Amica Spółka Akcyjna Group...T +48 61 62 51 100 . F +48 61 62 51 101 . . For the shareholders of...

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Statutory Auditor's Opinion and Report on the Audited Consolidated Financial Statements for the Year 2016

Amica Spółka Akcyjna Group

Opinion of an independent statutory auditor

Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k.

ul. Abpa. Antoniego Baraniaka 88 E 61-131 Poznań

Poland T +48 61 62 51 100 F +48 61 62 51 101

www.GrantThornton.pl

For the shareholders of Amica Spółka Akcyjna Report on the Audit of the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of the Groups whose parent company is Amica Spółka Akcyjna (Parent Company) with its registered office in Wronki, ul. Mickiewicz 52, which comprise the consolidated balance sheet as at 31 December 2016, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated cash flow statement for the period from 01 January 2016 to 31 December 2016, the additional information about the accounting policies and other explanatory notes. Responsibility of the Management Board and the Supervisory Board of the Parent Company for the Consolidated Financial Statements The Parent Company's Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Accounting Standards, International Financial Reporting Standards and related interpretations published in the form of European Commission regulations and other applicable laws. The Parent Company's Management Board is also responsible for the internal control, as they deems necessary for preparation of the consolidated financial statements without significant impairment as a result of fraud or error. Pursuant to the Act of 29 September 1994 on accounting (Journal of Laws of 2016, item 1047, as amended) (“Accounting Act”), the Management Board of the Parent Company and members of the Supervisory Board shall ensure that the consolidated financial statements and the report on the activities satisfy the requirements stipulated therein. Audit - Taxes - Outsourcing - Consulting Member of Grant Thornton International Ltd Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp.k. – an entity authorized to audit the financial statements, No. 4055 General Partner: Grant Thornton Polska Sp. z o.o. Management Board of the General Partner: Cecylia Pol - President of the Management Board, Tomasz Wróblewski - Vice-President of the Management Board Registered office address: 61-131 Poznań, ul. Abpa. Antoniego Baraniaka 88 E, Taxpayer ID: 782-25-45-999, REGON: 302021882 Bank Account No. 95 1750 1900 0000 0000 3165 2243 District Court of Poznań - Nowe Miasto & Wilda in Poznań, 8th Commercial Division, National Court Register No. 0000407558

Responsibility of the Statutory Auditor We are responsible for expressing an opinion on these consolidated financial statements based on our audit. We have conducted our audit in accordance with the provisions of Chapter 7 of the Accounting Act and in accordance with the National Standards on Auditing as amended by the International Standards on Auditing adopted by Resolution No. 2783/52/2015 of the National Council of Statutory Auditors of 10 February 2015, as amended. These standards require us to comply with the ethical requirements as well as to plan and perform the audit so as to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatements. The audit involved performing procedures designed to obtain evidence of the amounts and disclosures presented in the consolidated financial statements. The selection of audit procedures depends on the auditor's judgment, including assessment of the risk of material misstatement of the consolidated financial statements, due to fraud or error. When assessing that risk, the auditor considers internal control in relation to the Parent Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures appropriate to the circumstances and not to express an opinion on the effectiveness of the entity's internal control. The audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Parent Company's Management Board as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide an opinion. Opinion In our opinion, the attached consolidated financial statements:

- accurately and fairly present the assets and financial position of the Group as at 31 December 2016 and its financial result for the period from 1 January 2016 to 31 December 2016 in accordance with International Accounting Standards, International Financial Reporting Standards and related interpretations announced in the form of European Commission regulations and the adopted accounting principles (policies),

- comply, in terms of the form and content, with the Group's legal regulations and the provisions of the Parent Company's Articles of Association.

