24 (7 368) (5 972)

Net profit (loss) from continued operation 31 301 22 904

Discontinued operation Net profit (loss) from discontinued operation 28 - -

Continued and discontinued operation


Other total income Gains and losses arising from translating the financial statements of a foreign operation (108) (25)

Effects of valuation of financial assets available for sale - -

Hedging accounting - -

Effects of revaluation of fixed assets - -






31.12.2009 01.01.2008 31.12.2008

Actuarial profits and losses - -

Share in other total income of associated entities - -

Income tax concerning other total income - -

Other net total income (108) (25)

Total income in total 31 193 22 879 Net profit (loss) including: Note 31 301 22 904

- shareholders of dominant entity 30 090 21 174

- minority shareholders 1 211 1 730 Total income in total, including: Note 31 193 22 879


- minority shareholders 1 211 1 731

Net profit (loss) per one ordinary share: Note PLN / share PLN / share

from continued operation 29

- primary 1,06 0,74

- diluted 1,06 0,74

From continued and discontinued operation 29

- primary 1,06 0,74

- diluted 1,06 0,74

� COMPARATIVE VARIANT


31.12.2009 01.01.2008 31.12.2008

Continued operation Revenues from sales 1 371 591 358 227

Revenues from sales of products and services 330 360 319 280

Revenues from sales of goods and materials 37 197 36 911

Change in status of finished products and manufacturing in progress 4 034 2 036

Costs of operating activity (322 595) (310 014)

Costs of manufacturing of products for own needs of the entity 1 257 1 006 Amortization (15 226) (13 946)

Materials and energy consumption (127 327) (126 321)

Outsourcing (42 923) (38 619)

Employee benefits (89 723) (86 230)

Other costs (18 095) (16 360)

Costs of goods and materials sold (30 558) (29 544)

Profit (loss) from sales 48 996 48 213

Other operating revenues (costs) 26 960 8 071

* result on sales of fixed assets 1 508 1 563

* result on revaluation of non financial fixed assets 562 62

* result on revaluation on non financial current assets 1 118 3 830

* result on reserves for pensions, jubilee awards, leaves 334 2 625

* result on valuation of property 13 128

* write off due to depreciation of the Company (192) -

* result on other operating activity (2 383) (137)

Share in profit of consolidated entities by equity method 160 89

Restructuring revenues ( costs) - -

Profit (loss) on operating activity 50 116 56 373






31.12.2009 01.01.2008 31.12.2008

Financial revenues (costs) 27 (11 447) (27 497)

* dividends and shares in profit - -

* interest received on loans and borrowings (3 000) (3 738)

* result on other interest 1 281 1 525

* result on selling of financial assets available for sale 13 39

* result on financial assets held for trading - -

* result on foreign exchange rate differences (2 871) 552

* result on derivatives (5 794) (24 628)

* result on revaluation of financial fixed assets - -

* result on revaluation of financial current assets (529) (356)

* other financial revenues (costs) (547) (564) * expenditure on purchase of shares of subsidiary after having taken over the control - (327)

Taking the control over subsidiary (negative goodwill) - -

Profit (losss) before tax 38 669 28 876

Income tax 23,24 (7 368) (5 972)

Net profit (loss) from continued operation 31 301 22 904

Discontinued operation Net profit (loss) from discontinued operation 28 - -

Continued and discontinued operation


Other total income Gains and losses arising from translating the financial statements of a foreign operation (108) (25)

Effects of valuation of financial asset available for sales - -

Hedging accounting - -

Effects of revaluation of fixed assets - -

Actuarial profits and losses - -

Share in other total income of associated entities - -

Income tax concerning other total income - -

Net other total income (108) (25)

Total income in total 31 193 22 879 Net profit (loss) , including: Note 31 301 22 904


- minority shareholders 1 211 1 730 Total income in total, including: Note 31 193 22 879


- minority shareholders 1 211 1 731

Net profit (loss) per ordinary share: Note PLN / share PLN / share

from continued operation 29

- primary 1,06 0,74

- diluted 1,06 0,74

From continued operation and discontinued 29

- primary 1,06 0,74

- diluted 1,06 0,74





3.4. STATEMENT ON CHANGES IN EQUITY

Capital per shareholders of the dominant entity

Description Primary Capital

Other Capitals

Foreign exchange rates from translation

Undistributed financial result Total

Minority share Total equity

Balance on 01.01.2008 3 529 77 335 (2) 73 491 154 353 76 154 429 Adjustment of essential error - - - - - - Balance after changes 3 529 77 335 (2) 73 491 154 353 76 154 429

Changes in equity in the period since 01.01 till 3 1.12.2008 Profits (losses) from revaluation - - - - - - - Investments available for sale: - - - - - - -

- profits (losses) from valuation referred to equity - - - - - - - - transferred to the profit (losses) on sales - - - - - - - Hedging instruments for cash flow: - - - - - - -

-profits (losses) referred to equity - - - - - - - - profits (losses) transferred to financial result of the period - - - - - - -

- profits (losses) considered in valuation of balance of hedging items - - - - - - -

Foreign exchange rate differences from valuation of entities abroad - - (111) - (111) - (111)

Tax concerning item presented in capital or transferred from capital - - - - - - - Net profit for the period since 01.01 to 31.12.2008 - - - 21 174 21 174 1 730 22 904 Total income taken in the period since 01.01 till 31.12.2008 - - (111) 21 174 21 063 1 730 22 793 Dividends - - - (14 344) (14 344) (13) (14 357) Settlement of advance payment towards dividend from previous year - - - 5 742 5 742 - 5 742 Advance payments towards dividends paid - - - (2 859) (2 859) (4) (2 863) Profit distribution - 20 601 - (20 601) - - - Purchase of own shares - (1 475) - - (1 475) - (1 475) Establishment of reserve capital - (16 000) - - (16 000) - (16 000) Establishment of reserve capital 16 000 - - 16 000 - 16 000 Cover for the loss from supplementary capital - (10 425) - 10 425 - - - Consolidation adjustments (reserves from previous years) - - - (133) (133) - (133) Consolidation of Metcom KFT - - - 4 4 - 4 Consolidation of Grupa PoWoGaz - - - - - 1 596 1 596 Purchase of own shares by PoWoGaz - - - - - 104 104 Consolidation of Rector - - - - - 301 301 Purchase of additional shares ofi Apator Powogaz - - - - - (1 380) (1 380)





Capital per shareholders of the dominant entity

Description Primary Capital

Other Capitals

Foreign exchange rates from translation

Undistributed financial result Total

Minority share Total equity

Purchase of additional shares of Apator Mining - - - (11) (11) (7) (18) Purchase of additional shares of Apator GmbH - - - (1 098) (1 098) - (1 098)

Balance at 31.12.2008 3 529 86 036 (113) 71 790 161 242 2 403 163 645 Balance at 01.01.2009 3 529 86 036 (27) 71 918 161 456 2 421 163 877 Correction of essential error - - (86) (128) (214) (18) (232) Balance after changes 3 529 86 036 (113) 71 790 161 242 2 403 163 645

Changes in equity in the period since 01.01 till 3 1.12.2009 Profits (losses) from revaluation - - - - - - - Investments available for sale: - - - - - - - - profits (losses) from valuation referred to equity - - - - - - - - transferred to the profit (losses) on sales - - - - - - - Hedging instruments for cash flow: - - - - - - - -profits (losses) referred to equity - - - - - - - - profits (losses) transferred to financial result of the period - - - - - - -

- profits (losses) considered in valuation of balance of hedging items - - - - - - - Foreign exchange rate differences from valuation of entities abroad - - (108) - (108) - (108)

Tax concerning item presented in capital or transferred from capital - - - - - - - Net profit for the period since 01.01 to 31.12.2008 - - - 30 090 30 090 1 211 31 301 Total income taken in the period since 01.01 till 31.12.2009 - - (108) 30 090 29 982 1 211 31 193 Dividends - - - (9 986) (9 986) (1 784) (11 770) Settlement of advance payment towards dividend from previous year - - - 2 860 2 860 3 2 863 Advance payments towards dividends paid - - - (5 702) (5 702) (3) (5 705) Profit distribution - 45 317 - (45 317) - - - Purchase of own shares - (557) - - (557) - (557) Redemption of own shares (18) (2 014) - - (2 032) - (2 032) Redemption of own shares - 2 032 - - 2 032 - 2 032 Covering of the loss - (2 962) - 2 962 - - - Consolidation of Telemetry - - - - - 184 184 Consolidation of Metroteks - - - - - 10 10 Purchase of additional shares of Apator Powogaz - - - (3) (3) (3) (6) Change due to redemption of shares of Powogaz - - - - - 13 13 Change due to redemption of shares of Wodpol - (2) - 2 - (2) (2) Balance at 31.12.2009 3 511 127 850 (221) 46 696 177 836 2 032 179 868





3.5. CASH FLOW STATEMENT

Period

Description Note 01.01.2009 31.12.2009

01.01.2008 31.12.2008

Cash flow from operating activity Profit before tax (continued operation) 38 669 28 876 Adjustments: 10 379 42 689

Amortization of intangibles 1 294 1 197 Write downs due to reduction of the goodwill 192 - Amortization of fixed assets 13 932 12 747

Write downs due to decrease of the value of tangibles of fixed assets (375) (94) (Profit) loss on sales of tangibles of fixed assets (1 508) (1 481)

(Profit) loss on sales of financial assets available for sale (13) 14

(Profits) losses from valuation of investment property according to fair value (13) (128)

(Profits) losses due to change of fair value of financial assets specified according to fair value - 2 Costs of interest 3 027 3 944 Share in (profits) losses of associated entities (160) (89) Write down of negative goodwill - - Interest received (2) (68) Dividends received - - (Positive) negative foreign exchange rates differences 77 116 Other adjustments 34 (6 072) 26 529

Cash from operating activity prior consideration of changes in current capital 49 048 71 565 Changes in inventory (1 472) (1 588) Changes in receivables 34 7 544 (1 465) Changes in liabilities 34 (1 831) 1 079 Changes in reserves 34 374 (5 435) Changes in accruals 34 (973) (326) Other adjustments 34 (742) (2 105) Cash earned during operating activity 51 948 61 725 Interest paid - - Income tax paid (6 020) (7 365) Net cash from operating activity 45 928 54 360

Cash flow from investment activity Expenditure for the purchase of intangibles (980) (1 421) Inflow from sales of intangibles - - Expenditure for the purchase of property, plant and equipment (12 256) (7 862) Inflow from sales of property ,plant and equipment 1 741 2 858 Expenditure on purchase of investment property - - Inflow from sales of investment property - - Expenditure for the purchase of financial assets available for sale - (16) Inflow from sales of financial assets available for sale - 4 262 Expenditure of financial assets held for trading - - Inflow from sales of financial assets held for trading 347 1 333

Expenditure for the purchase of subsidiaries (reduced by the value of taken over cash)) (2 239) (80 110) Inflow of sales of subsidiaries - 90 Inflow from subsidies received - - Borrowings granted - - Repayment received from borrowings granted - - Interest received 2 49





Period

Description Note 01.01.2009 31.12.2009

01.01.2008 31.12.2008

Dividend received - - Other inflows (expenditures) 34 (19 108) (899) Net cash used to investment activity (32 493) (81 716)

Cash flow from financial activity Net inflows from the issue of shares - - Acquisition of own shares (584) (1 452) Inflows due to the issue of debt securities - - Buy back of of debt securities - - Inflows due to loans and borrowings taken 15 791 67 714 Repayment of loans and borrowings (20 507) (7 399) Interest (2 989) (3 881) Dividends paid (14 588) (16 773) Repayment of liabilities due to financial leasing (360) (289) Other inflows (expenditure) 34 (95) (51) Net cash from financial activity (23 332) 37 869

Increase (decrease) of net cash and its equivalents (9 897) 10 513

Change in cash and its equivalents due to foreign exchange rate differences (77) (116) Cash and its equivalents at the beginning of the pe riod 20 335 9 822 Foreign exchange rates (127) (11) Cash and its eqivalents at the end of the period 10 438 20 335 Foreign exchange rates (204) (127)

4. INTERNATIONAL STANDARDS OF FINANCIAL REPORTING APPLIED

4.1 STANDARDS APPROVED IN EUROPEAN UNION

International Standards of Financial Reporting in the shape approved by European Commission currently do not differ significantly from accepted by International Accounting Standards Committee except below interpretations that according to the status at 31st December 2009 have not been approved for application so far.

o Amendments to ISFR 1 „Application of International Standards of Financial Reporting for the first time” – published on 23rd July 2009 contain additional exemptions for the entities that used ISFR for the first time. It is obligatory referring to the annual periods commencing from 1st January 2010 or after that date.

o Amendments to MSSF 2 „Payment by shares” – it regards additional guidelines concerning the payment transactions to be settled by shares between of capital group (with consideration of the guidelines included in former KIMSF 11) and their adjust the scope of the Standard to cover the guidelines included in former KIMSF 8)

o ISFR (2009) – „Amendments to ISFR” – amendments made within the procedure on introduction of annual amendments to Standards published on 16th April 2009 – amendments made within the procedure on introduction of annual (ISFR 2, ISFR 5, ISFR 8, ISFR 1, MSR 7, MSR 17, MSR 18, MSR 36, MSR 38, MSR 39, KIMSF 9, KIMSF 16) focused mainly on solution of nonconformity and precision of wording (most of amendments is obligatory for annual periods commencing 1st January2010 or after that date)

According to estimations of the entities in Grupa APATOR above mentioned standards, interpretations and amendments to standards would not have the significant influence on financial statement of Grupa. At the same time still out of regulations accepted by European Union is hedging of accounting of financial assets and liabilities which principles had not been accepted to be used in European Union yet. According to the estimation of the Grupa the use of MSR 39 „Financial instruments: taking and valuation” would not have significant influence on financial statement if the amendments to the standard are accepted by European Union to be used at the end of reporting period.

4.2 STANDARDS APPLIED FOR THE FIRST TIME

Preparing hereby the financial statement APATOR S.A. applied for the first time the following regulations:





o Amendment to MSR 1 „Presentation of financial statements” – published on 6th September 2007

and accepted by European Union on 17th December 2008 and having got the usage to financial statements prepared for the periods commencing on 1st January 2009 and later. The amendment covers changes in names of the essential statements and presentation of balance sheet, income statement and changes in equity. Grupa APATOR has applied to hereby financial statement amended standard introducing amendments retrospectively. Amendments to the above standard have not influence on earlier presented financial results and the value of own capitals but only on presentation of financial statements and the titles of those statements.

o Amendment to MSR 23 „Costs of external financing” – published on 29th March 2007 and accepted by European Union on 10th December 2008 and having got the usage to financial statements prepared for the periods commencing 1st January 2009 and later. Amendment to the standard covers elimination of the option so far for the possibilities to take costs of external financing directly in income statement. Grupa APATOR applied in case of previous financial statements the principle to take costs of external financing in income statement in the moment of their transfer. Since 1st January 2009 Grupa APATOR applies the principle of capitalization according to amended standard. According to temporary regulations amendment the amendment has been introduced prospectively. The amendments to the above standard have no influence on earlier presented financial results and the value of own capitals.

o MSSR 8 „Operating segments” – published on 30th November 2006 and accepted by European Union on 21st November 2007 and having got the usage to financial statements prepared for the periods commencing on 1stJanuary 2009 and later. Standard replaces MSR 14 „Reporting according to segments of activity” and it requires among other things that operating segments to be defined based on internal statements concerning components of business entity subject to annual reviews made by the member of management responsible for making decision in order to allocate the resources in particular segments and the assessment of their operations. Standard applied by Grupa APATOR retrospectively, in accordance with temporary requirements No significant presenting changes have occurred because under the government of MSR 14 identification of trade segments was based on reporting to be presented the main bodies responsible for making decisions in business and therefore these segments have been considered as operating segments for purposes of MSSF 8. Amendments to the above standard do not have the influence on earlier presented financial results and the value of own capitals.

o Amendments to MSSF 1 „Application of MSSF for the first time” and to MSR 27 „Consolidated and individual financial statements” – published on 22nd May 2008 and accepted by European Union on 23rd January 2009 and obligatory in reference to annual periods commencing 1st January 2009 and later. Application of the standard does not have the influence on earlier presented results and the value of own capitals because the reporting of Grupa APATOR is already based on MSSF.

o Amendment to MSSF 7 „Financial instruments: disclosure of information” – published on 5th March 2009 and accepted by European Union on 27th November 2009 and having got the application to financial statements commencing on 1st January 2009 or later. Amendments to MSSF 7 introduce three level of hierarchy of disclosure concerning evaluation of fair value and it requires to disclosure additional information by the entity on relative credibility of the evaluations of fair value. Amendments additionally precise and extend existing requirements of disclosure concerning the risk of fluidity. In the first year of the application the entity does not have to present comparative data within the disclosure required by those amendments. Amendments to the above standard have no influence on earlier presented financial results and the value of own capitals..

o MSSF (2008) „Amendments to MSSF” – published on 22nd May 2008 and accepted by European Union on 23rd January 2009. Most of amendments is obligatory for annual periods commencing on 1st January 2009 and later. Improvements of MSSF are annual process accepted by RMSR in order to introduce not urgent but necessary amendments to MSSF. Amendments resulted from adjustments to MSSF had no influence on financial statements of Grupa APATOR.

o Amendment to KIMSF 9 „repeated valuation of introduced derivatives” and amendments to MSR 39 „Financial instruments: taken and evaluation” – published 12th March 2009 and accepted by European Union on 30th November 2009. Amendments serve to clarify the problem of treating of derivatives introduced into other contracts in situation if hybrid component of financial assets is retrained from category of financial assets evaluated in fair value by financial result. It is obligatory to the periods ending on 30th June 2009 or later. Amendments to the above standard and interpretation do not have the influence on earlier presented financial results and value of own capitals.

o Interpretation of KIMSF 11 „MSSF 2 – Payment in shares within the group and transaction on own shares acquired” – published on 2nd November 2006 and accepted by European Union on 1 st June 2007 it clarifies how to apply MSSF 2 to the contracts concerning payment in shares which cover own capital instruments of the entity or instruments or capital instruments of the entity that belongs to the same capital group. Interpretation is obligatory with reference to annual periods commencing on 1st March 2008 or after that date. Regulations contained in KIMSF 11 had no influence on statement of APATOR S.A.





o Amendment to MSSF 2 „Payment in form of shares” – published on 17th January 2008 and accepted by European Union on16th December 2008. Amendment concerning the conditions of acquisition of entitlements and their cancellation is applied to annual periods commencing on 1st January 2009 or after that date. Regulations contained in amendment to MSSF 2 had no influence on financial statement prepared by Grupa APATOR.

o Interpretation of KIMSF 13 „loyalty programmes” – published on 5th July 2007 and accepted by European Union on 16th December 2008 that eliminates occurring in practice incoherence in the method of taking in books for property or services transferred free of charge shares or sold at lower price within loyalty programmes to customers practicing by enterprises in order to remunerate their customers by points, air miles or other forms of additional entitlements at the sales of goods and services. This Interpretation is obligatory since financial year commencing after 31st December 2008 Regulations included in KIMSF 13 had no influence on statement of Grupa APATOR.

o Interpretation of KIMSF 14 „MSR 19 – Limit of evaluation of assets due to defined benefits, minimum requirements of financing and their mutual dependence” – published on 5th July 2007 and accepted by European Union on 16th December 2008 which clarifies the regulations of MSR 19 concerning evaluation of assets due to appropriate benefits in the context of the programmes of defined benefits after the period of employment where are minimum requirements for financing. This interpretation is obligatory since financial year commencing after 31st December 2008. Regulations contained in KIMSF 13 had no influence on the statement of Grupa APATOR.

4.3 STANDARDS AND INTERPRETATIONS EARLIER APPLIED

Preparing hereby financial statement Grupa APATOR did not decide to apply earlier standards and their amendments in relation to their date of obligation contained in this standard.

4.4 STANDARDS ALREADY PUBLISHED THAT HAVE NOT COME INTO LI FE SO FAR

Moreover, Grupa APATOR preparing this financial statement did not apply the following standards, amendments to standards and interpretations which were published and accepted to apply in European Union but they are not in use:

o Amendments to MSR 32 „Financial instruments: presentation” – published on 8th October 2009 and accepted by European Union on 23rd December 2009 define the taking of subscription rights. Amendments are obligatory together with the commencement of financial year starting after

31st January 2010. o Interpretation of KIMSF 18 „Transfer of assets by customers– published on 29th January 2009 and

accepted by European Union on 27th November 2009. Interpretation concerns particularly public sector and it applies to all contracts based on them the entity receives from customer the component of tangible fixed asset (or cash allocated to construct such component) that has to be use to connect a customer to its network or to assure permanent availability of delivery of goods or services. Interpretation is obligatory with the commencement of financial year starting after 31st October 2009.

o Interpretation of KIMSF 17 „transfer of non cash assets to the owners” – was published on 27thNovember 2008 and was accepted by European Union on 26th November 2009. Interpretation includes the guidelines concerning the settlement of distribution of non cash assets among shareholders. It is resulted from the interpretation first of all that the dividend should be valuated in fair value of the assets spent and the difference between this amount and earlier balance one of those assets should betaken into financial result at the moment of settlement of dividend due. Interpretation is obligatory with the commencement of financial year starting after 31st October 2009.

o MSSF 1 (amendment) „Application of MSSF for the first time” – published on 27th November 2008 and accepted by European Union on 25th November 2009. Reorganization of the content has been made and most of exceptions and relieves to enclosures in large number in the Standard have been moved. Amendments are obligatory with the commencement of financial year starting after 31st December 2009.

o MSR 39 (amendment) „Financial instruments: taking and evaluation” – published on 31st July 2008 and accepted by European Union on 15th September 2009. The amendments clarify two issues concerning hedging accounting: recognition of inflation as the risk or part of a risk subject to hedging and hedging in form of options. The amendments precise that inflation can subject to hedging only in case when the changes are agreed and defined as the element of the cash flows taken as financial instrument. Amended MSR 39 allows the entity to determine the options acquired (or net option acquired) as hedging instruments to hedge financial or non financial element.

The amendments are obligatory with the commencement of financial year starting after 30th June 2009 .





o Amendments to MSR 39 „Financial instruments: taking and valuation” and MSSF 7 „Financial instruments: disclosure of information” – published on 27th November 2008 and accepted by European Union on 9th September 2009. The amendments precise he date of coming to life and temporary means related to amendments of the standards issued by the International Accounting Standards Board on 13th October 2008.

o Interpretation of KIMSF 15 „Contracts concerning the construction of property” published on 3rd July 2008 and accepted by European Union on 22nd July 2009 that clarifies when one should take the revenues from the construction of property and also if the contract on construction of property is covered by the stipulations of MSR 11 „Contracts on civil service” or also MSR 18 „Revenues”. Interpretation is obligatory with the commencement of financial year starting after 31st December 2009.

o Interpretation of KIMSF 16 „Hedging of shares in net assets of the entity operating abroad” published on 3rd July 2008 and accepted by European Union on 4th June 2009 that clarifies how to apply the requirements of MSR 21 „Effects of the change in foreign exchange rates” and MSR 39 „Financial instruments: taking and valuation” in cases when the entity is hedged against currency risk resulting from it shares in net assets of the entity operating abroad. Interpretation is obligatory with the commencement of financial year starting after 30th June 2009.

o MSSF 3 (Updated) „Fusion of the entities” published on 10th January 2008 and accepted by European Union on 3rd June 2009 that defines the principles and requirements concerning the method of fusions of the entities, what kind of fusions the taking over entity takes and valuates in its financial statement particular elements (such as possible to identify acquired assets, taken over liabilities, non control shares and the goodwill) concerned with accounting of purchase transaction. It defines also what information concerning such type of transactions has to be disclosed. The acceptance of updated MSSF 3 is followed by amendments to be made in MSSF 1, MSSF 2, MSSF 7, MSR 12, MSR 16, MSR 28, MSR 32, MSR 33, MSR 34, MSR 36, MSR 37, MSR 38, MSR 39 and interpretation of KIMSF 9 in order to provide cohesion of international accounting standards. Updated MSSF 3 is obligatory with the commencement of financial year after 30th June 2009.

o Amendments to MSR 27 „Consolidated and individual financial statements” published on 10th January 2008 and accepted by European Union on 3rd June 2009 that define in what circumstances the entity has to prepare consolidated financial statement, how the dominant entities have to take amendments in their share in property in subsidiaries and how the losses of subsidiary should be allocated to control and non control shares. These amendments are obligatory with the commencement of financial year starting after 30th June 2009.

o MSSF (2008) „Amendments to MSSF” – published on 22nd May 2008 and accepted by European Union on 23rd January 2009. Improvements of MSSF are annual process accepted by RMSR in order to introduce not urgent but necessary amendments to MSSF. Amendments to MSSF 5 „Fixed assets for sales and discontinued operation” and amendments to MSSF 1 „Application of International Financial Reporting Standards for the first time” are obligatory with the commencement of financial year starting after 30th June 2009. Amendments to MSSF 5 precise that the entity which has decided to make the sale which is connected with the loss of control over subsidiary classifies all assets and liabilities of this subsidiary as for sale, if criteria included in this standard have been met. Disclosure of discontinued operation is required if the subsidiary forms a group to be sold and it meets criteria included in the definition of discontinued operation.





According to the estimations of the entities in Grupa APATOR above mentioned standards, interpretations and amendments to the standards except updated MSSF 3 and MSR 27 would not have any significant influence on financial statement if they were applied by the entity at the end of reporting period. The application of updated MSSF 3 and MSR 27 had the influence on the increase of the goodwill that has arisen after the acquisition of subsidiaries –Apator Telemetria Sp. z o.o. and Apator Metroteks by APATOR POWOGAZ S.A. and the increase of minority capital. The reference the costs of acquisition of subsidiaries to the costs of the period due to low values would not have significant influence on the change in the value of assets and liabilities in the balance.

Description Apator Telemetria Sp. z o.o.

Apator Metroteks Total

Values taken in the statement for 2009 Goodwill 1 832 333 2 165 Minority capital 184 9 193

Values after the application of updated MSSF 3 and MSR 27 Goodwill 3 607 546 4 153 Minority capital 1 959 222 2 181

Changes after the application of updated MSSF 3 and MSR 27 Goodwill +1 775 +213 +1 988 Minority capital +1 775 +213 +1 988





5 ACCOUNTING PRINCPLES APPLIED

5.1 GENERAL PRINCIPLES

Financial statement is prepared in accordance with the conception of historical cost, except evaluation of some fixed assets (investment property) and financial assets that according to MSSF are evaluated according to fair value or amortized cost with consideration of the effective interest rate. The most significant accounting principles applied by Capital Group have been presented in points from 4.2. to 4.3.17. 5.2 CONSOLIDATION

5.2.1 PRINCIPLES OF CONSOLIDATION

Consolidated financial statement includes the financial statement of APATOR SA the dominant company and statements of the companies being under its control prepared at 31st December 2009. Control is understood as the ability to influence on the financial and operational policy of the subsidiary in order to gain profit from its operations. On the day of purchase of the subsidiary (taking control) the assets and liabilities of purchased entity are estimated according to their fair value. The excess of the purchase price above the fair market value of the identifiable taken over net assets of the company is presented as the goodwill. If the purchase price of the company is lower from the fair value of the identifiable taken over net assets of the company, the difference is presented as a profit in the income statement for the period in which the purchase took place. The share of minority shareholders is presented in an appropriate proportion of net fair value of assets. In the following periods losses falling to minority shareholders above the value of their shares, decrease the capital of the parent company. In the case of purchase of minority interests that is the purchase of additional shares having got already control previously, a new fair market value of the purchased assets and equity is not established. This operation is presented as a movement in capitals between minority interest and parent company interest of the value settled basing on the fair market value of net assets on the day of taking over. Differences between value of assets and payment have the influence on the result of the period, in which the takeover took place. Dependent companies sold during financial year are subject to consolidation from the beginning of the financial year until the day of selling. Financial results of entities purchased during the year are included in the financial statement from the moment of their purchase. If it is necessary, the adjustments are made in the financial reports of dependent or affiliated companies aiming at the unification of accounting principles used by the entity in accordance with the principles used by the parent company. All the transactions, balances, income and costs between affiliated entities included in the consolidation were left out of the consolidated financial statement.

5.2.2 INVESTMENTS IN ASSOCIATED ENTITIES

Associated companies are such entities over which the parent company does not have control, but has much influence on them by participating in establishing financial and operational policy. Shares in associated companies are valuated by equity method, excluding a situation when they are classified as for sale. Investments in associated companies are valuated according to purchase price taking into consideration changes in the share of the company in net assets, that have taken place until the balance date, less the loss of value of specific investments. Significant profits and losses resulting from transactions between Grupa and an associated company are subject to consolidation exclusions up to the level of shares owned. The excess of the purchase price over the fair value of identifiable net assets of the associated entity as of the purchase date is presented as a goodwill and presented in the item “Investments in associated companies consolidated with the equity method”.





If the purchase price is lower than fair value of identifiable net assets of the associated entity as of the purchase date, the difference is presented as a profit in the profit and loss account for the period during which the takeover took place.

5.2.3 GOODWILL

Goodwill established at consolidation is an excess of the entity purchase cost over the fair value of identifiable components of assets and equity and liabilities of the dependent or affiliated company, or a common enterprise on the purchase day. Goodwill is pointed out as a component of assets and at least once a year put to value loss test. The results of value loss are applied to the profit and loss account and are not reversed in the following periods.

5.3 PRECISE RULES OF ASSETS AND LIABILITIES VALUATION USED WITHI N GRUPA

5.3.1 OWN CREATED INTANGIBLE ASSETS – RESEARCH AND DEVELOPMENT C OSTS

Assets fulfilling the following criteria can be included into intangible assets: - they may be excluded or separated from an economic entity, sell, transfer, licence or give for free usage to third parties, both individually and jointly with related contracts, asset or liability components or - result from contractual titles or other legal titles, irrespective whether they are sellable or possible to separate from an economic entity or other titles or liabilities. Intangible assets purchased in the scope of a separate transaction are presented in the balance according to their purchase price. Intangible assets purchased in the scope of an economic entity takeover are presented in the balance according to their fair value on the date of takeover. After the initial presentation intangible and legal assets are valuated according to the purchase price or the manufacturing cost less amortization and revaluation by way of value loss. Usage period of intangible assets, depending on their type is assessed and regarded as restricted or unspecified. Intangible assets with unspecified period of usage and those that are not yet used are reviewed every year for possible loss of value, in reference to various assets or at the level of the centre acquiring financial means. In reference to other intangible assets a yearly assessment is made, whether any premises for loss of value occurred. Periods of usage of various intangible and legal assets are reviewed yearly, and if need be, adjusted from the beginning of the following year. For amortization purposes of intangibles with specified period of usage the method of linear amortization is applied. The periods of usage of particular components of intangibles are as follows: Patents and licenses since 2 till 5 years R&D since 3 till 5 years Costs of research and development Costs of research are not activated and are presented in the profit and loss account as costs in the period in which they were born. Costs of development works are capitalized only if: - a specific project is performed (e.g. software or new procedures); - it is possible that a component of the assets shall bring future economic gains; - project costs can be reliably estimated. Costs of development works are amortized with the linear method throughout the forecasted period of their economic usefulness. If distinguishing of the own created asset component is impossible, the costs of development works are presented in the profit and loss account in the period in which they were incurred.

5.3.2 PROPERTY,PLANT AND EQUIPMENT

Property plant and equipment are fixed assets owned by entities in order to use them for production, supply of merchandise or rendering services, give for paid usage to third parties or for administrative purposes that are forecasted to be used for more than one period. They are valuated according to their purchase price, production costs or revaluated value (after revaluation of fixed assets) less amortization and permanent loss of value. According to the approach based on components the entity assumes different amortisation rates for important components of a tangible asset. Entities do not state residual





value of fixed assets. Fixed assets economic policy does not anticipate the sale of fixed assets, they can only be sold as scrap after liquidation. Fixed assets in entities include property and plant equipment with a foreseeable period of economic usability longer than one year and purchase price from 3.5 thousand PLN. Fixed assets from group 491 (computers and units of computers) are included in the register of fixed assets regardless of their purchase price. Fixed assets with value less than 3.5 thousand PLN (excluding computers and units of computers) are booked directly into “material wear” prime costs. Amortization is made on fixed assets the price of which is higher that 3.5 thousand PLN. Amortization commencement takes place in the month of usage commencement. While establishing yearly amortisation rates the period of economic usage of the fixed asset is taken into consideration. Correctness of the usage of amortization rates and periods by the entity is periodically checked by production departments managers. Purchased fixed assets in the conditions of hyperinflation were revaluated to fair value. The value was established by an independent property expert. For amortization purposes of fixed assets the method of linear amortization is applied. The periods of usage for particular components of fixed assets are as follows: Buildings and constructions since 3 till 70 years Machines and equipment since 2 till 25 years Means of transportation since 4 till 10 years Other fixed assets since 3 till 10 years If during the preparation of a financial report there occurred circumstances that suggest that the balance value of property and plant equipment may not be regained, a review of the assets is performed in the scope of possible loss of value. If there are any premises suggesting that, there could have occurred a loss of value, and the balance value is higher than the value possible to regain, than the vale of these assets of centres acquiring financial means, that own such assets is decreased to the level of recoverable value. Recoverable value is equal to the higher of the two following values: fair value less sales costs or usage value. While assessing usage value, estimated future income are is discounted to the current value using a gross discount rate reflecting current prices of money vale in time and risk connected to the given assets component. In the case of an assets component, which does not generate money income in a sufficiently independent way, the recoverable value is settled for the centre acquiring financial means to which this component relates. Profits or losses resulting from sale/liquidation or ceasing to use the fixed assets are presented as a difference between sales income and net value of such fixed assets and are included in the profit and loss account. Commenced investments concern fixed assets under construction or assembly and are presented according to purchase prices or production cost. Fixed assets under construction are not subject to amortization until construction completion and handing over of the fixed asset for usage. Companies have the right of perpetual usufruct of the land purchased with an administrative decision. If the companies do not have a reliably established valuation according to fair value they do not include their right in the balance. The right is represented in the additional notes. If the companies have a reliably established valuation according to fair value of the perpetual usufruct of land it is presented in the balance, and is not amortized. APATOR SA parent company and subsidiary APATOR POWOGAZ SA have their plants and equipment being used in social activity. Theses assets together with the right of perpetual usufruct of the land on the day of passing to MSR/MSSF were evaluated in fair value by property expert. Due to lack of plans of selling of the property and the fact of reimbursement of costs of keeping that property from Factory Social Fund, according to the agreements with Trade Unions, the companies present the assets in their financial statements and Grupa in consolidated financial statement.

5.3.3 LEASING

Financial leasing contracts are such contracts according to which the whole risk and the whole possible benefits resulting from being the owner as a leasing recipient are carried over to companies. All other types of leasing are treated as operational leasing. Usage according to company leasing contracts are treated equally to company assets and are valued at the commencement of leasing contract according to the lower of the two following values: fair value of the property component being the subject of leasing or the current value of minimal leasing fees. Leasing fees are divided into interest and capital parts in such a way that the interest rate from the remaining liability remains a constant value. Leasing fees for operational leasing are applied to profit and loss account with the linear method for the period of leasing.





5.3.4 INVESTMENT PROPERTIES

Those properties can be considered investment properties that are treated as a source of income from rents and/or are kept in possession because of the expected increase of their value. Investment properties are valuated on the balance day at fair value. Profit and loss resulting from changes in the fair value of investment properties are presented in the profit and loss account in the period in which they occurred.

5.3.5 FIXED ASSETS AND NET ASSET GROUPS DESIGNATED FOR SALE

Fixed assets classified for sale and also net asset groups designated for sale are valued at the level of the lower of the two values: balance value or fair value less sales costs. Fixed assets and net asset groups are designated for sale if their balance value can be recovered rather by sale than by usage. This condition is considered as fulfilled only when the assets component (or net asset groups designated for sale) is available in its current state for immediate sale, and occurrence of sale transactions during the year until the change of classification is very probable.

5.3.6 INVENTORY

Materials and merchandise are valuated according to purchase price. The purchase price includes the due payment without VAT due. Purchase costs (transport costs, border fees, customs, unloading and loading costs) are charged for a separate “purchase costs” account. If the level of purchase costs during a period does not exceed 2% (which is an irrelevant value) in reference to materials used in a given period, the material prices are not increased by it. Materials and goods are subject to systematic valuation write-down during the period, after each change of the purchase price at the level of weighted average. The deviations that occur are settled at the end of each month after estimate write-down. The products are estimated systematically according to production cost, and the product inventory is estimated according to production costs not higher than their net sale prices, possible to achieve if as if sale would have taken place on a balance day. Production cost is made up of the sum of direct costs (materials, remunerations) and a justified part of indirect costs connected to the manufacturing of the product including indirect production costs and part of constant indirect costs at the level of such costs with normal usage of production capacity. Inventory is verified for each reporting period. For the purpose of making the inventory value real an analysis of inventory age structure is conducted, in which the main factor is the date of warehouse incoming and outgoing. Write-down is created in reference to inventory of over 180 days assuming the creation of a write-down in the amount of 10% of the value of the inventory left. Another 10% of value of inventory left is taken for each 180. This way inventory left for over 5 years are subject to 100% write-down. In case of economically unsuitable inventory the write-down is 100%. At the end of the period also an analysis of inventory by way of loss of value, resulting from the difference between the book price and current market price (careful estimate).

5.3.7 OUTSIDE FINANCING COSTS

All outside financing costs that can be refer directly to purchase, construction or creation of being adjusted of the component of assets since 1st January 2009 they are no longer referred directly to the charge of costs of the period when they were incurred. According to amended standard MSR 23 (approved by European Union on 10th December 2008) Grupa applies the rule of capitalization of outside financing (interest and other costs born) by the company due to financial means borrowed) regarding the purchase or construction of plant and property. The rule of capitalization is not applied to the assets evaluated by fair value and inventory being manufactured repeatable with short manufacturing cycle. In accordance with temporary regulations the change was introduced prospectively. Estimated in 2009 by the companies in Capital Group APATOR outside financing costs that referred to the financing of the components of the property, requiring the their adjustment prior its acceptance to use, they were of not significant value therefore they were abandoned to activate them as the element of purchase price or manufacturing cost.

5.3.8 STATE SUBSIDIES

Government subsidies, including non-money subsidies presented in fair value are included only if there is a sufficient certainty that Grupa shall fulfil the conditions referring to the given subsidy and that the given subsidy shall in fact be received. If the subsidy concerns a given cost position than it is included as decrease of costs, which were supposed to be compensated by this subsidy. However if the subsidy concerns an assets component then its fair value decreases the value of this component and than it is gradually included in the profit and loss account as an income over the periods pro-rata to depreciations made to this assets component.





5.3.9 TRADE RECEIVABLES

Trade receivables are estimated in books at their nominal value adjusted with appropriate write-downs of the value of doubtful receivables. Receivable value is subject to write-down taking into consideration the probability of their payment by making an appropriate write-down to the operational or financial costs. Receivables and claims impossible to obtain, that is receivables documented with a verdict given by an execution proceedings institution, are not include in the assets. Write-downs for receivables with risk are made. These are receivables overdue more than 180 days without new payment dates settled. Receivables due over 180 days are corrected by a cumulated amount of the discounted difference between the initial value and value on date due, calculated according to an effective interest rate defined as WIBOR 6M rate.

5.3.10 FINANCIAL INSTRUMENTS

Grupa qualifies each contract which results in establishment of a financial assets component for one of the parties and a financial liability or capital instrument for the other as a financial instrument, under the condition that explicit economic results come from the contract concluded by two or more parties. Grupa classifies financial instruments as follows: � Financial assets or liabilities components estimated according to fair value through a profit and loss

account – assets and liabilities purchased or incurred mainly for the sale or purchase within a short time or are a part of the portfolio of specified financial instruments which are jointly managed and for which there is a confirmation of current actual pattern to generate short-term profits and derivatives;

� Investments held until maturity date – financial assets that are not derivatives, with set or possible to

set payments and with a set maturity date, towards which Grupa has a definite intention and is able to keep them until the maturity date expires;

� Loans and receivables – financial assets not being derivatives, with set or possible to set payments

which are not quoted on the active market, � Financial assets available for sale - financial assets not being derivatives, which were designated for

as available for sale or not being (a) loans and receivables, (b) investments held until maturity date expires, nor (c) financial assets valued in fair value through the financial result.

� Other financial liabilities.

Inclusion and exclusion of a financial asset compon ent and financial liability Financial asset component or financial liability is presented in the balance if Grupa is the party of the contract of such instrument. Standardized assets and financial liabilities purchase and sale transactions are included [option: on the date of transaction conclusion / on the date of their settlement]. Financial assets component is excluded from the balance if rights to economic benefits and risks resulting from the concluded contract were performed, expired of Grupa waived them. Grupa excludes a financial liability from the balance if the liability expired, that is when the obligation included in the contract was fulfilled, waived or expired. Estimation of financial instruments on the date of t heir establishment On the date of purchase financial assets and liabilities are estimated by Grupa according to their fair value, that is most often according to fair value of the price paid in the case of assets component or amount received in the case of a liability. Transaction costs are included by Grupa to the initial value of the estimation of all the assets and financial liabilities, outside of the assets and liabilities category estimated in fair value through the profit and loss account. Estimation of financial instruments on a balance day Grupa estimates: - according to depreciated cost, taking into consideration the effective interest rate: investments held until maturity date, loans and receivables and other financial liabilities. The estimation may also be conducted for value that requires payment, if the discount effects are irrelevant, - according to the fair value: assets and financial liabilities from the category of valuation in fair value through the profit and loss account and category of financial assets available for sale. If fair market value establishment is not possible (such a situation may take place in the case of unquoted capital instruments), such elements are valuated at the amount of cost (purchase price).





Effects of estimation of financial assets available for sale is included in equity. Effects of estimation of financial assets and liabilities qualified for other categories are included in the profit and loss account. Hedging accounting In case of transactions that fulfil the requirements specified in MSR 39.88 hedging dreivatives for cash flow are included in the fair value taking into consideration value changes: - in part considered to be an effective hedge – directly in equity, - in part considered to be an ineffective hedge – in the profit and loss account. In 2009 and previous years entities in Capital Group APATOR did not apply hedging accounting for any hegding transactions for the cash flow. The evaluation of derivatives related to these transactions were taken directly in financial result. Hedging derivatives for fair value of assets and liabilities are included in fair value. Effects of changes in fair value of these instruments are included in the financial result.

5.3.11 BANK LOANS

Bank loans with interest charges are included according to purchase price corresponding to the fair value of gained financial means, less the direct costs connected to granting the loan. In the following periods loans are estimated according to a depreciated purchase price, while using an effective interest rate.

5.3.12 TRADE LIABILITIES

After an initial inclusion all the liabilities, excluding liabilities estimated according to fair value on the basis of profit and loss account are estimated in the corrected purchase price, using the effective interest rate method. However in the case of liabilities with a maturity period not longer than 12 months from the balance date, premises influencing the estimation value of such liabilities in an adjusted purchase price are analyzed (changes of interest rate, possible additional cash flow and other). According to the results of the analysis made estimation is made in the amount of payment due only when the difference between the value in adjusted purchase price and value in the amount of the due payment does not have a significant influence on qualitative characteristics of the financial statement.

