MANAGEMENT REPORT OF APATOR SA 2011
TABLE OF CONTENTS:
1.Description of the capital group’s organization
1.1Composition of the Apator Group
1.2Specification of entities to be a subject of consolidation
1.3Vision of Apator Group
2.Statement of the Management Board of Apator SA on preparing the financial statement and Management Report.
3.Indicating of the statutory auditor and the statement of the Management Board of Apator SA on the statutory auditor.
4.Statement on applying the corporate governance principles
4.1The corporate governance principles, which issuer applies, and the place where they are available for public
4.2Application of the corporate governance principles
5.Description of the basic features of the internal control and risk management in relation to the process of preparing the financial statements and consolidated financial statements applied in the Apator Group
6.Specification of the shareholders holding directly or indirectly the significant blocks of shares with giving the number of shares held by these shareholders, their percentage share in the share capital, number of votes following them and their percentage share in the total number of votes at the general meeting.
6.1.1Shareholders holding over 5% of the votes at the general meeting
7.Dividend
7.1Dividend policy
7.2Dividend from profit for 2010
7.3Declaration of the dividend from the profit for 2011
8.Specification of the holders of any securities with the special control rights with their description.
9.Limitations in the execution of voting right
10.Specification of any limitations regarding the transfer of the securities' ownership rights of Apator SA
11.Description of the principles of appointing and recalling the members of the board and their rights, in particular the right to take a decision on issue or buy-out of shares
11.1Supervisory Board
11.2Management Board
12.Description of the changes in the Articles of Association of Apator SA
13.General Meeting
13.1General Meeting operation principles
13.2Ordinary General Meeting in 2011
13.3Extraordinary General Meeting held after the end of the period
14.The composition and its changes during the last fiscal year and description of the activity of managing, supervising bodies of Apator SA
14.1Supervisory Board
14.2The Auditing Committee of the Supervisory Board of Apator SA
14.3Management Board
15.Supervising and managing bodies of the Apator Group
16.Information of the agreements (including these concluded after the end of the period) known to the issuer, which may affect the proportion of the shareholding of the present shareholders
17.Agreements concluded between the companies of the Apator Group and persons managing these companies
18.Employment in the Apator Group
19.Information on sale markets and sources of supply
19.1Basic trends in the economy and tempo of economic growth
19.2Attractiveness of the branches, where Apator SA operates
19.3Revenues from sale and sales structure
19.4Export
19.5Sources of supply
20.Discussion of the basic economic values contained in the consolidated annual financial statement
20.1Assessment of the factors and unusual events affecting the profit from operation in the fiscall year with determination of the level of influence of these factors or unusual events on the achieved result
20.2Statement of comprehensive income of the Apator Group
20.2.1Profit/loss on basic activity
20.2.2Other operating activity
20.2.3Other financial activity
20.2.4Net financial result
20.2.5Forward contracts of the Apator Group
20.3Statement of financial position of the Apator Group- characteristics of assets and liabilities structure
20.3.1Non-current and current assets
20.3.2Capitals and liabilities
20.3.3Information on drawn and terminated agreement on credits and loans
20.3.4Information on loans granted to the entities outside the Apator Group in the current fiscal year
20.3.5Lease and rent
20.3.6Information on granted and received warranties and guarantees
20.3.7Contingent liabilities
21.Assessment of the possibility of the investment plans performance, including the equity investments in comparison to the amount of possessed assets, including the possible changes in the financial structure of this activity
22.Assessment and justification on financial resources management, in particular considering the ability to meet the taken liabilities and determination of the possible threats and actions, which were taken or will be taken by the issuer in order to counteract
23.Changes in the basic management principles of the issuer and its capital group
24.Description of the structure of the main capital deposits or main capital investments made within the Apator Group in the relevant fiscal year
25.Important events affecting the business activity and financial results of the Apator Group in the fiscal year of to affect in the next year
25.1Events in 2011:
25.2Events after the end of the period, i.e. 31 December 2011
25.3Specification of hedge transactions for this year and following years
26.Information on concluding by Apator SA or its subsidiary one or more transactions with affiliates, if they are important individually or at all and were concluded under other conditions than market conditions
27.Characteristic of external and internal factors important for the development of Apator SA, including the significant risk and threat factors and description of the business activity development prospectus at the latest in the next fiscal year
27.1Material external and internal development factors
27.2Risks and threats
27.3Development prospectus
28.Information on proceedings before court, competent authority for arbitrage proceedings of public administration authority referred to liabilities of receivables
29.Information on concluded significant agreements for the business activity of the Apator Group, including the agreements concluded between the shareholders known to the issuer, insurance agreements and cooperation agreements
30.Information on issuance of securities
31.Information on employee stockownership plan control system
32.Explanation of the differences between the financial results presented in the annual report and the published forecasts of the results for the fiscal year 2011
33.Forecast of financial results for 2012
1
MANAGEMENT REPORT OF APATOR SA 2011
1.Description of the capital group’s organization
1.1Composition of the Apator Group
APATOR SA seated in Toruń, ul.Żółkiewskiego 21/29 is a parent entity of Apator Group.It is registered in the District Court in Toruń, 7th Commercial Division of the National Court Register, KRS No.: 0000056456. From 24 April 1997 the shares of Apator SA are listed at the Warsaw Stock Exchange.This trading is performed in a form of the continuous trading.The Company is classified to the sector of electromachinery industry and is listed in the segment of sWIG 80 companies.In January 2011 the shares of the Company were included in the WIGdiv dividend index and Respect Index.