5.3.13 PROVISIONS

Provisions are created if there is a duty (legal or customary) on the Grupa resulting from past events and it is probable that the fulfilment of such a duty will cause a necessity of outflow of means and a reliable estimation of the amount is possible. The costs concerning a given provision are included in the profit and loss account after decreasing it with all returns. If the influence of the value of money overtime is significant, the size of a provision is settled through discounting forecasted future cash flow to current value, using a gross discount interest rate representing current market prices of money value overtime and possible risk connected to the given liability. If the method used was based on discounting, the increase of the provision in reference to the passage of time is presented as outside financing costs. Provisions are also created for future liabilities caused by restructuring, if according to separate regulations Grupa is obliged to its conduct or a binding contract was concluded concerning this and the restructuring plans allow in a reliable way to estimate the value of these future liabilities, while the decision on provision creation is made by the Executive Board. If there is no appropriate restructuring plan in the financial report then conditional liabilities for this title are revealed. According to the remuneration systems the employees are entitled to retirement gratuity and in some of the companies of Grupa employees are entitled to jubilee awards. Awards are paid to employees after a specified number of years of service. Retirement gratuities are paid once on passing to retirement. The amount of retirement gratuities and prizes depends on the length of service and average employee remuneration. The company creates provisions for the future liabilities by way of retirement gratuities and prizes in order to assign costs to periods that relate to them. According to MSR 19 jubilee awards are other long-term employee benefits, and the retirement gratuities are specified post-employment benefits programs. Provisions creates for prizes and retirement gratuities are set according to forecasted individual entitlements method according to MSR 19 and actuary techniques. The base for reliable assessment of provision size are:

� Rights for the mentioned benefits acquiring criteria in the companies of the capital group � Actuary assumptions

Grupa creates a provision for the costs of cumulated paid absences, that it will have to incur as a result of unused entitlement by the employees which entitlement accrued on the balance day. Provision for the





costs of cumulated paid absences is included as a liability (passive inter-period cost settlement) after deduction of all amounts already paid. Provision for the costs of cumulated paid absences is a short-term provision and is not subject to discounting. Grupa also creates a provision for warranty repairs because in Grupa APATOR the sales contracts are concluded with the warranty granted as a rule for two or three years. Therefore in order to calculate the provision the relation of ratio of warranty repairs to the general sales in this period is applied.

5.3.14 SALE REVENUES

Sale revenues are included – according to International Accounting Standard No 18 “Revenues” – in the fair value of payments received or due and represent dues for products, merchandise and services supplied in the scope of normal business activity, after subtracting rebates, VAT and other taxes connected to sales (excise), appropriately to the state of contract performance advancement. Revenue is included in such an amount at which Grupa is likely to gain economic benefits connected to the given transaction and when the amount of income can be reliably estimated. Sale of merchandise and products Sale of merchandise and products is included at the moment of merchandise and product delivery and risks and benefits resulting from the title to the goods are transferred to the buyer and when the revenue amount can be reliably estimated. Rendering services Revenues of rendering services are included according to the level of advancement of their performance, if the result of the transaction concerning rendering services can be reliably estimated. The percentage state of advancement of service performance is settled as a ratio of incurred costs for the given day and general estimated costs of the transaction. If as a result of transaction concerning rendering a service cannot be reliably estimated, than the revenues gained by way of this contract are included only up to the value of costs incurred, that Grupa is expecting to regain. Interests Income by way of interests are included successively as they grow, in reference to the net balance value of a given financial asset, according to the effective interest rate method. Dividends Dividends are included at the moment of establishing the rights of shareholder to receive them. Revenues from renting Revenues from renting of investment property are included with a linear method throughout the rent period in relation to the contracts concluded.

5.3.15 TRANSACTIONS IN FOREIGN CURRENCY

In financial statements of the entities of Grupa APATOR transactions in foreign currency which are calculated according to the exchange rate for the date of transaction concluded. On balance day cash assets and liabilities are calculated according to the exchange rate of a leading bank for the balance day. Profits and losses resulting from currency exchange are applied directly to the profit and loss account, excluding the cases in which they were created as a result of valuation of non-cash assets and liabilities, in the case of which changes to fair value is applied directly to equity. Operational currency of a foreign dependent company is EUR. On a balance day assets and liabilities of such foreign dependent companies are calculated into the Grupa presentation currency according to the exchange rate valid on balance day , and their profit and loss accounts are calculated according to an weighted average exchange rate for the given financial year. Exchange rate differences appearing as a result of such calculation are included directly in equity as a separate element. At the moment of sale of a foreign entity, accumulated, deferred exchange rate differences in equity, concerning the given foreign entity, are included in the profit and loss account.

5.3.16 TAXES

Compulsory result encumbrance include: current tax and deferred tax. Current tax encumbrance is calculated according to the basic tax result (taxation basis) of a given financial year. Taxation profit (loss) is different from net accounting profit (loss) in reference to exclusion of taxed income and costs being the cost of achieving revenue in the following years and costs and revenue items, that will never be subjected to taxation. Tax encumbrances are calculated according to tax rates valid for the given financial year.





Deferred tax is calculated according to the balance method as tax subject to payment or return in the future on the basis of differences between assets and liabilities balance values and relevant tax values used for the calculation of taxation basis. Provision for deferred tax is created from all the temporary positive differences subject to taxation, however assets component by way of deferred tax is recognized up to the amount, in which it is probable, that it will be possible to lower future taxation income by recognized negative exchange rate differences. Assets item or tax liability does not arise if the temporary difference arises by the goodwill or original presentation of another assets component or liability in a transaction that did not influence neither the basic result nor the accounting result. Provision by way of deferred tax is recognized from temporary tax differences arising as a result of investment in subsidiaries and affiliated companies and joint ventures, unless the companies are able to control the moment of temporary difference reversal and it is probable that in the foreseeable future the temporary difference will not be reversed. The value of the assets component by way of deferred tax is subject to analysis for on each balance day, and in the case if forecasted future tax profits will not be enough for the performance of the assets component or its part an appropriation will take place. Deferred tax is accounted according to tax rates that shall be valid at the moment when the asset item shall be performed or the liability becomes due. Deferred tax is included in the profit and loss account, excluding the case where it concerns items included directly in equity. In this case deferred tax is also settled directly into equity.

5.3.17 EQUITIES

Equities of the companies being the part of Grupa APATOR include: share capital, nominal share premium, other reserve capital, revaluation reserve, capital reserves, hedging reserve and foreign exchange differences from consolidation, financial result. Items lowering the multitude of equities include: own shares and appropriation of the current financial year result. Grupa calculated the components of equity according to the requirements of MSR 29 “Financial Reporting in Hyperinflation”. The calculation results and required disclosures are presented by the Grupa only in clarification notes of the financial statement.





6. CLARIFICATION NOTES TO FINANCIAL STATEMENT

NOTE NO. 1 OPERATING SEGMENTS

Activity of Grupa APATOR is focused on to key segments of electrical engineering sector: metering and switchgear. The Company is aimed at comprehensive operation in the scope of metering and readout of utility services and to provide electrical equipment for safe making and breaking of electrical circuits.

Continued operation

Discontinued operation

Description Metering

Equipment SwitchgearEquipment Other Total

Total

Financial results of operating segments for the rep orting period (since 01-01-2008 till 31-12-2009)

Total revenues 251 209 113 151 3 197 367 557 - 367 557 1. External net revenues from sale 288 894 114 297 5 345 408 536 - 408 536 2. Inter segment revenues from sales (37 685) (1 146) (2 148) (40 979) - (40 979)

Total costs (176 210) (86 105) (1 398) (263 713) - (263 713) 1. External costs (214 413) (87 358) (3 546) (305 317) - (305 317) 2. Inter segment costs 38 203 1 253 2 148 41 604 - 41 604

Result of segment 74 999 27 046 1 799 103 844 - 103 844 Costs not allocated (53 888) (53 888) Share in profit of associated entities 160 160

Profit (loss) from operating activity 50 116 - 50 116 Financial revenues 20 608 20 608 Financial costs (32 055) (32 055)

Profit before tax 38 669 - 38 669 Income tax (7 368) - (7 368)

Minority shares (1 211) - (1 211) Net profit (loss) 30 090 - 30 090

Other information on segments at 31-12-2009 Assets: 180 811 62 644 778 244 233 - 297 505

1. Fixed assets 66 478 12 830 257 79 565 - 79 565 2. Intangibles 2 118 1 091 - 3 209 - 3 209 3. Goodwill 40 533 75 - 40 608 - 40 608 4. Inventory 40 564 14 224 1 54 789 - 54 789 5. Trade receivables 31 118 34 424 520 66 062 - 66 062 6. Assets not allocated - - 53 272

Liabilities 11 176 6 395 - 17 571 - 17 571 Capital expenditures 10 430 4 230 - 14 660 - 14 779

1. Property, plant and equipment and intangibles 10 430 4 230 - 14 660 - 14 660

2. Expenditures not allocated - - 119 Amortization 11 361 3 638 139 15 138 - 15 226

1. Property, plant and equipment 10 391 3 314 139 13 844 - 13 844 2. Intangibles 970 324 - 1 294 - 1 294 3. Amortization not allocated - - 88

Write downs 3 410 2 216 98 5 724 - 5 724 1. Inventory 1 838 845 - 2 683 - 2 683 2. Liabilities 1 572 1 371 98 3 041 - 3 041

Financial results of operating segments for the pre vious period (since 01-01-2008 til 31-12-2008)

Total revenues 229 913 122 669 3 609 356 191 - 356 191 1. External net revenues from sales 259 159 124 376 5 495 389 030 - 389 030 2. Inter segment revenues from sales (29 246) (1 707) (1 886) (32 839) - (32 839)

Total costs (163 280) (95 224) (1 387) (259 891) - (259 891) 1. External costs (189 992) (96 795) (5 807) (292 594) - (292 594) 2. Inter segments costs 26 712 1 571 4 420 32 703 32 703





Continued operation


Description Metering

Equipment SwitchgearEquipment

Other Total

Total

Result of segment 66 633 27 445 2 222 96 300 - 96 300 Costs not allocated (40 016) (40 016) Share in profit of associated entities 89 89

Profit (loss) from operating activity 56 373 - 56 373 Financial revenues 13 505 13 505 Financial costs (41 002) (41 002)

Profit before tax 28 876 - 28 876 Income tax (5 972) (5 972) Minority shares (1 730) - (1 730)

Net profit (loss) 21 174 - 21 174 Other information on segments at 31-12-2008

Assets: 183 682 64 024 624 248 330 - 312 019 1. Fixed assets 70 206 13 661 395 84 262 - 84 262 2. Intangibles 2 040 1 212 - 3 252 - 3 252 3. Goodwill 38 560 75 - 38 635 - 38 635 4. Inventory 38 877 14 361 - 53 238 - 53 238 5. Trade receivables 33 999 34 715 229 68 943 - 68 943 6. Assets not allocated - - 63 689

Liabilities 10 748 7 344 - 18 092 - 18 092 Capital expenditure 6 794 3 701 - 10 495 - 10 703

1. Property ,plant and equipment and intangibles 6 794 3 701 - 10 495 - 10 495

2. Expenditure not allocated - - 208 Amortization 9 954 3 774 139 13 867 - 13 945

1. Property, plant and equipment 9 210 3 321 139 12 670 - 12 670 2. Intangibles 744 453 - 1 197 - 1 197 3. Amortization not allocated - - 78

Write downs 6 926 1 823 56 8 805 - 8 805 1. Inventory 2 981 820 - 3 801 - 3 801 2. Liabilities 3 945 1 003 56 5 004 - 5 004

Geographical information The Company has separated the following three areas of activity:

• Home – covering the sales on the territory of the country; • Export – export; • EU – sales to the countries of the European Union.

Continued operation

Description Home Export EU Total


Total

Revenues from sales in geographical segments for th e reporting period since 01-01-2009 till 31-12-200 9)

Total revenues 264 641 47 811 55 105 367 557 - 367 557 1. External net revenues from sale 304 623 47 811 56 102 408 536 - 408 536 2. Inter segment revenues from sales (39 982) - (997) (40 979) - (40 979)

Revenues from sales in geographical segments for p ervious period (since 01-01-2008 till 31-12-2008)

Total revenues 267 967 39 013 49 211 356 191 - 356 191 1. External net revenues from sale 300 803 39 013 49 214 389 030 - 389 030 2. Inter segment revenues from sales (32 836) - (3) (32 839) - (32 839)

Information on more important customers Grupa APATOR does not sell to the leading customer. The main customers of Grupa are power concerns.





NOTE NO. 2 INTANGIBLES

Description Goodwill Patents

and licenses and software

R&D costs Other intangibles Total

Net balance value at 01.01.2008 61 570 1 155 461 2 247 Increase of value due to take over of Rector - - - 938 938 Increase of value due to take over of PoWoGaz - 1 884 - - 1 884 Increase of value due to acquisition - 495 1 015 90 1 600 Increase of value due to reclassification - 267 - - 267 Decrease due to liquidation - (487) (1 311) (9) (1 807) Amortization - (431) (596) (170) (1 197) Amortization on the day of take over of Rector - - - (887) (887) Amortization on the day of take over of Powogaz - (1 743) - - (1 743) Decrease of current redemption due to liquidation, sales - 487 1 311 9 1 807 Other changes - - - - -

Net balance value at 31.12.2008 61 1 042 1 574 432 3 109

Net balance value at 01.01.2009 61 1 042 1 574 432 3 109 Increase of value due to own manufacturing - - 204 - 204 Increase of value due to acquisition - 463 564 - 1 027 Increase of value due to take over of Apator Telemetria - - - 218 218 Decrease of value due to liquidation - (21) (686) - (707) Decrease of value due to sale - - - - - Change of gross value due to reclassification - 1 505 - (1 505) - Write downs due to deprecation - - - - - Reversal of write downs - - 128 - 128 Amortization for the period - (487) (707) (100) (1 294) Redemption on the day of take over of Apator Telemetria - - - (55) (55) Changes of redemption due to reclassification - (1 370) - 1 370 - Reduction of current redemption due to liquidation, sales - 21 558 - 579 Other changes - - - - -

Net balance value at 31.12.2009 61 1 153 1 635 360 3 209 Status at 31.12.2008

Gross balance value 61 3 912 8 653 6 573 19 199

Sum of current redemption and write downs - (2 870) (7 079) (6 141) (16 090) Net balance value 61 1 042 1 574 432 3 109

Status at 31.12.2009 Gross balance value 61 5 859 8 735 5 286 19 941

Sum of current redemption and write downs - (4 706) (7 100) (4 926) (16 732) Net balance value 61 1 153 1 635 360 3 209

Table in 2008 is not in accordance with the balance since balance item „Intangibles” includes the advance payments towards intangibles.

Description – Status at the day: 31.12.2009 31.12.2 008 Advance payments towards intangibles - 143 Total - 143

The write downs for intangibles are presented in the table below.





WRITE DOWNS DUE DEPRECIATION Goodwill Patents and licenses and software R&D Other

intangibles Total

Write downs value at 01.01.2009 - - 128 - 128 Write down due to depreciation taken in income statement and referred to equity during the period

- - - - - The amount of reversal of write downs due to depreciation taken in income statement and referred to directly to equity during the period

- - (128) - (128) Write downs value at 31.12.2009 - - - - -

NOTE NO. 3 GOODWILL

Day Description

31.12.2009 31.12.2008

Apator Control Sp. z o.o. 75 75 Apator Kfap Sp. z o.o. 341 533 Apator GmbH - - Apator Rector Sp. z o.o. 20 513 20 513 Apator PoWoGaz S.A. 17 514 17 514 Apator Telemetria Sp.z o.o. 1 832 - Apator Metroteks (Ukraine) 333 - Net goodwill 40 608 38 635

Description Value

Gross balance value at 01.01.2008 751 Increase of value due to take over of Grupa PoWoGaz 17 514 Increase of value due to take over of Rector 20 513 Decrease of value due to the sale of subsidiary (-) - Increase of value due to adjustments resulting of later taking - Decrease of value due to adjustments resulting from later taking (-) - Net foreign exchange differences calculated from financial statement to the currency of presentation - Other changes in balance value - Gross balance value at 31.12.2008 38 778 Write downs due to depreciation at 01.01.2008 143 Write downs due to deprecation taken during the period - Other changes - Write downs due to deprecation at 31.12.2008 143 Net goodwill at 31.12.2008 38 635

Gross balance value at 01.01.2009 38 778 Increase of value due to take over the subsidiary - Apator Telemetria 1 832 Increase of value due to take over the subsidiary Apator Metroteks 333 Decrease of value due to sale of subsidiary (-) - Increase of value due to adjustments resulting due to later taking - Decrease of value due to adjustments resulting from later taking (-) - Foreign exchange differences from translation of financial statement to the currency of presentation - Other changes in balance value - Gross balance value at 31.12.2009 40 943 Write downs due to depreciation at 01.01.2009 143 Write downs due to depreciation taken during the period (Apator Kfap) 192 Other changes - Write downs due to depreciation at 31.12.2009 335 Net goodwill at 31.12.2009 40 608





NOTE NO. 4

PROPERTY, PLANT AND EQUIPMENT

Description Lands,buildings

and constructions

Machines and

equipment

Means of transportation

Other fixed assets Total

Net balance value at 01.01.2008 32 223 21 365 2 998 14 271 70 857 Increase of value due to take over of Rector 140 698 189 14 1 041 Increase of value due to take over of Powogaz 27 097 16 460 897 17 303 61 757 Increase of value due to acquisition 31 2 459 1 831 2 883 7 204 Increase of value due to modernization 649 88 7 798 1 542 Increase of value due to own manufacturing - 24 - 39 63 Increase of value due to reclassification 1 070 - - - 1 070 Increase of value due to acquisition of ST from leasing - - 638 - 638 Decrease of value due to sale - (8 146) (1 001) (6) (9 153) Decrease of value due to liquidation (25) (998) (123) (1 939) (3 085) Increase of value due to reclassification - (1 070) - - (1 070) Amortization for the period (1 342) (5 462) (1 300) (4 643) (12 747) Redemption on the day of take over of Rector (42) (533) - (12) (587) Redemption on the day of take over of Powogaz (565) (12 721) (617) (15 975) (29 878)

Increase of amortization charges due to sale - 7 913 837 6 8 756

Increase of amortization charges due to liquidation 20 946 101 1 906 2 973

Increase of amortization charges due to reclassification (823) 823 - - - Net balance value at 31.12.2008 58 433 21 846 4 457 14 645 99 381 Net balance value at 01.01.2009 58 433 21 846 4 457 14 645 99 381 Increase of value due to take over of Apator Telemetria - 66 15 - 81 Increase of value due to take over of Apator Metroteks - - - 2 2 Increase of value due to acquisition - 4 109 650 5 179 9 938 Increase of value due to modernization 268 154 - 437 859 Increase of value due to own technology - 311 - 278 589 Increase of value due to take over of ST from leasing - - 568 - 568 Decrease of value due to sale (1 534) (5 427) (953) (119) (8 033) Decrease of value due to liquidation (19) (1 508) - (4 559) (6 086) Change of value due to reclassification (2 606) (1 979) - (171) (4 756) Write downs due to depreciation - - - (32) (32) Reversal of write downs - - - 364 364 Amortization for the period (1 481) (5 969) (1 542) (4 940) (13 932) Redemption on the day of take over of Apator Telemetria - (15) (8) - (23)

Increase of amortization charges due to sale 160 4 991 819 116 6 086

Increase of amortization charges due to liquidation 10 1 467 - 4 557 6 034 Increase of value due to reclassification 184 1 535 10 87 1 816

Increase of amortization charges due to fate loss - - - - - Net balance value at 31.12.2009 53 415 19 581 4 016 15 844 92 856

Status at 31.12.2008 Gross balance value 68 466 80 259 8 261 81 717 238 703

Sum of current redemption and write downs (10 033) (58 413) (3 804) (67 072) (139 322)





Description Lands,buildings

and constructions

Machines and

equipment



Net balance value 58 433 21 846 4 457 14 645 99 381 Status at 31.12.2009

Gross balance value 64 575 75 985 8 541 82 764 231 865

Sum of current redemption and write downs (11 160) (56 404) (4 525) (66 920) (139 009)

Net balance value 53 415 19 581 4 016 15 844 92 856 Table is not in accordance with the balance since the balance item „Property ,plant and equipment does not include advance payments for fixed assets under construction and their write downs and the settlement of subsidy.

Description – Status at the day: 31.12.2009 31.12.2 008 Fixed assets under construction 4 574 2 168 Advance payments for fixed assets 232 565 Write downs - (194) Settlement of subsidy (42) (51) Total 4 764 2 488

Grupa has got fixed assets presented off balance and used based on leasing and renting contracts.

Description – Status at the day: 31.12.2009 31.12.2 008 Computer equipment 351 351 Cars 595 - Total 946 351

Write downs for fixed assets are presented in the table below.

WRITE DOWNS DUE TO DEPRECIATION

Lands,buildings and constructions under construction

Machines and

equipment


Other fixed

assets Total

Value of write downs at 01.01.2009 262 342 - 388 992 Write down due to depreciation taken in income statement and directly referred to equity during the period

- - - 32 32 Amount of reversal of write downs due to depreciation taken in income statement and directly referred to equity during the period

- - - (364) (364) Value of write downs at 31.12.2009 262 342 - 56 660

Since part of the companies of Capital Group APATOR has not evaluated in reliable manner the right to perpetual usufruct of land acquired based on administrative decision they take them in off balance items. The value of the right to perpetual usufruct of land of Grupa APATOR they assumed the evaluation based on administrative decision to establish the annual fee for the use of the above right. Additional information on tangibles is presented in the table below.

Description – Status at the day: 31.12.2009 31.12.2008 Subsidiary - FAP PAFAL SA 1.549 1.549

Hedging of property, plant and equipment:





Subsidiary - APATOR METRIX S.A. has got the hedging of property, plant and equipment – the stand for legalization of water meters of book value of 134 000 PLN (bank guarantee – the contract dated 27th October 2006 ) Additional information on property, plant and equip ment

Description – Status at the day: 31.12.2009 31.12.2008

Balance value of temporary unused property, plant and equipment 56 405

Gross balance value of all completely amortized property, plant and equipment being still in use 67 426 67 916

Balance value of property, plant and equipment withdrawn from use and not qualified as held for sale - -

Information on property,plant and equipment being in use for social activity is presented in the table below.

Description

Lands,buildings and constructions under construction

Machines and

equipment



Net balance value at 01.01.2008 5 203 6 - 268 5 477 Increase of value due to acquisition 209 4 - - 213 Amortization (118) (3) - (32) (153) Net balance value at 31.12.2008 5 294 7 - 236 5 537 Net balance value at 01.01.2009 5 294 7 - 236 5 537 Increase of value due to acquisition - - - 158 158 Amortization (119) (1) - (42) (162) Net balance value at 31.12.2009 5 175 6 - 352 5 533

Status at 31.12.2008 Gross balance value 5 791 35 - 342 6 168 Sum of current redemption and write downs (497) (28) - (106) (631) Net balance value 5 294 7 - 236 5 537

Status at 31.12.2009 Gross balance value 5 791 35 - 500 6 326

Sum of current redemption and write downs (616) (29) - (148) (793)

Net balance value 5 175 6 - 352 5 533

NOTE NO. 5 INVESTMENT PROPERTY

For the period Description Since 1.01.2009

till 31.12.2009 Since 1.01.2008 till 31.12.2008

Value at the begining of the period 1 381 1 253

Increase (decrease) of fasir value 13 128

Qualified to investment property - -

Sale - -

Vale at the end of the period 1 394 1 381 Parent company of GRUPA APATOR has qualified as investment property the land with buildings purchased that it gave for renting to not affiliated entities. The fair value of investment property of APATOR S.A. at 31st December 2009 was calculated based on evaluation carried out on that day by Property Expert - mgr Wiesław Wolant (independent expert not connected with the Company). The expert has got suitable qualifications and experience to carry out the evaluation of property. The evaluation of investment property of the Company was carried out by reference to market prices regarding similar property.





All investment property of APATOR S.A. is its possession.

NOTE NO. 6 INVESTMENTS IN ASSOCIATED ENTITIES

APATOR S.A. has in possession 50% of shares in associated entity- Apator-Elektro with headquarters in Moscow. Shares in the entity have been evaluated by equity method for the amount of 204 000 PLN. Subsidiary - APATOR METRIX S.A. has in possession 24% of shares in METCOM KFT with headquarters in Hungary. Effective share of APATOR S.A. in associated entity indirectly is 24%. The company is dealing with the sales of gas meters in Hungary manufactured by APATOR METRIX S.A. In 2008 was co0nsolidated by equity method. The shares in the company have been evaluated for the amount of 28 000 PLN. Subsidiary - APATOR POWOGAZ has in possession 44,06% shares in Teplovodomer with the headquarters in Moscow. The shares of the company have been evaluated by equity method for the amount of 1.361 000 PLN.

Name of the company Headquarters Percentage of shares

Percentage of votes

Method of consolidation

Apator Elektro Russia 50,00% 50,00% Equity method

METCOM KFT Hungary 24,00% 24,00% Equity method

Teplovodomer Russia 44,06% 44,06% Equity method

Description Apator Elektro Metcom Kft Teplovodomer (*) Total

2008

Fixed assets 296 7 551 854 Current assets 2 072 155 6 389 8 616 Long term liabilities 0 0 0 0 Short term liabilities 2 170 52 3 777 5 999 Net assets 198 110 3 163 3 471 Share of Grupa in net assets 99 26 1 394 1 519 Total revenue 13 196 150 17 564 30 910 Net profit -77 -13 297 207 Share of Grupa in net profit -39 -3 131 89

2009

Fixed assets 180 4 374 558 Current assets 2 962 348 5 231 8 541 Long term liabilities 0 0 0 0 Short term liabilities 2 734 237 2 517 5 488 Net assets 408 115 3 088 3 611 Share of Grupa in net assets 204 28 1 361 1 593 Total revenue 11 606 456 21 477 33 539 Net profit 222 9 107 338 Share of Grupa in net profit 111 2 47 160

NOTE NO. 7 SHARE IN COMMON VENTURES

Capital group of APATOR has no shares in common ventures.

NOTE NO. 8 FINANCIAL ASSETS AVAILABLE FOR SALE AND HELD FOR TRADING

Information on financial assets available for sale and financial assets held for trading has been presented in the table.





Day

Description 31.12.2009 31.12.2008

Financial assets available for sale - -

… - -

Financial assets held for trading 1 637 348

Bills of exchange 297 347

Shares of Energoaparatura Katowice 1 1

Evaluation of derivatives 1 339 -

The comparison of balance values and fair values of financial instruments (except trade receivables and trade liabilities) has been presented in the table.

Balance value at Fair value at Description

31.12.2009 31.12.2008 31.12.2009 31.12.2008

Financial assets Financial assets available for sale - - - - Financial assets held for trading 1 637 348 1 637 348 Other short term financial assets - - - - Other financial assets (long term ones) - - - - Financial liabilities Bank loans and borrowings 60 614 65 027 60 614 65 027

Liabilities due to financial leasing, contracts on tenancy with option of purchase and contracts with deferred payment 814 643 814 643 Liabilities due to purchase of own shares - 24 - 24 Liabilities due to derivatives 524 25 260 524 25 260 Liabilities due to earlier settlement of the options 2 560 - 2 560 - Preferred shares redeemed convertible to ordinary shares - - - -

NOTE NO. 9 DERIVATIVES

GRUPA APATOR – dominant entity ING optional strategy At 31st December 2009 Apator had in its possession the transaction of optional strategy of OTC market concluded on 25th August 2008 with ING Bank Śląski S.A. based on the frame contract. Totally, strategy concluded with ING Bank Śląski consists of 210 operations of Currency Options – 105 options put and 105 options call. Conditions of the strategy:

• Amount and currency Put – 50 000 Eur (totaly 5.250 000 Eur) • Amount and currency Call – 100 000 Eur (totaly10.500 000 Eur) • Exchange rate – 3,4600 • Barrier – 3,2050 • Date of performance – since 28th August 2008 till 26th August 2010 • Fees – zero cost transaction

On 14th October 2008 APATOR S.A. made the move of 1 option call with the date of performance on 16th October 2008. Conditions:

• Amount and currency Call – 100 000 Eur • Exchange rate – 3,4600 • Barrier – 3,4300 • Date of performance – 16th April 2009

The transaction has expired – inter bank market the exchange rate reached the level of barrier. On 21st October 2008 APATOR S.A. made the move of 1 option call with the date of performance on 23rd October 2008. Conditions:

• Amount and currency Call – 100 000 Eur • Exchange rate – 3,4600





• Barrier – 3,4140 • Date of performance – 23rd April 2009

On 12th November 2008 APATOR S.A. made the move of 6 options call with the date of performance since 14th November 2008 till 18th December 2008.Conditions:

• Amount and currency Call – 100 000 Euro (totally 600 000 Eur) • Exchange rate – 3,4800 • Barrier – 3,2050 • Date of performance – since 5th February 2009 till 12th March 2009.

In 2008 10 currency operations of optional strategy transactions were settled – with profit in amount of 52 000 PLN and loss in amount of 87 000 PLN. The other not settled currency operations (94 options) were evaluated for the amount of -6.098 000 PLN. In the period since January till December 2009, 60 currency operations of optional strategy in accordance with the contract concluded were settled in time with the loss of 4.594 000 PLN. The evaluation value taken to the cost in 2008 was -3.888 000 PLN. The influence on the result of 2009 has the difference in amount of -706 000 PLN (loss in result account). At the same time Apator SA made the decision on earlier settlement of 17 operations of optional strategy: Under the contract concluded on 16th November 2009 4 currency operations that dates of performance were on: 8th July 2010, 15th July 2010, 22nd July 2010 and 29th July 2010 were settled on 16th November 2009 with the loss of -233 000 PLN. The evaluation value taken into costs 2008 was -260 000PLN. The influence on the result in 2009 has the difference in amount of +27 000 PLN (profit in results account).

• Under the contract concluded on 18th November 2009 5 currency operations that the date of performance was on: 3rd June 2010, 10th June 2010, 17th June 2010, 24 June 2010, and 1st July 2010 were settled on 20th November 2009 with the loss in amount of -302 000 PLN. The evaluation value taken into costs in 2008 was -325 000 PLN. The influence on result has the difference in amount of +23 000 PLN (profit in results account).

• Under the contract concluded on 3rd December 2009,4 currency operations that the dates of performance were on: 5th August 2010, 12th August 2010, 19th August 2010 and 26th August 2010 were settled on 3rd December 2009 at loss in amount of -235 000 The evaluation was taken to the costs in 2008 was -260 000 PLN. The influence on the result has the difference in amount of +25 000 PLN. (profit in income statement).

• Under the contract concluded on 3rd December 2009 4 currency operations that the dates of performance were on: 6th May 2010, 13th May 2010, 20th May 2010 and 27th May 2010 were settled on 3rd December 2009 with the loss in amount of -230 000 PLN. The evaluation was taken into the costs in 2008 was -260 000 PLN. The influence on the result has the difference in amount of +30 000 PLN (profit in income statement).

• Under the contract concluded on 7th December 2009 4 currency operations that the dates of performance were on: 8th April 2010, 15th April 2010, 22nd April 2010 and 29th April 010 were settled on 7th December 2009 with the loss in amount of -206 000 PLN. The evaluation value taken into costs in 2008 was -260 000 PLN. The influence on the result has the difference in amount of +54 000 PLN (profit in income statement).

• Under the contract concluded on 7th December 2009 4 currency operations that the dates of performance were on: 4th March 2010, 11th March 2010, 18th March 2010, 25th March 2010 and 1st April 2010 were settled on 7th December 2009 with the loss in amount of -254 000 PLN. The evaluation value taken into costs in 2008 was -325 000 PLN. The influence on the result has the difference in amount of +71 000 PLN (profit in income statement).

At 31st December 2009 some currency operations were not settled (8 options call) they were evaluated for the amount of -500 000 PLN. The evaluations taken into costs in 2008 was -520 000 PLN. The influence on the result in 2009 has the difference in amount of 20 000 PLN. (profit in income statement) The evaluation of liabilities due to not settled optional transactions was carried out by the independent company - Financial Markets Center Management Sp. z o.o. Transaction of purchase of currency (Bank Handlowy) On 23rd October 2008 APATOR S.A. and Bank Handlowy concluded the transaction on unreal cumulative hedging purchase of convertible currency by Bank. Conditions of the transaction concluded:

• Amount and currency of hedging transaction – 350 000 Eur (1.400 000 Eur) • Additional amount and currency of hedging transaction – 700 000 Eur (2.800 000 Eur) • Hedging exchange rate – 4,0000 • Conversion exchange rate – 3,500





• Date of settlement – since 30th December 2008 till 30th September 2009. On 16th March 2009 the agreement on restructuring was concluded based on it APATOR S.A. closed the hedging transaction of the purchase of convertible currency for the amount of 1.171 000 PLN. The amount due to the bank is paid according to agreed time-table in three instalments at the end of each quarter (i.e. 31st March 2009, 30th June 2009 and 30th September 2009). The evaluation value taken into costs in 2008 was -231 000 PLN. The influence on the result in 2009 has the difference in amount of -940 000 PLN (loss in income statement). Currency transactions (Raiffeisen Bank) On 20th September 2009 APATOR SA concluded two forward transactions with Raiffeisen Bank Polska Spółka Akcyjna with the headquarters in Warsaw. Conditions of the first transaction were as follows:

• Amount and currency purchased – 2.436 000 PLN • Amount and currency sold – 565 000 Eur • Day of completion of transaction – 26th November 2010 • Hedging exchange rate – 4,312

Conditions of the second transaction: • Amount and currency purchased – 2.443 000 PLN • Amount and currency sold – 565 000 Eur • Day of completion of transaction – 29th December 2010 • Hedging exchange rate – 4,324

On 7th October 2009 APATOR SA concluded forward transaction with Raiffeisen Bank Polska SA. Conditions of transaction:

• Amount and currency purchased – 2.430 000 PLN • Amount and currency sold – 565 000 Eur • Day of completion of transaction – 27th October 2010 • Hedging exchange rate – 4,3015

On 12th October 2009 APATOR SA concluded forward transaction with Raiffeisen Bank Polska SA. Conditions of transaction:

• Amount and currency purchased – 2.448 000 PLN • Amount and currency sold – 565 000 Eur • Day of completion of transaction – 28th September 2010 • Hedging exchange rate – 4,3322

On 9th December 2009 APATOR S.A. concluded forward transaction with Raiffeisen Bank Polska S.A. Conditions of transaction:

• Amount and currency purchased – 2.100 000 PLN • Amount and currency sold – 500 000 Eur • Day of completion of transaction – 31st August 2010 • Hedging exchange rate – 4,2000

On 15th December 2009 APATOR S.A. concluded forward transaction with Raiffeisen Bank Polska S.A. Conditions of transaction:

• Amount and currency purchased – 2.105 000 PLN • Amount and currency sold – 500 000 Eur • Day of completion of transaction – 30th July 2010 • Hedging exchange rate – 4,2100

At 31st December 2009 not settled forward transactions were evaluated for the amount 347 000 PLN. The evaluation value was taken into financial revenues for 2009. The evaluation was carried out by independent company - Financial Markets Center Management Sp. z o.o. Currency transactions (Bank Handlowy) In 2009 transactions on immediate exchange of currency were concluded and settled with the profit in amount of 867.000 PLN.





Information summarizing the result on derivatives i n dominant entity APATOR SA

Description since 01.01.2009 till 31.12.2009

since 01.01.2008 till 31.12.2008

Revenues: 1 214 1 332 - performance 867 1 784

Bank Handlowy 867 1 732 ING Bank Śląski - 52 Raiffeisen Bank Polska S.A. - -

- evaluation at the end of the period 347 - Bank Handlowy - - ING Bank Śląski - - Raiffeisen Bank Polska S.A. 347 -

- evaluation at the beginning of the period - (452) Bank Handlowy - (452)

Costs: 1 396 6 524 - performance 7 225 228

Bank Handlowy 1 171 141 ING Bank Śląski 6 054 87 Raiffeisen Bank Polska S.A. - -

- evaluation at the end of the period 500 6 329 Bank Handlowy - 231 ING Bank Śląski 500 6 098 Raiffeisen Bank Polska S.A. - -

- evaluation on the beginning of the period (6 329) (33) Bank Handlowy (231) (33) ING Bank Śląski (6 098) -

Result on derivatives (182) (5 192) FAP PAFAL SA – subsidiary In 2009 the Company was settling the hedging transactions concluded in 2008 . The breakdown of not performed optional transactions and forward contracts at 1.01.2009 in 000’ EUR :

Bank Options put Options call Forward

Bank Handlowy 5 650 6 100 500 BZ WBK 2 400 6 000 0 BPH 1 800 3 350 500 Total 9 850 15 450 1 000

During the financial year all hedging transactions in opening balance were settled. Statement on total revenues prepared for the reporting period shows in financial cost the negative result of hedging transactions performed in value of 17 239 510,00 PLN . The result includes the performance of contracts and optional transactions concluded by the Company in 2008 and closing of contracts before the deadline according to the following breakdown: 1. concluded on 13.06.2008 with BH optional transaction for 43 pieces of forward option with prolonged exclusion 50/100 000 EUR (conditions: EUR/PLN <3,36 compensation 1000 PLN, 3,36<EUR/PLN<3,50 sale 50 000 EUR at 3,50, EUR/PLN>3,60 sale 100 000 EUR at 3,50, on 30.12.2008 fixing EUR/PLN>3,50 prolongation of transaction by 12 months for the amount of 100 000 EUR at 3,50, lower exchange rate 3,3250) settled in the period 27.01-13.03.2009 3 pieces of option for the amount of 300 000 EUR, loss in transaction -305 724,00 PLN





2. concluded on 7.08.2008 with BH optional transaction for 26 pieces of forward option with prolonged exclusion 50/100 000 EUR (conditions: EUR/PLN <3,20 sale 50 000 EUR at 3,20, 3,20<EUR/PLN<3,35 sale 50 000 EUR at 3,35, EUR/PLN>3,35 sale 100 000 EUR at 3,28, on 21.07.2009 fixing EUR/PLN>3,28 prolongation of transaction by 12 months for the amount of 100 000 EUR at 3,28) settled in the period 6.01-3.03.2009 3 pieces of option for the amount of 300 000 EUR, loss in transaction -367 900,00 PLN 3. concluded on 13.08.2008 z BH optional transaction for 26 pieces of forward option with prolonged exclusion 50/100 000 EUR (conditions: EUR/PLN <3,19 sale of 50 000 EUR at 3,19, 3,19<EUR/PLN<3,40 sale of 50 000 EUR at 3,40, EUR/PLN>3,40 sale of 100 000 EUR at 3,30, on 4.08.2009 fixing EUR/PLN>3,30 prolongation of transaction by 12 months for the amount of 100 000 EUR at 3,30) settled in the period 20.01-13.03.2009 3 pieces of option for the amount of 300 000 EUR, loss in transaction -363 424,00 PLN 4. concluded on 17.03.2008 with BH forward contract - sale to bank EUR with nominal of 500 000 EUR on 16-03-2009 at exchange rate 3,6140, settled on 13.03.2009, loss in transaction -422 750,00 PLN 5. concluded on 13.06.2008 with BZWBK optional transaction for 11 pieces of Canadian forward option 100/200 000 EUR (conditions: EUR/PLN <3,30 sale of 100 000 EUR at 3,30, 3,30<EUR/PLN<3,4510 sale of 50 000 EUR at 3,4510, EUR/PLN>3,4510 sale of 200 000 EUR at 3,4510) settled in the period 30.01-12.06.2009 6 pieces of option for the amount of 1 200 000 EUR, loss in transaction -1 208 471,00 PLN 6. concluded on 6.08.2008 optional transaction with Bank Zachodni WBK for 12 pieces of Canadian forward option of nominal of 50/100 000 EUR in the period since 28.01.2009 till 29.12.2009 ( conditions: EUR/PLN<3,30 sale to bank 50 000 EUR at 3,30, EUR/PLN>3,30 sale to bank 100 000 EUR at 3,30) settled in the period 28.01-29.12.2009 12 pieces of option for the amount of 1 200 000 EUR, loss in transaction -1 152 260,00 PLN 7. concluded on 8.08.2008 optional transaction with Bank Zachodni WBK for 12 pieces of forward option within the limits of nominal 100/300 000 EUR for the period since 28.01.2009 till 29.12.2009 (conditions: EUR/PLN<3,08 subsidy 25 000 PLN, 3,08<EUR/PLN<3,33 sale to bank 100 000 EUR at 3,33, 3,34<EUR/PLN<3,40 sale to bank 200 000 EUR at 3,33, EUR/PLN>3,40 sale to bank 200 000 EUR at 3,33 and 100 000 EUR at 3,40) settled in the period 28.01-29.12.2009 12 pieces of option for the amount of 3 600 000 EUR, loss in transaction -3 285 406,00 PLN 8. concluded on 6.08.2008 the contract with Bank Przemysłowo-Handlowy for 3 pieces of option of nominal 100/200 000 EUR for the period since 28.01.2009 till 27.03.2009 (conditions: EUR/PLN<3,15 exclusion, 3,15<EUR/PLN<3,30 sale to bank 100 000 EUR at 3,30, EUR/PLN>3,30 sale to bank 200 000 EUR at 3,30) settled in the period 28.01-27.03.2009 3 pieces of option for the amount of 600 000 EUR, loss in transaction -817 690,00 PLN 9. concluded on 8.08.2008 the contract with Bank Przemysłowo-Handlowy for 3 pieces of option of nominal 100/250 000 EUR for the period since 28.04.2009 till 29.06.2009 on the following conditions: EUR/PLN<3,33 sale to bank 100 000 EUR at 3,33, EUR/PLN>3,33 sale to bank 250 000 EUR at 3,33. Settled in the period 28.04-29.06.2009 3 pieces of option for the amount of 750 000 EUR, loss in transaction -894 775,00 PLN 10. concluded on 21.08.2008 the contract with Bank Przemysłowo-Handlowy for 1 piece of option of nominal 100/200 000 EUR with deadline for the performance 23.02.2009 (conditions: EUR/PLN<3,20 sale to bank 100 000 EUR at 3,20, 3,20<EUR/PLN<3,35 sale expires, EUR/PLN>3,35 sale to bank 200 000 EUR po 3,35) settled on 23.02.2009 1 piece of option for the amount of 200 000 EUR, loss in transaction -271 700,00 PLN 11. concluded on 5.09.2008 z BPH optional transaction for 6 pieces of option 100/300 000 EUR (conditions: EUR/PLN< 3,30 exclusion, 3,30<EUR/PLN<3,45 sale of 100 000 EUR at 3,45, EUR/PLN>3,45 sale of 300 000 EUR at 3,45) settled in the period 28.01-26.02.2009 2 pieces of option for the amount of 600 000 EUR, loss in transaction -592 820,00 PLN 12. concluded on 18.09.2008 with Bank Przemysłowo-Handlowy the contract for 1 piece of option of nominal 200/200 000 EUR with deadline for the performance on 19.03.2009 ( conditions: EUR/PLN<3,10 sale to bank 200 000 EUR at 3,10, 3,10<EUR/PLN<3,55 option expires, EUR/PLN>3,35 sale to bank 200 000 EUR at 3,35) settled on 19.03.2009 1 piece of option for the amount of 200 000 EUR, loss in transaction -237 040,00 PLN 13. concluded on 21.10.2008 the contract with Bank Przemysłowo-Handlowy for 1 piece of option of nominal 200/500 000 EUR with the deadline of performanc3e on 21.04.2009 on the following conditions: EUR/PLN<3,00 sale to bank 200 000 EUR at 3,00, 3,00<EUR/PLN<3,4350 option expires,





EUR/PLN>3,4350 sale to bank 500 000 EUR at 3,4350- settled on 21.04.2009 1 piece of option for the amount of 500 000 EUR, loss in transaction -496 950,00 PLN 14. concluded on 19.11.2008 contract with Bank Przemysłowo-Handlowy for 1 piece of option of nominal of 500/500 000 EUR with the deadline of performance on 19.05.2009 under following conditions: EUR/PLN<3,35 sale to bank 500 000 EUR at 3,35, 3,35<EUR/PLN<3,55 option expires, EUR/PLN>3,55 sale to bank 500 000 EUR at 3,55- - settled on 19.05.2009 1 piece of option for the amount of 500 000 EUR, loss in transaction -416 050,00 PLN 15. concluded on 6.10.2008 with BPH forward contract- sale to the bank EUR of nominal 500 000 on 30.09.2009 at exchange rate 3,4750, settled on 30.09.2009, loss in transaction -336 550,00 PLN 16. on 13.03.2009 the Company concluded the agreement with Bank Handlowy, in accordance with it the parties decided to this day as the day of earlier settlement of transactions concluded on 13.06.2008, 7.08.2008 and 13.08.2008 not performed for that day. Options call have been settled: - on 13.03.2008 in amount of 1 600 000,00 EUR - on 7.08.2008 in amount of 1 800 000,00 EUR - on 13.08.2008 in amount of 1 800 000,00 EUR In total earlier settlement of the options call covered 5 200 000,00 EUR. The amount due to the bank resulting of earlier settlement of transaction included in financial costs of the I quarter of 2009 is 6 070 000,00 PLN and it is paid towards the Bank in installments, amounts and terms specified in the schedule. Unit value of installment is 116 730,00 PLN, number of installments 52, payment in the period since 2.04.2009 till 5.08.2010. At 31.12.2009 financial liability of the Company towards the Bank Handlowy due to settled currency options before the deadline is 2 568 060 PLN. At 31.12.2009 the Company had in Bank Handlowy the options put for the total amount of 1 900 000 EUR, giving the entity the right to sell EUR in the following nominal at the exchange rates: • 300 000 EUR at exchange rate 3,50, • 800 000 EUR at exchange rate 3,28, • 800 000 EUR at exchange rate 3,30. Evaluation of the above instruments made by Bank Handlowy at the end of reporting period was 941,23 PLN. Up to the moment of approval of financial statement by the Executive Board options put expired for the amount of 750 000 EUR and it remained 1 150 000 EUR. Due to the fact that the Executive Board does not expect the strengthening of Polish zloty below the level of exchange rate of the options they have not been included in the statement. Financial revenues for 2009 include the evaluation of hedging transactions of the Company against the risk of exchange rate differences in amount of 73 500,00 PLN. The evaluation was undertaken in accordance with financial policy of Grupa APATOR by independent entity entitled to undertake such type of evaluations that is Financial Markets Center Management Sp. z o.o. with headquarters in Warsaw, Stawki 2, running business based on entry to National Court register under number KRS 0000237621. The value of evaluation of not settled transactions at the end of reporting period was taken in statement on total income. Total amount of not perform hedging transactions at 31.12.2009 is 1 800 000 EUR. Information summarizing the result of derivatives in subsidiary - FAP PAFAL SA Period 2009 2008 Revenues: 74 592 - performance - 1 176 - evaluation at the end of the period 74 - - evaluation at the beginning of the period - (584) Costs: 5 096 12 931 - performance 17 232 1 208 - evaluation at the end of the period - 12 136 - evaluation at the beginning of the period (12 136) (413) Result on contracts (5 022) (12 339)





APATOR METRIX SA – subsidiary At 31st December 2008 the subsidiary - APATOR METRIX SA had optional transaction concluded with Bank Millenium on 14th July 2008 . In total , transaction concluded with Bank Millenium consisted of 24 operations of currency options included – 12 options put and 12 options call. Conditions of the transaction are as follows:

• Amount and currency Put – 100 000 Eur (in total 1.200 000 Eur) • Amount and currency Call – 200 000 Eur (in total 2.400 000 Eur) • Exchange rate – from 3,445 to 3,225 (every month it decreases by 0,02 PLN) • Date of performance – since 11th August 2008 till 13th July 2009 • Maximum cumulative profit for the Company – 50 000 PLN • Fees – transaction with no charge

The transaction includes the option of prolongation by a year if the exchange rate will reach on 13th July 2009 the value above 3,445. Conditions of the prolonged transaction:

• Amount and currency Put – 100 000 Eur (in total 1.200 000 Eur) • Amount and currency Call – 200 000 Eur (in total 2.400 000 Eur) • Exchange rate – 3,445 • Date of performance – since 11th August 2009 till 12th July 2010 • Fees – transaction with no charge

In 2008 5 operations of currency optional transactions were settled – with profit in amount of 20 000 PLN and loss in amount of 201 000 PLN. Outstanding not settled currency options (19 options) have been evaluated for the amount of -2.751 000 PLN. In the period since January till December 2009 outstanding 19 currency operations of optional strategy were settled at loss of 3.869 000 PLN. Evaluation was taken in charge of costs of 2008 and it was -2.751 000 PLN. The influence on the result of 2009 has the difference in value of -1.118 000 PLN. At 31st December 2009 the Company does not have not settled currency transactions. The evaluation of liabilities due to no settled optional transactions was undertaken by independent entity Financial Markets Center Management Sp. z o.o. Information summarizing the result of derivatives i n subsidiary - APATOR METRIX SA Period 2009 2008 Revenues: - 70 - performance - 70 - evaluation at the end of the period - - - evaluation at the beginning of the period - - Costs: 1 118 2 952 - performance 3 869 201 - evaluation at the end of the period - 2 751 - evaluation at the beginning of the period (2 751) - Result on contracts (1 118) (2 882) APATOR POWOGAZ SA - subsidiary Subsidiary - Powogaz S.A. in 2009 settled all currency transactions concluded in 2008 . Forward contracts concluded in accordance with contracts with Raiffeisen Bank Polska S.A. have been settled at loss in value of 1.897 000 PLN. The evaluation taken in charge of 2008 was -1.286 000 PLN. The influence on result of current year has the difference in value of -611 000 PLN (loss in financial result). Optional transactions concluded in accordance with contracts concluded with Bank Handlowy S.A. have been settled at loss in value of 3.857 000 PLN. Evaluation taken in charge of costs of 2008 was -2.758 000 PLN. The influence on result of 2009 has the difference in value of -1.099 000 PLN (loss in financial result) In 2009 subsidiary of Apator Powogaz S.A. concluded the hedging transactions of forward type based on contracts with Raiffeisen Bank Polska S.A. on the following conditions:





Date

Conclusion of transaction

Settlement of transaction

Currency Amount in

000’ in currency

Exchange rate

2009-02-19 2009-12-28 EUR 700 4,7317

2009-03-02 2009-12-31 EUR 500 4,7601

2009-03-11 2009-12-31 EUR 500 4,6155

2009-03-11 2009-12-31 EUR 500 4,6055

2009-03-25 2010-06-30 EUR 500 4,5585

2009-03-30 2010-06-30 EUR 500 4,7160

2009-04-01 2010-06-30 EUR 500 4,6040

2009-05-11 2010-06-30 EUR 400 4,4065 At 31st December 2009 not settled hedging transactions of forward type were evaluated per balance for the amount of 894 000 PLN. The evaluation was undertaken by independent entity Financial Markets Center Management Sp. z o.o. Information summarizing the result of derivatives i n subsidiary - APATOR POWOGAZ S.A.

Period 2009 May-December

2008 Revenues: 2 262 315 - performance 1 344 605 - evaluation at the end of the period 918 - - evaluation at the beginning of the period - (290) Costs: 1 734 4 530 - performance 5 754 568 - evaluation at the end of the period 24 4 044 - evaluation at the beginning of the period (4 044) (82) Result on contracts 528 (4 215) The data of Apator Powogaz S.A. for 2008 have been presented for the period when dominant entity -APATOR S.A. supervised the subsidiary.

NOTE NO. 10 INVENTORY

Information on inventories has been presented in the tables.

Day Description

31.12.2009 31.12.2008 Materials 20 554 21 562 Manufacturing in progress 16 425 18 630 Finished products 13 418 8 499 Goods 3 199 3 036 Advance payments for deliveries 1 193 1 511

Inventories in total, including 54 789 53 238

- balance value presented in fair value and reduced by sales costs 54 789 53 238 - balance value of inventories being the hedging of liabilities 17 850 12 871

For the period Description 01.01.2009

31.12.2009 01.01.2008 31.12.2008

Value of inventories taken as the cost in the period 259 614 236 521 Write offs of the value of inventories taken as the cost in the period 1 479 8 082 Write offs of the value of inventories reversed in the period 2 597 11 912





The company in order to make the value of inventories real makes the analysis of the age structure when decisive factor is the date of coming the item in the warehouse. Based on the analysis the company makes the write downs. At the same time the companies make the analysis of inventories due to their depreciation. (conservative estimate). Information on write downs of inventories is presented in the table below .

Day Description

31.12.2009 31.12.2008 Materials 1 098 2 398 Manufacturing in progress 355 342 Finished products 503 483 Goods 727 578

Total write downs 2 683 3 801 Subsidiary - APATOR POWOGAZ S.A. at 31st December 2009 has got the pledge of products in value of 11.250 000 PLN towards Raiffeisen Bank Polska S.A. in order to hedge the contract by the limit of credibility. Subsidiary FAP PAFAL S.A. at 31st December 2009 has got the pledge of products in value of 6.600 000 PLN towards BZ WBK S.A. in order to hedge the loan contract on current account.

NOTE NO. 11 LONG TERM CONTRACTS

In 2009 subsidiary APATOR RECTOR Sp. z o.o. reached the revenues due to provision of services related to long term contracts with the following contracting parties:

• Contract (1) – Fonbud TP S.A. • Contract (2) – ZE Gdańsk ENERGA - GDA/01/2006 Implementation of SID • Contract (3) – ZE Słupsk ENERGA – ZES/01/2006 Implementation of SID • Contract (4) – ENERGA – OPERATOR ENERGA Nr 1/2008 Implementation of SID • Contract (5) – ZE Toruń U/DYR../TM/10/2008 Implementation of SID • Contract (6) – PGE Dystrybucja Warszawa Komit • Contract (7) – ZE Koszalin – Implementations PO U/2/11/2009 • Contract (8) – 1/IT4/2008 Upgrade KOMIT-GEWO Edit Teren

In 2009 indirect subsidiary APATOR TELEMETRIA Sp. z o.o. reached the revenues due to provision of services related to long term contracts with the following contracting parties:

• Contract (9) – Zakład Energetyki Cieplnej SkarŜysko Kamienna Sp. z o.o. (implementation of data radio read out system)

Information on long term contracts has been presented in the tables below.

Contract (1) Contract (2) Description For the period For the period

od 01.01.2009 do 31.12.2009

od 01.01.2008 do 31.12.2008

od 01.01.2009 do 31.12.2009

od 01.01.2008 do 31.12.2008

The revenues from the contract initially established in the contract 10 087 9 500 2 869 2 869

Amendments - - - -

Total amount of revenues from the contract 10 087 9 500 2 869 2 869

including revenues invoiced in financial year 5 855 4 232 495 1 043

Costs of the contract born till the balance day (7 634) (3 453) (1 298) (942) Costs of the contract remained for the performance of the contract - (3 107) (82) (313)

Estimated total costst of the contract (7 634) (6 560) (1 380) (1 255)

Estimated profits 2 453 2 940 1 489 1 614

The value of advancement on balance day 100% 53% 94% 75%






Description 01.01.2009 31.12.2009

01.01.2008 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

The revenues from the contract initially established in the contract 3 253 3 253 357 -

Amendments - - - -

Total amount of revenues from the contract 3 253 3 253 357 -

including revenues invoiced in financial year 691 708 159 -

Costs of the contract born till the balance day (842) (450) (215) - Costs of the contract remained for the performance of the contract (59) (318) -

Estimated total costst of the contract (901) (768) (215) -

Estimated profits 2 352 2 485 142 -

The value of advancement on balance day 93% 59% 100%


01.01.2009 31.12.2009

01.01.2008 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

The revenues from the contract initially established in the contract 1 086 - 400 -

Amendments - - - -

Total amount of revenues from the contract 1 086 - 400 -

including revenues invoiced in financial year 733 - 400 -

Costs of the contract born till the balance day (439) - (137) - Costs of the contract remained for the performance of the contract (62) - - -

Estimated total costst of the contract (501) - (137) -

Estimated profits 585 - 263 -

The value of advancement on balance day 88% 100%


01.01.2009 31.12.2009

01.01.2008 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

The revenues from the contract initially established in the contract 245 - 48 -

Amendments - - - -

Total amount of revenues from the contract 245 - 48 -

including revenues invoiced in financial year 21 - 48 -

Costs of the contract born till the balance day (3) - (189) - Costs of the contract remained for the performance of the contract (81) - - -

Estimated total costst of the contract (84) - (189) -

Estimated profits 161 - (141) -

The value of advancement on balance day 4% 100%

Contract (9) TOTAL Description For the period For the period

01.01.2009 31.12.2009

01.01.2008 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

The revenues from the contract initially established in the contract 477 - 18 822 15 622 Amendments - - - - Total amount of revenues from the contract 477 - 18 822 15 622 including revenues invoiced in financial year - - 8 402 5 983 Costs of the contract born till the balance day (53) - (10 810) (4 845) Costs of the contract remained for the performance of the contract (62) - (346) (3 738) Estimated total costst of the contract (115) - (11 156) (8 583) Estimated profits 362 - 7 666 7 039 The value of advancement on balance day 46% 97% 56%





Long term contracts Contract (1) Contract (2) Contr act (3) Contract (4)

Costs born till 31.12.2009 due to performance of the contract (7 634) (1 298) (842) (215) Reserves for losses taken till 31.12.2009 - - - - Costs born adjusted by taken reserves for losses (7 634) (1 298) (842) (215) Amounts invoiced till 31.12.2009 10 087 2 536 2 746 357

Result of the contract taken till 31.12.2009 according to the values invoiced 2 453 1 238 1 904 142

Not invoiced revenues on balance day according to the degree of advancement - 162 292 - Profits (losses) taken till 31.12.2009 2 453 1 400 2 196 142 Prepayments of revenues - - - - Receivables on balance day 446 529 220 -

Long term contracts Contract (5) Contract (6) Contr act (7) Contract (8)

Costs born till 31.12.2009 due to performance of the contract (439) (137) (3) (189) Reserves for losses taken till 31.12.2009 - - - - Costs born adjusted by taken reserves for losses (439) (137) (3) (189) Amounts invoiced till 31.12.2009 742 400 21 48

Result of the contract taken till 31.12.2009 according to the values invoiced 303 263 18 (141)

Not invoiced revenues on balance day according to the degree of advancement 209 - - - Profits (losses) taken till 31.12.2009 512 263 18 (141) Prepayments of revenues - - 13 - Receivables on balance day 59 - 26 -

Long term contracts Contract (9) TOTAL

Costs born till 31.12.2009 due to performance of the contract (53) (10 810) Reserves for losses taken till 31.12.2009 - - Costs born adjusted by taken reserves for losses (53) (10 810) Amounts invoiced till 31.12.2009 - 16 937

Result of the contract taken till 31.12.2009 according to the values invoiced (53) 6 127

Not invoiced revenues on balance day according to the degree of advancement 219 882 Profits (losses) taken till 31.12.2009 166 7 009 Prepayments of revenues - 13 Receivables on balance day 219 1 499

NOTE NO. 12

TRADE RECEIVABLES AND OTHER ONES Information on trade receivables and other ones has been presented in the table.

Day Description 31.12.2009 31.12.2008

Trade receivables 66 062 68 963

Current receivables 49 868 52 486

Overdue receivables till 1 month 7 785 9 798

Overdue receivables from 1 month to 3 months 5 581 4 968

Overdue receivables from 3 months to 6 months 2 974 1 616

Overdue receivables from 6 months to 1 year 948 691

Overdue receivables over 1 year 1 757 3 935

Evaluation of receivables – current value - -

Write downs of trade receivables value (2 851) (4 531)

Other receivables 6 627 8 585 Receivables due to sales of investments and fixed assets – long term 133 251





Day Description 31.12.2009 31.12.2008

Receivables due to long term hedging 113 -

Discount of long term receivables (27) (20)

Receivables due to sales of shares – short term ones 48 -

Receivables due to income tax of legal persons 923 411

Receivables due to VAT, customs and other taxes 1 117 1 812

Receivables due to fixed assets sold and value of intangibles 2 484 634

Other receivables 1 465 1 039

Prepayments – advance payments for purchase of services 561 1 526

Deposits for hedging of the options - 3 266

Disputable claims - 147

Write downs of the value of other receivables (190) (481)

Total receivables, including 72 689 77 548

- long-term part 219 253

- short-term part 72 470 77 295

Total receivables, including 72 689 77 548

- to affiliated entities 2 592 1 649

- to other entities 70 097 75 899 Write downs of receivables value have been presented in the table below:

Day Write downs of receivables

31.12.2009 31.12.2008 Value at the beginning of the period 5 012 5 461 Increase - establishment 7 656 2 136 Increase – write downs of subsidiaries on the day of take over - - Write down in revenues of unused amounts (7 127) (2 124) Cancelled (2 500) (461) Value at the end of the period 3 041 5 012

NOTE NO. 13 CASH AND ITS EQUIVALENTS

Cash in bank bears variable interest rates. Short term deposits are located for different periods from one to three months depending on current needs of the Companies for cash and they bear interest rates according to established ones.

Description 31.12.2009 31.12.2008

Cash in cash office 67 73

Cash on bank accounts 8 017 15 592

Short-term deposits 2 150 4 543

Cash in process - -

Total cash and its equivalents 10 234 20 208 At 31st December 2009 cash held on deposit in amount of 650 000 PLN was alienated towards Bank Millenium for hedging of the guarantee granted by the Bank for good performance of the contract by subsidiary- Rector Sp. z o.o. for Fonbud Sp. z o.o.

NOTE NO. 14 FIXED ASSETS HELD FOR SALE

In 2008 in subsidiary FAP Pafal S.A. the decision was made to sell the shares of Gran Systema Pafal Sp. z o.o. (Belarus) to its partners. Therefore the above shares of the value of 42 000 PLN at 31st December 2008 have been presented in item „fixed assets held for sale”. On 12th May 2009 subsidiary FAP PAFAL





S.A. sold all its shares to the partners for the amount of 17 000 USD. FAP PAFAL S.A. had 50% of shares of nominal value of 15 000 USD. Subsidiary - APATOR POWOGAZ S.A. based on the resolution of the Supervisory Board dated 14th December 2009 held for sale the properties with machines and equipment in Pniewy. Property plant and equipment held for sale have been evaluated by independent property expert – The Chambers - Lis, Mizera i Wspólnicy with headquarters in Poznań. Fixed assets held for sale were evaluated according to lower one from two values: balance value or fair value reduced by sales costs.

Description Balance value Evaluation of the expert

Write down Value of fixed assets held for sale

Lands, buildings and constructions 2 422 2 491 30 2 392 Machines and equipment 419 974 61 358 Means of transportation - - - - Other fixed assets 83 106 - 83

Total 2 924 3 571 91 2 833

NOTE NO. 15 SHARE CAPITAL

Information on share capital has been presented in the tables.

Day Description

31.12.2009 31.12.2008

Number of shares 35 107 028 35 293 500

Nominal value of share (PLN / share) 0,10 0,10

Share capital 3 511 3 529

For the period Description 01.01.2009

31.12.2009 01.01.2008 31.12.2008

Share capital at the beginning of the period 3 529 3 529 Increase of share capital in the period - -

… - -

Decrease of share capital in the period 18 -

Redemption of own shares 18 -

Share capital at the end of the period 3 511 3 529 The General Shareholders Meeting on 8th June 2009 adopted the Resolution no.17/2009 on reduction of the value of share capital of APATOR S.A. from the amount of 3.529.350,00 PLN to the amount of 3.510.702,80 PLN that is by the amount of 18.647,20 PLN. According to the resolution the reduction of share capital is made by redemption of 186.472 bearer shares of APATOR S.A. of A, B and C series of nominal value 0,10 PLN each and marked by the National Depository of Securities with the code PLAPATR00018. Shares have been purchased by APATOR S.A. for their redemption based on Resolution no.14/2007 of General Shareholders Meeting dated 11th June 2007 and Resolution no.19/2008 of General Shareholders Meeting dated 23rd June 2008. On 18th November 2009 APATOR S.A. received the verdict of Regional Court in Toruń, VII Economic Department of National Register Court and based on it the registration took place on 13th November 2009 of reduction of share capital of the Company from the amount of 3.529.350,00 PLN to the amount of 3.510.702,80 PLN that is by the amount of 18.647,20 PLN. The reduction of capital was carried out according to art. 359 §1 and §2 of the Polish Commercial Companies Code and §11 of the Statute of APATOR S.A. by redemption of 186.472 own shares of the Company acquired for their redemption. The structure of shareholders at 31st December 2009 has been presented in the table.





Description Shares Votes % of shares % of votes

Apator Mining Sp. z o.o. 6 600 000 6 600 000 18,80% 11,28% Persons holding over 5% 7 822 457 21 895 001 22,28% 37,43%

Mariusz Lewicki 2 014 000 5 507 776 5,74% 9,42% Tadeusz Sosgórnik 1 900 503 4 879 809 5,41% 8,34% Danuta Guzowska 1 520 279 4 382 921 4,33% 7,49% Zbigniew Jaworski 1 327 107 3 609 651 3,78% 6,17% Janusz Marzygliński 1 060 568 3 514 844 3,02% 6,01%

Others 20 684 571 30 002 274 58,92% 51,29% TOTAL 35 107 028 58 497 275 100% 100%

At the day of passing to MSSF/MSR Grupa APATOR made calculations of equity occurred in hyperinflation. In opinion of the Executive Board of the Company some doubts can arise the taking in the balance already mentioned hyperinflation corrections as not covered loss from previous years in the situation when it regards the events from several years ago and corresponding profits were distributed prior the date of preparation of the financial statement. Moreover, it is not clear if possible taking of hyperinflation correction causes the effects based on the Polish Commercial Companies Code regarding dividend or conditions when it is necessary to adopt the resolution concerning the living of the entity longer. In such situation in opinion of the Executive Board taking the hyperinflation correction directly in the balance could be misleading for the readers of financial statement and therefore appropriate amounts have been presented in the note.

Day Description

31.12.2009 31.12.2008

Share capital 3 511 3 529

Hyperinflation correction 3 806 3 806

Share capital after translation 7 317 7 335

Reserve capital 108 247 65 894

Hyperinflation correction 38 38

Supplementary capital after translation 108 285 65 932

Undistributed financial result 22 308 53 475

Hyperinflation correction (3 844) (3 844) Undistributed financial result after translation 18 464 49 631

In order to calculate the equity in hyperinflation the following price ratios have been taken into consideration:

Year Ratio 1993 135,3 1994 132,2 1995 127,8 1996 119,9

NOTE NO. 16 OTHER CAPITALS

Information on other capitals has been presented in the table.

Description Own shares Supplementary capital

Capital from revaluation

Other reserve capitals

Total

Value at 01.01.2008 (5 914) 71 718 6 169 5 362 77 335 Increases since 01.01 till 31.12.2008 (1 475) 20 601 - 16 000 35 126

Distribution of the result - 20 601 - - 20 601 Purchase of own shares (1 475) - - - (1 475) Establishment of reserve capital - - - 16 000 16 000

Decreases since 01.01 till 31.12.2008 - 26 425 - - 26 425





Description Own shares Supplementary capital

Capital from revaluation

Other reserve capitals

Total

Establishment of reserve capital - 16 000 - - 16 000 Cover of the loss from supplementary capital - 10 425 - - 10 425

Value at 31.12.2008 (7 389) 65 894 6 169 21 362 86 036 Value at 01.01.2009 (7 389) 65 894 6 169 21 362 86 036 Increases since 01.01 till 31.12.2009 (557) 45 317 - - 44 760

Distribution of the result - 45 317 - - 45 317 Purchase of own shares (557) - - - - Establishment of reserve capital - - - - -

Decreases since 01.01 till 31.12.2009 (2 032) 2 964 - 2 014 2 946 Cover of the loss from supplementary capital - 2 962 - - 2 962 Payment of dividend - - - - - Changes due to redemption of shares of Wodpol - 2 - - 2 Redemption of own shares (2 032) - - 2 014 (18) Reserve capital establishment - - - - -

Value at 31.12.2009 (5 914) 108 247 6 169 19 348 127 850 Profit distribution (cover loss) in entities in Capi tal Group APATOR . Dominant entity in GRUPA APATOR According to the Resolution No 11/2009 of General Shareholders Meeting of APATOR S.A. dated 8th June 2009 net profit was distributed for financial year 2008 in amount of 34.607.242,33 PLN in the following manner:

• dividend 12.296.304,90 PLN, • supplementary capital 22.310.937,43 PLN.

Towards expected dividend from the profit for financial year 2008 the advance payment was paid in total amount 3.519.547,90 PLN that is 0,10 PLN per share. For the advance payment towards expected dividend were entitled 35.195.479 registered shares of A series and bearer shares of A, B and C series. In payment of advance payment towards expected dividend did not take part 98.021 own shares acquired for the redemption. The rights to receive the advance payment towards the dividend for financial year 2008 have obtained the shareholders holding shares APATOR SA on 5th December 2008. The payment of the advance payment was made on 12th December 2008. The rights to the payment of the other part of dividend were entitled 35.107.028 registered shares of A series and bearer shares of A, B and C series. In the payment of the other part of dividend did not take part 186.472 own shares of APATOR S.A. purchased for the redemption. The rights to other part of dividend in total amount of 8.776.757,00 PLN have obtained the shareholders holding the shares of APATOR S.A. on 29th June 2009 . The payment of the other part of dividend in amount of 0,25 PLN per share was made on 14th July 2009. In accordance with the Resolution No. 12/2009 of General Shareholders Meeting of APATOR S.A. dated 8thJune 2009 the financial result from previous years was distributed in amount of 110.326,69 PLN destining it in whole to supplementary capital. Subsidiary - APATOR MINING Sp. z o.o. According to the resolution 8/2009 of Ordinary Partners Meeting of APATOR MINING Sp. z o.o. dated 30th March 2009 the profit distribution of amount of 11.119.422,74 PLN was made in the following manner:

• dividend 8.942.000,00 PLN, • supplementary capital 2.177.422,74 PLN

Right to dividend was fixed on the day of General Partners Meeting to be held that is on 30th March 2009 The payment of dividend is presented as follows:

� Amount of 2.630.000,00 PLN as advance payment was paid on 24th November 2008 according to the Resolution of General Partners meeting no. 1/2008 dated 21st October 2008 ,

� Amount of 6.312.000,00 PLN was paid in two instalments: • 1.052.000,00 PLN on 31st March 2009 ; • 5.260.000,00 PLN on 28th May 2009





On 2nd December 2009 the Executive Board of APATOR MINING Sp. z o.o. adopted the Resolution No. 1/2009 on payment of advance payment towards the dividend. In accordance with adopted resolution the advance payment towards expected dividend for 2009 was 100,00 PLN per 1 share, and entitled to get advance payment are shareholders who are entitled to the shares on 2nd December 2009. The Supervisory Board of APATOR MINING Sp. z o.o on 4th December 2009 adopted the Resolution no. 171/2009 approving the resolution of the Executive Board. Payment of advance payment towards expected dividend for 2009 in amount of 2.630.000,0 PLN will be paid on 15th December 2009. Subsidiary - APATOR CONTROL Sp. z o.o. According to the Resolution No. 9/2009 of Ordinary Partners Meeting of APATOR CONTROL Sp. z o.o. dated 28th April 2009 profit distribution was made for 2008 in value of 1.668.026,09 PLN in the following manner:

• dividend 1.650.000,00 PLN, • reserve capital 18.026,09 PLN

The date of payment of dividend has been fixed as follows: � 30th April 2009 500.000,00 PLN � 19th May 2009 500.000,00 PLN � 29th May 2009 650.000,00 PLN

Subsidiary - APATOR RECTOR Sp. z o.o. According to the Resolution No. 3/2009 of Ordinary Partners Meeting of APATOR RECTOR Sp. z o.o. dated 22nd April 2009 profit distribution for 2008 was made in value 5.695.656,75 PLN in the following manner:

• dividend 5.695.000,00 PLN, • supplementary capital 656,75 PLN

The right to dividend was fixed on the day of Ordinary Partners Meeting to be held that is on 22nd April 2009. The date of payment was fixed as follows:

� 23rd April 2009 5.000.000,00 PLN � 28th May 2009 695.000,00 PLN

Subsidiary - APATOR METRIX S.A. According to the Resolution No. 3/2009 of Ordinary General Shareholders Meeting of APATOR METRIX S.A. dated 22nd June 2009 profit distribution for 2008 was made in value of 1.292.567,01 PLN as follows:

• dividend 1.000.561,52 PLN, • supplementary capital 292.005,49 PLN.

One share entitles for payment of dividend in value of 4,76 PLN. The list of shareholders entitled to dividend for financial year 2009 was established on 22nd June 2009. The date of payment of dividend was fixed as follows:

• 15th July 2009 500.000,00 PLN • 15th August 2009 500.561,52 PLN

Subsidiary - FAP PAFAL S.A. According to the Resolution No. 11/2009 of Ordinary General Shareholders Meeting of FAP PAFAL S.A. of 19th June 2009 profit distribution for 2008 was made in value of 135.963,35 PLN entirely to supplementary capital According to the Resolution No. 12/2009 of Ordinary General Shareholders Meeting of FAP PAFAL S.A. dated 19th June 2009 it was decided to make payment of dividend in total value of 2.503.114,00 PLN (3,40 PLN per share). Entitled for payment of dividend were shareholders holding shares on 19th June 2009. The date of payment of dividend was fixed as follows:

• 30th June 2009 1.502.800,00 PLN • 31st July 2009 1.000.314,00 PLN

NOTE NO. 17 OWN SHARES

Capital Group APATOR has not option for own shares. Subsidiary - APATOR – MINING Sp. z o.o. has in its possession 6.600.000 shares of dominant entity - APATOR S.A.





According to the Resolution No 13/2007 of General Shareholders Meeting of APATOR S.A. dated 11th June 2007 the fund was established for redemption of APATOR S.A. by separation of the sum of 4.000 000 PLN from supplementary capital. General Shareholders Meeting of APATOR S.A. gave the consent to acqusition by APATOR S.A. own shares for their later redemption til 31st May 2008. Since 23rd April till 30th May 2008 APATOR S.A. acquired 13.388 own shares for their redemption. According to the Resolution No. 18/2008 of General Shareholders Meeting of APATOR S.A. dated 23rd June 2008 the consent to the acquisition by APATOR S.A. of own shares for their later redemption was prolonged till 30th June 2009. According to the Resolution No. 19/2008 the fund for redemption of shares was expanded to the amount of 20 m PLN. Since 1st July 2008 till 31st December 2008 Apator S.A. acquired 114.270 own shares for their redemption. In 2009 Apator S.A. acquired 58.814 own shares for their redemption. General Shareholders Meeting of APATOR S.A. according to the resolution No. 16/2009 dated 8th June 2009 decided to redeem 186.472 bearer shares of APATOR S.A. of A, B and C series of nominal value of 0,10PLN each, marked by the National Depository of Securities with the code PLAPATR00018. Shares were bought in the period since 23rd April 2008 till 3rd April 2009. Total sot of acquisition of own shares was 2.032.624,66 PLN:

• Shareholder who sold shares to APATOR S.A. were paid in total amount of 2.026.897,58 PLN. • Commissions and deposit fees were 5.727,08 PLN

On 13th November 2009 the reduction of capital of the Company from the amount 3.529.350,00 PLN to the amount 3.510.702,80 PLN, i.e. by the amount 18.647,20 PLN. The reduction of capital was carried out according to art. 359 §1 and § 2 of the Polish Commercial Companies Code and §11 of the Statute of APATOR S.A. by acquisition of 186.472 own shares of the Company for their redemption. On 9th December 2009 the National Depository of Securities adopted the resolution no 513/09 with regard to the redemption of 186.472 shares of APATOR S.A., 27.310.279 shares of APATOR S.A. are marked with the code PLAPATR00018

NOTE NO. 18 PROVISIONS FOR LIABILITIES

Information on provisions for liabilities has been presented in the table.

Description Employees Extras Margins Warranties Future costs Total

Provisions at 01.01.2008 8 127 108 91 563 821 9 710

Consolidation of Grupa PoWoGaz 8 198 934 - 157 2 223 11 512

Consolidation of Rector 151 - - - 22 173

Provisions kept 2 378 595 76 579 1 001 4 629

Provisions used (4 856) (990) (96) (124) (3 557) (9 623)

Provisions diluted (408) - - - (31) (439)

Other changes in provisions - - - - - -

Provisions at 31.12.2008 13 590 647 71 1 175 479 15 962

Provisions at 01.01.2009 13 590 647 71 1 175 479 15 962

Provisions kept 2 252 1 753 427 791 1 531 6 754

Provisions used (10) (960) - - (929) (1 899)

Provisions diluted (2 586) - (473) (726) (696) (4 481)

Other changes in provisions - - - - - -

Provisions at 31.12.2009 13 246 1 440 25 1 240 385 16 336

- short term provisions 2 575 1 440 25 1 195 385 5 620

- long term provisions 10 671 - - 45 - 10 716

NOTE NO. 19 TRADE LIABILITIES AND OTHER ONES

Information on trade liabilities and other ones has been presented in the table.





Day

Description 31.12.2009 31.12.2008

Trade liabilities 17 571 18 092

Current liabilities 15 450 16 156

Overdue liabilities up to 1 month 1 939 1 519

Overdue liabilities from 1 month to 3 months 100 203

Overdue liabilities from 3 months to 6 months 33 177

Overdue liabilities from 6 months up to 1 year 9 1

Overdue liabilities over 1 year 40 36

Other liabilities 76 758 107 055

Loans and borrowings 60 614 65 027

Liabilities due to income tax 591 2 162 Liabilities due to other taxes, customs and social insurance 7 408 7 744

Liabilities due to salaries and wages 1 915 2 301

Liabilities due to derivatives 524 25 260

Liabilities due to settlement of derivatives 2 560 -

Other financial liabilities 814 667

Advance payments received for deliveries 148 262

Liabilities due to bills of exchange - -

Liabilities due to dividend 85 80

Investment liabilities 1 374 2 215

Other liabilities due to other entities 712 1 018

Prepayments for revenues 13 319

Total liabilities, including 94 329 125 147

- long term part 27 375 40 848

- short term part 66 954 84 299

Total liabilities,including 94 329 125 147

- to related entities - -

- to other entities 94 329 125 147

NOTE NO. 20 LOANS AND BORROWINGS

Information on loans and borrowings has been presented in the tables.

Description Amount due Interest

Loans 60 464 3 057 Raiffeisen Bank Polska S.A. 5 000 135 Raiffeisen Bank Polska S.A. 4 102 181 Citibank Handlowy - Bank Handlowy w Warszawie S.A. 36 000 1 727 Citibank Handlowy - Bank Handlowy w Warszawie S.A. 9 341 410 BZ WBK 866 143 Bank Millenium 1 356 252 ING Bank Śląski 2 003 110 Citibank Handlowy - Bank Handlowy w Warszawie S.A. 1 781 99 Credit cards 15 0 Borrowings 150 14 Borrowings from minority of Apator Telemetria 150 14 Total loans and borrowings 60 614 3 071

Day

Description 31.12.2009 31.12.2008

Short-term loans and borrowings 33 614 29 027 Long-term loans and borrowings 27 000 36 000

- paid over 1 year up to 2 years 9 000 18 000





- paid over 2 years up to 5 years 18 000 18 000 - paid over 5 years - -

Total loans and borrowings 60 614 65 027

Day

31.12.2009 31.12.2008 Description

Value in currency Value in PLN Value in

currency Value in PLN

PLN 60 614 60 614 65 027 65 027 Total loans and borrowings X 60 614 X 65 027

The fair value has been taken like book value of loans since the companies did not intend to sell those loans. Information on interest rate risk has been presented in the table:

Description < 1 year 1 - 5 years > 5 years Total

Share of age at 31.12.2009

Loans and borrowings

Raiffeisen Bank Polska S.A. 4 102 4 102

Raiffeisen Bank Polska S.A. 5 000 5 000

Citibank Handlowy - Bank Handlowy w Warszawie S.A. 9 341 9 341

Citibank Handlowy - Bank Handlowy w Warszawie S.A. 9 000 27 000 36 000

BZ WBK S.A. 866 866

Bank Milenium S.A. 1 356 1 356

ING Bank Śląski 2 003 2 003

Citibank Handlowy - Bank Handlowy w Warszawie S.A. 1 781 1 781

Credit cards 15 15

Borrowings from minority of Apator Telemetria 150 150

Share of age at 31.12.2008

Loans and borrowings

Raiffeisen Bank Polska S.A. 8 654 - - 8 654

Citibank Handlowy 12 779 36 000 - 48 779

Bank Milenium S.A. 4 462 - 4 462

ING Bank Śląski 3 132 3 132 Dominant entity – APATOR SA

At 31st December 2009 Apator SA had the debt due to loans in amount of 54.433 000 PLN. The Company did not have any debt due to borrowings. Conditions of the loan incurred on current account under the contract concluded on 27th May 2004 and annex dated 17th April 2008 with Bank Handlowy w Warszawie SA are as follows:

� Amount of the loan 7.000 000 PLN for the period since 17th April 2008 till 20th April 2008; 12.000 000 PLN for the period since 21st April 2008 till 20th April 2010

� Deadline of the loan repayment 20th April 2010 � Type of hedging Bail mortgage in amount of 15.000 000 PLN

Assignment of receivables in amount of 2.800 000 PLN Assignment of rights from contract regarding insurance of property

� Interest rate WIBOR 1M + annual margin of 0,5625% � Commissions and costs 0,3% of loan amount – I installment of the

preparatory commission 0,3% of loan amount – II installment of preparatory commission to be paid on 21st April 2009





0,4% of loan amount not used – engage commission 0,1% of loan amount – commission for the change of conditions

� Current engagement 9.341 000 PLN

Conditions on long-term loan incurred under the contract concluded on 17th April 2008 with Bank Handlowy w Warszawie SA are as follows:

� Amount of the loan 45.000 000 PLN � Deadline of the loan repayment 9.000 000 PLN till 30th June 2009

9.000 000 PLN till 30th June 2010 9.000 000 PLN till 30th June 2011 9.000 000 PLN till 30th June 2012 9.000 000 PLN till 30th June 2013

� Type of hedging Ordinary mortgage in total amount of 45.000 000 PLN Bail mortgage for the amount of 11.250 000 PLN Warranties of the companies: APATOR-MINING Sp. z o.o., APATOR-METRIX S.A. and FAP PAFAL SA

� Interest rate WIBOR 1M + annual margin 0,3% � Commissions and costs 0,1% of loan amount – preparatory commission � Current engagement 36.000 000 PLN

Conditions of the loan incurred on current account and revolving loan under the contract on liability limit concluded on 16th June 2005 and annex dated 14th December 2009 with Raiffeisen Bank Polska SA:

� Limit 12.500 000 PLN: - 7.500 000 PLN – loan on current account - 5.000 000 PLN – revolving loan - 1.500 000 PLN – limit for letter of credit “without advance payment” - 1.500 000 PLN – limit for bank guarantees

� Deadline of the loan repayment 7th December 2010 � Type of hedging Power of attorney to current account

Secret assignment of liabilities in amount of min. 40% entire business trading

� Interest rate - WIBOR 1T + annual margin of 1,5% – loan on current account - WIBOR 1M + annual margin of 1,5% – revolving loan

� Commissions and costs 0,75% annually – engage commission � Current engagement 4.102 000 PLN – current account

5 000 000 PLN – revolving loan Subsidiary - APATOR MINING Sp. z o.o. At 31st December 2009 APATOR-MINING Sp. z o.o. had the debt due to loans in value of 3.783 000 PLN. The conditions of loan incurred on bank account under the contract concluded on 4th November 2008 with ING Bank Śląski S.A.: � Amount of loan 2.300 000 PLN – since 29th December 2009 till 28th March

2010 2.000 000 PLN – since 29th March 2010 till 30th June 2010

� Deadline of repayment 30th June2010 � Type of hedging Guarantee of APATOR S.A.

Power of attorney to current account � Interest rate WIBOR 1M + 1,5% � Commissions and costs 0,3% of the amount of loan received

0,035% of the amount of loan used � Current engagement 2.003 000 PLN

Conditions of loan incurred on current account under the contract concluded on 15th May 2009 with Bank Handlowy w Warszawie S.A.:





� Amount of loan� 5.000 000 PLN since 15th May till 29th July 2009 4.500 000 PLN since 30th July till 30th August 2009 4.000 000 PLN since 31st August till 29th September 2009 3.500 000 PLN since 30th September till 29th October 2009 3.000 000 PLN since 30th October till 30th November 2009 2.500 000 PLN since 1st December till 29th December 2009 2.000 000 PLN since 30th December 2009 till 28thJanuary 2010 1.500 000 PLN since 29th January till 25th February2010 1.000 000 PLN since 26th February till 29th March 2010 5.000 000 PLN since 30th March till 13th May 2010

� Deadline of repayment 13th May 2010 � Type of hedging Guarantee of APATOR S.A.

Power of attorney to current account � Interest rate WIBOR 1M + 1,1% � Commissions and costs 0,5% amount of loan – preparatory commission

0,4% - engage commission � Current engagement 1.781 000 PLNł (interest rates of 7 000 PLN included)

Subsidiary - APATOR CONTROL Sp. z o.o. At 31st December 2009 APATOR CONTROL Sp. z o.o. had no debt due to bank loans and borrowings. Subsidiary - APATOR METRIX S.A. At 31st December 2009 APATOR METRIX S.A. had the debt due to bank loan granted by Bank Milenium S.A. Conditions of the loan incurred on current account under the contract concluded on 28th February 2007 and annex dated 22nd April 2009 with Ban Milenium SA.:

Amount of the loan 1.000 000 PLN since 28th February till 6th May 2007; 3.000 000 PLN since 7th May till 27th June 2007; 5.000 000 PLN since 28th June till 31st December 2007; 3.000 000 PLN since 1st January till 31st March 2008; 5.000 000 PLN since 1st April till 15th April 2008; 6.500 000 PLN since 16th April 31st December 2008; 5.000 000 PLN since 1st January till 21st April 2009; 6.500 000 PLN since 22nd April 2009 till 21st April 2010.