Apator SA creates the capital group composed directly of six domestic companies and two foreign entities.The share of Apator SA in the share capital of the particular entities as at 31 December 2011 is presented below.
The Company Apator Elektro SA is the affiliated entity.All other companies, directly related to Apator SA, are subsidiaries.Any capital relations do not exist between the subsidiaries.The capital relations do not exist between the subsidiaries and the associate.
The companies of Apator Group (except for the parent entity), which held the shares in other entities are Apator Rector Sp. z o.o. and Apator Powogaz SA.
As at 31 December 2011
1)Apator Powogaz SA holds:
100% of the capital of Apator Metra s.r.o.(Czech Republic),
50.80% of the capital of Apator Telemetria Sp. z o.o.(Słupsk),
61% of the capital of Apator Metroteks Sp. z o.o. (Ukraine),
50% of the capital of Teplovodomer SA (Russia),
77.33% of the capital of Wodpol Sp. z o.o.(Poznań)- a company in liquidation (on 8 July 2011 deleted from the entrepreneurs register by the District Court);
Apator Powogaz SA along with the above mentioned companies constitutes the capital group in the Apator Group.
On 1 January 2011 the company Apator Powogaz SA purchased 360 k shares (100%) of the company Metra Sumperk s.r.o. seated in Czech Republic.The subject of activity of this company is a production of the costs allocators system used in calculation of the heat and thermometers and thermostats. As a result of acquisition of Metra Sumperk s.r.o. the product offer was expanded by the heat costs allocators and that means that Apator Powogaz SA has a full range of assortment to settle the consumption of water and heat and to offer the measuring systems.
2)Apator Rector Sp. z o.o. holds 60% of the capital of the company Newind Grupa Apator Sp. z o.o. seated in Wrocław.The contingent agreement of acquisition of 60% of shares at the total amount of PLN 173.7 k was concluded on 25 May 2011.The transfer of the ownership right to the shares took place on 31 May 2011.
Apator Rector Sp. z o.o. along with the above mentioned companies constitutes the capital group in the Apator Group.
Changes after 31 May 2011:
On 15 March 2012 the Company Apator Powogaz SA acquired 10.8% of shares in the company Apator Telemetria Sp. z o.o. from the present partner.Since then Apator Powogaz SA has held 61.6% of the capital of Apator Telemetria Sp. z o.o.