� Deadline of repayment 21st April 2010 � Type of hedging Bail mortgage up to the amount of 7.000 000 PLN on

property with buildings � Interest rate WIBOR 1M + margin 1,5% � Commissions and margins 0,08% of loan amount – commission for readiness � Current engagement 1.356 000 PLN

Subsidiary - FAP PAFAL S.A. At 31st December 2009 FAP PAFAL S.A. had the debt due to loans in value of 866 000 PLN. Conditions of the loan incurred on current account under the contract concluded on 15thJune 2005 and annex dated15th June 2009 with BZ WBK S.A.:

� Amount of the loan 10.000 000 PLN � Deadline of repayment 17th July 2009 - repaid � Type of hedging Bail mortgage on properties in amount of 11.000 000

PLN Product pledge in amount of 11.500 000 PLN Cession of receivables in amount of 5.000 000 PLN bill of exchange in’blanco

� Interest rate WIBOR 1M + margin 1,50% � Commissions and costs 0,75% loan amount – preparatory commission

0,73% commission of the loan unused Conditions of the loan incurred on current account under the contract concluded 10th July 2009 and annex dated 19th November 2009 with BZ WBK S.A.:





� Amount of the loan 10.000 000 PLN since 17th July 2009

6.000 000 PLN since 19th November 2009 � Deadline of repayment 30th June 2010 � Type of hedging Bail mortgage on properties for the amount of 6.500

000 PLN Product pledge in amount of 8.800 000 PLN Cession of receivables in amount of 5.000 000 PLN Bill of exchange in’blanco

� Interest rate WIBOR 1M + margin 1,50% � Commissions and costs 0,6875% of loan amount – preparatory commission

0,73% - commission of unused loan

� Current engagement 866 000 PLN

Conditions of loan contract on current account under the contract concluded on 16th July 2008 with Bank Przemysłowo – Handlowy S.A.:

� Amount of the loan 5.000 000 PLN � Deadline of repayment 16th July 2009 - repaid � Type of hedging Machine and equipment pledge for the amount of

7.000 000 PLN Product pledge in amount of 1.500 000 PLN

� Interest rate WIBOR 1M + margin 0,50% � Commissions and costs none

Subsidiary - RECTOR Sp. z o.o.. At 31st December 2009 Rector Sp. z o.o. had no debt due to loans and borrowings. The company has concluded loan contract on current account with Bank Millenium S.A., that it did not make use till the date of preparation of the statement. Conditions of the loan incurred on current account under the contract concluded on 4th March 2008 and annex dated 6th March 2009 with Bank Millenium S.A.:

� Amount of the loan 2.200 000 PLN – till 6th March 2009 1.200 000 PLN – till 3rd October 2010

� Deadline of repayment 3rd October 2010 � Type of hedging Contract on transfer of receivables � Interest rate WIBOR 1M + margin 2% � Commissions and costs Commission for readiness – 0,12% � Current engagement 0 000 PLN

Subsidiary - APATOR GmbH At 31st December 2009 Apator GmbH had no debt due to loans and borrowings except borrowings granted by dominant entity - APATOR S.A. Subsidiary - APATOR Powogaz At 31st December 2009 Grupa Apator Powogaz had the debt due to borrowings incurred from minority shareholders of Apator Telemetria in value of 150 000 PLN and the debt on credit cards in value of 15 000 PLN. Four contracts on borrowings concluded in April and May 2009 with minority shareholders of Apator Telemetria Sp. z o.o. ,each for the amount of 37.500 PLN has the deadline for repayment fixed on 31st May 2010 . Annual interest rate is 6%; interest are paid in advance till 31st December 2009.





NOTE NO. 21 CONDITIONAL LIABILITIES AND ASSETS

Operating leasing and renting At 31st December 2009 Apator SA had the liabilities due to renting contracts concluded on computer equipment and cars. The contract concluded with IBM Polska Sp. z o.o. defines monthly rent in amount of 10 000 PLN for renting of server. The value of equipment rented at 31st December 2009 is 351 000 PLN. The contract was concluded for 36 month period. On 15th September 2009 the contract for renting cars was concluded with Arpol Motor Company Sp. z o. o. The object of renting is the car Seat Leon, the contract was concluded for the period of 36 months. Monthly rent was defined for the amount of 1.900 PLN plus additional amount (0,45 PLN per 1 kilometer) for exceeded limit of kilometers (50.000 km per year). Apator SA under the contract has pre-emotion right to the car rented anytime based on three month notice at the gross price of 70.000 PLN reduced by 1.500 PLN for each month of renting paid. On 1st October 2009 the contract was concluded for renting the car Mitsubishi Outlander from Arpol Motor Company Sp. z o.o. the contract was concluded for the period of 36 months, monthly rent was defined for the amount of 3.550 PLN plus additional amount (0,65 PLN per 1 kilometer) for exceeded limit of kilometers (50.000 km per year). Apator SA under the contract has pre-emotion right to the car rented after termination of the contract at the price of 37.800 PLN.

.

Subsidiary - APATOR RECTOR Sp. z o.o. At 31st December 2009 Rector Sp. z o.o. had liabilities due to operating leasing for renting cars. The contracts with Prima Car Management S.A. were concluded in 2006, 2007 and 2008. In accordance with the contracts 71 000 PLN (including payment up to 1 year 54 000 PLN) still remained to be repaid. Guarantees Dominant entity - APATOR S.A. On 25th July 2007 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 51 000 PLN for Koncernu Energetycznego Energa SA in order to guarantee proper performance of commitments by Apator SA. Guarantee is valid till 24th July 2010. Hedging for bank credibility is mortgage. On 31st July 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 100 000 PLN for Energa Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 4th September 2010. Hedging for bank credibility is mortgage. On 3rdAugust 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 30 000 PLN for Energa Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 19th September 2015. Hedging for bank credibility is mortgage. On 19th September 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 65 000 PLN for RWE Stoen Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Under the agreement the guarantee was valid till 5th December 2009 and it was prolonged on 20th November to 31st December 2009. Hedging for bank credibility is mortgage. On 9th October 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 140 000 PLN for Enea Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 31st December 2009. Hedging for bank credibility is mortgage.





On 20th October 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 13 000 PLN for PGE Dystrybucja Warszawa teren Sp. z o.o. in order to guarantee proper performance of commitments by Apator SA . Guarantee is valid till 31st December 2010. Hedging for bank credibility is mortgage. On 21stOctober 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 260 000 Eur for REGIE DE PRODUCION (BURUNDI) in order to guarantee the return of advance payment. Guarantee is valid till 28th February 2010. Hedging for bank credibility is mortgage. On 21stOctober 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 87 000 Eur for REGIE DE PRODUCION (BURUNDI) in order to guarantee the proper performance the commitments of APATOR SA. Guarantee is valid till 31st October 2010. Hedging for bank credibility is mortgage. On 4th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the tender guarantee for the amount of 10 000 USD for RECO (Rwanda). Guarantee is valid till 31st March 2010. Hedging for bank credibility is mortgage. On 12th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 329 000 PLN for Enea Operator SA. Under the agreement guarantee was valid till 14th January 2010 and on 23rd December 2009 it was prolonged till 15th March 2010. Hedging for bank credibility is mortgage. On 20th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the tender guarantee for the amount of 76 000 PLN for PGE Dystrybucja Łódź - Teren SA. in order to guarantee proper performance of commitments by Apator SA.Guarantee is valid till 29th January 2010. Hedging for bank credibility is mortgage. On 17th December 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank guarantee for the amount of 727 000 PLN for RWE Stoen Operator Sp. z o.o. in order to guarantee proper performance of commitments by Apator SA. Under the contract concluded guarantee is valid till 14th January 2011. Hedging for bank credibility is mortgage.

Subsidiary - FAP PAFAL S.A. The company at 31st December 2009 has got in its off balance records the guarantees for the remedy of defects and guarantees for tender bonds for total amount of 2.074 000 PLN: � guarantee for remedy of defects issued by Hestia SA towards STORN S.A. 1.065 000 PLN � guarantees for tender bonds issued by BZ WBK S.A. 1.009 000 PLN Subsidiary - APATOR METRIX SA The company concluded the contract on bank guarantee on 27th October 2006. Under the contract the company has the right to make us of guarantees granted by the Bank with the validity period not exceeding 36 months of the date of the issue of the guarantee. The hedging for the contract is thee contract on transfer of title to secure the repayment for legalization stands for gas meters of book value at 31st December 2009 in value of 134 000 PLN. Subsidiary - APATOR RECTOR Sp. z o.o. The company at 31st December 2009 has got the agreement concluded with Bank Millenium on granting the guarantee. Under the agreement Bank has granted the guarantee towards Fonbud in order of good performance of the contract. In accordance with the agreement the guarantee is valid till May 2011 and the hedging of receivables of the Bank is the cash in bank deposit in value of 650 000 PLN conveyed by the Bank. Subsidiary - APATOR POWOGAZ S.A. At 31st December 2009 has got the agreement concluded with Raiffeisen Bank Polska S.A. on granting the guarantee. Under the agreement concluded, Bank granted the guarantee for tender bonds: • towards Chief Executive Oficer, Africa Re Centra, Kenya for the amount of 16.500 USD with the validity of 28th February 2010 ;





• Tyska Spółdzielnia Mieszkaniowa „OSKARD” Tychy for the amount of 140 000 PLN with the validity of 6th April 2010 . At 31st December 2009 the following contracting parties had in their possessions own bills of exchange issued by Apator Powogaz S.A.:

Beneficiary of bill of exchange Bill of

exchange The reason of issuing Date of return

InterRisk Towarzystwo Ubezpieczeń S.A. Insurance Group „in blanco”

Insurance policy no 150600/51/143/2009 (guarantee for remedy of defects) 02-12-2014


General contract on granting of contractual insurance guarantee no. 150204060 (guarantees for tender bonds) 28-10-2010


General contract on granting of contractual insurance guarantee no. 150204060 (guarantee for appropriate performance of the contract) 28-10-2010


General contract on granting of contractual insurance guarantee no. 150204060 (guarantee for remedy of defects) 28-10-2010

Raiffeisen-Leasing Polska S.A. „in blanco” Contract on operating leasing no. MF918N (UL) 15-12-2012

Dominant entity concluded with the insurance company - Risk Towarzystwo Ubezpieczeń S.A., Vienna Insurance Group, Przedstawicielstwo Generalne Toruń the contract on granting of contractual insurance guarantees. Under the contract InterRisk S.A. guarantees the liabilities of APATOR POWGAZ S.A. due to: Obligation to pay the tender bond - limit is 750 000,00 PLN Not doing its duties or improper doing it duties specified in the contract (commercial contract) – limit is 1 000 000,00 PLN lack of remedy or improper remedy of defects – limit is 500 000,00 PLN At 31.12.2009 r. the following guarantees issued by InterRisk were active:

Beneficiary of guarantee Guarantee Amount Validity

Zakład Energetyki Cieplnej S.A. Katowice usunięcia wad i usterek 9 882 PLN 02-12-2014 RTBS "ADMINISTRATOR" Sp. z o.o., Radom Wadialna 4 000 PLN 08-01-2010

Warranties

APATOR S.A. granted warranty due to granted loan under the contract concluded on 4th November 2008 with ING Bankiem Śląskim S.A. and annex to the contract dated18th December 2009 on current account of APATOR MINING Sp. z o.o. in amount of 2.300 000 PLN. Guarantee to the amount of 3.450 000 PLN covers liabilities resulting from loan contract and particularly liabilities regarding interest, commissions and other costs of execution is valid till 30th June 2013. APATOR S.A. granted warranty under the contract on guarantee concluded on 15th May 2009 with Bank Handlowy S.A. he contract was concluded in order to hedge the repayment of liabilities due to loan granted on 15th May 2009 on current account of APATOR MINING Sp. z o.o. in amount of 5.000 000 PLN. Guarantee to the amount of 6.000 000 PLN covering liabilities resulting from loan contract and regarding particularly liabilities of the loan, interest, commissions and other costs of execution is valid till 30th November 2010 (bank execution is valid 30th November 2012). Subsidiaries Apator Metrix S.A., Apator Mining Sp. z o.o. and FAP Pafal S.A. concluded on 17th April 2008 with Bank Handlowy SA the contract on warranty being the hedging of repayment of receivables due to the loan granted to dominant entity - APATOR S.A. in amount of 45.000 000 PLN. Guarantee was granted to the amount of 54.000 000 PLN. According to the stipulations of the contract guarantors undertake to perform the duties of the debtor in case when the debtor does not fullfil its duties in time. Guarantee is valid till 31st December 2013.

Conditional liabilities Dominant entity - APATOR S.A.





Under the investment contract concluded on 30th August 2007 with Przedsiębiorstwo Techniczno – Handlowe Rector Unlimited Partnership represented by partners, Apator SA purchased 70% of shares in transformed Rector Sp. z o. o. for the amount of 21.000 000 PLN. Apator SA has undertaken to pay extra after the period of three years to the price of 70% shares provided the transformed company Rector will earn expected net profit in the period 2008 - 2010. Under the contract the extra payment will not exceed the amount of 5.000 000 PLN. At the same time Apator SA committed to purchase outstanding 30% shares after three years at the price defined based on the value of the company. Subsidiary - APATOR POWOGAZ S.A.

During the purchase of Apator Metroteks selling parties was granted additional conditional price extras depending on result to be gained in the future by the company. Maximum value should be as follows.: • 30 000 Eur – paid after the approval of result of financial year 2010; • 50 000 Eur – paid after the approval of results of financial year 2011.

NOTE NO.22 FINANCIAL LEASING AND OTHER FINANCIAL LIABILITIES

APATOR S.A has financial liabilities resulting from the contract concluded on 26th March 2008 with IBM Polska Sp. z o.o. Liabilities resulting from the contract regard the purchase of the software with deferred payment. The value of the software purchased is 120 000 PLN. Total financing costs were established for 15 000 PLN. Payment in 36 installments of 4 000 PLN each in the period since 31st May 2008 till 30th April 2011. Liability is subject to evaluation by the method of amortized cost at effective interest rate. At 31st December 009 the liability is 57 000 PLN. The liability has been presented in item „other financial liabilities”. Spółka Apator Metrix has financial liabilities due to the contracts concluded on 10th June 2008 and 21st July 2008 with Volkswagen Leasing Polska Sp. z o.o. The object of the contracts are cars of make Skoda. The contract have been concluded for the period of 48 months. The liability at 31st December 2009 is 94 000 PLN. (including long term ones for the amount of 66 000 PLN). Apator Rector Sp. z o.o. concluded financial leasing contracts where their objects are cars of the value of 611 000 PLN at 31st December 2009 .The liability at 31st December 2009 is 438 000 PLN (including long term ones for the amount of 186 000 PLN). Apator Kfap Sp. z o.o. in January 2009 concluded financial leasing contract where their objects are three cars. The liability is 97 000 PLN (including long term ones for the amount of 54 000 PLN). Apator Powogaz S.A. in 2009 concluded financial leasing contract where its object is a car of the value of 91 000 PLN. The contract with option of purchase has been concluded for the period of 35 months. The liability is 86 000 PLN. (including long term ones for the amount of 55 000 PLN) Apator Telemetria Sp. z o.o. has at 31st December 2009 liability due to financial lesing (short term liability) in value of 42 000 PLN.

NOTE NO. 23 INCOME TAX

Structure of income tax for the reporting period has been presented in the table.

Period

Main components of tax charge: 01.01.2009 31.12.2009

01.01.2008 31.12.2008

Income statement Current income tax 3 912 9 874

Current expenses due to income tax (continued operation) 3 912 9 874

Current expenses due to income tax (discontinued operation) - - Adjustments regarding current income tax from previous years - - Deferred income tax 3 456 (3 902) Related to establishment and reverse of temporary differences 3 456 (3 902)





Period Main components of tax charge: 01.01.2009

31.12.2009 01.01.2008 31.12.2008

Related to reduction of income tax rates - - Tax expense indicated in income ststement 7 368 5 972

Statement on changes in equity Current income tax - - Current income tax due to foreign exchange differences from the loan - - Deferred income tax - - Net loss due to revaluation of hedging of the cash flow - - Not used profit due to financial assets available for sale - -

Net deferred income tax taken in reserve capital in the first application of MSR 39 - - Net deferred income tax from hedging of the cash flow settled during the financial year - - Net deferred income tax from financial assets available for sale and sold during the financial year. - - Tax profit indicated in equity - -

NOT NO. 24 DEFERRED INCOME TAX

Deferred income tax has been presented in table.

Balance day Income statement in the period

Description

31.12.2009 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

Provisions due to deferred income tax - interest from liabilities, borrowings and advance payments for shares 23 24 (1) 10 - discount of bills of exchange - 2 (2) 1 - evaluation of currency - 92 (92) 92 - temporary differences - leasing 35 22 13 22 - future tax revenues 21 183 (162) 164

- evaluation of long term contracts (not invoiced revenues) 158 - 158 - - balance amortization other than tax one 6 215 6 679 (464) (19) - evaluation of other financial assets 254 - 254 (138) - cost of legal representation 1 1 - - - evaluation of property 27 24 3 24

- excess of nominal value over book value of apport 238 238 - -

Gross provisions due to deferred income tax 6 972 7 265 (293) 156

Assets due to deferred income tax

- write downs of inventories, margin held in inventories 597 727 (130) (1 011) - other accruals 71 185 (114) 75 - salaries and wages unpaid, insurance fees, leaves 198 1 157 (959) 55 - tax losses 1 819 174 1 645 (265) - balance amortization different to tax one 4 - 4 - - from provisions for warranty repairs 236 223 13 94 - for employees benefits 2 556 2 425 131 (598) - evaluation- negative exchange rate differences 36 196 (160) 122

- manufacturing costs in progress and current maintenance costs in reporting period 150 94 56 62

- net write downs of liabilities 331 283 48 (181) - evaluation of liabilities – current value 5 4 1 4 - for margin of revenues 5 12 (7) (5) - write downs of fixed assets 143 224 (81) - - eliminated profit on inter group transactions 1 096 1 294 (198) 1 131





Balance day Income statement in the period

Description

31.12.2009 31.12.2008

01.01.2009 31.12.2009

01.01.2008 31.12.2008

- overestimation of fixed assets according to MSR - 3 (3) (43) - evaluation of bills of exchange 1 - 1 - - write offs due to depreciation of R&D - - - (170) - evaluation of derivatives 588 4 830 (4 242) 4 824 - provision for extras 234 - 234 - - interest and commissions from loans 12 5 7 (2) - provision for scrapping - - - (34) - other 5 - 5 - - evaluation of construction contracts 2 - 2 - Gross assets due to deferred income tax 8 089 11 836 (3 747) 4 058 Charging due to deferred income tax X X 3 454 (3 902) Net provision due to deferred income tax 6 972 7 265 X X

Net assets due to deferred income tax 8 089 11 836 X X

NOT NO. 25 REVENUES FROM SALES EARNED IN REPORTING PERIOD

Revenues from sales in Capital Group APATOR have been presented in the statement of total income statement. Additional information is included in the note concerning operating segments.

NOTE NO. 26 OPERATING REVENUES AND COSTS

Operating revenues and costs have been presented in the table.

Period Description 01.01.2009

31.12.2009 01.01.2008 31.12.2008

Operatingrevenues 16 778 22 389

Revenues from sales of fixed assets and right of perpetual usufruct of land and intangibles 3 521 2 072

Write offs for inventories 2 566 11 756

Sales of depreciated products 31 106

Write offs for intangibles 128 895

Write offs for fixed assets and provisions for liquidation 558 62

Provisions for employees benefits 2 586 5 490

Evaluation of properties 109 164

Provisions for liabilities 697 105

Compensations received 416 134

Donations received 11 98

Provision for margin 473 96

Provisions for warranty repairs 726 159

Surplus of stocktaking 4 299 78

Reimbursement of costs(fairs and conferences) - 53

Provisions for scrapping - 180

Reimbursement of costs of proceedings in the court 404 47

Other revenues 253 894

Operating costs 15 818 14 318

Net value of sold and liquidated fixed assets and right of perpetual usufruct of land 1 998 509 Costs related to sales of fixed assets 15 -






31.12.2009 01.01.2008 31.12.2008

Write offs for inventories 1 364 8 007

Conservative estimate of inventories 115 25

Write offs for fixed assets and fixed assets held for sales 124 -

Provisions for employees benefits 2 252 2 865

Evaluation of properties 96 36 Investment give up 59 -

Liquidated intangibles 128 -

Fate loss and shortages in stocktaking 4 378 26

Provision for liabilities 695 -

Damages to property 246 31

Donations granted 127 148

Scrapping of inventories 1 404 538

Provisions for warranty repairs 791 585

Provisions for margin 427 858

Penalties paid, fines and compensations 221 43

Provisions for VAT 234 -

Costs regarding proceedings at court, collectors, legal representation 596 29

Free fees 26 -

Deduction of goodwill 192 -

Reimbursed costs, arrangement of conferences - 77

Other costs 330 541

Net operating revenues (costs) 960 8 071

NOTE NO. 27 FINANCIAL REVENUES AND COSTS

Financial revenues and costs have been presented in the table.


31.12.2009 01.01.2008 31.12.2008

Financial revenues 20 608 13 494

Bank and receivable interest 1 308 1 571

Interest of bills of exchange received 71 -

Sales of securities - 64

Write downs of financial current assets 7 127 1 729 Positive exchange rate differences 8 201 7 700 Revenues due to derivatives 3 550 2 309 Evaluation of receivables – current value 31 - Write downs of shares - - Evaluation of short term financial assets - 16 Revenues from sales of financial assets 55 65 Interest cancelled - - Other 265 40 Financial costs 32 055 40 991 Loans and borrowings interest 3 000 3 738 Bank guarantees and commissions 393 192 Other interest 76 46

Interest paid of bills of exchange 12 -

Interest cancelled 10 13

Costs of sales of financial assets 42 25

Evaluation of bills of exchange 46 -






31.12.2009 01.01.2008 31.12.2008

Negative exchange rate differences 11 072 7 148

Costs due to derivatives 9 344 26 937

Write downs of financial fixed assets - -

Write downs of financial current assets 7 656 2 085

Write downs of financial assets 20

Commissions from compensations and financial services - 30

Purchase of shares in subsidiary (after taking over the control) - 327

Other 404 430

Net financial revenues (costs) (11 447) (27 497) Instruments used to minimize exchange rate risk due to export contract and sales within EU countries and import contracts and purchases within EU countries were forward contracts and currency options . The breakdown of revenues and costs concerning currency transactions has been presented in the table:

Periods 2009 2008 Revenues: 3 550 2 309 - performance 2 211 3 635 - evaluation at the end of the period 1 339 - - evaluation at the beginning of the period - (1 326) Costs: 9 344 26 937 - performance 34 080 2 205 - evaluation at the end of the period 524 25 260 - evaluation at the beginning of the period (25 260) (528) Results on contracts (5 794) (24 628)

Profits (losses) due to net exchange rates differences – have been presented in the table.

Period

Items of income statement where exchange rate diffe rence have been taken 01.01.2009 31.12.2009

01.01.2008 31.12.2008

Revenues from sales - - Costs of products, goods and materials sold - - Sales costs - - Overheads - - Financial revenues 8 201 7 700 Financial costs (11 072) (7 148) Total (2 871) 552

NOT NO. 28 RESULT OF DISCONTINUED OPERATION

Grupa does not have any discontinued operation.

NOTE NO. 29 PROFIT PER SHARE

Profit per share was calculated by division of net profit by number of shares being in possession of entities outside Capital Group APATOR.





Data concerning the profit and shares have been presented in the table below that had been used for calculations of net profit per share.

Period

Profit 01.01.2009 31.12.2009

01.01.2008 31.12.2008

Net profit from continued operation per ordinary shareholders of dominant entity 30 090 21 174

Profit (loss)) on discontinued operation per ordinary shareholders of dominant entity - - Net profit per ordinary shareholders of dominant entity 30 090 21 174

Interest bearing preferred redeemed shares convertible to ordinary shares - -

Net profit per ordinary shareholders of dominant entity corrected by effect of convertible preferred shares 30 090 21 174

Weighted average number of shares 31.12.2009 31.12.2008

Shares issued 35 107 028 35 293 500

Own shares 6 600 000 6 727 658

Weighted average number of shares (without own shares) 28 516 158 28 653 261

Influence of dilution - -

Weighted average number of shares issued (without own shares) corrected by effect of dilution 28 516 158 28 653 261

Purchase of own shares Number Status

Own shares at 01-01-2008 6 600 000 28 693 500 April-2008 528 28 692 972 May-2008 12 860 28 680 112 June-2008 - 28 680 112 July-2008 17 703 28 662 409 August-2008 17 462 28 644 947 September-2008 15 148 28 629 799 October-2008 22 840 28 606 959 November-2008 11 480 28 595 479 December-2008 29 637 28 565 842 Total 2008 6 727 658 28 565 842 January-2009 22 382 28 543 460 February-2009 22 164 28 521 296 March-2009 14 268 28 507 028 April -2009 - 28 507 028 May-2009 - 28 507 028 June-2009 - 28 507 028 July-2009 28 507 028 August-2009 28 507 028 September-2009 28 507 028 October-2009 28 507 028 November-2009 28 507 028 December-2009 28 507 028 Total 2009 58 814 28 507 028

TOTAL 6 786 472 28 507 028 Weighted average number of shares for the period of six months was calculated in the following manner: 28.565.842 * 1/12 + 28.543.460 *1/612+ 28.521.296 * 1/12 + 28.507.028 * 9/12

NOTE NO. 30 FUSION OF ENTITIES





Settlemnet of fusions in 2008 of initial nature On 22nd January 2008 the contract was concluded on purchase by APATOR S.A. 70% of shares in Rector Sp. z o.o. with headquarters in Zielona Góra. The purchase price was 21 m PLN, the date of payment was fixed on 7 days of the conclusion of the contract. The transfer of the ownership of shares was on the day of payment that is on 29th January 2008. Share capital of the company is 1.000 000 PLN. On 30th April 2008 the Grupa was extended by manufacturer of water meters - Powogaz S.A. APATOR S.A. acquired 16.332 shares of the company for total amount of 70 m PLN. The above shares are 97,10% of share capital of the company. Share capital of Powogaz S.A. was 841 000 PLN. Fair values of assets and liabilities of Rector Sp. z o.o. (current name Apator Rector Sp. z o.o.) and Powogaz S.A. (current name Apator Powogaz S.A.) on the day of acquisition have been presented in the table below.

Description Apator Rector Sp. z o.o.

Grupa Powogaz Total

Fixed assets 979 37 236 38 215 Intangibles 51 141 192 Property, plant and equipment 454 32 033 32 487 Financial assets - 1 345 1 345 Receivables 312 - 312 Assets due to deferred tax 162 3 717 3 879

Current assets 8 115 38 038 46 153 Inventory - 13 242 13 242 Liabilities 7 350 9 161 16 511 Financial assets - 4 552 4 552 Prepayments 196 30 226 Cash and its equivalents 569 11 053 11 622

Total assets 9 094 75 274 84 368 Long term liabilities and provisions 56 11 390 11 446

Liabilities 56 - 56 Provisions for tax - 4 104 4 104 Other provisions - 7 286 7 286

Short term liabilities and provisions 8 035 8 851 16 886 Liabilities 7 719 4 623 12 342 Provisions 316 4 228 4 544

Total liabilities and provisions 8 091 20 241 28 332 Net assets 1 003 55 033 56 036 Minority shares (301) (1 596) (1 897) Net assets acquired, total 702 53 437 54 139 Goodwill of the company on purchase 20 513 17 514 38 027 Purchase price 21 215 70 951 92 166

The influence of cash due to fusion of Apator Rector Sp. z o.o. and Apator Powogaz S.A. have been presented in the table below:


Grupa Powogaz Total

Net cash taken over with the subsidiary 569 11 053 11 622 Cash paid (21 215) (70 951) (92 166) Net cash outflows (20 646) (59 898) (80 544)

In cash flow statement for 2008 in the item „Expenditures for the purchase of subsidiaries reduced by cash taken over” it was demonstrated the amount of 80.110 000 PLN. The difference in value of 434 000 PLN resulted from the settlement of the advance payment paid for the shares in Apator GmbH (return) and purchase of shares from minorities of Apator Mining Sp. z o.o. and Apator Powogaz S.A. The influence of the taken over on the results of Grupa APATOR has been presented in the table below:






Grupa Powogaz Total

Total revenues (for 2008) 17 525 59 194 76 719 Net profit (for 2008) 5 723 (2 176) 3 547

Total revenues (for the period of control) 17 220 40 664 57 884 Net profit (for the period of control) 5 696 4 973 10 669

Share in net profit (for the period of control) 3 987 4 971 8 958 Fusions that ocurred in 2009 TELEMETRIA On 28th January 2009 subsidiary APATOR POWOGAZ S.A. acquired 50,8% of shares in WMC Telemetria Sp. z o.o. Share capital in WMC Telemetria Sp. z o.o. is 100 000 PLN and it is divided into 1.000 shares of nominal value of 100,00 PLN. Acquired shares are 50,8% of share capital and 50,8% of total votes. Due to consolidation the goodwill is in value of 1.832 000 PLN. Fair values of assets and liabilities of Apator Telemetria on the day of take over have been presented in the table below.


Fixed assets 222 Intangibles 164 Property, plant and equipment 58 Financial assets - Receivables - Assets due to deferred tax -

Current assets 513 Inventory 33 Liabilities 359 Financial assets - Prepayments - Cash and its equivalents 121

Total assets 735 Long term liabilities and provisions - Liabilities - Provisions for tax - Other provisions - Short term liabilities and provisions 361 Liabilities 361 Provisions -

Total liabilities and provisions 361 Net assets 374 Minority shares (184) Net assets acquired, total 190 Goodwill of the company on purchase 1 832

Purchase price 2 022 The influence of cash due to the fusion of Apator Telemetria Sp. z o.o. has been presented in the table below:


Net cash taken over with the subsidiary 121 Cash paid (2 022) Net cash expedintures (1 901)





The influence of the take over on results of Grupa APATOR has been presented in the table below:


Total revenues (for 2009) 1 304 Net profit (for 2009) 194

Total revenues (for the period of control) 1 287 Net profit (for the period of control) 191

Share in net profit (or the period of control) 97 APATOR METROTEKS In 2009 subsidiary APATOR POWOGAZ S.A. acquired 61% of shares of Ukrainian company - APATOR METROTEKS (Ukraine) for the amount of 348 000 PLN. In result of consolidation of Apator Metroteks the goodwill was 3 000 PLN. The settlement of fusion is of initial nature. Agreed purchase price of shares provides for extras to the purchase price. Fair values of assets and liabilities of Apator Metroteks on the day of take over have been presented in the the table below.

Description Metroteks

Fixed assets 3 Intangibles - Property, plant and equipment 2 Financial assets - Receivables - Assets due to deferred tax 1

Current assets 68 Inventory 46 Liabilities 6 Financial assets - Prepayments - Cash and its equivalents 16

Total assets 71 Long term liabilities and provisions - Liabilities - Provisions for tax - Other provisions - Short term liabilities and provisions 47 Liabilities 47 Provisions -

Total liabilities and provisions 47 Net assets 24 Minority shares (9) Net assets acquired, total 15 Goodwill of the company on purchase 333

Purchase price 348 The influence of cash due to fusion Apator Metroteks has been presented in the table below:






Net cash taken over with subsidiary 16 Cash paid (348) Net cash expenditures (332)

The influence of the take over on results of Grupa APATOR has been presented in the table.


Total revenues (for 2009) 315 Net profit (for 2009) (2)

Total revenues (for the period of control) 76 Net profit (for the period of control) (23) Share in net profit (or the period of control) (14)

NOTE NO. 31 INFORMATION ON AFFILIATED ENTITIES

Information on affiliated entities has been presented in the table.

Benefits to management staff Period

01.01.2009 31.12.2009

01.01.2008 31.12.2008

Short term employee benefits 7 285 6 792

Benefits after employment 9 4

Other long term benefits 68 113

Benefits due to termination of employment contract - 126

Payment in form of own shares - -

Total 7 362 7 035

Transactions with affiliated entities / balance of entity regarding affiliated entities Dominant entity Subsidiaries Affiliated entities

Sales of products and services 38 158 25 472 - Sales of goods and materials 686 443 - Sales of fixed assets and intangibles 114 193 - Sales of shares 3 010 - - Cost regarding sale 29 470 12 165 - Cost regarding sale of shares 3 041 - - Trade receivables 2 757 5 543 - Other receivables 9 149 - Borrowings granted 137 300 - Repayment of borrowings granted 454 - - Interest received from borrowings granted 35 10 - Receivables due to borrowing granted 926 300 - Revenues due to dividend 18 073 2 970 - Dividend paid 2 970 18 073 - Financial revenues discount of bills exchange - - - Adopted dividend (for payment) - - - Purchase of products, goods and materials 5 105 42 552 17 102 Trade liabilities 2 366 3 357 2 592 Investment liabilities - 149 -

In accordance with MSR 24, APATOR S.A. made identification of affiliated entities. The affiliated entities are as follows:

a. subsidiaries • Apator-Control Sp. z o.o.





• Apator-Mining Sp. z o.o. • FAP Pafal S.A. • Apator Mertix S.A. • Apator GmbH • Apator Rector Sp. z o.o. • Apator Powogaz SA

b. semi subsidiaries • Apator-Kfap Sp. z o.o. • Wodpol Sp. z o.o. • Apator Telemetria Sp. z o.o. • Apator Metroteks - Ukraina

c. affiliated entity Apator-Elektro - Moscow d. semi affiliated entities

• Teplovodomer – Russia • Metcom KFT - Hungary

e. members of the Supervisory Board f. members of key management personnel g. close to families of members of the Supervisory Board and Management Staff being in one

common household h. entities being controlled by persons specified in points e and f.

The Executive Board of APATOR S.A. stated that the make-up of the top management of APATOR S.A. is as follows:

• Janusz Niedźwiecki – President, Managing Director • Tomasz Habryka – Member of the Executive Board, Marketing and Sales Director of Switchgear,

(since 1st January 2010 Member of the Executive Board, Switchgear Director) • Jerzy Kuś – member of the Executive Board,Marketing and Sales Director of Metering

Equipment and Systems (since 1st January 2010 Member of the Executive Board, Metering Equipment and Systems Director)

• Janina Karaszewska-Zandrowicz – Proxy, Finance Director • Zbigniew Baranowski – Proxy, Manufacturing Director • Tomasz Piasecki –Technique and Development Director (till 26th January 2010)

No transactions with affiliated entities specified in points e – h have been found , except the payment of salaries for the fulfilment of duties or benefits for the employment. Salaries of members of the Executive Board and the Supervisory Board resulting of the fulfilment of their duties in dominant entity is demonstrated in the table:

Description Essential remuneration

Other benefits Total

Remuneration of Members of the Executive Board

Janusz Niedźwiecki 630 - 630

Tomasz Habryka 383 - 383

Jerzy Kuś 57 - 57

Total 1 070 - 1 070 Remuneration of Members of the Supervisory Board

Danuta Guzowska 101 - 101

Mariusz Lewicki 54 - 54

Janusz Marzygliński 60 - 60

Ryszard Wojnowski 54 - 54

Krzysztof Kwiatkowski 54 - 54 Mariusz Pawlak 31 - 31 Total 354 - 354

Remuneration of Members of the Executive Board and the Supervisory Board resulting of the fulfilment of their duties in subsidiaries and affiliated entities has been presented in the table:

Description Essential remuneration

Other benefits Total

Remuneration of Members of the Executive Board

Janusz Niedźwiecki 72 - 72 Tomasz Habryka 24 - 24





Jerzy Kuś 289 - 289

Total 385 - 385 Remuneration of Members of the Supervisory Board

Danuta Guzowska - - - Mariusz Lewicki 72 - 72 Janusz Marzygliński 89 - 89 Ryszard Wojnowski 36 - 36 Krzysztof Kwiatkowski - - - Mariusz Pawlak - - -

Total 197 - 197

NOTE NO. 32 OBJECTIVES AND PRICIPLES OF FINANCIAL RISK MANAGEMENT

Apart to derivatives the main financial instruments that being used by Grupa are bank loans, loans on current account. Grupa has got also financial assets such trade receivables, foreign bills of exchange, cash arising in the result of direct activity and other receivables and loan granted. The Companies conclude also transactions on derivatives including first of all forward contracts and currency options. The objective of these transactions is currency risk management arising during the activity of the Companies. The forward contracts and currency options are concluded based on current situations, forecasts for the foreign exchange rates. The principle of Grupa is not to run the turnover with financial instruments. The main types of risk resulting from financial instruments of Grupa cover currency risk, fluidity risk, and loan risk. Currency risk The Companies are exposed to currency risk due to the transactions concluded. The risk occurs in result of sale and purchase by Grupa in other currencies than the functional currency (PLN). The status of trade receivables and liabilities and loan granted and divided into currencies.

At 31-12-2009 At 31-12-2008

Description Currency PLN Currency PLN

Trade receivables x 9 702 x 16 510

Receivables in 000’ EUR 2 377 9 480 3 299 13 162

Receivables in 000’ CZK 913 137 967 207

Receivables in 000’ GBP 0 0 499 2 915

Receivables in 000’ USD 31 85 82 226 Advancepayments transferred for purchase of materials and services x 936 x 1 899

Advance payments in 000’ USD 160 443 469 1 363

Advance payments in 000’ EUR 124 493 133 536

Cash x 4 983 x 9 633

Receivables in 000’ EUR 464 1 903 1 614 6 457

Receivables in 000’ CZK 0 0 502 76

Receivables in 000’ GBP 0 0 5 22

Receivables in 000’ USD 53 114 40 116

Trade liabilities x 2 966 x 2 962

Receivables in 000’ EUR 429 1 816 430 1 845

Receivables in 000’ CZK 351 1 030 351 1 077

Receivables in 000’ GBP 186 95 91 40

Receivables in 000’ USD 5 25 0 0

Advance payments received for deliveries x 76 x 188

Advance payments in 000’ USD 0 0 53 162

Advance payments in 000’ EUR 18 76 6 26





According to accepted on 26th May 2009 guideline „regulations regarding hedging contracts” in order to hedge inflows from export exceeding the import expenses forward contracts are used (since 2010 also ordinary cost options). Hedging contracts to be concluded require the consent of the Executive Board in form of resolution where the maximum nominal of hedging is defined based on plan of foreign trade balance and the value of current hedging. The conclusion of complex hedging structure is made after positive opinion received of the Supervisory Board. The Supervisory Board makes the decision after having received the reasons of its intention from the Executive Board to apply such hedging and its potential influence on financial results. The table below presents the sensibility of gross financial result to rational possible fluctuations of exchange rate of EUR assuming stability of other factors.

Description Change of exchange rate Influence on gr oss financial result

Sensibility analysis in the period 01.01.2009 - 31. 12.2009

+5% 834

-5% -553

Sensibiity analysis in the period 01.01.2008 - 31.1 2.2008

+5% 1 576

-5% -1 624 There is also the risk resulting from leasing contracts concluded for means of transportation where the liabilities are in Swiss francs in Capital Group Apator. The table below presents the sensibility of gross financial result on rational possible changes of the exchange rate of CHF provided stability of other factors.

Description Change of exchange rate Influence on gross financial result

Sensibility analysis in the period 01.01.2009 - 31. 12.2009

+10% -8

-10% 8

Sensibiity analysis in the period 01.01.2008 - 31.1 2.2008

+10% -15

-10% 15 Interest rate risk The Companies are exposed to interest rate risk because it takes cash interested according to variable interest rates. The Companies do not apply hedging in form of swaps and forwards of interest rates due to low variability of WIBOR rates which are the base for the interest rates of the loans. If interest rates are by 50 basis points higher/lower and all other variables remained constant than:

• Profit of Grupa for the period ended on 31st December 2009 will decease / increase by 302 000 PLN;

• Profit of Grupa for the period ended on 31st December 2008 will decrease / increase by 356 000 PLN;

For the purpose of the analysis it should be assumed that the amount of unpaid liabilities on balance day was unpaid for the whole year. Loan risk





Loan risk consists in that contracting party will not do its duties resulting from financial instrument or the contract what causes the losses born by the second party The companies in Capital Group APATOR are exposed to loan risk resulting from their operating activity mainly it regards trade receivables. Grupa conclude the contracts exclusively with famous firms having got good loan worthiness. All customers who want to make us of deferred payment are subject to initial verification. There is financial instruction in the Companies concerning of the control of sales orders. Grupa aims for the cooperation with all to be performed based on commercial contracts. Moreover, due to current monitoring of receivables the exposition of the Companies to bad receivables is insignificant. Trade receivables include the mounts due from large number of customers spread over different sectors and geographical areas. Loan risk concerning cash and derivatives is limited since the contracting parties of Grupa APATOR are the banks of the high rating granted by international rating agencies. Fluidtiy risk Grupa controls the risk of lack of cash making monthly plans of expenditures and weekly financial positions. The Companies aim at maintaining equilibrium between continuity and flexibility of financing. In order to finance current activity the Companies make use mainly of the loans on current accounts. For the investment activity (purchase of shares of Powogaz S.A.) the dominant entity –APATOR SA has taken long-term loan in amount of 45 m PLN. At 31st December 2009 the debt due to the loan was 36 m PLN. The table below presents the information on the loan due dates of liabilities.

Description to 1 month From 1

month to 3 months

From 3 months to 12 months

From 1 year

to 5 years

Over 5 years Total

Status at 31.12.2009 Trade liabilities 12 936 4 635 0 0 0 17 571 Financial derivatives 240 260 24 0 0 524 Other liabilities 11 241 2 085 1 919 375 0 15 620 Loan 55 0 33 559 27 000 0 60 614 Total 24 472 6 980 35 502 27 375 0 94 329

Financial assets and liabilities according to fair value The table below presents the analysis of financial instruments measured in fair value and segregated according to three level structure where:

• Level 1 – fair value based on prices on stock exchange (not corrected) being offered for the same assets or liabilities on active markets;

• Level 2 – fair value is fixed on the basis of values being observed on the market but not being direct market quotation;

• Level 3 – fair value is fixed on the basis of different techniques of evaluation not putting on any market data being observed

Description Level 1 Level 2 Level 3 Total

Financial assets evaluated in fair value by financial result 1 1 339 0 1 340 Derivatives 0 1 339 0 1 339 Shares of Energoaparatura katowice 1 0 0 1 Financial liabilities evaluated in fair value by financial result 0 524 0 524 Derivatives 0 524 0 524 Other 0 0 0 0

In current period transfers between level 1 and level 2 did not occurred.





Capital management The main objective of capital management of Grupa is to keep good loan rating and capital ratios that would support operating activity of Grupa and would increase the value for its shareholders. Grupa manages the capital structure and in result of changes in economical conditions it introduces the changes in it. In order to maintain or make corrections of capital structure, the dominant entity is able to pay dividend to shareholders, return the capital to shareholders or to issue new shares. Grupa monitors the status of capitals using financial leverage ratio that is calculated as the relation of net debt to sum of capitals increased by net debt. Grupa includes in net debt the interested loans and borrowings, trade liabilities and other liabilities excluding derivatives reduced by cash and its equivalents. The equity covers equity presented in the statement on financial position.

Financial leverage Day 31.12.2009 31.12.2008 Debt 90 958 124 480 Cash and its equivalents (10 234) (20 208)

Net debt 80 724 104 272 Equity 179 868 163 645 Capital and net debt 260 592 267 917 Financial leverage 31% 39%

NOTE NO. 33 REMUNERATION OF CHARTERED ACCOUNTANT

On 14th May 2009 the contract with KORYCKA, BUDZIAK & AUDYTORZY Sp. z o.o. was concluded on auditing of interim and annual individual financial statements and rewiews and auditing of annual consolidated financial statements of APATOR S.A. forfinancial years 2009 and 2010. In accordance with the contract concluded the remuneration of chartered accountant for auditing of individual financial statement of dominant entity - APATOR S.A. and review of consolidated statement of Grupa APATOR for the first half of 2009 was established for the amount of 36 000 PLN. According to the contract concluded the remuneration of chartered accountant for auditing of individual financial statement of dominant entity - APATOR S.A. and auditing of consolidated financial statement of Grupa APATOR for 2009 was established for the amount of 53 000 PLN. Apart to the above remuneration APATOR S.A. covers proved costs of staying of auditing team outside the headquarters of auditors (travels, lodging) and currier mail.

NOTE NO. 34 EXPLANATIONS CONCERNING CASH FLOW ACCOUNT

Grupa APATOR proves cash flows account from operating activity by use of indirect method where the profit is corrected by effects of transactions with non cash nature, changes in inventories, receivables and liabilities and other items in case of them the cash effects are cash flows from financial activity or investment activity.

1. Discrepancies between changes in balance of some items and changes in them presented in cash flow account.

Change in inventory

Inventory (1 551)

Inventory on the day of take over of Apator Telemetria 33

Inventory on the day of take over of Metroteksu 46

Total changes (1 472)

Change in receivables

Trade receivables 2 881

Receivables due to taxation, customs and social security 183

Long-term receivables 34

Other receivables 796





Prepayments – advance payments for the purchase of services 965

Receivables on the day of take over of Apator Telemetria 359

Receivables on the day of take over of Apator Metroteks 5

Correction of receivables due to sales of shares 48

Correction of receivables due to dividend (17)

Correction of receivables due to income tax 512

Correction of investment receivables (without VAT) 1 778

Total change 7 544

Change in liabilities

Trade liabilities (521)

Liabilities due to taxes, customs and social securities (1 909)

Liabilities due to wages and salaries (386)

Other liabilities (1 140)

Advance payments (114)

Liabilities on the day of take over of Apator Telemetria (26)

Liabilities on the day of take over of Apator Metroteks (47)

Correction of liabilities due to dividends (6)

Correction of liabilities due to income tax 1 571

Correction of liabilities due to investments (without VAT) 747

Total change (1 831)

Change in provisions

Long-term provisions for employee benefits (126)

Short-term provisions for employee benefits (420)

Other short-term provisions 875

Other long-term provisions 45

Total change 374

Changes in accruals and prepayments

Short term settlements of prepayments (646)

Long term settlements of prepayments (21)

Accruals (306)

Total change (973)

2. Explanations for the amounts taken as other corrections and other expenditures (inflows)

Day Other corrections – operating activity

31.12.2009 31.12.2008

Damages to fixed assets - -

Liquidation of fixed assets, investments failed and reclassification of fixed assets 75 34

Settlement of donation (9) (9)

Evaluation of hedging transactions (26 082) 26 058

(Profit) loss due to settlement of options 19 870 31

Write downs of shares value - 1

Exchange rates from consolidation (19) (17)

Increase of minority capitals due to the purchase of own shares - 104

Additional purchase of own shares 13 327

Other 80 -

Gross profit (loss) on discontinued activity - -

Total (6 072) 26 529





Day Other corrections – operating activity after consid eration the changes in

current capital 31.12.2009 31.12.2008

Liabilities paid by bills of exchange (297) (1 465)

Acceptance of finished goods to fixed assets (445) (478)

Other - (162)

Total (742) (2 105)

Day Other inflows (outflows) – investment activity

31.12.2009 31.12.2008

Advance payments for fixed assets under construction (1 768) (819)

Advance payments for intangibles (13) -

Expenditures due to hedging contracts and options (17 302) (31)

Payment of commission and other costs concerning sale and liquidation of fixed assets (15) (28)

Other (10) (21)

TotL (19 108) (899)

Day Other inflows (outflows) – financial activity

31.12.2009 31.12.2008

Leasing interest (34) (24)

PCC fees (30) 3

Commissions and fees from loans and borrowings (31) (30)

Total (95) (51)

NOTE NO. 35 CHANGES IN ACCOUNTING PRINCIPLES

Change (1) After consolidated statement for 2008 was prepared and approved, dominant entity - APATOR S.A. received corrected financial statement of subsidiary - APATOR GmbH. Change (2) After consolidated statement for 2008 was prepared and approved, subsidiary - APATOR POWOGAZ received corrected financial statement of associated entity - Teplovodomer (Russia). Change (3) After consolidated statement for 2008 was prepared and approved, dominant entity - APATOR S.A. received corrected financial statement of associated entity - APATOR ELEKTRO (Russia). Change (4) After consolidated statement for 2008 was prepared and approved, subsidiary APATOR METRIX S.A. received corrected financial statement of associated entity METCOM KFT (Hungary). Change (5) Dominant entity - APATOR S.A. made corrections of receivables resulting from settlement of long term contracts in subsidiary - APATOR RECTOR Sp. z o.o. Change (6) Dominant entity - APATOR S.A. made corrections of exchange rate differences in cash flow account resulting from settlement of cash flow account. Change (7) Subsidiary - FAP PAFAL S.A. introduced the change in exchange rate differences and receivables and liabilities due to sale and purchase of property, equipment and plant in cash flow statement. The company made correction to number of shares quoted on Warsaw Stock Exchange and the method of presentation of the performance of the contracts on currency transactions. Change (8) Capital Group APATOR made some changes in settlement of dividend paid and advance payments towards future dividends of minority shares. Further to the above data presented and comparable with data of 2008 some changes were made that you can find in the table below.





Item in the statement Change (1) Change (2) Change (3) Change (4) Change (5) Change (6) Change (7) Change (8) Total

Statement on financial position

Investments in associated entities consolidated by equity method - (219) (10) (3) - - - - (232) Trade receivables - - - - 882 - - - 882

Other short term receivables (40) - - - - - - (40)

Accruals and prepayments (2) - - (882) - - - (884)

Total assets (42) (219) (10) (3) - - - - (274)

Capital from evaluation of hedging transactions and exchange rate differences from consolidation 2 (82) (9) 3 - - - - (86) Undistributed financial result - - - 7 - - - 13 20

Financial result of current period (2) (136) (1) (13) - - - - (152)

Write offs of financial result of current year - - - - - - - 4 4

Minority shares - (1) - - - - - (17) (18)

Liabilities due to taxes, customs and social insurance (39) - - - - - - - (39)

Other short term liabilities (2) - - - - - - - (2)

Short term provisions (1) - - - - - - - (1)

Total liabilities (42) (219) (10) (3) - - - - (274)

Statement of total income

Share in profits of entities consolidated by equity method - (137) (1) (2) - - - - (140)

Financial activity – result of exchange rate differences 46 - - - - - - - 46

Financial activity – result of revaluation of financial fixed assets - - - (11) - - - - (11)

Financial activity- other revenues / costs (48) - - - - - - - (48)

Profit (loss) of minority shareholders - 1 - - - - - - 1

Financial result of current period (2) (136) (1) (13) - - - - (152) Gains and losses arising from translating the financial statements of foreign operations 2 (82) (9) 3 - - - - (86)

Othe total income 2 (82) (9) 3 - - - - (86)

Cash flow account

Profit before tax (continued operation) (2) (137) (1) (13) - - - - (153)

(Profit loss on sales of property, plant and equipment - - - - - - (452) - (452)

(Profits) losses due to change of fair value of financial assets specified according to fair value - - - 11 - - - - 11





Item in the statement Change (1) Change (2) Change (3) Change (4) Change (5) Change (6) Change (7) Change (8) Total

Share in (profits) losses in associated entities - 137 1 2 - - - - 140

(positive) negative exchange rate differences - - - - - 3 (1) - 2 Operating activity – other corrections – exchange rate differences from translation 2 - - - - - - - 2 Operating activity – other corrections – settlement of contracts and options - - - - - - 31 31

Change in receivables 40 - - - (882) - 7 - (835)

Change in liabilities (40) - - - - - 22 - (18)

Change in provisions (2) - - - - - - - (2)

Change in accruals and prepayments 2 - - - 882 - - - 884

Expenditures for purchase of property,plant and equipment - - - - - - 414 - 414

Inflows from sales property, plant and equipment - - - - - - 10 - 10 Expenditures from other investment activity –contracts and options - - - - - - (31) (31)

Exchange rate differences at the beginning of the period - - - - - - (1) - (1)

Exchange rate differences at the end of the period (3) - - (3)

Total - - - - - - (1) - (1)





NOT NO. 36 EMPLOYMENT

The employment at 31st December 2009 in subsidiares and in dominant entity were as follows:

Company Number of employees

APATOR S.A. 391

FAP PAFAL S.A. 383

APATOR MERTIX S.A. 263

APATOR MINING Sp. z o.o. 121

APATOR CONTROL Sp. z o.o. 57

APATOR RECTOR Sp. z o.o. 74

APATOR POWOGAZ S.A. 294

APATOR KFAP Sp. z o.o. 40

TOV APATOR METROTEKS 7

APATOR TELEMETRIA Sp. z o.o. 4

WODPOL Sp. z o.o. 7

APATOR GmbH 2

Total 1 643

NOTE NO.37 EVANTS THAT OCCURRED AFTER THE REPORTING PERIOD

Till the day the statement is prepared, i.e. 29th April 2010 remaining to be settled currency operations of optional strategy in accordance with contract concluded on 25th August 2008 with ING Bank Śląski were settled with the loss in amount of -362 000 PLN. The evaluation value was taken in charge of costs in 2009 and it was -500 000 PLN. The influence on the result in 2010 has the difference in amount of 138 000 PLN (profit in current financial result). On 4th January 2010 APATOR S.A. concluded the contract on cooperation with the subsidiary FAP PAFALA S.A., the object of the contract was the sales of products of the subsidiary, after sales service and provision of design services towards FAP PAFAL S.A. Estimated mutual turnover due to the above contract in 2010 are 50.000 000 PLN. The Executive Board of the Company on 25th February 2010 announced that declared level of dividend for financial year 2009 is 0,50 PLN gross per share, but declared level of advance payment towards expected dividend from the profit for financial year 2010 is 0,25 PLN gross per share. Towards the dividend for financial year 2009 was paid in December 2009 the advance payment in amount of 0,20 PLN per share. The other declared amount of dividend in amount of 0,30 PLN gross per share will be paid after the approval of General Shareholders Meeting of APATOR S.A. At 31st March 2010 the procedure of the compulsory purchase of shares of APATOR POWOGAZ S.A. was completed. Therefore, at the above mentioned day the dominant company APATOR S.A. has in its possession 100 % of shares of subsidiary APATOR POWOGAZ S.A. Till the day of the statement is prepared i.e. 29th April 2010 dominant entity APATOR SA concluded the sales contracts with minority shareholders of subsidiary APATOR MINING Sp. z o.o. Therefore, on that day the dominant entity APATOR SA has 100% of shares in subsidiary –APATOR MINING Sp. z o.o. On 16th April 2010 Ordinary General Partners Meeting of APATOR CONTROL Sp. z o.o. was held where based on adoption of the Resolution No. 2 the financial statement was approved for 2009. Ordinary General Partners Meeting adopted also the resolution No. 8 on profit distribution for financial year 2009. Based on that resolution the profit in value 601.056,55 PLN was entirely designed for payment of the dividend. The payment of dividend will be made in the following terms:

• 17th May 2010 – amount of 300.528,27 PLN • 15th June 2010 – amount of 300.528,28 PLN





On 27th April 2010 Ordinary General Partners Meeting of APATOR RECTOR Sp. z .o., was held where based on the Resolution No 2/2010 adopted the financial statement for 2009 was approved. Ordinary General Partners Meeting adopted also the Resolution No 3/2010 on profit distribution for financial year 2009. Based on that resolution the profit in value of 3.614.707,83 PLN was distributed into:

• dividend in value of 3.600.000,00 PLN • supplementary capital in value 14.707,83 PLN

The partners who held on 27th April 2010 the shares are entitled to the dividend. The payment of dividend will be in the following terms:

• 30th April 2010 – amount of 2.400.000,00 PLN • till 30th December 2010 – amount of 1.200.000,00 PLN, however the day of payment of dividend will be

established by the Executive Board





7. SIGNATURES

Signatures of Members of the Executive Board Date 2010-04-29

Janusz Niedźwiecki President, Managing Director

Date 2010-04-29

Tomasz Habryka Member of the Executive Board, Marketing and Sales Director of Switchgear

Date 2010-04-29

Jerzy Kuś Member of the Executive Board, Marketing and Sales Director of Metering Equipment and Systems

The signature of the person responsible for keeping books

Date 2010-04-29

Janina Karaszewska – Zandrowicz Finance Director

Letter from the President of Apator SA Dear Sirs, Our shareholders, customers and collaborators. On behalf of the Executive Board of Apator SA I have pleasure to present you financial statement and the report of the Executive Board including the summary of the most important achievements of the past year and the main tasks we determined for the future. In 2009 Grupa Apator performed the strategy of development assuming to obtain the leader position in Central and Eastern Europe both in the scope of metering equipment and switchgear equipment. In spite of world economic crisis, Grupa Apator achieved last year higher revenues from sales than in 2008 and they reached 368 m. PLN. Profit on sales achieved the level of 49 m. PLN and net profit was 31m. PLN. Both items of financial result were higher than in 2009. Moreover, net profit takes into consideration additional costs born by Grupa Apator related to the settlement of deadline transactions concluded in 2008. Among many successes achieved last year by Grupa Apator was the further increase of export. In spite of crisis it was higher by 15 m. PLN in relation to 2008, its share in revenues in total was 28%. On foreign markets we not only increased the level of sales of traditional products being exported but also the sales prepayment electricity meters that won new African market like Sierra Leone, Burundi, Malavi or Rwanda. Significant influence on further increase of export of Grupa Apator had also the higher sales of water meters performed by Apator Powogaz SA and gas meters performed by Apator Metrix SA. In the last period the process of restructuring of the companies was continued in Grupa Apator. The effect of the process was the decrease of the costs of current activity, improvement both manufacturing processes and efficiency of labour and implementation in January 2010 changes in the organization of sales of post-paid electronic electricity meters. Invariably, since many years we share the profits with our shareholders we have succeeded to earn each year. In spite of world economic crisis we have declared higher than in 2008 the level of dividend - 0,50 PLN per share. Last year Apator SA was granted high valuation in rating of public companies of social respect - Respect Rating. Thus Apator has joined the group of 16 elite companies being in the Respect Index. The Company was appreciated for its involvement in the performance of its tasks according to the principles of social respect of enterprises. At the end of 2009 we made the assessment of the effectiveness of strategy of development of Grupa Apator performed in the period 2007-2009 and we focused on determination of further strategic objectives till 2012. Updated strategy of development we will present in 2010. I would like to assure you that since many years invariably Grupa Apator focuses on the performance of strategy of permanent growth of value of the Company. At the same time I would like to thank you the shareholders, the Supervisory Board, business partners and other stakeholders for their cooperation and confidence in Apator SA and Grupa Apator in 2009.

Yours faithfully, Janusz Niedźwiecki President

REPORT OF THE EXECUTIVE BOARD OF APATOR SA ON ACTIV ITY OF GRUPA APATOR IN 2009

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Content:

1. GENERAL INFORMATION ................................ ............................................................................................................................2 2. THE STATEMENT OF THE EXECUTIVE BOARD OF APATOR SA R EGARDING MAKING OF CONSOLIDATED FINANCIAL STATEMENT AND THE REPORT ON ACTIVITY OF G RUPA APATOR. ....................................... .....................................8 3. APPOINTMENT OF CHARTERED ACCOUNTANT AND THE DECLARA TION OF THE EXECUTIVE BOARD OF APATOR SA REGARDING CHARTERED ACCOUNTANT..................... .....................................................................................................................8 4. DECLARATION OF ACCEPTANCE OF THE RULES OF CORPORATE GOVERNANCE WITH REFERENCE TO APATOR SA .8 5. BODIES SUPERVISING AND MANAGING THE ENTITIES OF GRU PA APATOR .......................................... ............................21 6. INFORMATION ON KNOWN TO THE ISSUER CONTRACTS (INCLU DING THOSE CONCLUDED AFTER THE BALANCE DAY), IN RESULT OF WHICH THEY CAN CAUSE THE CHANGES IN PROPORTIONS OF THE SHARES HELD BY CURRENT SHAREHOLDERS IN THE FUTURE. ........................ ...........................................................................................................................22 7. CONTRACTS CONCLUDED BETWEEN GRUPA APATOR AND PERSO NS OF MANAGEMENT STAFF OF THE ENTITIES THAT FORESEEN COMPENSATION IN CASE OF THEIR RESIGN OR DISMISSAL FROM THE POSTS WITHOUT CLEAR REASONS OR THEIR RECALL OR DISMISSAL DUE ACQUISITIO N OF THE COMPANY ................................................................22 8. DESCRIPTION OF THE MAIN FEATURES OF INTERNAL CONTRO L SYSTEMS AND RISK MANAGEMENT IN GRUPA APATOR WITH REFERENCE TO THE PROCESS OF PREPARATION OF INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................................................................................................................22 10. INFORMATION ON SALES MARKETS AND SOURCES OF PROCURE MENT .....................................................................24 11. THE ESSENTIAL ECONOMIC VALUES INCLUDED IN CONSOLIDA TED ANNUAL FINANCIAL STATEMENT....................3 1 12. THE ASSESSMENT THE POSSIBILITY OF PERFORMANCE OF IN VESTMENT PLANS INCLUDING CAPITAL INVESTMENTS IN COMPARISON WITH THE FUNDS BEING IN POSSESSION, TAKING INTO CONSIDERATION THE POSSIBLE CHANGES IN FINANCING STRUCTURE OF THE ACTIVITY..... .........................................................................................................48 13. ASSESSMENT AND ITS JUSTIFICATION, CONCERNING THE MA NAGEMENT OF FINANCIAL RESOURCES, PARTICULARLY TAKING INTO CONSIDERATION THE ABILITY TO MEET THE OBLIGATIONS AND TO DEFINE POSSIBLE THREATS AND ACTIONS THAT THE ISSUER TOOK OR IS GOIN G TO TAKE IN ORDER TO OPPOSE THE THREATS........... ......49 14. CHANGES IN THE ESSENTIAL RULES OF MANAGEMENT OF THE COMPANY OF ISSUER AND ITS CAPITAL GROUP49 15. DESCRIPTION OF THE STRUCTURE OF THE MAIN CAPITAL DE POSITS OR MAIN CAPITAL INVESTMENTS PERFORMED IN GRUPA APATOR IN THE FINANCIAL YEAR .... .......................................................................................................50 16. MORE IMPORTANT EVENTS HAVING GOT THE INFLUENCE ON A CTIVITY AND FINANCIAL RESULTS OF GRUPA APATOR IN THE FINANCIAL YEAR OR WHICH POSSIBLY WILL HAVE THE INFLUENCE IN THE NEXT YEARS .............. ............50 17. INFORMATION ON CONCLUSION BY APATOR SA OR ITS SUBSI DIARY ONE OR MORE TRANSACTIONS WITH AFFILIATED ENTITIES IF THEY ARE INDIVIDUALLY OR IN TOTAL SIGNIFICANT AND THEY WERE CONCLUDED ON OTHER CONDITIONS THAN MARKET ONES........................ ..........................................................................................................................54 18. CHARACTERISTICS OF EXTERNAL AND INTERNAL FACTORS SI GNIFICANT FOR THE DEVELOPMENT OF GRUPA APATOR, INCLUDING SIGNIFICANT FACTORS OF RISK AND T HREATS AND DESCRIPTION OF THE PERSPECTIVES FOR DEVELOPMENT OF ITS ACTIVITY IN THE COMING FINANCIAL YEAR. ..........................................................................................55 19. DEVELOPMENT POLICY OF GRUPA APATOR ................. ....................................................................................................56 20. INFORMATION ON PROCEEDINGS AT THE COURT, BODY APPRO PRIATE FOR ARBITRATION OR BODY OF PUBLIC ADMINISTRATION REGARDING LIABILITIES OR RECEIVABLES OF APATOR SA ...................................... ...................................57 21. INFORMATION ON CONTRACTS CONCLUDED AND SIGNIFICANT TO ACTIVITY OF THE GRUPA APATOR, INCLUDING THE CONTRACTS KNOWN TO THE ISSUER CONCLUDED BETWEEN SHAREHOLDERS, INSURANCE CONTRACTS, CONTRACTS ON COOPERATION OR COLLABORATION.......... .......................................................................................................58 22. INFORMATION ON ISSUING OF SECURITIES ......................................................................................................................59 23. INFORMATION ON CHECKING SYSTEM OF PROGRAMMES FOR TH E SHARES OF EMPLOEES ............................... ....60 24. THE FORECAST OF FINANCIAL RESULTS .................. ........................................................................................................60


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1. General information

1.1 Make up of Grupa Apator

Apator SA with the seat in Toruń at śółkiewskiego 21/29 is parent entity in Grupa Apator. It is registered in Regional Court in Toruń at VII Economic Department of the National Court Register under number KRS: 0000056456. The shares of SA are quoted on essential market of Warsaw Stock Exchange – sector according to Warsaw Stock Exchange in Warsaw„ electrical engineering industry”. The shares of the Company are included in index sWIG80 and Respect Index.

Apator SA forms the capital group of six domestic entities and two foreign ones.

The share of Apator SA in share capital of particular companies at 31st December 2009 has been presented in the table below.

Name of the Company Seat Relationships Share in capital

FAP Pafal SA Świdnica subsidiary 100,00%

Apator Metrix SA Tczew subsidiary 100,00%

Apator Powogaz SA Poznań subsidiary 99,40%*)

Apator Rector sp. z o. o. Zielona Góra subsidiary 70,00%

Apator Control sp. z o. o. Toruń subsidiary 100,00%

Apator Mining sp. z o. o. Katowice subsidiary 99,89%**)

Apator Elektro Moscow Associated entity 50,00%

Apator GmbH Berlin subsidiary 100,00%

*) In Apator Powogaz SA the procedure of the enforced purchase of shares has been completed - at 31st March 2010 Apator SA had 100% capital of the company.

**) In the period since January 2010 to April 2010 Apator SA acquired 28 shares of Apator Mining Sp. z o.o. – therefore on the moment of the issue of the report Apator SA has 100,00% shares in Apator Mining Sp. z o. o.

Apator SA is strategic investor in all subsidiaries (it has one hundred percent or almost one hundred per cent packages of shares). There are no capital connections between subsidiaries. There are also no


3

connections between subsidiaries and associated entity.

Apator Metrix SA and Apator Powogaz SA in Grupa Apator (except parent entity) have the shares in other entities.

Apator Metrix SA has 24% shares in Hungarian company- Metcom KFT. Apator Powogaz SA has 100% shares in Apator Kfap sp. z o. o., 77,33% shares in Wodpol sp. z o. o., 44,06% shares in ZAO Teplovodomer in Russia. On 28th January 2009 Apator Powogaz SA acquired 50,8% shares in WMC Telemetria sp. z o.o. with the seat in Słupsk. The company is the producer and supplier of wireless telemetry systems for heat meters and water meters. On 4th November 2009 Apator Powogaz SA acquired 61% shares in Apator Metroteks with the seat in Kiev (Ukraine). The company deals with distribution of products of Grupa Apator Powogaz on Ukrainian market.

Apator Powogaz SA and Apator Kfap sp. z o. o., Wodpol sp. z o. o., Teplovodomer in Russia, Apator Telemetria sp. z o.o. and Apator Metroteks form capital group within Grupa Apator.

Scope of activity of the entities in Grupa Apator i n 2009

SEGMENT: METERING OF UTILITY SERVICES

Name of the company Seat of the company

Scope of activity

Apator SA Toruń prepayment electricity meters, metering systems

FAP Pafal SA Świdnica post-paid electricity meters (inductive and electronic ones),

Apator Metrix SA Tczew residential and industrial gas meters, industrial systems

Grupa

Apator Powogaz Poznań residential and industrial water meters, heat meters, temperature sensors,

metering systems

Apator Rector

Sp. z o. o. Zielona Góra

it systems for distribution management in power engineering, heat engineering, water supply and sewage systems, gas engineering, telecommunication, rescue operations and local government administration

Apator GmbH Berlin export of products of Grupa Apator to German market

SEGMENT: PROTECTION AND SWITCHING OF POWER CIRCUITS

Apator SA Toruń low voltage switchgear for making and breaking and protection of electrical circuits

Apator Control

Sp. z o. o. Toruń drives and applications of drives, distribution and control equipment

Apator Mining

Sp. z o. o. Katowice mining equipment

Apator Elektro SA Moskwa export of switchgear to Russian market

Apator GmbH Berlin export of products of Grupa Apator to German market


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1.2 Entities subject to consolidation

− parent company: Apator SA with the seat in Toruń,

− subsidiaries subject to full consolidation :

Firm Seat Share in capital Remarks

Apator Mining sp. z o. o. Katowice 99,89%*) Subsidiary

Apator Control sp. z o. o. Toruń 100,00% Subsidiary

Apator Metrix SA Tczew 100,00% Subsidiary

FAP Pafal SA Świdnica 100,00% Subsidiary

Apator Rector sp. z o. o. Zielona Góra 70,00% Subsidiary

Apator Powogaz SA Poznań 99,40%**) Subsidiary

Apator GmbH Berlin (Germany) 100,00% Subsidiary

Apator Kfap sp. z o. o. Kraków 100,00%

99,40%

Indirect subsidiary

Indirect share

Wodpol sp. z o.o. Poznań 77,33%

76,87%

Indirect subsidiary

Indirect share

Apator Metroteks Kiev (Ukraine) 61,00%

60,63%

Indirect subsidiary

Indirect share

Apator Telemetria sp. z o.o. Słupsk 50,80%

50,50%

Indirect subsidiary

Indirect share

.

* In the period since January 2010 to April 2010 Apator SA acquired 28 shares of Apator Mining Sp. z o.o. – therefore on the moment of the issue of the report Apator SA has 100,00% shares in Apator Mining Sp. z o. o

**) In Apator Powogaz SA the procedure of the enforced purchase of shares has been completed - at 31st March 2010 Apator SA had 100% capital of the company.


5

.

− associated entities evaluated by equity method:

Firm Seat Share in capital Remarks

Apator Elektro Moscow (Russia) 50,00% Associated entity

ZAO Teplovodomer Mytishi (Russia) 44,06%

43,80%

Indirect associated entity

Indirect share

Metcom KFT Hungary 24,00%

24,00%

Indirect associated entity

Indirect share

1.3 Vision of Grupa Apator

Vision: GRUPA APATOR is bound to be a leader in Central & Eastern Europe for development and sales of metering systems, metering equipment and switchgear. Strategic objective of APATOR SA and GRUPA APATOR is to create the Polish technological group based on strong brand of APATOR bound to increase the sales on foreign markets. APATOR SA and GRUPA APATOR concentrate their activities on two segments of electromechanical industry: metering and switchgear.

Such companies like APATOR SA, FAP PAFAL SA, APATOR METRIX SA, APATOR POWOGAZ SA, APATOR RECTOR Sp. z o.o., APATOR GmbH act in the segment of metering of utility services.

Metering segment offers advanced services, products and comprehensive implementations covering among other things the manufacturing of smart meters for electricity, gas, water and heat and also start up and service of automated meter management and prepayment systems. Comprehensive and broad offer covers both hardware and software of smart metering integrated systems and enabling active demand side management, optimization of energy consumption and also the inventory of network property of utility services of distributors and other enterprises of built-up field structure.

GRUPA APATOR holds strong position and it has great experience in the segment regarding protection and switching of electrical circuits.

Such companies like APATOR SA, APATOR MINING Sp. z o.o., APATOR CONTROL Sp. z o.o. and APATOR ELEKTRO S.A. and APATOR GmbH act in this segment. In contrary to „metering companies” all the above mentioned entities act in independent segments of the markets. The aim of the strategy is to hold strong position on domestic market and to increase export.

1.4 Business activity of particular entities in Gru pa Apator

1.4.1 APATOR SA – parent entity

Business activity of the company includes the design, manufacturing, sales of metering systems and metering equipment and switchgear. The main products of the company are LEWsystem Apator ( pre-paid and post- paid system) and AMRsystem Apator (remote data reading system), prepayment electricity meters, surge protective devices, ARS, PBS, RBK type disconnectors and 4G series rotary cam switches. Moreover since January 2010 Apator SA provides with the design services and deals with distribution and after sales service of products of subsidiary FAP Pafal SA.

APATOR SA manufactures for subsidiaries: − calculators for heat meters; the assembly and sales of heat meters are performed by Grupa Apator

Powogaz, − electronic electricity meters that are assemblied and legalized by FAP Pafal SA.

The company sells its products on domestic and foreign markets.

Management System according to ISO 9001-2000, ISO 14001 and PN-N 18001 standards operates in the company.


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1.4.2 FAP Pafal SA - subsidiary

Business activity of the company to the end of 2009 was the design, manufacturing and sales of induction and electronic electricity meters. In January 2010 Apator SA concluded the contract on cooperation with FAP Pafal SA. The subject of the cooperation is to deal by Apator SA with:

- sales of electronic electricity meters being manufactured by FAP Pafal SA,

- after sales service

- provision of design services for FAP Pafal SA

The conclusion of the contract on cooperation results from performance of the strategy of Grupa Apator according to it the development and sales of electronic electricity meters (post-paid and pre-paid) and metering systems are performed by Apator SA.

FAP Pafal SA is the entity that has been in GRUPA APATOR since April 2004

Quality Management System according to ISO 9001-2000 standard operates in the company.

1.4.3 APATOR METRIX SA – subsidiary

Business activity of the company includes the design, manufacturing, and sales of bellows gas meters both residential and industrial ones and provision of the service regarding legalization of such gas meters.

The strategy of the company is to perform the main objectives that are to maintain parent position on domestic market and to obtain the position of one of the leaders on European markets in the range of manufacturing and supplies of traditional bellows gas meters as well as “smart”gas meters.

The company sells its products both on domestic market and foreign ones.

APATOR METRIX SA is the entity that has been in GRUPA APATOR since January 2005.

Quality Management System according to ISO 9001-2000 and ISO 14001 standards operates in the company.

1.4.4 APATOR RECTOR Sp. z o. o. – subsidiary

Business activity of the company includes the manufacturing, provision and implementation of IT solutions for inventory and management of branch distribution networks. It offers comprehensive IT solutions for the suppliers of utility services (power engineering, gas engineering, water supply and sewage companies and heat engineering) and also for telecommunication, rescue operations and local government administration. The unique feature of the offered systems is the possibility to upgrade them by GIS spatial information that makes easier to interpret and present the data.

APATOR RECTOR Sp. z o.o. has been in GRUPA APATOR since January 2008.

1.4.5 Apator Powogaz SA - subsidiary

The business activity of the entity includes the design, manufacturing and sales of residential and industrial water meters and heat meters. The company deals with the assembly and start-up of metering systems for water and heat. Apator Powogaz SA has also a strong position on foreign markets.

The headquarters of the entity are in Poznań ul. Klemensa Janickiego 23/25. Currently, APATOR Powogaz SA is the competence center for water and heat meters for the entire Grupa APATOR.

Quality Management System according to ISO 9001-2000 and ISO 14001 standards operates in the company.

APATOR Powogaz SA composites capital group which includes at 31st December 2009 the following entities:

• APATOR-KFAP Sp. z o.o. – with the seat in Cracow,

• WODPOL Sp. z o.o. with the seat in Poznań,

• TEPLOVODOMER SA with the seat in Mytiszczi ( Russia)

• APATOR TELEMETRIA Sp. z o.o. with the seat in Słupsk


7

Business activity of APATOR-KFAP Sp. z o.o. is :

- assembly and legalization of split and compact heat meters (manufacturing of calculators is carried out in APATOR SA),

- manufacture,legalization and sales of temperature sensors,

- repeated legalization,

Business activity of WODPOL Sp. z o.o. is:

- after warranty repairs of the products manufactured by APATOR POWOGAZ SA

Business activity of ZAO Teplovodomer SA is:

- sales of the products of APATOR POWOGAZ SA on the territory of Russia (according to certificates possessed authorizing to sell them),

- warranty service and post warranty repairs of the above products,

- installation of water meters in flats, public housing and industrial objects

Business activity of Apator Metroteks is:

- distribution of products of Grupa Apator Powogaz on Ukrainian market

Business activity of APATOR TELEMETRIA Sp. z o.o. is:

- manufacture of data reading and data transmitting equipment from any type of heat meters, water meters, electricity meters, and central managing equipment,

- development of information technology system applications

1.4.6 APATOR MINING Sp. z o.o. – subsidiary

Business activity of the company includes the design, manufacturing and sales of distribution equipment, control equipment and metering equipment for mining, automation and electronic elements for mining, screw compressors and also provision of services regarding the repairs and maintenance services. The main products are: − circuit breakers, − transformer units, − enclosures for mining equipment, − electronic elements for mining, − compressors

The company does not sell its products directly on foreign markets but through the cooperating companies (e.g. KOPEX).

APATOR MINING Sp. z o.o. is the entity that has been in GRUPA APATOR since 1995.

Quality Management System according to ISO 9001-2000 and 14001 standards has been implemented in the company.

1.4.7 APATOR CONTROL Sp. z o.o. – subsidiary

Business activity of the company includes the design, manufacturing and sales of AC/DC drives and drive applications, switchgear units and transformer stations and services in the scope of their implementation and maintenance.

Quality Management System according to ISO 9001-2000 operates in the company.

APATOR – CONTROL Sp. z o.o. is the entity that has been in GRUPA APATOR since 2000.

1.4.8 APATOR GmbH – subsidiary

The company established in May 2006. APATOR GmbH with headquarters in Germany was registered on 25th October 2006. The objective of the company is to export switchgear and metering equipment of GRUPA APATOR to the German market.


8

1.4.9 APATOR ELEKTRO SA – associated entity The company has its headquarters in Moscow. Business activity of APATOR ELEKTRO SA is the distribution of products of GRUPA APATOR on the Russia market, mainly switchgear. The company has been in GRUPA APATOR since 1998.

2. The statement of the Executive Board of APATOR SA regarding making of consolidated financial statement and the report on activity of G rupa Apator.

The Executive Board of APATOR SA: − Janusz Niedźwiecki – President of Executive Board, − Tomasz Habryka – Member of Executive Board, − Jerzy Kuś – Member of Executive Board

makes a statement that according to the best knowledge of the Executive Board, annual consolidated financial statement of Grupa Apator and comparable data were made in accordance with International Accounting Standards and International Financial Reporting Standards and related to them interpretations announced as the resolutions of European Commission. The companies of Grupa Apator comply with the regulations of the act on accounting and executive regulations issued based on the act regarding aspects not regulated by MSR/MSSF. Consolidated financial statement reflects in real manner, reliable and clearly the property and financial situation of Grupa Apator and also its financial result. The report on activity of Grupa Apator contains real picture of development of achievements and situations of the company with description of essential risks and threats included. Detailed principles of making the report were presented in clarification notes to the consolidated financial statement.

3. Appointment of chartered accountant and the decl aration of the Executive Board of APATOR SA regarding chartered accountant

The audit of consolidated financial statement was performed by authorised entity for auditing of financial statements – Korycka, Budziak & Audytorzy Sp. z o.o. with the seat in Warsaw.

The contract with entity authorised for auditing of financial statements was concluded on 14th May 2009. According to the contract the remuneration of the authorised entity is 89 000 PLN plus VAT and it includes the auditing of individual and consolidated financial statements for 2009, individual semi annual financial statement and also the review of consolidated semi annual financial statement. Moreover, APATOR SA covers the lodging, travelling and courier mail costs. For financial year 2008 the remuneration was 82 000 PLN plus VAT.

APATOR SA made used in the past of service of the firm Korycka, Budziak & Audytorzy Sp. z o.o.

The Executive Board of APATOR SA declares that the entity authorised for auditing of financial statements, - Korycka, Budziak & Audytorzy Sp. z o.o., that had performed the audit of the annual financial statement was selected according to the law. The firm - Korycka, Budziak & Audytorzy Sp. z o.o. registered in register of authorised entities under number 84 and also the members of it, Executive Board and supervising bodies and chartered accountants performing the audit towards Apator SA and entities related to it comply with the conditions of impartial and independent report of audit in accordance with art 56 of the act dated 7th May 2009 on chartered accountants and their council, entities authorised for auditing of financial statements and government control .

4. Declaration of acceptance of the rules of corpor ate governance with reference to Apator SA

4.1 The set of rules of corporate governance to be observed by APATOR SA and place where the set of these rules is available to the public

The Executive Board of APATOR SA has declared to observe all the rules of corporate governance and made public the information on single case of not acceptance of one rule of Best Practice in 2009 regarding the broadcasting of the Ordinary General Shareholders Meeting on 8th June 2009. The set of rules is presented on the website: www.corp-gov.gpw.pl and the website of APATOR SA: www.apator.eu in section - investor service.


9

4.2 The acceptance of the rules of corporate govern ance

On 9th June 2009 the Executive Board of APATOR SA made public the information that since 8th June 2009 i.e. the day of the Ordinary General Shareholders Meeting was held, the Company accepts the rule of the best practices no III.6, according to which at least two members of the Supervisory Board should met the criteria of independence from the company and entities remaining in some relations with the company.

At the same time the Executive Board of APATOR SA advised that the criteria of independence mentioned in the Best Practices no III.6 are met by two newly appointed members of the Supervisory Board: Mr Mariusz Pawlak and Mr Krzysztof Kwiatkowski.

Further to the above APATOR SA observes all the rules of the Best Practices of Public Companies quoted on Warsaw Stock Exchange.

In result of extension of makeup of the Supervisory Board with two independent members, the Supervisory Board of APATOR SA on 23rd September 2009 brought into existence the Audit Committee of Supervisory Board in APATOR SA .Two Audit Committee members and being at the same time members of Supervisory Board of Apator S.A. comply criteria of independence from APATOR SA. Establishing the Audit Committee, APATOR SA fulfils the stipulations of the rule III point 7 of the Best Practices of Public Companies quoted on Warsaw Stock Exchange. The essential task of the Committee is advisory to the Supervisory Board on proper implementation the rules of budget and financial reporting, internal control of Grupa APATOR and cooperation with chartered accountants of the Company. Detailed description regarding the functioning of the Audit Committee is presented in point 4.10.3

4.3 Shareholders of APATOR SA holding directly or i ndirectly huge packages of shares with their number indicated, their percentage share in company capital, number of votes and percentage share in total number of votes at General Sharehold ers Meeting

4.3.1 Shareholders holding more than 5% of votes at General Shareholders Meeting

The list of shareholders holding more than 5% of votes at General Shareholders Meeting has been presented below:

At 31 st December 2009

Description shares votes % shares % votes

Apator Mining sp. z o. o. 6 600 000 6 600 000 18,80% 11,28%

Mariusz Lewicki*) 2 014 000 5 507 776 5,74% 9,42%

Tadeusz Sosgórnik 1 900 503 4 879 809 5,41% 8,34%

Danuta Guzowska*) 1 520 279 4 382 921 4,33% 7,49%

Zbigniew Jaworski 1 327 107 3 609 651 3,78% 6,17%

Janusz Marzygliński 1 060 568 3 514 844 3,02% 6,01%

Total 14 422 457 28 495 001 41,08% 48,71%

*) with the spouse

4.3.2 Share of particular groups of shareholders in total number of shares

Below pie chart presents the share of particular groups of shareholders in share capital (based on payment of advance payment towards dividend for 2009)


10

Natural persons (packages over 5% of

votes)22%

Others31%

Apator Mining19%

Institutional investors28%

The share of institutional investors stabilized in 2009 and achieved the level of 28%. Funds acquire ordinary bearer shares therefore their share in share capital is higher than share in voting. The graph below presents the share of institutional investors in share capital in the recent six years.

Share of institutional investors in capital of APAT OR SA

28%27%

20%

9%

15%

31%

5%

9%

13%

17%

21%

25%

29%

33%

2004 2005 2006 2007 2008 2009

4.3.3 Share price

The beginning of 2009 is the continuation of the long-term downward tendency of share price of APATOR SA that commenced the slump on Warsaw Stock Exchange in 2008. The tendency has maintained for the first three months of the current year where the share price was below 10 PLN. After this period with the stabilization of WIG index, the share price of the Company commenced to increase and it reached and in July the level of 19,88 PLN. In the second half of the year the share price dropped a bit and stabilized and average level of 16,00 PLN and at the end of the year it reached the level of 15,91PLN per share.


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Share price (PLN) and volume of turnover (pcs)

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

2009

-01-

05

2009

-02-

02

2009

-03-

02

2009

-03-

30

2009

-04-

29

2009

-05-

28

2009

-06-

26

2009

-07-

24

2009

-08-

21

2009

-09-

18

2009

-10-

16

2009

-11-

16

2009

-12-

14

0

5

10

15

20

25

volu

me

of t

urno

ver

shar

e pr

ice

0

5

10

15

20

25

2009

-01-

05

2009

-02-

11

2009

-03-

20

2009

-04-

30

2009

-06-

09

2009

-07-

17

2009

-08-

25

2009

-10-

01

2009

-11-

09

2009

-12-

17

5 000

7 000

9 000

11 000

Share price of Apator SA sWIG80

The table below presents selected market data of Apator SA in 2009

DESCRIPTION Date Unit 2009

Closing rate on the first day of quotation in 2009 05.01.2009 PLN 9,90

Valuation of the goodwill at the beginning of the period 05.01.2009 PLN 349 405 650


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DESCRIPTION Date Unit 2009

Closing rate on the last day of quotation in 2009 31.12.2009 PLN 15,91

Valuation of the goodwill at the end of the period 31.12.2009 PLN 558 552 815

The lowest share price 15.01.2009 PLN 8,21

The highest share price 22.07.2009 PLN 19,88

Packet transactions - PLN 458 009

Average turn over volume per session - pcs 23 741

4.3.4 Dividend policy

The main objective of the Executive Board of APATOR SA is to increase the satisfaction of shareholders of investment in shares of the Company. The objective is performed by: − expansion of Grupa APATOR and in result of it, long-term value is being created for the shareholders, − dividend payment policy

On 16th March 2007 the Executive Board of the Company determined dividend policy of APATOR SA. and declared to make annual payment of dividend of 75% net profit of APATOR SA earned for the financial year. The payment of dividend will be made in two parts: one in form of advance payment in current financial year and the second one after the final value the whole dividend has been approved by General Shareholders Meeting. At the same time Executive Board of APATOR S.A. stipulated that in case of performance of significant investment, Management of the Company may decide on other distribution of the profit for financial year. The above policy has been obligatory since the moment of the profit distribution made for financial year 2007.

On 8th June 2009 the General Shareholders Meeting approved the payment of dividend from the profit earned in 2008 in amount of 0,35 PLN per share, towards the dividend the advance payment was paid on 12th December 2008 in amount of 0,10 PLN per share (totally 3.519.547,90 PLN). The outstanding amount of dividend in amount of 0,25 PLN per share (totally 8.776.757,00 PLN), was paid on 14th July 2009.The shareholders holding their shares on 29th June 2009 were authorised for payment of dividend. The lower level of dividend for 2008 in relation to the previous two years is in accordance with the dividend policy of the Company and it considers investment expenditures in amount of 93.658 000 PLN for the extension in 2008 of Grupa Apator by the entities; Apator Powogaz SA and Apator Rector sp. z o. o.

On 28th October 2009 the Executive Board of Apator SA made the decision on payment of advance payment towards anticipated dividend from the profit in 2009 in total amount of 7.021.405,60 PLN, that is 0,20 PLN gross per share. For the payment of the advance payment towards anticipated dividend for financial year 2009 were authorised 35.107.028 registered shares of A series and bearer shares of A, B and C series. The right for payment of advance payment towards anticipated dividend from the profit in financial year 2009 obtained the shareholders holding the shares of Apator SA on 4th December 2009 but the payment was made on 11th December 2009.

The difference in between declared on 3rd March 2009 (current report no 50/2009) advance payment in amount of 0,25 PLN per share and the amount of advance payment paid in amount of 0,20 PLN per share, resulted from legal regulations. In accordance with the Polish Commercial Companies Code the amount of advance payment towards anticipated dividend is allowed to be the half at the most of the profit earned from the end of the previous financial year increased by reserve capitals that can be at the disposal of the Executive Board for payment of advance payment reduced by not covered losses and own shares.