The subject of activity of the companies of Apator Group is presented below:
Company’s name / Registered office / Scope of business activitySEGMENT:METERING OF ENERGY CARRIERS
Apator SA / Toruń / Electric energy meters, measuring systems
FAP Pafal SA / Świdnica / Electric energy meters
Apator Metrix SA / Tczew / Gas meters, measuring systems
Grupa
Apator Powogaz / Poznań / Water meters, heat meters, electronic costs allocators, measuring systems
Apator Rector Sp. z o. o. / Zielona Góra / IT systems for management of distribution in power engineering, heat engineering, water supply and sewage companies, gas engineering, telecommunication, rescue operations and local government administration
Apator GmbH / Berlin / export of products of the Apator Group to German market
SEGMENT:PROTECTION AND MAKING OF POWER CIRCUITS
Apator SA / Toruń / Low voltage switchgear instruments, low voltage surge arresters
Apator Control Sp. z o.o. / Toruń / drive and drive applications, distribution and control equipment
Apator Mining Sp. z o. o. / Katowice / mining equipment
Apator Elektro SA / Moscow / export of switchgear equipment to Russian market
Apator GmbH / Berlin / export of products of the Apator Group to German market
OTHER SALE
Newind Grupa Apator Sp. z o. o. / Wrocław / Solutions and consultancy services in the field of IT systems integration, their safety and business software
1.2Specification of entities to be a subject of consolidation
Parent entity:Apator SA seated in Toruń,
Related entities included to the full method of consolidation:
Company / Registered office / Share in capital / Relation with Apator SAApator Mining sp. z o. o. / Katowice / 100,00% / Subsidiary of Apator SA
Apator Control Sp. z o. o. / Toruń / 100,00% / Subsidiary of Apator SA
Apator Metrix SA / Tczew / 100,00% / Subsidiary of Apator SA
FAP Pafal SA / Świdnica / 100,00% / Subsidiary of Apator SA
Apator Rector Sp. z o. o. / Zielona Góra / 70,00% / Subsidiary of Apator SA
Apator Powogaz SA / Poznań / 100,00% / Subsidiary of Apator SA
Apator GmbH / Berlin (Gemany) / 100,00% / Subsidiary of Apator SA
Newind Sp. z o. o. / 60,00%
42,00% / Subsidiary indirectly by Apator Rector Sp. z o.o.
Indirect share by Apator Rector Sp. z o.o.
Apator Metra s. r. o. / Sumperk (Czech Republic) / 100,00%
100,00% / Subsidiary indirectly by Apator Powogaz SA
Indirect share by Apator Powogaz SA
Apator Metroteks Sp. z o. o. / Kiev (Ukraine) / 61,00%
61,00% / Subsidiary indirectly by Apator Powogaz SA
Indirect share by Apator Powogaz SA
Apator Telemetria Sp. z o. o. / Słupsk / 50,80%
50,80% / Subsidiary indirectly by Apator Powogaz SA
Indirect share by Apator Powogaz SA
Affiliates measured by equity method:
Company / Registered office / Share in capital / Relation with Apator SAApator Elektro SA / Moscow (Russia) / 50,00% / Affiliate of Apator SA
Teplovodomer SA / Mytishchi (Russia) / 50,00%
50,00% / Affiliate indirectly by Apator Powogaz SA
Indirect share by Apator Powogaz SA
WODPOL Sp. z o.o.(subsidiary indirectly by Apator Powogaz SA)- the company in liquidation.On 8 July 2011 deleted from the entrepreneurs register by the District Court.Due to this fact it was excluded from consolidation.
1.3Vision of Apator Group
The Apator Group aims at achieving the leader position of the East-Central Europe in the field of the development and sale of:
measuring equipment and systems,
switchgear equipment.
2.Statement of the Management Board of Apator SA on preparing the financial statement and Management Report.
The Management Board of Apator SA composed of:
Janusz Niedźwiecki- President of the Management Board
Tomasz Habryka- member of the Management Board
Jerzy Kuś- member of the Management Board
states that pursuant to its best knowledge, the consolidated financial statement for 2011 of the Apator Group and the comparative data were prepared pursuant to the International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and the related interpretations published in a form of the regulations of the European Commissions.The Apator Group applies the provisions of the Accounting Act and the executive regulations under this Act in the field not regulated by IAS/IFRS.
The consolidated financial statement reflects the property and financial condition of the Group Apator and its financial result in a reliable, accurate and clear manner.The detailed principles for preparing this statement are included in the explanatory notes.
The annual report on business activity of Apator Group contains the accurate description of the development, achievements and the Apator Group's condition, including the description of the basic risks and threats.
3.Indicating of the statutory auditor and the statement of the Management Board of Apator SA on the statutory auditor.
The audit of the consolidated annual financial statement was performed by the entity authorized to audit the financial statements- the company KPMG Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw.
On 11 April the Company Apator SA concluded two agreements with the entity authorized to audit financial statements:
Agreement on audit of the separate financial statement and review of the interim financial statement for 2011 - under this agreement the remuneration for the authorized entity is PLN 37 k plus VAT;
Agreement on audit of the separate financial statement and audit of the consolidated financial statement for 2011 - under this agreement the remuneration for the authorized entity is PLN 55 k plus VAT;
Moreover the company Apator SA covers the costs of travelling, meals and accommodation of the employees performing the audit.Pursuant to these agreements on audit an review of the interim consolidated statements this amount cannot exceed PLN 9.5 k plus VAT and for the audit of the separate and consolidated financial statement- PLN 15 k plus VAT.