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Dividend per share of Apator SA

0,50 PLN

0,35 PLN

0,03 PLN

0,64 PLN

0,80 PLN

0,36 PLN

0,14 PLN 0,15 PLN

0,05 PLN

0,50 PLN

0,00 PLN

0,10 PLN

0,20 PLN

0,30 PLN

0,40 PLN

0,50 PLN

0,60 PLN

0,70 PLN

0,80 PLN

0,90 PLN

2000 2001 2002 2003 2004 2005 2006 2007 2008 Declaration

of div idendf or 2009

4.4 The holders of any securities that provide spec ial entitlements to control and the description of the entitlements

There is no holder of securities issued by Apator SA who has any special control entitlements of the Company.

At 31st December 2009 share capital is made up of 35.107.028 shares of nominal value of 0,10 PLN each and it was divided into:

Shares and votes Number of shares

Structure of shares

%

Number of votes

Structure of votes

%

Registered shares 7 796 749 22,21% 31 186 996 53,31%

Bearer shares 27 310 279 77,79% 27 310 279 46,69%

Total shares 35 107 028 100,00% 58 497 275 100,00%

Each bearer share gives the right to one vote but registered shares are preferred ones where one share gives the right to four votes at General Shareholders Meeting. On the day of preparation of the report (29th April 2010) after conversion of shares made on 12th January 2010, preferred shares are 22,21% of share capital and 53,31% of votes at General Shareholders Meeting of Apator SA. The rules of sales of registered shares are governed by the Statute of Apator SA.


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7 796 749

27 310 279

31 186 996

27 310 279

0

10 000 000

20 000 000

30 000 000

40 000 000

50 000 000

60 000 000

Number of shares Number of votes

Structure of shares and votes - at 31.12.2009Bearer shares

Registered shares

35 107 028

58 497 275

4.5 All limitations regarding voting like; limited right to holders holding some part or limited number of votes , time limitations regarding voting or records according to them at cooperation of the company, capital rights relating to the securities are separated from holding the securities

There are not any limitations in voting by shareholders of Apator SA.

During 2009 Apator SA was the owner of 186.472 own shares (ordinary bearer shares) acquired for their redemption. The shares were 0,5283% of share capital and they entitled to 186.472 votes (0,3178%) at General Shareholders Meeting. Average unit price of own shares purchased was 10,86 PLN. Accordaning to art. 364 para. 2 of the Polish Commercial Companies Code, the Company has not used them to voting at General Shareholders Meeting and they have not been taken into consideration for the payment of the dividend. Based on Resolution no. 16/2009 of Ordinary General Shareholders Meeting of Apator SA dated 8th June 2009 the procedure of redemption of the above shares was performed. On 18th November 2009 Apator SA received the decision of Regional Court in Toruń, VII Economy Department of the National Court Register based on which the registration was made on 13th November 2009 regarding the reduction of the company capital from the amount of 3.529.350,00 PLN to the amount of 3.510.702,80 PLN, that is by the amount of 18.647,20 PLN. The reduction of the capital was made based on art. 359 §1 and §2 of the Polish Commercial Companies Code and §11 of the statute of Apator SA and resolution of General Shareholders Meeting by redemption of 186.472 own shares of the Company acquired for their redemption.

Moreover, on 13th November 2009 the registration of the change of 9.680 registered shares preferred in voting 1:4 to ordinary bearer shares was performed. The change was made on 5th January 2009.

General Shareholders Meeting on 8th June 2009 passed the Programme of own shares acquisition for redemption. Since 8th June 2009 (commenced the acquisition of own shares) till the moment of the issue of the report Apator SA did not purchase any own shares.

4.6 All limitations regarding the transfer of owne rship of securities of Apator SA

Preferred registered shares are subject to some limitations in selling. They can be sold by shareholders or their heirs or their legal successors only to shareholders holding registered shares. The selling of registered shares to other persons than shareholders holding registered shares requires the permission of the Executive Board. If the Executive Board does not consent to transfer the shares then it should within 60 days: indicate other buyer, define the price in accordance with the bearer share price on the day of application. If the Executive Board within 60 days of the day of application in writing for selling of shares does not make any decision then the selling of shares is not subject to any limitations.

Bearer shares are not subject to any limitations in the terms of transfer of ownership.


15

4.7 The rules regarding appointment and dismissal o f persons in management and giving and deprival their powers particularly the right to mak e the decision concerning the issuing and buying up the shares

According to the Statute of Apator SA, the right to make the decision on:

− share issue, convertible bonds or bonds with priority rights, − share acquisition and redemption, − rise or reduction of share capital

belongs exclusively to the competence of General Shareholders Meeting of Apator SA.

4.7.1 Supervisory Board

The members of the Supervisory Board of Apator SA are nominated and dismissed by the General Shareholders Meeting of Apator SA. General Shareholders Meeting decides also about the number of members of the Supervisory Board and their remuneration. Members of the Supervisory Board should have appropriate knowledge and experience. The makeup of the Supervisory Board can consist of 5 to 7 members elected by General Shareholders Meeting for the period of 5 years. Members of the Supervisory Board are nominated for the common tenure. The reduction of the number of members of the Supervisory Board during the tenure to not less than 5 members does not cause the need to complete the makeup of the Supervisory Board.

The Supervisory Board at its first meeting nominates from its members the Chairman and Deputy to Chairman of the Supervisory Board.

Member of the Supervisory Board is subject prohibition against competitive activities. Members of the Supervisory Board are not allowed to be: Member of the Executive Board, Proxy, Liquidator, Head of Branch Office or Company, Chief Accountant employed in the Company, Legal Adviser or barrister of the person that are subject directly to member of the Executive Board. Moreover members of the Supervisory Board are not allowed to be member of the Executive Board or Liquidator of subsidiary or dependent cooperative.

Resolutions of the Supervisory Board are valid if all its members are invited and in case of presence:

− at least three members in case of five person makeup of Supervisory Board,

− at least four members in case of over five person makeup of the Supervisory Board.

The resolutions of the Supervisory Board are made by absolute majority of votes of the members present at the meeting. In case of equality of votes, the vote of the Chairman of the Supervisory Board is decisive one.

The General Shareholders Meeting passes the Regulations of the Supervisory Board.

The Supervisory Board has no entitlements to make the decision regarding the issue or acquisition of shares.

4.7.2 The Executive Board

The members of the Executive Board of Apator SA are appointed and dismissed according to the regulations of Polish Commercial Companies Code and stipulations of the Statute of the Company. The makeup of the Executive Board of Apator SA consists from one to three members nominated for three years by the Supervisory Board for the common tenure. The Supervisory Board adopts the resolutions concerning the following issues:

− establishment of the number of members of the Executive Board,

− appointment and dismissal of the Executive Board,

− nomination of the President of the Executive Board,

− suspension in their duties due to serious reasons, all or particular members of the Executive Board,

− delegation of the members of the Supervisory Board for temporary to perform the duties of the member of the Executive Board,

− establishment of remuneration of members of the Executive Board taking into account its motivative character.

The members of the Executive Board are allowed to be dismissed in every moment by the Supervisory


16

Board or General Shareholders Meeting. However, the stipulations of their contracts of employment remain valid.

The Executive Board manages all the activity of the Company and it represents the Company outside, it manages its property and all the matters not restricted to other bodies, it is responsible for proper accounting of the Company and it observes exactly the stipulations of the Statute, Regulations of the Executive Board and resolutions adopted by the top management of the Company. The Executive Board in its activity is oriented to first of all the interest of the Company. The operation of the Executive Board is managed by the President of the Executive Board. The resolutions of the Executive Board are adopted based on the absolute majority of votes. In case of equal number of votes the vote of the President is decisive.

Each member of the Executive Board independently or proxy is authorized to make statements regarding the property rights and obligations of the Company and to sign the documents. Each member of the Executive Board has the right and obligation to manage the matters of the Company not exceeding the scope of normal duties of the Company.

Members of the Supervisory Board and Proxies are subject to prohibition against competitive activities

The Supervisory Board establishes the Regulations of the Executive Board

The Executive Board is not allowed to make decisions on issuing or acquisition of shares.

4.8 The amendment to the rules in the Statute of AP ATOR SA

Amendments to the Statute of APATOR SA are allowed to be made by General Shareholders Meeting of APATOR SA according to para 14 point 13 of the Statute of the Company. The amendment to the statute is allowed to be adopted by General Shareholders Meeting based on three fourth majority of votes.

In case of amendment to be made in the Statute, in announcement on calling of General Shareholders Meeting current reading is presented and also the content of the amendments to be introduced. In the resolution with the amendment to the Statute, General Shareholders Meeting is allowed to authorize the Supervisory Board to edit uniform text of the Statute or to introduce some editorial amendments.

4.9 The operation of General Shareholders Meeting a nd its essential entitlements and the description of rights of shareholders and the metho d of their performance and particularly the rules related to the regulations of General Shareho lders Meeting if such regulations exist, provided information concerned does not result dire ctly from the law

Structure of the management of the Company is as follows:

General Shareholders Meeting of Apator SA operates based on stipulations of the Polish Commercial Companies Code, the Statute of the Company and Regulations of General Shareholders Meeting of Apator SA. General Shareholders Meetings are ordinary and extraordinary ones. Ordinary General Shareholders Meeting is called annually at the latest to the end of June.

General Shareholders Meeting is called by the announcement in the manner specified in the Polish Commercial Companies Code at least of 26 days prior the date of General Shareholders Meeting to be held.

GENERAL SHAREHOLDERS MEETING

Supervisory Board Janusz Marzygliński, Ryszard Wojnowski, Danuta Guzowska,

Mariusz Lewicki, Krzysztof Kwiatkowski, Mariusz Pawlak

Executive Board Janusz Niedźwiecki,

Tomasz Habryka, Jerzy Kuś


17

The right to attend the General Shareholders Meeting have only persons being the shareholders being on 16 days prior the date of General Shareholders Meeting to be held (the day of registration of participants in the General Shareholders Meeting): − authorized persons based on registered shares and temporary certificates, liens and users who have the right to vote, they have the right to attend the General Shareholders Meeting if they are registered in share book on the day of registration of the attendance the General Shareholders Meeting;

− the list of authorized persons based on bearer shares to attend the General Shareholders Meeting is made by the Company based on the list made by the National Depository of Securities SA in accordance with the rules of the Polish Commercial Companies Code.

Shareholder or shareholders representing at least 1/20 of share capital are allowed to: − demand to call Extraordinary Shareholders Meeting and to put appropriate matters on the agenda of

the General Shareholders Meeting. The demand to call Extraordinary Shareholders Meeting should be made to the Executive Board in writing or in electronic form;

− demand to put appropriate matters on the agenda of coming General Shareholders Meeting.

The demand should be submitted to the Executive Board not later than 21 days prior the fixed date of General Shareholders Meeting to be held. The Executive Board is obligated not later than 18 days prior the fixed date of General Shareholders Meeting to be held to immediate announcement the amendments to the agenda introduced based on demand of shareholders. The announcement is made in the manner appropriate to calling the General Shareholders Meeting.

- submit in writing or in electronic form to the Company prior the date of the General Shareholders Meeting the drafts of resolutions regarding the matters put on the agenda of the General Shareholders Meeting or the matters to be put to the agenda of debates. The Company immediately gives announcement about the projects of the resolutions on the website. Every shareholder is allowed during the General Shareholders Meeting to submit the draft of the resolutions regarding the matters in the agenda.

At the General Shareholders Meeting should be presented: − members of the Supervisory Board and the Executive Board in the makeup enabling to give the

merit answers to the questions during the General Shareholders Meeting. − chartered accountant if the debates regard the financial issues of the Company.

The General Shareholders Meeting is valid regardless to the number of shares and shares represented unless the regulations of the Polish Commercial Companies Code say different.

The General Shareholders Meeting is allowed to adopt the resolutions only regarding matters put on the agenda of the debates except order resolutions that can regard only the matters concerning with the conduct of the debates. The resolution regarding the give up to debate the issue put on the agenda is allowed to be adopted only in case of significant and material reasons. The application in such a matter should be justified in details. The General Shareholders Meeting is not allowed to adopt the resolution to remove from the agenda of the meeting or to cease from debate the issue put on the agenda of the meeting based on the application of the shareholders. The resolutions are adopted by absolute majority of votes unless the regulations of the Statute of the Company or the Polish Commercial Companies Code say different. Voting is open except the situations specified by art. 420 of the Polish Commercial Companies Code when closed voting is arranged for the elections and dismissals of the members of the bodies in the Company, in case of applications regarding their responsibility and also in personal matters and for the demand of even one shareholder or authorized representative present at the General Shareholders Meeting.

On 8th June 2009, Ordinary General Shareholders Meeting of APATOR S.A. was held, where: − report of the Executive Board on activity of the Executive Board and capital group for the financial

year 2008 were approved; − financial statement of APATOR SA and capital group was approved for financial year 2008; − vote of approval was granted to the members of the Executive Board for the fulfillment of their

duties in financial year 2008; − report for financial year 2008 of Supervisory Board was approved; − vote of approval was granted to the members of the Supervisory Board for the fulfillment of their

duties in financial year 2008;; − resolution was adopted on distribution of profit for the financial year 2008 and payment of dividend; − resolution was adopted on distribution of retained earnings from previous years;


18

− resolution on increase of number of the Supervisory Board up to 6 persons was adopted; − resolution on appointment of Mr Mariusz Pawlak the member of the Supervisory Board of APATOR

SA for current common tenure was adopted; − resolution on completion of the Programme for acquisition of own shares for their redemption on

reduction of the company capital dated 9th July 2008 was adopted; − resolution on redemption of 186.472 bearer shares of A, B and C series was adopted; − resolution on reduction of the company capital with regard to redemption of shares and amedments

to § 7 of the Statute of APATOR SA was adopted; − resolution on amendment to § 6 of the Statute of APATOR SA was adopted; − resolution on amendment to § 14 of the Statute of APATOR SA was adopted; − resolution on the Programme for the acquisition of own shares for their redemption and reduction of

the company capital was adopted; − resolution on the authorization of the Supervisory Board to edit uniform text of the Statute was

adopted − resolution on the amendment to the regulations of General Shareholders Meetings of APATOR S.A.

was adopted

4.10 Personal makeup and changes made in it during last year and description of the operation of managing and supervisory bodies of APATOR SA

4.10.1 Supervisory Board

Supervisory Board of current common tenure was appointed by Ordinary General Shareholders Meeting on 6th June 2005 for five year tenure that lasts till 2010.(the day of General Shareholders Meeting to be held in 20010).

In the period since 1st January till 8th June 2009 the makeup of the Supervisory Board was the following: − Janusz Marzygliński - Chairman of the Supervisory Board, − Ryszard Wojnowski - Deputy Chairman of the Supervisory Board, − Danuta Guzowska - Member of the Supervisory Board, − Mariusz Lewicki - Member of the Supervisory Board, − Krzysztof Kwiatkowski - Member of the Supervisory Board.

Since 8th June 2009 the makeup of the Supervisory Board was the following:

− Janusz Marzygliński - Chairman of the Supervisory Board, − Ryszard Wojnowski - Deputy Chairman of the Supervisory Board, − Danuta Guzowska - Member of the Supervisory Board, − Mariusz Lewicki - Member of the Supervisory Board, − Krzysztof Kwiatkowski - Member of the Supervisory Board, − Mariusz Pawlak - Member of the Supervisory Board.

On 8th June 2009 the General Shareholders Meeting based on resolution no 14/2009 appointed Mr Mariusz Pawlak to the member of the Supervisory Board.

Mr Mariusz Pawlak and Mr Krzysztof Kwiatkowski are the members of the Supervisory Board complying with independence criteria from the Company described in Best Practices no III.6.

The Supervisory Board of Apator SA operates based on regulations of the Polish Commercial Companies Code, the Satute of the Company and the regulations of the Supervisory Board of Apator S.A.

The Statute of the Company and the Regulations of the Supervisory Board of APATOR SA are available on the website of APATOR SA : www.apator.eu in section Investment Service.

According to the Statute, the makeup of Supervisory Board consists of 5 to 7 members appointed by the General Shareholders Meeting for the period of 5 years. The members of the Supervisory Board are appointed for the common tenure. The reduction of the number of the members of Supervisory Board during the tenure to not less than 5 members does not cause the necessity to complete the makeup of the Supervisory Board. In order to have the resolution of the Supervisory Board valid it is required that all the


19

members are invited and present: in case of the makeup of 5 persons of the Supervisory Board at least three of them and in case the makeup more than 5 persons at least four persons should be present. The resolutions are adopted based on absolute majority of votes of the members present. In case of equal votes the vote of the Chairman of the Supervisory Board is decisive.

Shares being in the possession of the members of the Supervisory Board are as follows;

at 31st December 2009 DESCRIPTION

shares votes % shares % votes

Mariusz Lewicki*) 2 014 000 5 507 776 5,74% 9,42%

Danuta Guzowska*) 1 520 279 4 382 921 4,33% 7,49%

Ryszard Wojnowski 1 145 334 1 145 334 3,26% 1,96%

Janusz Marzygliński 1 060 568 3 514 844 3,02% 6,01%

Krzysztof Kwiatkowski 0 0 0,00% 0,00%

Mariusz Pawlak 0 0 0,00% 0,00%

Total 5 740 181 14 550 875 16,35% 24,88%

*) with spouse

The members of the Supervisory Board of APATOR SA acting in supervisory bodies of 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 FAP PAFAL SA till 19.06.2009

− Ryszard Wojnowski Chairman of the Supervisory Board of APATOR CONTROL sp. z o. o.

The members of the Supervisory Board of Apator SA do not have shares in subsidiaries and associated entities included in Grupa Apator. Remuneration of the members of the Supervisory Board was not significant cost item of the activity APATOR SA and had no serious influence on its financial result.The remuneration obtained in 2009 was the following:

Remuneration in

Apator SA

Remuneration in subisidiaries

Total remuneration Name and surname

000’ PLN 000’ PLN 000’ PLN Danuta Guzowska 101 0 101

Mariusz Lewicki 54 72 126

Janusz Marzygliński 60 89 149

Ryszard Wojnowski 54 36 90

Mariusz Pawlak 31 0 31

Krzysztof Kwiatkowski 54 0 54

Total 354 197 551

According to stipulations of the Statute of APATOR SA, the sessions of Supervisory Board were called once a quarter of the year or more frequent if required based on the invitation of the Chairman of Supervisory Board. In 2009 took place 9 sessions of the Supervisory Board of APATOR SA. The members of the Executive Board of APATOR SA took part in them. The members of the Executive Board provided Supervisory Board exhaustive information on all important matters regarding the activity of APATOR SA and Grupa APATOR. During the sessions of the Supervisory Board, the resolutions were adopted on matters that had been listed in the agenda and sent to the members of Supervisory Board with the announcement about the session to be held.

The activity of the Supervisory Board focused on the matters of great importance for the activity of APATOR SA and Grupa APATOR.


20

4.10.2 Executive Board

Since 1st January 2009 the Executive Board of APATOR SA has been operating in team of three persons.

The Supervisory Board of APATOR SA nominated Mr Jerzy Kuś the member of the Executive Board since 1st January 2009 for the common tenure 2007-2009 that ends on the day of the session of Ordinary Shareholders Meeting of APATOR SA in 2010. The Supervisory Board appointed Mr Jerzy Kuś as Marketing and Sales Director for Metering Equipment and Systems. This information was made public in current report 126/2008 dated 27th October 2008. − Janusz Niedźwiecki - President of Executive Board, − Tomasz Habryka - Member of Executive Board, − Jerzy Kuś - Member of Executive Board

The Executive Board operates based on regulations of the Polish Commercial Companies Code, the Statute of the Company and the Regulations of the Executive Board of APATOR SA. The Statute of the Company and the Regulations of the Executive Board of APATOR SA are available on the website of APATOR SA www.apator.eu in section investor service.

The members of the Executive Board are the members of the supervisory boards of dependent companies (status on 31st December 2009):

− Janusz Niedźwiecki -Deputy Chairman of Supervisory Board in FAP Pafal SA and Apator Metrix SA,

Member of the Supervisory Board of Apator Powogaz SA, − Tomasz Habryka - Deputy Chairman of Supervisory Board in Apator Control sp. z o. o. − Jerzy Kuś - Member of Executive Board till the end of 2009,

Member of Supervisory Board in Apator Rector sp. z o. o.,

The members of the Executive Board of Apator SA do not have shares in the entities in Grupa Apator.

Remuneration of the members of the Executive Board was established based on transparent procedures and rules, taking into consideration its motivated character and assurance of effective and fluent management of the Company. The remunerations responded to criteria of the scope of responsibility resulting from the function performed remaining in reasonable relation to the value of remuneration of the members of the executive boards in similar companies and on comparable markets. Remuneration of the members of the Executive Board received in 2009 was as follows:

Name and surname

Remuneration in

Apator SA

in 000’ PLN

Bonus / Reward

Apator SA

in 000’ PLN

Remuneration in subidiaries

in 000’ PLN

Total remuneration

in 000’ PLN

Janusz Niedźwiecki 512 118 72 702

Tomasz Habryka 318 65 24 407

Jerzy Kuś 36 21 289 346

Total 866 204 385 1 455

The shares of APATOR SA being in possession of the members of the Executive Board are as follows:

Status at 31st December 2009 DESCRIPTION

shares votes % shares % votes

Janusz Niedźwiecki 434 570 1 732 691 1,24% 2,96%

Tomasz Habryka 0 0 0,00% 0,00%

Jerzy Kuś 200 200 0,00057% 0,00034%

Total 434 770 1 732 891 1,24057% 2,96034%

Taking decisions on the matters of the Company, the members of the Executive Board act within the limits of reasonable economical risk i.e. after having considered all the information, analysis and opinions that


21

according to the opinion of the Executive Board should be in such a case be taken into consideration due to the interest of the Company. In order to establish the interest of the Company, reasonable interests in long term prospective of shareholders, creditors, employees and other entities and persons cooperating with the Company in business and also the interests of local societies have been taken into consideration.

The Executive Board has managed with the special care in order to provide transactions with shareholders and other persons who interests have influence on the interest of the Company to be made on market conditions.

4.10.3 Audit Comittee of the Supervisory Board of A pator SA

The Supervisory Board of Apator SA on 23rd September 2009 appointed Audit Committee of the Supervisory Board of the Company.

Autit Committee makeup consists of at least three members including the chairman, nominated for the period of the tenure by the Supervisory Board from among its members. Currently the makeup of Audit Committee is as follows:

− Mariusz Lewicki – Chairman of the Committee, − Mariusz Pawlak – Member of the Committee, − Krzysztof Kwiatkowski – Member of the Committee

Two members of Audit Committee at the same time members of the Supervisory Board, comply with the criteria of independence from Apator SA. The meetings of Audit Committee should take place at least twice a year, prior the financial statements (semi annual and annual) are published by the Company.

The aim of functioning of Audit Committee is advisory the Supervisory Board on the issues concerning individual and consolidated financial reporting , internal control and risk management and cooperation with chartered accountants. The main tasks of Audit Committee are as follows:

− monitoring of financial reporting process (research of accounting standards applied, circulation of information, documents and amendments to be made related to it);

− monitoring of the effectiveness of internal control systems, internal audit and risk management; − monitoring of performance of financial audit; − monitoring of the independence of chartered accountant nominated to audit the financial statements

Detailed rules of the operation of Audit Committee are specified in the Regulations of Audit Committee of the Supervisory Board of Apator SA that are available on the website of Apator SA : www.apator.eu in section –investor service.

5. Bodies supervising and managing the entities of Grupa Apator

The make up of supervisory boards and executive boards of the entities of Grupa Apator are present in the table below:

Entity Make up of Supervisory Board

at 31.12.2009

Make up of Executive Board

at 31.12.2009

Apator SA

Janusz Marzygliński

Ryszard Wojnowski

Danuta Guzowska

Mariusz Lewicki

Krzysztof Kwiatkowski

Mariusz Pawlak

Janusz Niedźwiecki

Tomasz Habryka

Jerzy Kuś

Apator Metrix SA

Janusz Lewicki

Janusz Niedźwiecki

Tomasz Urbańczyk

Arkadiusz Chmielewski

Ryszard Lippke

FAP Pafal SA

Kazimierz Piotrkowski

Janusz Niedźwiecki

Janina Karaszewska-Zandrowicz

Bohdan Wierzbicki

Jerzy Kuś

Apator Rector sp. z o. o.

Janusz Marzygliński

Tomasz Piasecki

Jerzy Kuś

Krzysztof Wojtczak

Marek Kurzawa

Marek Michalski

Apator Powogaz SA Janusz Marzygliński

Janina Karaszewska-Zandrowicz

Krzysztof Prucnal

Mieczysław Ziółek


22

Entity Make up of Supervisory Board

at 31.12.2009

Make up of Executive Board

at 31.12.2009

Tadeusz Sosgórnik

Janusz Niedźwiecki

Jolanta Dombrowska

Marcin Szczurowicz

Apator Mining sp. z o.o.

Mariusz Lewicki

Kazimierz Piotrowski

Zbigniew Baranowski

Tadeusz Sosgórnik

Apator Control sp. z o.o.

Ryszard Wojnowski

Tomasz Habryka

Monika Guzowska

Ryszard Trąbała

Apator Elektro

Aleksander Iwanow

Mirosław Klepacki

K. G. Burcew

A. W. Konfetkin

O. W. Petrowa

Apator GmbH - Tomasz Habryka

Mirosław Klepacki

6. Information on known to the issuer contracts (in cluding those concluded after the balance day), in result of which they can cause the changes in pr oportions of the shares held by current shareholders in the future.

Apator SA has no knowledge about such contracts.

7. Contracts concluded between Grupa Apator and pe rsons of management staff of the entities that foreseen compensation in case of their resign or dismissal from the posts without clear reasons or their recall or dismissal due acquisitio n of the company

There are no such special contracts in Grupa Apator concluded between the Company and persons of management staff regarding compensation in case of their resign or dismissal from the posts without significant reason or recall or dismissal due to acquisition of the company.

Persons of the management staff of Grupa Apator are employees of the Company based on the contracts of employment. In case of resign or dismissal from the post the parties will perform their obligations based on obligatory legal regulations including particularly labour law.

8. Description of the main features of internal con trol systems and risk management in Grupa Apator with reference to the process of preparation of individual and consolidated financial statements

Financial statements are prepared by Accounting Department of Apator SA. The department is separated organization unit operating in the division of Finance Director of Apator SA. The Company prepares individual and consolidated financial statements in accordance with International Accounting Standards and International Financial Reporting Standards. They both include interpretations accepted by the Commission for Interpretation of International Financial Reporting Standards. Moreover, financial statements are prepared based on the Regulation of Ministry of Finance dated 19th February 2009 (with later amendments) on current and regular information being transferred by issuers of securities and conditions of the information to be considered as equivalent one required by law of the country not being the member of the EU. Reporting and accounting in entities like Apator SA, FaP Pafal SA, Apator Metrix SA, Apator Powogaz SA and Apator Control Sp. z o.o. are performed by use of BaaN IV -Integrated Management System.

Each entity has its own accounting based on own accounting policy that defines the main principles of recording of economic events. However, the essential elements of the process of preparing the statements are accepted for all the entities in Grupa Apator common principles of accounting based on solutions applied in parent entity – Apator SA. In consequence of recording made there are accounting books in particular entities being further the basis to prepare individual financial statements by all entities of the group. Individual financial statements are the bases to prepare consolidated financial statements of Grupa Apator.


23

In the process of preparing of the financial statements the following risks have been identified: − input data errors, − improper data presentation, − effects of wrong estimations made by independent advicers (actuaries, experts), − at the stage of financial data consolidation of Grupy Apator – improper data integration coming from

the entities that do not have BaaN IV integrated management system with data from entities where the system operates.

All mentioned areas of the risk are minimized by internal and external control systems and common for all entities in Grupa Apator principles of accounting. Direct responsible for minimizing the existing of risk level and also for identification of new dangers is the Executive Board of Apator SA and Finance Director who assesses on current basis effectiveness of internal control system in the process of preparing of financial statements. The assumption of effective internal control system in financial reporting is to provide correct financial information included in financial statements and correctness of their presentation. The correctness is performed by auditing the compliance with provisions and guidelines of financial law and internal regulations and also by audit based on ISO 9001:2000. Internal control is performed directly by every employee (including self-assessment system), its superior and persons cooperating with him and managers of organization units in the scope of quality and correctness of the tasks made by particular employees. The objective is to provide the compliance of the tasks wit internal control mechanisms.

At every stage of preparation of financial statements one of the essential control mechanisms (external ones) is regular verification of financial statements by independent chartered accountant, particularly the review of semi-annual and audit of annual statements. The entity to be chartered accountant for Apator SA and Grupa Apator is selected in such manner to provide the independence in performance of the tasks.

The selection of chartered accountant is made by supervisory boards of particular companies among reputable auditing companies that guarantee high standards of services and independence. All the companies in Grupa Apator are audited by the same entity entitled to auditing of financial statements.

The Audit Committee of the Supervisory Board of Apator SA that was established on 23rd September 2009 takes part in monitoring process of the effectiveness of internal control system. The essential task of the Committee is the advising regarding the issues of individual and consolidated financial reporting, internal control and risk management and cooperation with chartered accountant (more in point 6.11.3).

Financial data that are essential for financial statements and periodical reports are also needed for every month financial and operation reporting. After closing the accounting of monthly settlement period, the top management (Executive Board, Directors) under supervision of the Supervisory Board make monthly analysis of financial results of Apator SA, particular companies in Grupa Apator and consolidated results of Grupa Apator. The analysis of the results achieved is made by their comparison to the assumptions regarding business included in annual budget and in strategy of development. Identified deviations are analyzed on current basis in view of their influence on current results Grupa Apator and further possible corrective actions are taken. Moreover, the reviews of annual business plans are made in Grupa Apator and it regards both all the entities of capital group and entire Grupa Apator. In the process of preparing budget covering all operation areas is involved entire management of top and medium level. Prepared budget is accepted by the Executive Board of the Company and approved by the Supervisory Board.

Based on assessment of the procedures applied, the Executive Board confirms that at 31st December 2009 there were no circumstances that could have negative influence on the effectiveness of internal control in the range of preparation of financial statements.

9. Employment in Grupa Apator The employment in subsidiaries and parent entity is presented in the table below.

Increase/Decrease

Name of the entity At 31.12.2009 At 31.12.2008 persons Dynamics

Apator SA 391 398 -7 98,24%

FAP Pafal SA 383 480 -97 79,79%

Apator Metrix SA 263 275 -12 95,64%

Apator Mining sp. z o. o. 121 126 -5 96,03%

Apator Control sp. z o. o. 57 62 -5 91,94%

Apator Rector sp. z o. o. 74 56 18 132,14%


24

Increase/Decrease

Name of the entity At 31.12.2009 At 31.12.2008 persons Dynamics

Grupa Apator Powogaz 352 362 -10 97,24%

Apator GmbH 2 2 0 100,00%

Total 1 643 1 761 -118 93,30%

The employment in Grupa Apator (in subsidiaries and parent entity) at 31st December 2009 decreases in relation to the number of employees at 31st December 2008 by 118 persons (by 6,70%). The main changes in employment regarded to: − FAP Pafal SA – decrease by 97 persons due to reduction of employment in manufacturing and technical

division and also no longer prolongation of majority of expiring in 2009 contracts concluded for the limited time of employment,

− Apator Metrix SA – decrease by 12 persons − Grupy Apator Powogaz – changes in employment by 10 persons (decrease) caused by:

o natural exchange of employees (pensions, obtaining qualified employees), o organization and restructuring changes of the Apator Kfap – commercial representatives have

joined Apator Powogaz SA,

Moreover, dismissal of people in assembly department of water meter and legalization was performed in associated entity of ZAO Teplovodomer (Grupa Apator Powogaz) due to the completion of that activity in the company. The decrease in employment was by 74 persons.

10. Information on sales markets and sources of pro curement

10.1 Investment attractiveness of sectors related t o Grupa Apator

In the sector of manufacturing and distribution of electrical equipment, the employment dropped by (1,%) in the second half of 2009.The changes in prices in the sector were a bit slower than in entire economy (2,5 %) and slower than in previous year. In 2009 the value of manufacturing in industry was lower by o 3,2 % than one year ago and the dynamics of drop was slower (last year 4,3%). According to Central Statistical Office report - 178.801 permissions for construction were granted in 2009 i.e. by 22,3% less than in previous year – the situation in building industry was still getting worse. The number of flats constructed was lower by 3% than in the previous year. Bad situation in building industry allows for the assumption that in 2010 the situation will not change for better. The value of the ratio of economic situation in electrical engineering branch was by 1% lower than last year. The situation in mining got worse – mining extraction dropped by 12,9% and it caused less orders placed for mining equipment in mining industry.

In switchgear segment in the first half of this year some negative events were noted. First of them was the decrease by almost 9% of the sales of cables. The further were worse results than last year in enterprises dealing with integration (construction of the switchgear, substations – drop by 8%). Distribution segment of electrical equipment also faced clear slow down of the increase of revenues.

In 2009 wholesales of electrical equipment sold goods for the amount of about 2 billion PLN that means the decrease of turn over by 20%.Some wholesales networks had the decrease in sales reaching 30%.

The results confirm further considerable getting worse situation in electrical engineering sector.

The sales of electricity also dropped (-10%) what may cause the worse situation in energy distribution sector.

Metering equipment sector is one of the most prospective segments of activity of Grupa Apator.

The segment of electricity meters in Poland develops steady however in the first half of the year one could notice a bit slow down that regarded with developing recession in the Polish economy (huge ups and downs in the economy and sales in particular months). Dynamics of growth of the market is still high.

Among metering equipment segments, quick development of the segment of software for data and distribution and metering management is noted where the development rate is two-digit. Unusual dynamic is


25

the segment of systems of remote data reading (water, heat, electricity) where the annual growth reaches several dozen percent. Among the meters for utility services the quickest growth was observed among water meters – 28%. In gas meters segment the increase by 6% was noted. Segment of electricity meters in spite of bad situation in power industry increased about 2%.

Quick development is also observed in case of the segment concerning electricity meters („smart meters”), which huge installation is expected in Poland by Energy Regulatory Office in 2011 – 2020. It is also expected that over 15,5 m electricity meters will be replaced in Poland. The electricity meters will be operated in AMR type remote data reading system. Similar number of water meters will be probably replaced by water meters with remote data reading.

10.2 Sales strategy

The trade and marketing actions being performed by Grupa Apator are aimed at: − creation of strong brand of Apator based on extended Grupa Apator and it product brands like: Pafal,

Metrix, Powogaz, Rector, Kfap, Mining, Control, Telemetria, − establishment of the stable customer base – actions are being carried out aiming at to start-up long term

loyalty programme, − increase of export – wining new markets in Africa, Asia and to strengthen its position on current

markets, − emphasizing the image of modern, flexible and technologically competent Company operating in sector

of metering and switchgear equipment, − maintaining the image of the honest partner in business, − maintaining the image of the Company that takes care about quality of its products and respecting the

environment and natural resources

Strategic objective concerning metering equipment is to prepare the Polish customer to settle utility services by utilities and to provide the equipment favorable the saving the consumption of utility services. Further to the above the development works in the segment are aimed at first of all to develop comprehensive metering systems, modern solutions for reading and transfer of information adjusted to the service of consumers on liberalized competitive energy market. Grupa Apator is stronger involved with the initiatives concerning sustainable development, particularly with measures taken to save energy and smart management of power networks.

In case of switchgear equipment, Grupa Apator strives to maintain the position of important supplier of products of good quality at the same time keeping low manufacturing costs and offers broad range of products

10.3 Sales structure

Consolidated revenues from sales of Grupa Apator in 2009 were at the level of 367.557 000 PLN (in 2008: 356.191 000 PLN), included:

− Sales of products - 330.360 000 PLN,

− Sales of goods and materials - 37.197 000 PLN.

Revenues from sales of particular products were as follows:

Description 2009

in 000’ PLN

2008

in 000’ PLN Dynamics

Structure

in 2009

Metering segment 251 209 229 913 109,26% 68,35%

Switchgea segment 113 151 122 669 92,24% 30,78%

Other sales 3 197 3 609 88,58% 0,87%

Total 367 557 356 191 103,19% 100,00%

In the sales structure of capital group metering equipment is the parent that in 2009 was 68,35% of revenues from sales in total.

The following factors had the influence on the value of revenues from sales in total in 2009:


26

− Activity of Grupa Apator in extended make up in entire reporting period of 2009 (in 2008 Apator Powogaz SA joined the Grupa on 30th April 2008 ),

− Increase of export caused by the increase of sales volume on new markets (Africa) and getting weaker of zloty,

− Decrease of sales in switchgear segment that was feeling more the effects of recession than metering segment (decrease of sales by 9.518 000 PLN in relation to 2008).

Sales segments in 2009

metering segment 68%

other sale1%

switchgear segment 31%

Sales segments in 2008

switchgear segment 34%

other sale1%

metering segment 65%

10.4 Export

Grupa Apator is consequently bound to achieve leader position in Central and Eastern Europe in the range of systems and metering equipment and switchgear.

The main exporters in Grupa Apator in 2009 were: − Apator SA – switchgear and prepayment electricity meters, − Apator Metrix SA – gas meters, − Apator Powogaz SA – water meters, − FAP Pafal SA – electricity meters.

Grupa Apator in 2009 achieved the revenues from export at the level of 102.916 000 PLN, i.e. higher by 14.692 000 PLN (by 16,65%) in relation to 2008. The share of export in total sales increased from 24,77% in 2008 up to 28,00% in 2009. The following factors had the influence on the above results:


27

− Increased sales of water meters (among other things by the activity of Grupa Apator in the entire financial year 2009 in the extended make –up by Apator Powogaz SA – in 2008 – the period from may to December),

− increased sales of prepayment meters (particularly to African countries: Tunisia, Sierra Leone, Burundi), − increased sales of gas meters (particularly to Denmark, Portugal, Italy).

The relations of export and domestic sales are presented in the table below.

Territorial structure of revenues 2009

(000 PLN)

2008

(000 PLN)

Dynamics

(%)

domestic market

264 641 267 967 98,76%

export 102 916 88 224 116,65%

Total revenues 367 557 356 191 103,19%

Export segments have been presented by the bar charts below.

84 271

18 645

68 501

19 723

0

20 000

40 000

60 000

80 000

100 000

120 000

2009 102 916 000 PLN

2008 88 224 000 PLN

Export segments of Grupa APATOR ( 000 PLN)

Switchgear segment

Metering segment


28

Segment structure of export of Grupa APATOR in 2009

Metering segment82%

Switchgear segment

18%

Segment structure of export of Grupa APATOR in 2008

Metering segment78%

Switchgear segment 22%

The table below presents geographical structure of export.

Value (000 PLN) Structure (%)

Description 2009 2008 Dynamics 2009 2008

European Union 55 105 49 211 111,98% 53,54% 55,78%

Other countries 47 811 39 013 122,55% 46,46% 44,22%

Total export 102 916 88 224 116,65% 100,00% 100,00%

In geographical structure of export – European Union and other countries – considerable increase of export to other countries has occurred, mainly due to export of metering equipment to African countries.

The below bar chart presents main countries where Grupa Apator performed the export (value over 500 000 PLN) in the period since January till December in 2009 and 2008.


29

Export of Grupa APATOR according to countries of sa les performed over > 500 000 PLN

239 800

333

4 63

2

4 85

9

8 79

1

8 97

7

12 9

61

18 8

25

4 12

6

3 74

3

3 49

7

734

749

1 05

4

1 11

6

1 19

6

1 36

6

1 51

4

1 60

0

1 95

3

1 98

2

2 23

9

2 27

2

2 48

9

2 89

5

3 07

1

443

7701 44

3

613

487

2 35

8

2 14

6

1 61

8

2 25

4

2 44

7

2 79

9

3 19

4

0

3 52

2

2 70

94 07

1

5 27

4

8 71

310 3

40

10 0

78

15 2

08

01 000

2 0003 000

4 0005 0006 000

7 0008 000

9 00010 00011 000

12 00013 000

14 00015 00016 000

17 00018 000

19 00020 000

Russia

Denm

ark

German

y

Hungary

Ukraine

Belaru

s

Si erra

Leon

e

Roman

ia

Burund

i

Austri

a

Lithua

nia

Great

Brita

inIta

ly

Bulgar

i a

Croat

ia

Turke

y

Portu

gal

France

Serbia

Colombia

Czech

Rep

ubli c

Spain

Egypt

Belgium

2009 2008

10.5 Sources of procurement

In 2009 Grupa Apator continued the actions aiming at the maintenance of proper procurement and further reduction of costs of purchased materials, services and goods. Further to the above the following have been done:

− common purchase of metallurgical and plastic products and electronic components performed with subsidiaries

− renegotiations of commercial conditions with suppliers of products of high volume turnover, − permanent oversight carried out over the performance of the contracts concluded in entire Grupa

Apator, − regular valuation of credibility of strategic suppliers − bid analysis and selection of suppliers,

Grupa Apator is provided with materials, services and goods in most part on domestic market i.e. from entities registered in Poland. Import is the minority of the entire procurement.

However, many suppliers, domestic manufacturers import the raw materials therefore part of purchases from Polish entities is the indirect import. Therefore, the exchange rates have the influence on prices of goods being purchased from import and on domestic market as well.

In the range of the manufacturing of post-paid electronic electricity meters, Apator SA cooperates with the subisidiary - FAP Pafal SA with the seat in Świdnica. It regards the manufacturing of printed circuit boards for electricity meters by Apator SA and the supply them to FAP Pafal SA . The cooperation is based on the contract concluded between Apator SA and FAP Pafal SA on the 1st March 2005 (with later annexes). The contract defines general conditions of cooperation in the range of the supply by Apator SA printed circuit boards and subassemblies to FAP Pafal SA. Number of deliveries is performed according to current orders and prices are agreed on market conditions. The contract is concluded on unlimited period.

The detail conditions of the contract do not deviate from the ones commonly applied in such contracts. The value of the common turnover in 2009 between Apator SA and FAP Pafal SA was 32.209 000 PLN.

Except above mentioned case no supplier performing the procurement to particular companies in Grupa Apator in 2009 exceeded 10% of revenues from sales in 2009 of Apator SA.


30

The largest external suppliers of Grupa Apator with supplies over 2 m PLN are presented in the table below..

Value in 2009 Recipient of supplies

Supplier (000 PLN) in Grupa Apator

Schenker sp. z o. o., Bydgoszcz 5 988 Apator SA

Fabryka Armatur „Swarzędz” sp. z o. o., Swarzędz 5 434 Apator Powogaz SA

Ningbo Free Trade Zone Min Sun International Co. Ltd, CPR 5 080 Apator Powogaz SA

Flonidan DC A/S, Denmark 4 411 Apator Metrix SA

B&S Gaz Serwis sp. z o. o., Tczew 4 208 Apator Metrix SA

Sabic Innovative Plastics Poland sp. z o. o., Warszawa 4 188 Apator SA

EBV Elektronik GmbH & Co.KG, Germany 3 595 Apator SA

Control Techniques Drives Ltd, Great Britain 2 663 Apator Control sp. z o. o.

Elsit sp. z o. o., Gliwice 2 577 FAP Pafal SA

Reliance Technology Development Ltd, Hongkong 2 507 Apator SA

Effbe-France S..A. S., France 2 222 Apator Metrix SA

Hutmen SA, Wrocław 2 218 Apator SA

Ferrex sp. z o. o., Poznań 2 209 Apator Powogaz SA

PPUH Raft, Turza Śląska 2 193 Apator Mining sp. o. o.

Walcownia Metali „Dziedzice" SA, Czechowice-Dziedzice 2 142 FAP Pafal SA

Masters sp. z o. o., Straszyn 2 123 Apator SA

PHM Pehamet sp. z o. o., Mrowla 2 061 Apator SA

Metallurgical products (non ferrous metals, steel, connecting elements, etc.) and plastic products, plastics and chemicals are the essential part of purchase of Grupa Apator. In 2009 was noted significant increase in world prices of raw materials, mainly cooper (from about 3.132 USD/t at the beginning of 2009 to the level of about 7.376 USD/t at the end of 2009 r.) and crude oil (at the beginning of 2009 from the level. 46,86 USD/bbl to the level about 77,97 USD/bbl at the end of 2009 ). It has been mainly reflected in increase of costs of non ferrous materials being purchased in steelworks and plastics.

The graph below shows the price of cooper in USD/t and crude oil in USD/ bbl in 2009.

source: http://www.money.pl/


31

source: http://www.money.pl/

11. The essential economic values included in conso lidated annual financial statement

11.1 The assessment of factors and non standard eve nts having the influence on the result of activity in financial year with determination of th e degree of the influence of those factors of non standard events on the result achieved

In 2009 the factor having significant negative influence on the results achieved was the slow down of domestic economy and economic recession at the most important foreign recipients of the products of Grupa Apator. Moreover, the increase of the exchange rate of EUR reflected negatively to the price of raw materials and materials being imported but at the same time it had positive influence on the revenues from slaes on foreign markets.

The Executive Board of Apator SA identifies four essential areas of factors having got the influence on the results of activity of Grupa Apator. They are as follows:

1. Effects of world economic crisis

The sales of Apator SA and Grupa APATOR depend mainly on the level of performance of investments in Polish economy and in the world. Global crisis caused the limitation of expenditure on investments and in even in some areas it made their cancellation. It caused the reduction of the demand for products being manufactured by the Company and Grupa Apator. In Apator SA and entire Grupa Apator more sensitive for the effects of economy crisis was switchgear segment where the decrease of sales in relation to 2008 was 3.508 000 PLN. The drop regarded both domestic sales (by 2.255 000 PLN) and export (by 1.253 000 PLN). On the other hand dramatic weakness of zloty exchange rate having its beginning in the third quarter of 2008 and remained in it dropping tendency to the end of four quarter of 2009 had positive influence on the value of revenues from export of the Company and Grupa Apator calculated in PLN. In the result of the above and winning of new markets for selling of metering equipment, the increase of share of export in revenues in total has occurred. Essential success of Apator SA was the deliveries of prepayment system to African markets (Sierra Leone, Burundi).

2. Performance and valuation of hedging transaction s concluded in 2008

The costs related to hedging transactions concluded in 2008 had negative influence on the results of Grupa


32

Apator in 2009. It regarded mainly I quarter of 2009. The following quarters brought positive influence on the results of activity of the Company and Grupa Apator. It has been presented in the table below.

Result on hedging transactions of Apator SA Influence on net result

(000 PLN)

I quarter 2009 -10 169

II quarter 2009 723

III quarter 2009 1 483

IV quarter 2009 2 169

Total 2009 -5 794

3. High material costs caused by the increase of pr ices of cooper and crude oil.

Since the beginning of 2009 one could observe increasing prices of essential raw materials being used for final products of the Company and Grupa Apator: cooper (increase from the level about 3.132 USD/t at the beginning of 2009 to the level about 7.376 USD/t at the end of 2009) and crude oil (increase at the beginning of 2009 from the level about 46,86 USD/bbl to the level about 77,97 USD/bbl at the end of 2009 ). It is mainly followed by the increase of material costs of non-ferrous metals purchased in steelworks and plastics. Next increase in prices of raw materials and materials is followed by increase of manufacturing costs of products and margins earned on them.

4. Costs of interest on loan incurred in 2008

On 17th April 2008 APATOR SA concluded the contract with Bank Handlowy w Warszawie SA on long term loan of 45 m. PLN. The loan was designed to finance the purchase of shares of Water Meters Company Powogaz SA with the seat in Poznań. The loan was granted for the period of five years and two months with the following dates and amounts for repayment: 30th June 2009 – 9 m. PLN, 30th June 2010 – 9 m. PLN, 30th June 2011 – 9 m. PLN, 29th June 2012 – 9 m. PLN, 28th June 2013 – 9 m. PLN.

The cost of the loan concerning the interest is the biggest value in the item - cost of interest being born by Grupa Apator.

Total level of interest on loans reducing current results of the Company in 2009 is presented in the table below.

Interest on loans of Apator SA Influence on net result

(000 PLN)

I quarter 2009 -736

II quarter 2009 -585

III quarter 2009 -549

IV quarter 2009 -547

Total 2009 -2 417

Total level of interest on loans and borrowings for entire Grupa Apator in 2009 was 3.000 000 PLN.

11.2 Statement on total income of Grupa Apator

In 2009 Grupa Apator earned the revenues from sales in value of 367.557 000 PLN and net profit in amount of 31.301 000 PLN.

Results of activity of Grupa Apator in 2009 in relation to 2008 are as follows:


33

Description

2009

(000 PLN)

2008

(000 PLN)

Dynamics

(%)

Net revenues from sales 367 557 356 191 103,19%

Sales costs of products, goods and materials 239 129 237 932 100,50%

Gross profit from sales 128 428 118 259 108,60% Sales costs 24 584 21 959 111,95% Overheads 54 848 48 087 114,06% Profit from sales 48 996 48 213 101,62% Result on other operating activity 960 8 071 11,89%

Share in profits of entities consolidated by equity method 160 89 179,78%

Profit on operating activity 50 116 56 373 88,90% Result on financial activity -11 447 -27 497 58,37%

Taking control over subsidiary – negative goodwill 0 0 0,00%

Gross profit 38 669 28 876 133,91% Income tax 7 368 5 972 123,38% Net profit, including: 31 301 22 904 136,66% - shareholders of parent entity 30 090 21 174 142,11% - minority shareholders 1 211 1 730 70,00%

11.2.1 Revenues

Revenues from all areas of activity of the Company were 404.943 000 PLN and they increased by 12.869 000 PLN, mainly it regards revenues from financial activity (increase by 7.114 000 PLN). The main element of the growth of financial activity (Clarification Note no. 27 to consolidated financial statement) was the increase of the write downs of financial current assets (increase by 5.398 000 PLN). Other operating revenues decreased by 5.611 000 PLN (details in Clarification Note no. 26 to consolidated financial statement).

Revenues

2009

(000 PLN)

2008

(000 PLN) Dynamics

Revenues from sales of products 330 360 319 280 103,47%

Revenues from sales of goods and materials 37 197 36 911 100,77%

Other operating revenues 16 778 22 389 74,94%

Revenues from financial activity 20 608 13 494 152,72%

Total 404 943 392 074 103,28%

11.2.2 Costs

Product costs of Grupa Apator were 293.294 000 PLN in 2009 and they were higher by 11.818 000 PLN (by 4,20%) in relation to 2008.

Description 2009

(000 PLN)

2008

(000 PLN)

Dynamika

(%)

Amortization 15 226 13 946 109,18%

Materials and energy consumption 127 327 126 321 100,80%

Outsourcing 42 923 38 619 111,14%

Remuneration and benefits of employees 89 723 86 230 104,05%

Other product costs 18 095 16 360 110,61%

Total 293 294 281 476 104,20%


34

The increase has been noticed in all cost items, mainly in:

− Outsourcing by 4.304 000 PLN

− Remuneration and benefits of employees by 3.493 000 PLN.

Structure of costs according to product in 2009 has been presented below.

Structure of product costs in 2009

Materials and energy consumption

43%

Outsourcing15%

Salaries and wages and employees

benefits31%

Amortization5%

Other product costs6%

Total costs born by Grupa Apator in 2009 were 366.434 000 PLN and they were higher by 3.147 000 PLN in relation to 2008.

Description 2009

(000 PLN)

2008

(000 PLN)

Dynamics

(%)

Cost of manufacturing of products sold 208 571 208 388 100,09%

Costs of goods and materials sold 30 558 29 544 103,43%

Sales costs 24 584 21 959 111,95%

Overheads 54 848 48 087 114,06%

Other operating costs 15 818 14 318 110,48%

Financial costs 32 055 40 991 78,20%

Total 366 434 363 287 100,87%

Manufacturing costs of products sold in 2009 increased by 183 000 PLN in relation to 2008. Dynamics of growth of manufacturing costs of products (100,09%) was much lower than dynamics of revenues from sales of products (103,47%).

Significant drop of costs has been also noted in item of financial costs. In relation to 2008 the level was decreased by 8.936 000 PLN. The decrease regards the costs related to hedging transactions and currency options (drop by 17.593 000 PLN), interest on loans (drop by 738 000 PLN). Considerable increase of write downs of financial current asset was noted (increase by 5.571 000 PLN).

11.2.3 Financial result

In the table below the level of results achieved by Grupa Apator has been presented in the table below.

Description 2009

(000 PLN)

2008

(000 PLN)

Dynamics

(%)


35

Description 2009

(000 PLN)

2008

(000 PLN)

Dynamics

(%)

Gross profit on sales 128 428 118 259 108,60%

Profit on sales 48 996 48 213 101,62%

Profit on operating activity 50 116 56 373 88,90%

EBITDA 65 342 70 319 92,92%

Gross profit 38 669 28 876 133,91%

Net profit with the profit per minority shares 31 301 22 904 136,66%

The main factors having got the influence on financial results achieved in 2009: − lower dynamics of the growth of manufacturing costs of products, goods and materials sold in relation to

the dynamics of the growth of sales, that is directly reflected to the increase of gross result on sales (difference in 2009 was 2,69 of per cent point),

− increase of profitability of export, − financial costs related to the service of the loans taken for financing of acquisition, − decreasing negative influence of hedging transactions on net result in 2009, − increase of prices of raw materials (cooper, crude oil) – metallurgical metals (non ferrous metals, steel,

connecting elements, etc.) and plastic products, plastics and chemicals that are significant part of purchase of Grupa Apator.

128 428118 259

48 996 48 21350 116 56 37365 342

70 319

38 66928 876

31 30122 904

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

Gross profiton sales

Profit onsales

Profit onopeatingactivity

EBITDA Gross profit Net profit

Financial result (in 000 PLN)

2009

2008

11.2.4 Hedging transactions of Grupa Apator

Grupa Apator at 31stDecember 2009 had the hedging transactions concluded for the value of 10.610 000 EUR with the deadline of performance in 2010. The value consisted of the options for the amount of 800 000 EUR of 2008 and forward contracts for the amount of 9.810 000 EUR concluded in 2009.

The above transactions are hedging of foreign currency flows against negative effects of exchange rate differences. According to the evaluation of hedging instruments made at 31st December 2009 for all entities in the group by FMCM sp. z o. o. with the seat in Warsaw where positive evaluation in amount of 1.338 000 PLN was referred to financial receivables but the negative evaluation in amount of 524 000 PLN was referred to the charge of financial costs.

For the charge of financial costs of four quarters of 2009 was referred the performance of hedging instruments where the deadline of performance was in the reporting period and also the flows closed prior the deadline of performance in total amount of 30.560 000 PLN. (including 8 000 PLN of discount of long term liabilities due to earlier closing of transactions in Pafal SA).

Taking into consideration the evaluation of hedging at 31st December 2009, correction of the evaluation of


36

hedging at 31st December 2009 and actual performance of hedging, the result of 2009 was negative amount of 5.794 000 PLN.

Grupa Apator settled to the end of 2009 almost 100% of hedging transactions against the effects of exchange rate differences concluded in 2008.

Hedging transactions Value

Negative evaluation at 31st December 2008 23 952

Performance for four quarters of 2009 -30 560

Positive result on evaluation at 31st December 2009 814

The influence on the result of four quarters in 200 9 -5 794

11.3 Report on financial position of Grupa Apator – structure of assets and liabilities

The balance sum at 31st December 2009 was 297.505 000 PLN that means the drop by 14.514 000 PLN in relation to 31st December 2008. The drop is resulted mainly from the decrease of the value of current assets by 8.522 000 PLN (on assets side) and the decrease of the value of liabilities by 30.737 000 PLN (on side of liabilities).

Balance

31.12.2009

(000 PLN)

31.12.2008

(000 PLN)

Total assets 297 505 312 019

Fixed assets 152 829 158 821

Current assets 144 676 153 198

Total liabilities 297 505 312 019

Own capital 179 868 163 645

Liabilities 117 637 148 374

11.3.1 Fixed and current assets

The value of assets of the Company at 31st December 2009 was 297.505 000 PLN.

Fixed assets are 51,37% of total value of assets. In value they dropped in relation to 31st December 2008 by 5.992 000 PLN that is to the level of 52.829 000 PLN.

The main changes in fixed assets regarded to: − decrease of tangible fixed assets by 4.249 000 PLN (Clarification Note no. 4 to consolidated financial

statement ), − decrease of assets due to deferred income tax by 3.747 000 PLN, − increase of the goodwill by 1.973 000 PLN (Clarification Note no. 3 to consolidated financial

statement).

Fixed assets

30.12.2009

(000 PLN)

30.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Intangible assets 3 209 3 252 98,68% 2,10%

Goodwill 40 608 38 635 105,11% 26,57%

Tangible fixed assets 97 620 101 869 95,83% 63,88%

Investment properties 1 394 1 381 100,94% 0,91%

Investments in associated entities consolidated by equity method 1 593 1 519 104,87% 1,04%

Long term financial assets available for sale 0 0 0,00% 0,00%

Other long term investments in affiliated entities 0 0 0,00% 0,00%

Long term borrowings granted 0 0 0,00% 0,00%


37

Fixed assets

30.12.2009

(000 PLN)

30.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Long term receivables 219 253 86,56% 0,14%

Prepayments 97 76 127,63% 0,06%

Assets due to deferred income tax 8 089 11 836 68,34% 5,29%

Total 152 829 158 821 96,91% 100,00%

Current assets at the end of 2009 were in value of 144.676 000 PLN and it was 48,63% of total assets.

They dropped in relation to 2008 by 8.522 000 PLN. The changes regarded mainly to: − drop of the cash by 9.974 000 PLN (Clarification Note no. 13 to consolidated financial statement), − drop of trade receivables by 2.881 000 PLN (Clarification Note no. 12 to consolidated financial

statement), − increase of fixed assets classified as held for sale by 2.791 000 PLN (Clarification Note no. 14 to

consolidated financial statement), − increase of inventory by 1.551 000 PLN (Clarification Note no. 10 to consolidated financial statement), − increase of short term financial assets held for turnover by 1.289 000 PLN (Clarification Note no. 8 to

consolidated financial statement).

Current assets

31.12.2009

(000 PLN)

31.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Inventory 54 789 53 238 102,91% 37,87%

Trade receivables 66 062 68 943 95,82% 45,66%

Receivables due to taxes, customs and social insurance 2 040 2 223 91,77% 1,41%

Prepayments – advance payments for purchase of services 561 1 526 36,76% 0,39%

Other short term receivables 3 807 4 603 82,71% 2,63%

Short term financial assets available for sale 0 0 0,00% 0,00%

Short term financial assets as held for turnover 1 637 348 470,40% 1,13%

Other short term financial assets 0 0 0,00% 0,00%

Short term borrowings granted 0 0 0,00% 0,00%

Cash and its equivalents 10 234 20 208 50,64% 7,07%

Prepayments 2 713 2 067 131,25% 1,88%

Fixed assets classified as held for sale 2 833 42 6745,24% 1,96%

Current assets 144 676 153 198 94,44% 100,00%

The cycle of material turnover was 59 days, manufacturing in progress cycle was 18 days and finished products was 15 days (cycle has been calculated for the status at the end of 2009). Inventory of Grupa Apator is as follows (details in Clarification Note no 10 to consolidated financial statement).

Inventory

31.12.2009

(000 PLN)

31.12.2008

( 000 PLN)

Dynamics

(%)

Structure

2009 (%)

Materials 20 554 21 562 95,33% 37,51%

Manufacturing in progress 16 425 18 630 88,16% 29,98%

Finished products 13 418 8 499 157,88% 24,49%

Goods 3 199 3 036 105,37% 5,84%

Advance payments for deliveries 1 193 1 511 78,95% 2,18%

Total inventory 54 789 53 238 102,91% 100,00%

Net receivables at 31st December 2009 were 72.689 000 PLN and they were decreased by 4.859 000 PLN in relation to 31st December 2008. The main item in total receivables are not overdue current receivables in value of 49.868 000 PLN that in comparison with 2008 dropped by 2.618 000 PLN (by 4,99%). The details regarding receivables are included in Clarification Note no. 12 to consolidated financial statement.


38

Receivables 31.12.2009

(000 PLN)

31.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Trade receivables 66 062 68 963 95,79% 90,88%

Current receivables 49 868 52 486 95,01% 68,60%

Overdue receivables up to 1 month 7 785 9 798 79,45% 10,71%

Overdue receivables from 1 month to 3 months 5 581 4 968 112,34% 7,68%

Overdue receivables from 3 months to 6 months 2 974 1 616 184,03% 4,09%

Overdue receivables from 6 months to 1 year 948 691 137,19% 1,30%

Overdue receivables over 1 year 1 757 3 935 44,65% 2,42%

Evaluation of receivables – current value 0 0 0,00% 0,00%

Write downs of trade receivables -2 851 -4 531 37,08% -3,92%

Other receivables 6 627 8 585 77,19% 9,12%

Receivables due to sales of investments and fixed assets –long term 133 251 52,99% 0,18%

Receivables due to long term hedging 113 0 0,00% 0,16%

Discount of long term receivables -27 -20 -35,00% -0,04%

Receivables due to sales of shares – short term 48 0 0,00% 0,07%

Receivables due to income tax of legal persons 923 411 224,57% 1,27%

Receivables due to VAT, customs and other taxes 1 117 1 812 61,64% 1,54%

Receivables due to fixed assets sold and the value of intangibles 2 484 634 391,80% 3,42%

Other receivables 1 465 1 039 141,00% 2,02%

Prepayments – advance payments for purchase of services 561 1 526 36,76% 0,77%

Deposits for hedging of the options 0 3 266 0,00% 0,00%

Dispute claims 0 147 0,00% 0,00%

Write downs of other receivables -190 -481 60,50% -0,26%

Total receivables, including: 72 689 77 548 93,73% 100,00%

- long term part 219 253 86,56% 0,30%

- short term part 72 470 77 295 93,76% 99,70%

11.3.2 Liabilities - capitals and liabilities Equity at 31stDecember 2009 was 179.868 000 PLN and it increased by 16.223 000 PLN in relation to 31st December 2008 mainly due to the increase of supplementary capital. The details concerning the supplementary capital have been included in Clarification Note no 16 to consolidated financial statement. Primary capital dropped by 18 000 PLN. On 18th November 2009 Apator SA received the decision of Regional Court in Toruń and based on it the registration of the decrease of share capital of the Company from the amount of 3.529.350,00 PLN to the amount of 3.510.702,80 PLN of 13th November 2009 was made.The decrease was made by redemption of 186.472 own shares of the Company. The details are included in Clarification Note no. 15 to consolidated financial statement.

Description 31.12.2009

(000 PLN)

31.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Primary capital 3 511 3 529 99,49% 1,95%

Supplementary capital from sales of own shares above their nominal value 15 142 15 142 100,00% 8,42%

Other supplementary capital 93 105 50 752 183,45% 51,76%

Revaluation capital 6 169 6 169 100,00% 3,43%

Own shares (5 914) (7 389) 19,96% -3,29%

Reserve capitals 19 348 21 362 90,57% 10,76%

Capital from evaluation of hedging transactions and exchange rate differences from consolidation (221) (113) -95,58% -0,12%

Directly taken in capital the amounts related to fixed assets held for sales. - - 0,00% 0,00%


39


(000 PLN)

31.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Undistributed financial result 22 308 53 475 41,72% 12,40%

Financial result of current period 30 090 21 174 142,11% 16,73%

Write offs from financial result of current year (5 702) (2 859) -99,44% -3,17%

Minority shares 2 032 2 403 84,56% 1,13%

Own capital 179 868 163 645 109,91% 100,00%

Total liabilities of Grupa Apator at 31st December 2009 were 117.637 000 PLN and they dropped by 30.737 000 PLN in relation to 31st December 2008 . The biggest changes have occurred as follows:

− long term loans – the decrease due to repayment of instalment for the amount of 9.000 000 PLN, − short term loans – the increase by 4.587 000 PLN due to more involvement to finance the current

activity – details in Clarification Note no. 20 to consolidated financial statement − other long term and short term financial liabilities – total decrease by 22.029 000 PLN due to

decrease of the liabilities related to hedging transactions of Grupa Apator – details are in Clarification Notes nos. 9 and 19 to financial report.


(000 PLN)

31.12.2008

(000 PLN)

Dynamics

(%)

Structure

2009 (%)

Long term liabilities 45 063 58 910 76,49% 38,31%

Long term loans and borrowings 27 000 36 000 75,00% 22,95%

Other long term financial liabilities 375 4 848 7,74% 0,32%

Other long term liabilities 0 0 0,00% 0,00%

Reserve due to deferred income tax 6 972 7 265 95,97% 5,93%

Reserves for liabilities due to employees benefits 10 671 10 797 98,83% 9,07%

Other long term reserves 45 0 0,00% 0,04%

Short term liabilities 72 574 89 464 81,12% 61,69%

Short term loans and borrowings 33 614 29 027 115,80% 28,57%

Other short term financial liabilities 3 523 21 079 16,71% 2,99%

Trade liabilities 17 571 18 092 97,12% 14,94%

Liabilities due to taxes, customs and social insurance 7 999 9 908 80,73% 6,80%

Liabilities due to salaries and wages 1 915 2 301 83,22% 1,63%

Advance payments received 148 262 56,49% 0,13%

Other short term liabilities 2 171 3 311 65,57% 1,85%

Accruals 13 319 4,08% 0,01%

Reserve for liabilities due to employees benefits 4 015 3 440 116,72% 3,41%

Short term reserves 1 605 1 725 93,04% 1,36%

Liabilities related to fixed assets classified as held for sale 0 0 0,00% 0,00%

Total liabilities 117 637 148 374 79,28% 100,00%

11.3.3 Information on concluded and terminated cont racts on loans and borrowings in financial year

The status of loans in entities of Grupa Apator at 31st December 2009 has been presented in the table below.

Description Amount of liabilities Interest incurred in 2009

Loans 60 464 3 057

Raiffeisen Bank Polska SA 9 102 316

Citibank Handlowy - Bank Handlowy w Warszawie SA 47 122 2 236

BZ WBK 866 143


40

Description Amount of liabilities Interest incurred in 2009

Bank Millenium 1 356 252

ING Bank Śląski 2 003 110

Credit cards 15 0

Borrowings 150 14

Borrowings from minorities of Apator Telemetria 150 14

Loans and borrowings in total 60 614 3 071

Day

Description 31.12.2009 31.12.2008

Loans and borrowings in total 60 614 65 027

Short term loans and borrowings 33 614 29 027

Long term loans and borrowings 27 000 36 000

- paid over 1 year to 2 years 9 000 18 000

- paid over 2 years to 5 years 18 000 18 000

- paid over 5 years - -

Parent entity - Apator SA: At 31st December 2009 Apator SA had the debt due to loans in amount of 54.433 000 PLN. Conditions of the loan on current account according to the contract concluded on 27th May 2004 and annex dated 17th April 2008 with Bank Handlowy w Warszawie SA are as follows:

� Amount of the loan 7.000 000 PLN for the period since 17th April 2008 till 20th April 2008; 12.000 000 PLN for the period since 21st April 2008 till 20th April 2010

� Deadline of the loan repayment 20th April 2010 � Type of hedging Bail mortgage in amount of 15.000 000 PLN

Assignment of receivables in amount of 2.800 000 PLN Assignment of rights from contract regarding insurance of property

� Interest rate WIBOR 1M + annual margin of 0,5625% � Commissions and costs 0,3% of loan amount – I installment of the

preparatory commission 0,3% of loan amount – II installment of preparatory commission to be paid on 21st April 2009 0,4% of loan amount not used – engage commission 0,1% of loan amount – commission for the change of conditions

� Current engagement 9.341 000 PLN

Conditions on long-term loan based on contract concluded on 17th April 2008 with Bank Handlowym w Warszawie SA are as follows:

� Amount of the loan 45.000 000 PLN � Deadline of the loan repayment 9.000 000 PLN till 30th June 2009

9.000 000 PLN till 30th June 2010 9.000 000 PLN till 30th June 2011 9.000 000 PLN till 30th June 2012 9.000 000 PLN till 30th June 2013

� Type of hedging Ordinary mortgage in total amount of 45.000 000 PLN Bail mortgage for the amount of 11.250 000 PLN


41

Warranties of the companies: APATOR-MINING Sp. z o.o., APATOR-METRIX S.A. and FAP PAFAL SA

� Interest rate WIBOR 1M + annual margin 0,3% � Commissions and costs 0,1% of loan amount – preparatory commission � Current engagement 36.000 000 PLN

Conditions of the loan on current account and revolving loan based on the contract on liability limit concluded on 16th June 2005 and annex dated 14th December 2009 with Raiffeisen Bank Polska SA:

� Limit 12.500 000 PLN: - 7.500 000 PLN – loan on current account - 5.000 000 PLN – revolving loan

� Deadline of the loan repayment 7th December 2010 � Type of hedging Power of attorney to current account

Secret assignment of liabilities in amount of min. 40% entire business trading

� Interest rate - WIBOR 1T + annual margin of 1,5% – loan on current account - WIBOR 1M + annual margin of 1,5% – revolving loan

� Commissions and costs 0,75% annually – engage commission � Current engagement 4.102 000 PLN – current account

5 000 000 PLN – revolving loan

Subsidiary - APATOR MINING Sp. z o.o. At 31st December 2009 APATOR-MINING Sp. z o.o. had the debt due to loans in value of 3.783 000 PLN. The conditions of loan incurred on bank account under the contract concluded on 4th November 2008 with ING Bank Śląski S.A.: � Amount of loan 2.300 000 PLN – since 29th December 2009 till 28th March

2010 2.000 000 PLN – since 29th March 2010 till 30th June 2010

� Deadline of repayment 30th June2010 � Type of hedging Guarantee of APATOR S.A.

Power of attorney to current account � Interest rate WIBOR 1M + 1,5% � Commissions and costs 0,3% of the amount of loan received

0,035% of the amount of loan used � Current engagement 2.003 000 PLN

Conditions of loan incurred on current account under the contract concluded on 15th May 2009 with Bank Handlowy w Warszawie S.A.: � Amount of loan� 5.000 000 PLN since 15th May till 29th July 2009

4.500 000 PLN since 30th July till 30th August 2009 4.000 000 PLN since 31st August till 29th September 2009 3.500 000 PLN since 30th September till 29th October 2009 3.000 000 PLN since 30th October till 30th November 2009 2.500 000 PLN since 1st December till 29th December 2009 2.000 000 PLN since 30th December 2009 till 28thJanuary 2010 1.500 000 PLN since 29th January till 25th February2010 1.000 000 PLN since 26th February till 29th March 2010 5.000 000 PLN since 30th March till 13th May 2010

� Deadline of repayment 13th May 2010 � Type of hedging Guarantee of APATOR S.A.

Power of attorney to current account � Interest rate WIBOR 1M + 1,1% � Commissions and costs 0,5% amount of loan – preparatory commission

0,4% - engage commission � Current engagement 1.781 000 PLNł (interest rates of 7 000 PLN included)

Subsidiary - APATOR CONTROL Sp. z o.o. At 31st December 2009 APATOR CONTROL Sp. z o.o. had no debt due to bank loans and borrowings.


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Subsidiary - APATOR METRIX S.A. At 31st December 2009 APATOR METRIX S.A. had the debt due to bank loan granted by Bank Milenium S.A. Conditions of the loan incurred on current account under the contract concluded on 28th February 2007 and annex dated 22nd April 2009 with Ban Milenium SA.:

Amount of the loan 1.000 000 PLN since 28th February till 6th May 2007; 3.000 000 PLN since 7th May till 27th June 2007; 5.000 000 PLN since 28th June till 31st December 2007; 3.000 000 PLN since 1st January till 31st March 2008; 5.000 000 PLN since 1st April till 15th April 2008; 6.500 000 PLN since 16th April 31st December 2008; 5.000 000 PLN since 1st January till 21st April 2009; 6.500 000 PLN since 22nd April 2009 till 21st April 2010.

� Deadline of repayment 21st April 2010 � Type of hedging Bail mortgage up to the amount of 7.000 000 PLN on

property with buildings � Interest rate WIBOR 1M + margin 1,5% � Commissions and margins 0,08% of loan amount – commission for readiness � Current engagement 1.356 000 PLN

Subsidiary - FAP PAFAL S.A. At 31st December 2009 FAP PAFAL S.A. had the debt due to loans in value of 866 000 PLN. Conditions of the loan incurred on current account under the contract concluded on 15thJune 2005 and annex dated15th June 2009 with BZ WBK S.A.:

� Amount of the loan 10.000 000 PLN � Deadline of repayment 17th July 2009 - repaid � Type of hedging Bail mortgage on properties in amount of 11.000 000

PLN Product pledge in amount of 11.500 000 PLN Cession of receivables in amount of 5.000 000 PLN bill of exchange in’blanco

� Interest rate WIBOR 1M + margin 1,50% � Commissions and costs 0,75% loan amount – preparatory commission

0,73% commission of the loan unused Conditions of the loan incurred on current account under the contract concluded 10th July 2009 and annex dated 19th November 2009 with BZ WBK S.A.:

� Amount of the loan 10.000 000 PLN since 17th July 2009 6.000 000 PLN since 19th November 2009

� Deadline of repayment 30th June 2010 � Type of hedging Bail mortgage on properties for the amount of 6.500

000 PLN Product pledge in amount of 8.800 000 PLN Cession of receivables in amount of 5.000 000 PLN Bill of exchange in’blanco

� Interest rate WIBOR 1M + margin 1,50% � Commissions and costs 0,6875% of loan amount – preparatory commission

0,73% - commission of unused loan

� Current engagement 866 000 PLN

Conditions of loan contract on current account under the contract concluded on 16th July 2008 with Bank Przemysłowo – Handlowy S.A.:

� Amount of the loan 5.000 000 PLN � Deadline of repayment 16th July 2009 - repaid � Type of hedging Machine and equipment pledge for the amount of

7.000 000 PLN Product pledge in amount of 1.500 000 PLN

� Interest rate WIBOR 1M + margin 0,50% � Commissions and costs none


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Subsidiary - RECTOR Sp. z o.o.. At 31st December 2009 Rector Sp. z o.o. had no debt due to loans and borrowings. The company has concluded loan contract on current account with Bank Millenium S.A., that it did not make use till the date of preparation of the statement. Conditions of the loan incurred on current account under the contract concluded on 4th March 2008 and annex dated 6th March 2009 with Bank Millenium S.A.:

� Amount of the loan 2.200 000 PLN – till 6th March 2009 1.200 000 PLN – till 3rd October 2010

� Deadline of repayment 3rd October 2010 � Type of hedging Contract on transfer of receivables � Interest rate WIBOR 1M + margin 2% � Commissions and costs Commission for readiness – 0,12% � Current engagement 0 000 PLN

Subsidiary - APATOR GmbH At 31st December 2009 Apator GmbH had no debt due to loans and borrowings except borrowings granted by parent entity - APATOR S.A. Subsidiary - APATOR Powogaz At 31st December 2009 Grupa Apator Powogaz had the debt due to borrowings incurred from minority shareholders of Apator Telemetria in value of 150 000 PLN and the debt on credit cards in value of 15 000 PLN. Four contracts on borrowings concluded in April and May 2009 with minority shareholders of Apator Telemetria Sp. z o.o. ,each for the amount of 37.500 PLN has the deadline for repayment fixed on 31st May 2010 . Annual interest rate is 6%; interest are paid in advance till 31st December 2009.

In 2009 no bank terminated the contract on loan any entity in Grupa Apator.

11.3.4 Information on borrowings granted in the fi nancial year

On 15th October 2006 the contract on borrowing was concluded between Apator SA and Apator GmbH. Under the contract Apator SA granted the borrowing to subsidiary of Apator GmbH in amount of 215 000 Eur to be repaid in tranches:

− 115 000 Eur till 31st October 2006 , − 50 000 Eur till 31st December 2006, − 50 000 Eur till 28th February 2007.

According to the contract the borrowing had to be repaid till 31st July 2009.

On 21st September 2007 the companies signed the annex to the contract defining the final date of repayment of the borrowing on the day 30th June 2010.

On 21st September 2007 the contract on the second borrowing was concluded between Apator SA and Apator GmbH. Under the contract concluded Apator SA granted the borrowing to subsidiary in amount of 75 000 Eur. According to the contract the borrowing is to be repaid till 31st December 2010.

On 11th December 2008 the contract on the third borrowing was concluded between Apator SA and Apator GmbH. Under the contract Apator SA granted the borrowing to subsidiary of Apator GmbH in amount of 50 000 Eur to be repaid in trenches:

− 20 000 Eur till 19th December 2008 , − 30 000 Eur till 31st January 2009.

According to the contract the borrowing is to be repaid till 31st May 20011.

Moreover, at 31st December 2009 Grupa Apator Powogaz had the debt due to taken borrowings from minority shareholders of Apator Telemetria in amount of 150 000 PLN.


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11.3.5 Essential ratios for the assessment of fluid ity

The essential ratios of Grupa Apator in 2009 and 2008 have been presented in the table below.

Ratios of profitability Method of calculation 2009

(%)

2008

(%)

Gross profit margin from sales ratio of gross profit from sales to revenues from sales in total 34,94% 33,20%

Profit margin from sales ratio of result on sales to revenues from sales in total

13,33% 13,54%

Operating margin ratio of profit on operating activity to revenues from sales in total 13,63% 15,83%

EBITDA margin ratio of EBITDA to revenues from sales in total

17,78% 19,74%

Net profit margin ratio of net result to revenues from sales in total

8,52% 6,43%

Return of equity (ROE) ratio of net result to equity 17,40% 14,00%

Return of assets (ROA) ratio of net result to assets in total 10,52% 7,34%

Ratios of fluidity and debt Method of calculation 2009

(%)

2008

(%)

Fluidity ratio current assets / short-term liabilities 1,99 1,71

Quick liquidity ratio (current assets - inventories) / short-term

liabilities 1,24 1,12

Debt ratio liabilities /equity and liabilities 39,54% 47,55%

Cover of fixed assets by equity (equity + reserves + long-term liabilities /

fixed assets 1,47 1,40

Durability of financial structure (equity + reserves + long term liabilities )

/ liabilities 0,76 0,71

11.3.6 Information on granted and received garantee s and warranties in financial year

1. Guarantees

Parent entity - APATOR S.A. On 25th July 2007 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 51 000 PLN for Koncernu Energetycznego Energa SA in order to guarantee proper performance of commitments by Apator SA. Guarantee is valid till 24th July 2010. Hedging for bank credibility is mortgage. On 31st July 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 100 000 PLN for Energa Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 4th September 2010. Hedging for bank credibility is mortgage. On 3rdAugust 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 30 000 PLN for Energa Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 19th September 2015. Hedging for bank credibility is mortgage.


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On 19th September 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 65 000 PLN for RWE Stoen Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Under the agreement the guarantee was valid till 5th December 2009 and it was prolonged on 20th November to 31st December 2009. Hedging for bank credibility is mortgage. On 9th October 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 140 000 PLN for Enea Operator SA in order to guarantee proper performance of commitments by Apator SA and PAFAL SA. Guarantee is valid till 31st December 2009. Hedging for bank credibility is mortgage. On 20th October 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 13 000 PLN for PGE Dystrybucja Warszawa teren Sp. z o.o. in order to guarantee proper performance of commitments by Apator SA . Guarantee is valid till 31st December 2010. Hedging for bank credibility is mortgage. On 21stOctober 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 260 000 Eur for REGIE DE PRODUCION (BURUNDI) in order to guarantee the return of advance payment. Guarantee is valid till 28th February 2010. Hedging for bank credibility is mortgage. On 21stOctober 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 87 000 Eur for REGIE DE PRODUCION (BURUNDI) in order to guarantee the proper performance the commitments of APATOR SA. Guarantee is valid till 31st October 2010. Hedging for bank credibility is mortgage. On 4th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the tender guarantee for the amount of 10 000 USD for RECO (Rwanda). Guarantee is valid till 31st March 2010. Hedging for bank credibility is mortgage. On 12th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank for the amount of 329 000 PLN for Enea Operator SA. Under the agreement guarantee was valid till 14th January 2010 and on 23rd December 2009 it was prolonged till 15th March 2010. Hedging for bank credibility is mortgage. On 20th November 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the tender guarantee for the amount of 76 000 PLN for PGE Dystrybucja Łódź - Teren SA. in order to guarantee proper performance of commitments by Apator SA.Guarantee is valid till 29th January 2010. Hedging for bank credibility is mortgage. On 17th December 2009 the Company reached the agreement with Bank Handlowy w Warszawie SA on guarantee to be granted. Under the agreement reached Bank granted the bank guarantee for the amount of 727 000 PLN for RWE Stoen Operator Sp. z o.o. in order to guarantee proper performance of commitments by Apator SA. Under the contract concluded guarantee is valid till 14th January 2011. Hedging for bank credibility is mortgage.

Subsidiary - FAP PAFAL S.A. The company at 31st December 2009 has got in its off balance records the guarantees for the remedy of defects and guarantees for tender bonds for total amount of 2.074 000 PLN: � guarantee for remedy of defects issued by Hestia SA towards STORN S.A. 1.065 000 PLN � guarantees for tender bonds issued by BZ WBK S.A. 1.009 000 PLN Subsidiary - APATOR METRIX SA The company concluded the contract on bank guarantee on 27th October 2006. Under the contract the company has the right to make us of guarantees granted by the Bank with the validity period not exceeding 36 months of the date of the issue of the guarantee. The hedging for the contract is thee contract on transfer of title to secure the repayment for legalization stands for gas meters of book value at 31st December 2009 in value of 134 000 PLN. Subsidiary - APATOR RECTOR Sp. z o.o. The company at 31st December 2009 has got the agreement concluded with Bank Millenium on granting the guarantee. Under the agreement Bank has granted the guarantee towards Fonbud in order of good performance of the contract. In accordance with the agreement the guarantee is valid till May 2011 and the hedging of receivables of the Bank is the cash in bank deposit in value of 650 000 PLN conveyed by the Bank.


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Subsidiary - APATOR POWOGAZ S.A. At 31st December 2009 has got the agreement concluded with Raiffeisen Bank Polska S.A. on granting the guarantee. Under the agreement concluded, Bank granted the guarantee for tender bonds: • towards Chief Executive Oficer, Africa Re Centra, Kenya for the amount of 16.500 USD with the validity of 28th February 2010 ; • Tyska Spółdzielnia Mieszkaniowa „OSKARD” Tychy for the amount of 140 000 PLN with the validity of 6th April 2010. At 31st December 2009 the following contracting parties had in their possessions own bills of exchange issued by Apator Powogaz S.A.:

Beneficiary of bill of exchange

Bill of exchange The reason of issuing

Date of return


Insurance policy no 150600/51/143/2009 (guarantee for remedy of defects) 02-12-2014


General contract on granting of contractual insurance guarantee no. 150204060 (guarantees for tender bonds) 28-10-2010


General contract on granting of contractual insurance guarantee no. 150204060 (guarantee for appropriate performance of the contract) 28-10-2010


General contract on granting of contractual insurance guarantee no. 150204060 (guarantee for remedy of defects) 28-10-2010

Raiffeisen-Leasing Polska S.A. „in blanco” Contract on operating leasing no. MF918N (UL) 15-12-2012

Parent entity concluded with the insurance company - Risk Towarzystwo Ubezpieczeń S.A., Vienna Insurance Group, Przedstawicielstwo Generalne Toruń the contract on granting of contractual insurance guarantees. Under the contract InterRisk S.A. guarantees the liabilities of APATOR POWGAZ S.A. due to: Obligation to pay the tender bond - limit is 750 000,00 PLN Not doing its duties or improper doing it duties specified in the contract (commercial contract) – limit is 1 000 000,00 PLN lack of remedy or improper remedy of defects – limit is 500 000,00 PLN At 31.12.2009 r. the following guarantees issued by InterRisk were active:

Beneficiary of guarantee Guarantee Amount Validity

Zakład Energetyki Cieplnej S.A. Katowice usunięcia wad i usterek 9 882 PLN 02-12-2014

RTBS "ADMINISTRATOR" Sp. z o.o., Radom Wadialna 4 000 PLN 08-01-2010

2. Warranties

APATOR S.A. granted warranty due to granted loan under the contract concluded on 4th November 2008 with ING Bankiem Śląskim S.A. and annex to the contract dated18th December 2009 on current account of APATOR MINING Sp. z o.o. in amount of 2.300 000 PLN. Guarantee to the amount of 3.450 000 PLN covers liabilities resulting from loan contract and particularly liabilities regarding interest, commissions and other costs of execution is valid till 30th June 2013. APATOR S.A. granted warranty under the contract on guarantee concluded on 15th May 2009 with Bank Handlowy S.A. he contract was concluded in order to hedge the repayment of liabilities due to loan granted on 15th May 2009 on current account of APATOR MINING Sp. z o.o. in amount of 5.000 000 PLN. Guarantee to the amount of 6.000 000 PLN covering liabilities resulting from loan contract and regarding particularly liabilities of the loan, interest, commissions and other costs of execution is valid till 30th November 2010 (bank execution is valid 30th November 2012).


47

Subsidiaries Apator Metrix S.A., Apator Mining Sp. z o.o. and FAP Pafal S.A. concluded on 17th April 2008 with Bank Handlowy SA the contract on warranty being the hedging of repayment of receivables due to the loan granted to parent entity - APATOR S.A. in amount of 45.000 000 PLN. Guarantee was granted to the amount of 54.000 000 PLN. According to the stipulations of the contract guarantors undertake to perform the duties of the debtor in case when the debtor does not fullfil its duties in time. Guarantee is valid till 31st December 2013.

3. Contingent liabilities Parent entity - APATOR S.A.

Under the investment contract concluded on 30th August 2007 with Przedsiębiorstwo Techniczno – Handlowe Rector Unlimited Partnership represented by partners, Apator SA purchased 70% of shares in transformed Rector Sp. z o. o. for the amount of 21.000 000 PLN. Apator SA has undertaken to pay extra after the period of three years to the price of 70% shares provided the transformed company Rector will earn expected net profit in the period 2008 - 2010. Under the contract the extra payment will not exceed the amount of 5.000 000 PLN. At the same time Apator SA committed to purchase outstanding 30% shares after three years at the price defined based on the value of the company.

Subsidiary - APATOR POWOGAZ S.A.

During the purchase of Apator Metroteks selling parties was granted additional conditional price extras depending on result to be gained in the future by the company. Maximum value should be as follows:

• 30 000 Eur – paid after the approval of result of financial year 2010; • 50 000 Eur – paid after the approval of results of financial year 2011.