In the past Apator SA did not use the services of KPMG Audyt spółka z ograniczoną odpowiedzialnością Sp. k., but used the services of tax consultancy from the company belonging to the network KPMG i.e. the company KPMG Tax M.Michna Sp. k.
The Management Board of Apator SA states that the entity authorized to audit the financial statement, the company KPMG Audyt spółka z ograniczoną odpowiedzialnością Sp. k., which performed the audit of the consolidated financial statement was selected pursuant to the law.The Supervisory Board of Apator SA elected the entity to audit and review the financial statements on 1 March 2011 pursuant to § 20 of the Articles of Association of Apator SA i.e. in a manner assuring independence at performance of the tasks. The election of the entity authorized to examine the financial statements was performed pursuant to the binding regulations and professional standards.
The Company KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k.(entered into the register of the entities authorized to audit the financial statements under the number KIBR 3546, as well as the members of its Management Board and the statutory auditors carrying out the financial audit in favor of Apator SA and its subsidiaries, meet the requirements of independency specified in Art.56 of the Act of 7th May 2009 on the Statutory Auditors and Their Self-Regulation, entities authorized to audit financial statements and on public supervision.
4.Statement on applying the corporate governance principles
4.1The corporate governance principles, which issuer applies, and the place where they are available for public
The corporate governance principles are available on the website of WSE: and on the website of the company Apator SA:
4.2Application of the corporate governance principles
On 22 December 2011The Management Board of Apator SA declared that from 1 January 2012 it will observe the rules applied in the document “Code of Best Practice for WSE Listed Companies" (Appendix to the Resolution of WSE Board No. 20/1287/2011 of 19 October 2011) except for:
Rule I.1 in the field of broadcasting the General Meeting session using Internet,
Rule IV.10 in the field of shareholders' participation in the General Meeting using the electronic communication means.
The Company does not apply these rules because of lack of interest from the shareholders and the necessity to bear the additional costs.
The application of the corporate governance principles was described in the Management Report of Apator SA for 2011.
5.Description of the basic features of the internal control and risk management in relation to the process of preparing the financial statements and consolidated financial statements applied in the Apator Group
The financial statements are prepared by the Accounting Division of Apator SA., operating in the Financial Director Division.The consolidated and separate financial statements are prepared pursuant to the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).IAS and IFRS includes the interpretation recommended by the Commission forInternational Financial Reporting Interpretations.Moreover, the prepared financial statement are based on the Ordinance of the Ministry of Finance of 19 February 2009(as amended) on the current and periodic information provided by the issuers of securities and conditions of considering as equal the information required by the legal provisions of the non-member country.
Financial reporting and accountancy in the companies of Apator Group i.e.Apator SA, FAP Pafal SA, Apator Metrix SA, Apator Powogaz SA and Apator Control sp. z o. o. is performed using the Integrated Management System Baan IV.
Each company keeps the accounting policy basing on the commonly accepted principles of the Apator Group.They determine the main principles for recording the events.But the basic elements of the statements preparation process are the common accounting principles, accepted for all entities of the Apator Group, based mainly on the solutions applied in the parent entity Apator SA.As a consequence of the kept records, the accounting books of the relevant companies, which are the further base for the separate financial statements by all entities of the group, are created.The separate financial statements are the base to prepare the consolidated financial statements of the Apator Group.
The following risks are defined in the process of preparation of the financial statements:
Error input data,
Improper presentation of data,
Effects of error estimations made by the independent consultants (actuaries, appraisers),
At the stage of the financial data consolidation- improper strategy of the data coming from the companies, which do not have the integrated management system BaaN IV with the data of the companies, which have such system.
The all presented risks are minimized by the internal and external control systems and by the common accounting principles.The person responsible for minimizing the risk as well as for the identification of new risks is the Management Board of Apator SA with the Financial Director, who assesses the efficiency of the internal control system in the process of preparation of the financial statements on a current basis.The assumption of the effective internal control system in the financial reporting is to provide the correctness of the financial information included in the financial statements and their proper presentation.This correctness is performed trough checking the compliance with the regulations and guidelines of the financial law and the internal regulations as well as through the audit based on EN ISO 9001:2008.The internal control is performed directly by each employee (by the self-assessment system), its supervisor and cooperating persons as well as by the managers of the organizational unit in the field of the quality and correctness of the activities performed by the relevant employees.The purpose is to assure the compliance of these activities with the procedures and mechanisms of the internal control.