4. Leasing and renting

Parent entity – Apator SA On 31st December 2009 Apator SA had the liabilities due to renting contracts concluded on computer equipment and cars. The contract concluded with IBM Polska Sp. z o.o. defines monthly rent in amount of 10 000 PLN for renting of server. The value of equipment rented at 31st December 2009 is 351 000 PLN. The contract is valid till 30th April 2011. On 15th September 2009 the contract for renting cars was concluded with Arpol Motor Company Sp. z o. o. The object of renting is the car Seat Leon, the contract was concluded for the period of 36 months. Monthly rent was defined for the amount of 1.900 PLN plus additional amount (0,45 PLN per 1 kilometer) for exceeded limit of kilometers (50.000 km per year). Apator SA under the contract has pre-emotion right to the car rented anytime based on three month notice at the gross price of 70.000 PLN reduced by 1.500 PLN for each month of renting paid. On 1st October 2009 the contract was concluded for renting the car Mitsubishi Outlander from Arpol Motor Company Sp. z o.o. the contract was concluded for the period of 36 months, monthly rent was defined for the amount of 3.550 PLN plus additional amount (0,65 PLN per 1 kilometer) for exceeded limit of kilometers (50.000 km per year). Apator SA under the contract has pre-emotion right to the car rented after termination of the contract at the price of 37.800 PLN.

Subsidiary - Apator Rector sp. z o. o. At 31st December 2009 Apator Rector sp. z o. o. had the liabilities due to operation leasing of cars. The contracts with Prima Car Management SA were concluded in 2006, 2007 and 2008. In accordance with the contracts the amount of 71 000 PLN remained to be repaid (including in one year 54 000 PLN).

5. FINANCIAL LEASING AND OTHER FINANCIAL LIABILITIE S

APATOR S.A has financial liabilities resulting from the contract concluded on 26th March 2008 with IBM Polska Sp. z o.o. Liabilities resulting from the contract regard the purchase of the software with deferred payment. The value of the software purchased is 120 000 PLN. Total financing costs were established for 15 000 PLN. Payment in 36 installments


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of 4 000 PLN each in the period since 31st May 2008 till 30th April 2011. Liability is subject to evaluation by the method of amortized cost at effective interest rate. At 31st December 009 the liability is 57 000 PLN. The liability has been presented in item „other financial liabilities”. Spółka Apator Metrix has financial liabilities due to the contracts concluded on 10th June 2008 and 21st July 2008 with Volkswagen Leasing Polska Sp. z o.o. The Skoda cars are the subject of the contracts. The contracts have been concluded for the period of 48 months. The liability at 31st December 2009 is 94 000 PLN. (including long term ones for the amount of 66 000 PLN). Apator Rector Sp. z o.o. concluded financial leasing contracts where their objects are cars of the value of 611 000 PLN at 31st December 2009 .The liability at 31st December 2009 is 438 000 PLN (including long term ones for the amount of 186 000 PLN). Apator Kfap Sp. z o.o. in January 2009 concluded financial leasing contract where their objects are three cars. The liability is 97 000 PLN (including long term ones for the amount of 54 000 PLN). Apator Powogaz S.A. in 2009 concluded financial leasing contract where its object is a car of the value of 91 000 PLN. The contract with option of purchase has been concluded for the period of 35 months. The liability is 86 000 PLN. (including long term ones for the amount of 55 000 PLN) Apator Telemetria Sp. z o.o. has at 31st December 2009 liability due to financial leasing (short term liability) in value of 42 000 PLN.

12. The assessment the possibility of performance o f investment plans including capital investments in comparison with the funds being in p ossession, taking into consideration the possible changes in financing structure of the acti vity

Investment plan of Grupa Apator in 2010 regards mainly expenditures for tangible investments. They are estimated at the level of 18.000 000 PLN (in 2009: 15.589 000 PLN). Plan of investment expenditures of particular entities in Grupa Apator includes mainly:

− purchase for modernization and regeneration or other purposes (new technologies, modernization of machine stock),

− purchase of tooling related to implementation of the new products and modernization of existing ones in terms of market requirements.

The purchase is necessary in order to:

− provide further increase of revenues that it is required by implementation new products and modernization of ones being offered,

− increase the manufacturing capacity in order to meet growing market demand, − decrease the manufacturing costs, improve manufacturing culture and organization of work.

The essential sources of financing the investments that have been mentioned will be own means and bank loan.

The exception is Apator Rector sp. z o. o., that was granted the financial support for the project under title “Interdisciplinary research of digital modeling of power engineering and information technology, the source of innovation of information technology system for the distributors of energy". The application for the financial support has been submitted within the programme Operations 1.4 Support of earmarked projects – Operations 4.1 Support of implementations of results B + R Operating proggramme - Innovative Economy. Project will be performed up to the end of 2010 and it value is 1.981 000 PLN.

In 2010 capital group established by Apator Powogaz, plans its development among other things by capital investments. The performance of the investments will not be possible from means of capital group and it will require external financial support.

Other entities of Grupa Apator do not plan in 2010 any expenditure on financial assets.


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13. Assessment and its justification, concerning th e management of financial resources, particularly taking into consideration the ability to meet the obligations and to define possible threats and actions that the issuer took or is goin g to take in order to oppose the threats

Management of financial resources of the Company is carried out based on the following criteria: − verification of financial situation of current and potential customers, − taking advance payments or immediate settlements with new customers, hedging of buyer account, − current monitoring of settlements with customers and suppliers, − collection of overdue receivables, − establishment of possible profitable dates for the settlements , − financing of current activity by loan on current account that level automatically drops at every cash

inflow, − obtaining possible most profitable conditions for loans and other bank instruments, − replacement of bails by bank guarantee in tenders

The essential assumption concerning the management of financial resources of Grupa Apator is to maintain safe foothold in the range of financial fluidity of particular entities which is the base for confidence of commercial partners, creditors and market what allows to perform the plans and future development each of the entity and entire Grupa Apator. The entities monitor on current basis the parameters having got the influence on the value of financial resources striving to maximum acceleration of the cash flow, both by analysis of inventory turnover cycles and the quickest possible collection of receivables. In order to avoid possible irregularities in management of financial resources in the entities of Grupa Apator agreed rules of proceeding in the areas: sales, hedging of buyer credit, monitoring of receivables, current information on financial position for the executive board and directors.

Analysis of the basic financial ratios confirms the steady financial condition. It is proved by profitability ratios that have positive values in result of the profit achieved on every level of economic activity.

Grupa Apator more and more finances its activity by own capital both in respect of the value (increase by 16.223 000 PLN in relation to 2008) and percentage share (increase by 8,01 of percentage point in relation to the structure in 2008). Grupa Apator has got correct level both of current fluidity (1,99 in 2009) and quick fluidity (1,24 in 2009 ). The ratios are presented in point 11.3.5 of the statement. The structure of assets reveals similar levels of fixed assets (51,37%) and current ones (48,63%). The significant components of fixed assets are: tangible fixed assets and goodwill that has been earned from the excess of the purchase price over fair value possible to be identified from taken net assets of particular entities in Grupa Apator (details have been included in Clarification Note no. 3 to consolidated financial statement). Net financial results achieved by Grupa Apator cause on permanent basis the increase of own capital (details in Clarification Note no. 16 to consolidated financial statement). Information on cash flows presented in the statement indicates the sources of origin and the value of obtained cash and its usage by the Company.

14. Changes in the essential rules of management of the Company of issuer and its capital group

During 2009 took place the following changes in management of Apator SA: − since January 2009 was established new directors section of marketing and sales of metering

equipment and systems – the section was established by separation from section of marketing and sales to departments (home and export) sales of metering equipment and systems;

− since August 2009 in the directors section of switchgear equipment and marketing, two switchgear equipment sales departments of were joined: home and export in one.

On 28th January 2009 subsidiary Apator Powogaz SA acquired 50,8% of shares in WMC Telemetria Sp. z o.o.

On 1st June 2009 commercial contract was concluded where based on it the sale of heat meters being manufactured by Apator Kfap Sp. z o.o. is performed by Apator Powogaz SA.

Due to the fact that Apator Powogaz SA has got 100% of shares in Apator kfap Sp. z o.o. and both companies have got in their offers similar products concerning heat meters and water meters, it has been decided also to join together trade departments for the above products and to include regional sales services of Apator Kfap to the structure of Apator Powogaz. It allowed to:


50

- improve complementary sale system of heat meters and water meters

- to gain new customers for the product being offered

- optimization of the costs related to the after sales service

On 4th November 2009 subsidiary Apator Powogaz SA acquired 61% shares in Apator Metroteks with the seat in Kiev (Ukraine) for the amount of 348 000 PLN.

On 12th May 2009 subsidiary FAP PAFAL SA sold its shares in Gran-Systema-Pafal Sp. zo.o. with the seat in Minsk in Byelarus.

After the reporting period i.e. since January 2010 Apator SA concluded the contract on cooperation with subsidiary Pafal SA. The subject of cooperation is the performance by Apator SA:

− sales of products of subsidiary Pafal SA, − after sales service,

and design services for Pafal SA. The conclusion of the contract resulted from the performance of strategy of Grupa Apator, according to it the development and sales of electronic electricity meters (post- paid and pre- paid) and metering systems will be performed by APATOR SA.

15. Description of the structure of the main capita l deposits or main capital investments performed in Grupa Apator in the financial year

On 28th January 2009 subsidiary Apator Powogaz SA acquired 50,8% shares in WMC Telemetria sp. z o.o. Subsidiary Apator Powogaz SA acquired 508 shares from 4 natural persons (127 shares from each person). Nominal value of one share is 100,00 PLN. The purchase price is 3.967,00 PLN. Total purchase price of the above shares is 2.015 000 PLN. The date of payment for the shares was established on 7 days of the conclusion of the contract. The transfer of property was performed on the day of payment. Share capital of WMC Telemetria sp. z o.o. is 100 000 PLN and it is divided into 1.000 shares of nominal value 100,00 PLN. Acquired shares are 50,8% of share capital and 50,8% of total number of voices.

In 2009 Apator SA acquired from natural person one registered shares of Apator Powogaz SA for the amount of 4,3 000 PLN.

On 11th May 2009 the contract was concluded on the sales of registered shares of Apator Powogaz SA.

Based on the contract Apator Powogaz SA acquired from Apator SA 700 own shares for the amount of 3.010 PLN for their redemption.

On 4th November 2009 subsidiary Apator Powogaz SA acquired 61% shares in Apator Metroteks Sp. z o.o. with the seat in Kiev /Ukraine/ for the amount of 348 000 PLN.

On 12th May 2009 subsidiary FAP Pafal SA sold all its shares in Gran-Systema-Pafal sp. z o.o. with the seat in Minsk in Byelarus to other co-shareholders for the amount of 17 000 USD. FAP Pafal SA had in its possession 50% of shares of nominal value 15 000 USD.

16. More important events having got the influence on activity and financial results of Grupa Apator in the financial year or which possibly will have t he influence in the next years

16.1 Events that took place in financial year 2009.

1. Since 1st January 2009 the Executive Board of APATOR SA has been operated in the team of three persons based on the resolution dated 24th October 2008. The Supervisory Board of APATOR SA has nominated Mr Jerzy Kuś the member of the Executive Board of APATOR SA, for the common tenure. The Supervisory Board has entrusted Mr Jerzy Kuś the function of Marketing and Sales Director for Metering Equipment and Systems.

2. On 28th January 2009 APATOR POWOGAZ SA – subsidiary acquired 50,8% of shares in WMC Telemetria Sp. z o.o. Telemetria Sp. z o.o. with the seat in Słupsk is the manufacturer and the supplier of wireless telemetry systems for heat and water meters. The share capital of WMC Telemetria Sp. z o.o. is 100 000 PLN and it is divided into 1.000 shares with nominal value of 100 PLN each. APATOR POWOGAZ SA has acquired 508 shares from 4 natural persons (127 shares from each of the persons). The nominal value of one share was 100 PLN. Purchase price of 1 share is 3.967 PLN. Total price of acquisition of the above shares was 2.022 000 PLN (including the purchase costs of 7000 PLN) Payment for the shares will


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be made within 7 days of conclusion of the contract. Shares acquired are 50,8% of company capital of WMC Telemetria Sp. z o.o. and 50,8% of total number of votes.

3.On 22nd January 2009, APATOR MINING Sp. z o. o. - subsidiary and Kompania Węglowa SA with the seat in Katowice concluded the contract of the supply of mining equipment of the value of 1,9 m. PLN. The base for the conclusion of the contract was unlimited tender for the supply of intrinsically safe transformer units for sections of Kompania Węglowa SA in 2009.

4. On 30th January, APATOR MINING Sp. z o. o. – subsidiary and Kompania Węglowa SA with the seat in Katowice have concluded the contract of the supply of mining equipment of the value of 2,2 m.PLN. The base for the conclusion of the contract was unlimited tender for the supply of intrinsically safe mining starters, circuit breakers, and withdrawal units for Kompania Węglowa SA in 2009.

5. On 10th February, APATOR METRIX S.A. – subsidiary and Dolnośląska Spółka Gazownictwa with the seat in Wrocław have concluded the contract of the supply of gas meters in the value of 2,7m.PLN. The base for the conclusion of the contract was unlimited tender. The performance of the supplies by APATOR METRIX SA will be in the period since 31st December 2009.

6. On 3rd March 2009 APATOR SA announced the forecast of consolidated financial results for 2009. The forecast of consolidated financial results of Grupa APATOR for 2009 assumes that consolidated revenues from sales in total will be of 380 m. PLN and consolidated net profit in amount of 40 m. PLN.

7. On 3rd March 2009 APATOR SA announced the declaration of dividend from the profit to be paid for financial year 2008 in amount of 0,35 PLN per 1 share and advanced payment towards dividend from the profit to be made of 2009 will be in amount of 0,25 PLN per share.( in fact the advance payment was paid in amount of 0,20 PLN per share that is in maximum amount in accordance with the provisions of the Polish Commercial Companies Code related to the level of the net profit earned of Apator SA in the first half of 2009).

8. On 24th March 2009 subsidiary APATOR METRIX S.A. - dependent company and Pomorska Spółka Gazownictwa Sp. z o. o. with the seat in Gdańsk have concluded the contract on the supply of gas meters of the value of 8,6 m.PLN. The base for the conclusion of the contract was unlimited tender. The performance of the supplies by APATOR METRIX SA will be in the period up to 23rd January 2011.

9. On 12th May 2009 subsidiary FAP PAFAL S.A. – sold all its shares in Gran-Systema-Pafal Sp. z o.o. with the seat at Minsk in Belarus to other shareholders for the amount of 17.250 USD. FAP PAFAL SA had 50% of shares with nominal value of 15.000 USD. The capital of the company of Gran-Systema-Pafal Sp. z o.o. is 30.000 USD

10. On 8th June 2009 in the premises of APATOR S.A., the Ordinary General Shareholders Meeting of APATOR SA was held and the Ordinary General Shareholders Meeting of APATOR SA that among other things settled the activities of Apator SA and Grupa Apator in 2008 and nominated Mr Mariusz Pawlak the Member of the Supervisory Board of APATOR S.A. for the common tenure.

11. Since the 1st June 2009 regional service of the sales of Apator Kfap Sp. z o.o. has been integrated with the structure of Apator Powogaz SA and at the same time Apator Powogaz SA took over the distribution of compact heat meters, split heat meters, water meters and flow transducers.

12. In the third quarter 2009 Apator telemetria Sp. z o.o. signed the contract on implementation of telemetry systems for heat distribution companies.


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13. In August 2009 APATOR METRIX S.A. - subsidiary and Wielkopolska Spółka Gazownictwa Sp. z o. o. with the seat in Poznań have concluded the contract of delivery of the accessories for gas meters with the net value of 2, 6 m. PLN. 14. In September 2009 Apator Rector sp. z o. o. was granted the sfinancial support of the project "Interdisciplinary research of digital modeling for electrical engineering and information technology as the source of innovation for information technology system for the distributors of energy ". Project will be performed up to the end of 2010 and its value is 1.981 000 PLN. 15. On 5th October 2009 Apator Metrix SA and Wielkopolska Spółka Gazownictwa sp. z o. o. with the seat in Poznań concluded the contract on delivery of gas meters of net value of 8,6 m PLN. 16. On 13th October 2009 Apator SA and Enea Operator sp. z o. o. with the seat in Poznań concluded the contract on the supply of prepayment electricity meters and configuration tools of total net value 2,9 m PLN. 17.On the sitting on 19th October 2009, Regional Court in Toruń, VI Economy Department dismissed the action that had been brought by Madam Kinga Hannę Stachowiak on annulement of the Resolution no. 11/2009 adopted on 8th June 2009 by Ordinary General Shaeholders Meeting of Apator SA on distribution of the profit for 2008, fixing the date of the right to dividend to be valid and the payment of dividend as – against the Act oceeding precautions in case of dismiss of the above claim and its abolishment as to be purposely unfair to a shareholder. 18. On 4th November 2009 Apator Powogaz SA acquired 61% of shares in Apator Metroteks sp. z o.o. with the seat in Kiev (Ukraine). Total purchase price the above shares was 80 000 EUR (18,7 000 PLN at the exchange rate at the day of conclusion of the contract 1 EUR = 4,27 PLN). 19. On 9th November 2009 to the seat of Apator SA was submitted the contract signed with REGIE DE PRODUCTION ET DISTRIBUTION D’EAU ET D’ELECTRICITE (REGIDESO) with the seat in Burundi for the supply of prepayment electricity meters. Total value of the contract is 866 000 EUR net (i.e. 3,7 m PLN ). The contract was concluded on 10th October 2009. 20. On 16th November 2009 Apator SA announced the correction of consolidated forecast of financial results for 2009 that was announced on 3rd March 2009. The following parameters of the forecast have been corrected: consolidated revenues from sales in total 360 m PLN, consolidated net profit 32 m PLN. The correction of financial results in the forecast was made due to: stronger than it was anticipated the influence of crisis in economy on the level of revenues achieved by entities in Grupa Apator and higher that it was assumpted the costs related to evaluation and performance of hedging transactions concluded in 2008. 21. On 18th November 2009 roku Apator SA received the decision of Regional Court in Toruń, VII Economy Department of the National Court Register and based on it on 13th November 2009 the registration of the reduction of share capital of the Company was made from the amount of 3.529.350,00 PLN to the amount of 3.510.702,80 PLN. The reduction of the capital was made in accordance with art. 359 §1 and §2 of the Polish Commercial Companies Code and §11 of the Statute of Apator SA, based on the Resolution no. 16/2009 of the General Shareholders Meeting of Apator SA dated 8th June 2009 by the redemption of 186.472 own shares of the Company acquired for their redemption. At the same time the registration of the change of 9.680 preferred registered shares of voting in elation 1:4 to ordinary bearer shares was made on 5th January 2009. 22. On 27th November 2009 Apator Powogaz SA and associated entity ZAO Teplovodmer with the seat in Mytiszczi (Russia) concluded the contract on sales of water meters and flow meters. Total value of the contract is 3,5 m EUR net, i.e. 14,5 m PLN. 23. On 8th December 2009 Apator SA received the appeal of Madam Kinga Stachowiak to the verdict of Regional Court in Toruń, VI Economy Department dated 19th October 2009 dismissing the action of the annulement of the Resolution no. 11 of Ordinary General Shareholders Meeting dated 8th June 2009 on distribution of the profit for financial year 2008, fixing the date of the right to dividend to be valid and the payment of dividend. 24. On 11th December 2009 Apator SA made payment of advance paayment towards expected dividend from the profit for 2009 in total value of 7.021.405,60 PLN, that is 0,20 PLN gross per one share. The shareholders holding the shares of Apator SA on 4th December 2009 had the right to the payment of advance payment towards expected divided from the profit for financial year 2009 had the shareholders holding the shares of Apator SA on 4th December 2009.

25. On 16th December 2009 r. The Executive Board of APATOR SA announces that on 16th December 2009 it received the notification from Pioneer Pekao Investment Management SA regarding the change of the share in total number of votes at General Shareholders Meeting of APATOR S.A.

Pioneer Pekao Investment Management SA advised that total engagement of in shares of APATOR SA that provides the services regarding management of portofolio of investment funds based on the contract concluded with Pioneer Pekao Towarzystwo Funduszy Inwestycyjnych SA (i.e. for: Pioneer Akcji Polskich Fundusz Inwestycyjny dropped to the level of 2.741.166 shares that is 4,69% of the total number of votes at General Shareholders meeting of Apator SA. At the same time Pioneer Pekao Investment Management SA


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advised that within the share portofolio of all its customers that it provides services of management of stock exchange broker portofolio of financial instruments decreased in total to the level of 2.764.858 shares that is 4,73% of total number of votes at General Shareholders Meeting of APATOR SA

16.2 Events that took place after the balance day t hat is 31 st December 2009

1.On 4th January 2010 Apator SA concluded the contract on cooperation with subsidiary FAP Pafal SA with the seat in Świdnica. The object of cooperation is the sales by Apator SA the products of subsidiary FAP Pafal SA, provision after sales service and design services for FAP Pafal SA. Estimated mutual turnover under the contract in 2010 is 50 m PLN.

2.On 4th January 2010 Apator SA concluded the contract with CECHTAR Sp. z o. o. with the seat in Tarnów for deliveries in 2010 of post-paid electricity meters and GSM/GPRS type communication modules. Estimated value of the contract is 14,6 m. PLN.

3.On 5th January 2010 Apator SA and RWE Stoen Operator Sp. z o. o. with the seat in Warsaw, concluded the contract on the delivery of electronic post-paid electricity meters of total value 6 m. PLN.

4.On 26th January 2010 in Apator SA the independent of Mr Tomasz Piasecki was cancelled.

5.On 12th January 2010 the conversion of 1.111 registered shares preferred to voting in relation 1:4 to ordinary bearer shares (not preferred) was made. In result of the conversion the total number of votes has been reduced from 58.497.275 to 58.493.942. The above shares were assimilated and entered to stock trading on 29th January 2010.

6.Since 26th January 2010 till 27th January 2010 the member of the Supervisory Board of Apator SA sold in total 9.500 bearer shares of Apator SA at average price 16,85 PLN per share.

7.On 3rd February 2010 Apator SA concluded the contract with associated entity of Apator Elektro SA with the seat in Moscow, the contract on delivery of low voltage switchgear equipment. The value of the contract is 3 m. EUR.

8.On 3rd February 2010 the member of the Supervisory Board of Apator SA sold 40.000 bearer shares of Apator SA at the price of 18,70 PLN per share.

9.In the period since January till February 2010 Apator SA purchased 16 shares of Apator Mining Sp. z o.o. Therefore, Apator SA currently holds 99,95% shares of Apator Mining Sp. z o.o.

10.On 25th February 2010 Apator SA announced the forecast of consolidated financial results for 2010 that assumes to obtain consolidated revenues from sales in amount in total of 400 m. PLN and consolidated net profit in amount of 40 m PLN.

11.On 25th February 2010 Apator SA declared that the payment of dividend from the profit in financial year 2009 in amount of 0,50 PLN gross per share and advance payment towards expected dividend from the profit of 2010 is 0,25 PLN gross per share.

12.On 12th March 2010 and 19th March 2010 Apator Mining sp. z o. o. and Kompania Węglowa SA with the seat in Katowice concluded the contracts on delevieries to its branch offices intrinsically safe transformer units. Total values of the contracts are net 3 m PLN. The deliveries will be performed in 2010.

13.In subsidiary Apator Powogaz SA the procedure of forced purchaing of shares was completed- at 31st March 2010 Apator SA has 100% of the capital of the company.

14.On 21st April 2010 Apeal Court in Gdańsk dismissed the appeal of Madam Kinga Stachowiak to the


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verdict of Regional Court in Toruń. Apeal regarded the decision in favour of Apator SA the case of complain of Madam Kinga Stachowiak on annulement to be affirmed the resolution no.11 of Ordinary General Shareholders Meeting of Apator SA dated 8th June 2009 on the distribution of the profit for 2008.

16.3 The list of transactions hedging the exchange rate for current year and following ones

The hedging of exchange rates in the entities of Grupa Apator on the day of preparation of the statement has been presented in the table below.

Value Weighted average Deadline of payment

( EUR)

EUR Exchange rate in,

PLN 2010 2011 2012

Grupa Apator 24 451 000 4,1932 11 451 000 11 000 000 2 000 000

The above presented value in amount of 24.451 000 EUR includes:

− 23.451 000 EUR hedging of forward type,

− 1.000 000 EUR hedging of option type

17. Information on conclusion by Apator SA or its s ubsidiary one or more transactions with affiliated entities if they are individually or in total significant and they were concluded on other conditions than market ones.

During 2009 Apator SA did not conclude any transactions with affiliated entities that individually or in total were significant and they were concluded on other conditions than market ones.

Transactions of Apator SA and subsidiaries in the period since January till December 2009 were typical ones and they were concluded on market conditions and their character resulted from current operating activity being performed by Apator SA and subsidiaries. Transactions regard cooperation in manufacturing of post-paid electronic electricity meters and heat meters.

As regards to the manufacturing of post-paid electronic electricity meters Apator SA cooperates with subsidiary FAP Pafal SA. It regards the manufacturing by Apator SA for FAP Pafal SA electricity meters. Moreover since January 2010 Apator SA collaborates with FAP Pafal SA in the following scope:

− sales of post-paid electronic electricity meters, − after sales service, − provision of design services

Dividends are transferred between entities in Grupa Apator within the scope of financial activity.

Subsidiaries made the following payments of dividends to Apator SA:

Dividends and advance payments received by Apator S A from subsidiaries 2009 2008

Apator Control sp. z o. o. 1 650 2 000

Apator Metrix SA 1 001 3 002

Apator Mining sp. z o. o. 8 932 11033

Apator Kfap sp. z o. o. 0 1 606

Apator Rector sp. z o. o. 3 987 0

FAP Pafal SA 2 503 10 000

Apator Powogaz SA 0 0

Apator GmbH 0 0

Apator Elektro SA 0 0


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Dividends and advance payments received by Apator S A from subsidiaries 2009 2008

Total dividends 18 073 27 641

18. Characteristics of external and internal factor s significant for the development of Grupa Apator, including significant factors of risk and threats a nd description of the perspectives for development of its activity in the coming financial year.

Prior any investment decision concerning shares made, potential shareholders should take into account presented above factors of risk and other information included in the report on activity. Every one of presented below factors may have significant influence on activity, financial situation and prospective of development of the Company and at the same time it may have significant influence on share price.

Factors of development and risk described below are not the only ones the Company is expose to. Issuer showed only the factors that it considered as significant ones. It can be other more factors of risk that in opinion of the issuer are not currently significant or which were not identified by him but they could cause the effects that are mentioned above. Presenting the order of factors of risk, issuer was not guided by their probability of occurrence neither the assessment of their magnitude.

The above factors for development and risks and threats concern both Apator SA and entire Grupa Apator.

18.1 External and internal factors for development significant for Grupa Apator

Apator SA coordinates and supervises the activity of entire Grupa Apator and among significant factors for development of Grupa Apator it pays attention to:

18.1.1 External factors for development

− Programme (propagated by Energy Regulatory Office) of the replacement of traditional electricity meters to smart meters in the period 2010 – 2017 – the replacement will regard about 14 m. units of electricity meters at individual consumers and 1,5 m units of electricity meters at industrial consumers of total project value 7,6 billion PLN,

− getting positive opinion of Energy Regulatory Office on co-financing the purchase of new metering device by a consumer,

− investment and modernization needs of the Polish power sector should meet the increase of national demand in metering segment and switchgear segment (installations of low and medium voltage),

− development of sales of systems and prepayment meters on new markets (particularly African ones),

− expected economic revival in 2010 − zloty depreciation in relation to EU currency – positive influence on profitability of export, − demand stimulated by the investments in construction and road infrastructure concerning

approaching EURO 2012. 18.1.2 Internal factors for development

− intensive development works particularly regarding metering systems, − common marketing activity, logistics, purchasing etc. in Grupa APATOR, − possibility of product certification in accordance with MID – Directive of European Union (reduction

of costs concerning product legalization), − establishment of one center for the sales of electricity meters, the process of sales and

development of products of FA PAFAL SA transferred to APATOR SA in January 2010 − restructuring of APATOR POWOGAZ SA (with acquisitions performed by the company), − cost reduction of employment in FAP PAFAL SA, − taking the intensive actions aiming at the increase of export particularly to African market (Burundi,

Sierra Leone, Guinea) and Eastern markets (mainly Russia and Ukraine) and to Western Europe

18.2 Risks and threats for Grupa Apator Among significant factors of risks and threats Apator SA pays attention to:


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18.2.1 External risks and threats

− situation on currency markets and dramatic change of foreign currency exchange rates still having got (in 2009) the influence on valuation of the earlier concluded currency transactions .

− effects of economy slow down in Poland – decrease of demand, − collapse in economy at eastern neighbours of Poland (export slow down to those countries), − bad economicsituation in building industry connected with tightening of procedure regarding the

granting of loans by banks what makes more difficult the access to loans by developers, construction companies and at least buyers of flats and individual investors

high prices of non-ferrous metals and crude oil.

18.2.2 Internal risks and threats

− foreign currency exchange rates (mainly EUR) in relation to PLN due to considerable share of export performed in foreign currency. Appreciation of the Polish zloty can have influence on the volume of sales in PLN and at the same time on gross margin resulted from those sales,

− termination of tenure of the Executive Board and the Supervisory Board on the day of Ordinary General Shareholders Meeting of APATOR SA to be held.

− costs concerned with the service of the loan for the purchase of shares of APATOR POWOGAZ SA and APATOR RECTOR Sp. z o. o.

− risks related to business activity – by implemented comprehensive programme of property insurance and personal liability insurance of Grupa APATOR and personal liability insurance of the members of management of APATOR SA have been limited the level of risk in this range.

− in case of withdrawal or suspension of the subsidy for the project “Interdisciplinary research of digital modeling for power engineering and information technology as the source of innovation of IT system for energy distributors” that is performed in Apator rector Sp. z o.o. would cause the necessity to finance by the company, the project by own means and bank loan to be taken.It would worsen the results of the company by the costs related to interest of the loan.

Moreover, one should pay attention to the objectives and principles of risk management of Grupa Apator described in Clarification Note no. 32 to consolidated financial statement.

18.3 Perspectives of development Grupa Apator

Grupa Apator strives for getting the leading position in Central and Eastern Europe in the range of development and sale both systems and metering equipment and switchgear equipment.

The development policy of Grupa Apator was descibed in the point below no. 19.

19. Development policy of Grupa Apator

The most important startegic initiatives that be will be taken by Grupa Apator in the period 2010 – 2012 are as follows:

1. Geographical expansion Grupa Apator strives to focus on the following key geographical markets: Russia and countries of Central and Eastern Europe and Commomnwealth of Independent States, Germany, Benelux Countries, Great Britain and Irleand, France, Italy, Austria, Switzerland, Turkey. In this strategic region Grupa Apator is going to be in the top fourth of suppliers of metering equipment. The strategic objective is also to obtain strong position of the Apator brand on the above mentioned markets.

Grupa also intends to make use of sales potential of technologically developed products being offered since many years on Polish market offering them on developing markets.

2. Technological development Grupa Apator sets on development of technology, products and services related to the saving of energy, metering and optimization of the operation of the network. The company is interested in offering of comprehensive services for the industry and institutional consumers leading to optimized consumptiom of electricity and other utility services (advising, programmes, software, hardware).

Grupa Apator will offer inventory services of network property for distribution companies.


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3. System development Grupa Apator indends to gain and mainatin 1/3 of the Polish market of smart metering systems and smart meters including smart electricity meters, smart gas meters, smart water meters and smart heat meters. The company is also going to implement first large remote data reading and management systems abroad. The development of multi utility services systems will be accelerated by agreements, aliances, purchase of new technologies,licenses.

4. Extension of the base of customers Grupa Apator is going to offer existing products and new products and services for new groups of customers. Apart the industry and institutional consumers the company directs its offer to among others to fitters, integrators, housing associations and it intends to increase its share in sales to water and heat distributors (among other things due to new products and comprehensive offer completed with services).

One of the strategic objectives will be to have the products of the highest quality and reliability that will allow increasing the share in sales on requiring foreign markets. (WesternEurope). Grupa Apator will invest also in infrastructure of information technology (CRM system, teleconference systems, development of intranet) for telecommunication in order to make the relationships with customers closer and to increase their loyalty to Apator brand. Investments in IT will increase the profitability of internal communication within Grupa Apator and will make the management more effective. Grupa Apator will take part in larger scale in alliances, consortiums and initiatives leading to make popular the idea of „smart metering” and to establish the Polish and European m entering standards.

20. Information on proceedings at the court, body a ppropriate for arbitration or body of public administration regarding liabilities or receivables of Apator SA

On 11th August 2009 Apator SA received the action of Madam Kinga Stachowiak (the shareholder of one share at Ordinary General Shareholders Meeting of APATOR SA held on 8th June 2009).

The action was brought to Regional Court in Toruń VI Economy Department and it regarded:

- declaration on the adopted resolution on 8th June 2009 to be invalid. The resolution no.11/2009 of Ordinary General Shareholders Meeting of APATOR SA regarding distribution of the profit for the financial year 2008, fixing the date of the right to dividend and the payment of dividend – as being against the Act;

- taking proceeding precautions in case of dismissal of the above complaint, the plaintiff lodges to abolish adopted the resolution no 11/2009 on 8th June 2009 of Ordinary General Shareholders Meeting of APATOR SA regarding distribution of the profit for financial year 2008, fixing the date of the right to dividend and the payment of dividend as to be purposely unfair to a shareholder.

On 19th October 2009 Regional Court in Toruń, VI Economy Department dismissed the lodged complaint by Madam Kinga Stachowiak on declaration of invalidity of the Resolution no 11/2009 adopted on 8th June 2009 by Ordinary General Shareholders meeting of Apator SA regarding distribution of the profit in financial year 2008, fixing the date of the right to dividend and payment of dividend – as being against the Act and taking proceeding precautions in case of dismissal of the above complaint to abolish adopted resolution as to be purposely unfair to a shareholder.

On 16th November 2009 Madam Kinga Stachowiak appealed from the above decision of the court.

On 16th November 2009 Madam Kinga Stachowiak made the apeal to the above verdict of the court.On 21st April 2010 Apeal Court in Gdańsk dismissed the apeal of Madam Kinga Stachowiak from the verdict of the Regional Court in Toruń. There is the right to the last resort apeal from the verdict of apeal court.

The value of the object of the dispute is at least 10% of own capitals of issuer.

Other proceedings (including two or more) regarding liabilities or receivables are at the court, body appropriate for arbitration or body of public administration regarding the issuer and subsidiaries are not 10% of own capitals of the issuer.


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21. Information on contracts concluded and signific ant to activity of the Grupa Apator, including the contracts known to the issuer concluded between sha reholders, insurance contracts, contracts on cooperation or collaboration

The contracts significant to the activity of Grupa Apator The entities of Grupa Apator concluded the following contracts significant to the activity of Grupa Apator.

− during the financial year 2009:

1. On 27 November 2009 subsidiary - APATOR POWOGAZ SA with seat in Poznań concluded contract with its affiliated company - Teplovodmer S.A. with seat in Mytiszczi (Russia) for the sales by Apator Powogaz SA heat meters and flow meters. Total value of the contract is 3,5 m EUR net (i.e. 14,5 m PLN according to National Bank of Poland average exchange rate dated on 26th November 2009) with the value of 1 EUR=4,1341 PLN (the table of exchange rate of National Bank of Poland no 231/A/NBP/2009).The performance of the contract will be made in 2010 and the aim of the contract concluded is to strengthen the position of Apator Powogaz on the Russian market and to perform the sales tasks that had been specified before.The conditions of the above contract are not different from ones which are typical for such kind of transactions on the market. The contract has been concluded without restriction to the condition or the date.The stipulated penalties are not included in the clauses of the contract and its maximum value can not exceed at least 10% value of this contract or at least the equivalent of 200.000 EUR according to the average exchange rate announced by National Bank of Poland for the given currency obligating on the day of the concluding of this Contract.The contract has been recognised as a significant one due to the exceeding of the value of 10% equity of Apator SA

− after the balance day i.e. 31st December 2009 :

1. On 4th January 2010 APATOR SA concluded the contract with CECHTAR sp. z o.o. with the seat in Tarnów for the supply of post paid electricity meters and GSM/GPRS communication modules in 2010.

Estimated value of the contract is 14,6 m PLN. The conditions of the above contract do not differ from typical conditions for such kind of transactions on the market.

The contract for the supply includes typical stipulations regarding stipulated penalties resulting from not meeting the deadline for the supply, delays in remedy of possible defects or lack of the issue of warranty document according to requirements of the contract.

The value of stipulated penalties is not possible to be defined due to the fact that it depends on possible number of days of the delay of performance of the order or remedy of the defects.The contract was concluded without any reservation regarding the condition or the date.

The contract was considered as significant one due to the exceeding of the value 10% of equity of APATOR SA. 2. On 15th February 2010 - subsidiary -APATOR METRIX SA - and Mazowiecka Spółka Gazownictwa with the seat in Warsaw concluded the contract on the supply of bellows gas meters of net value of 14,4 m. PLN. The base for the conclusion of the contract was unlimited tender by ordering party. The performance of the supplies by APATOR METRIX SA will be up to 31st December 2010. The conditions of the contract do not differ from ones which are typical for such kind of transactions on the market. However, the contract does not include the terms and conditions causing invalidity of the contract.Ordering party has the right to demand from the performer the following stipulated penalties: - for the delay in deliveries of the gas meters ordered – stipulated penalty for each day of delay is in the amount of 0,2 % net price for gas meters not being delivered on time,

- for the delay in rectification of the damages of gas meters or change the gas meter damaged of the new one – the stipulated penalty for each day of delay is in the amount of 1 % of the net price of the gas meter,

- ordering party has the right to retract from the contract, in case of the performance ofthe supplies of the gas meters delayed over 30 days.Statement of the retraction of the contract in writing requires to be preceded by written call of the performer to make the delivery of the gas meters that had been ordered before and it requires to be assigned within 14 days of the day of the call made by performer.

Complete retraction from the contract made by ordering party caused by the above reason, inflicts the stipulated penalty upon the performer in the amount of 10% total net value of the contract.Stipulated penalties do not exclude further claims for compensation made by the ordering party against the performer, if the value of damages exceeds the value of the penalties or if damage has been caused by events different than described above.The contract has been recognised as a significant one due to the exceeding of the value of 10% equity of Apator SA.


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Insurance contracts Grupa Apator with regard to comprehensive insurance programme of property insurance and civil liability of has got the insurance contracts concluded with insurance funds like PZU SA/STU Ergo Hestia SA. Insurance contracts are concluded for the period since 1st July 2009 till 30th June 2010 and they cover:

− Contracts on insurance of property: − insurance of possessions against all the risks, − insurance of loss of profit based on insurance of possessions against all the risks, − insurance of machines against damages, − insurance of electrical machines against electrical damages, − insurance of electronic equipment against all the risks, − insurance of possessions in transport, − insurance of traveling (only PZU SA), − insurance during traveling:

o costs of medical treatment and assistance for white collar s and blue collars, o after effect of accidents, o travel luggage

− Contracts on insurance of civil liability with regard to business and new product being introduced for trading

− Contracts of insurance of civil liability of the members of the management of the Company.

Cooperation or collaboration contracts

As regards to the manufacturing of post-paid electronic electricity meters Apator SA cooperates with subsidiary FAP Pafal SA with the seat in Świdnica. It concerns the manufacturing by Apator SA for FAP Pafal SA electricity meters. Legal base for such activity is the contract concluded between Apator SA and FAP Pafal SA on 1st March 2005 (with later annexes). The contract specifies general conditions of cooperation in deliveries by Apator SA printed circuit boards and subassemblies for FAP Pafal SA. Numbers of deliveries are performed according to current orders and prices are agreed on market conditions.

The contract was concluded for unlimited period. Detailed conditions of the contract do not differ from conditions commonly used for such type of contracts. The value of mutual turnover in 2009 between Apator SA and FAP Pafal SA was 32.209 000 PLN.

On 4th January 2010 (after the reporting period) Apator SA concluded the contract on cooperation with subsidiary FAP Pafal SA. The object of cooperation of Apator SA is:

− sales of products of subsidiary FAP Pafal SA, − after sales service

and to provide design services for FAP Pafal SA. Conclusion of the contract was resulted from the performance of strategy of Grupa Apator, according to it the development and sales of electronic electricity meters (post-paid and pre-paid) and metering systems are performed by Apator SA. Estimated mutual turnover under the above contract in 2010 is 50 m PLN. The contract on cooperation was concluded for unlimited period and their conditions do not differ from conditions commonly used for such type of transactions on the market.

APATOR SA has no information on any contracts concluded between shareholders..

22. Information on issuing of securities

In the reporting period (reporting year 2009) no entity in Grupa Apator issued securities.


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23. Information on checking system of programmes fo r the shares of emploees

No entity in Grupa Apator performs checking system programe for the shares of employees.

24. The forecast of financial results

Apator SA publishes the forecast of consolidated financial results of Grupa Apator.

24.1 The differences between financial results pres ented in annual statement and earlier published forecast of results for financial year 2009

In the forecast published on 3rd March 2009 it was assumed that the following consolidated financial results in 2009 would be achieved:

− consolidated revenues from sales in total in thevalue of 380 m PLN,

− consolidated net profit in the value of 40 m PLN.

The Executive Board of Apator SA, after having analysed the financial results of all entities in Grupa Apator, updated on 16th November 2009 the forecast of consolidated financial results for 2009 in the following:

− consolidated revenues from sales in total - 360 m PLN,

− consolidated net profit - 32 m PLN.

Correction of the forecast that is reduction of consolidated net profit and consolidated revenues from sales resulted from higher than it had been assumed the costs related to hedging transactions concluded in 2008 and stronger influence of economy crisis on the level of revenues obtained by the entities of Grupa Apator.

The adjustment to the forecast is as follows:

Description Forecast for 2009 Performance in 2009 Performance

Revenues from sales of products,goods and materials

360 000 367 557 102,10%

Net profit 32 000 31 301 97,82%

The net profit of 32 m PLN in the forecast has not been achieved due to lack of performance by one of the entities in Grupa Apator the assumed (in the correction) the sales and net profit of the forecast.

24.2 The forecast of financial results for financia l year 2010

The forecast of consolidated financial results for 2010 is as follows: − consolidated revenues from sales in total: 400 m PLN, − consolidated net profit: 40 m PLN.

The following factors have been taken in to account in preparation of the above forecast:

− considerable share of export in revenues from sales in total, − costs of interest from the loans taken for the purchase of entties: Apator Powogaz SA and Apator

Rector sp. z o. o;


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− make-up of Grupa Apator covering the following entities: Apator SA, FAP Pafal SA, Apator Metrix SA, Apator Mining sp. z o. o., Apator Control sp. z o. o., Apator Elektro SA, Apator GmbH and Grupa Apator Powogaz.

The Executive Board of parent entity (Apator SA) has been monitoring the performance of the forecast of consolidated financial results of the capital group by the system of monthly and quarterly reports.

The assessment of the possibility of performance of the forecast results is published in quarterly reports being made public.

The corrextion of the forecast is made based on decision of the Executive Board of Apator SA and it is announced in current report.

The forecast of consolidated financial results of Grupa Apator in 2010 has been made public in the current report no 12/2010 on 25th February 2010.

Toruń, 29th April 2010

Janusz Nied źwiecki

President of Apator SA

Tomasz Habryka Jerzy Ku ś Member of Executive Board of Apator SA Member of Executive Board of Apator SA

Documents

KORYCKA,BUDZIAK&AUDYTORZY Sp. Zo.o. Auditors & Tax ... · PPH Wodpol Sp. z o.o. – subsidiary of Apator Powogaz S.A. Apator Telemetria Sp. Z o.o. – subsidiary of Apator Powogaz