Clarification: Without objecting to the accuracy and reliability of the audited consolidated financial statements, we would like to point out that in Note 26 of the additional information to the consolidated financial statements, the Management Board of the Parent Company informed about the existence of a trade receivable (in the amount of PLN 8.7 million) due to a subsidiary from an entity in the course of insolvency proceedings. The fee was not included in the write-down due to the fact that it was covered by insurance. The Management Board of the parent company announced that the amount receivable is claimed from the insurer in court. ©2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

According to the Management Board of the parent company, the positive outcome of the dispute before the court is highly unlikely. Report on other legal requirements and regulations Opinion on the Report on Activities of the Group Our opinion on the audit of the consolidated financial statements does not include the report on activities of the Group. The Management Board of the Parent Company is responsible for preparing the report on activities of the Group in accordance with the Accounting Act and other applicable laws. Furthermore, the Parent Company’s Management Board and Supervisory Board members are obliged to ensure that the report on activities of the Group complies with the requirements laid down in the Accounting Act. Our responsibility in connection with the conducted audit of the financial statements was to review the content of the report on activities of the Group and to ascertain whether the information contained therein is consistent with the provisions of Article 49 paragraph 2 of the Accounting Act and whether it is consistent with the information contained in the attached consolidated financial statements. Our obligation was also to make a statement as to whether, in the light of our knowledge on the Group and its environment acquired during the audit of the financial statements, we have identified any significant distortions in the report on activities of the Group. In our opinion, the information included in the report on activities of the Group takes into account the provisions of Article 49 paragraph 2 of the Accounting Act and is consistent with the information presented in the attached consolidated financial statements. Furthermore, in the light of our knowledge on the Group and its environment acquired during the audit of the consolidated financial statements, we have not identified any material misstatements in the report on activities of the Group. Jan Letkiewicz Statutory auditor No 9530 Key auditor conducting the review on behalf of Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k., Poznań, ul. Abpa. Antoniego Baraniaka 88E, an entity authorized to audit financial statements, entry number 40551 Poznań, 27 April 2017 © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

Report on the audit of the consolidated financial statements for the year 2016. Amica Spółka Akcyjna Group Audit - Taxes - Outsourcing - Consulting Member of Grant Thornton International Ltd Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp.k. – an entity authorized to audit the financial statements, No. 4055 General Partner: Grant Thornton Polska Sp. z o.o. Management Board of the General Partner: Cecylia Pol - President of the Management Board, Tomasz Wróblewski - Vice-President of the Management Board Registered office address: 61-131 Poznań, ul. Abpa. Antoniego Baraniaka 88 E, Taxpayer ID: 782-25-45-999, REGON: 302021882 Bank Account No. 95 1750 1900 0000 0000 3165 2243 District Court of Poznań - Nowe Miasto & Wilda in Poznań, 8th Commercial Division, National Court Register No. 0000407558


1. Information on the parent company The Parent Company in the Capital Group is Amica Spółka Akcyjna. The Parent Company was incorporated on 18 October 1996. The Parent Company was established for an indefinite period of time. The Parent Company's registered office is situated in Wronki at ul. Mickiewicza No. 52. The Parent Company's core business are the following:

- manufacture and sale of electric and gas-fired domestic appliances; - Sale of domestic appliances - Sales of maintenance and repair services and heating media - rental and leasing activities.

The core business of the subsidiaries is associated with the activity of the Parent Company, and the following are also core business of the subsidiaries:

- wholesale and retail sale of computers, peripheral devices and software, - activity associated with IT consultancy, - hotels and similar premises for accommodation, - operation of objects serving to improve physical fitness. - advertising, - advertising agencies, - market and public opinion research.

On 07 June 2001, the Parent Company was entered in the Register of Entrepreneurs of the National Court Register maintained by the District Court in Poznań - Nowe Miasto and Wilda in Poznań, 9th Commercial Division of the National Court Register under the number KRS 0000017514. The Parent Company has a VAT number 7630003498 and REGON business statistical number 570107305. The share capital of the Parent Company at the end of the financial year i.e. as at 31 December 2016, amounted to PLN 15,551 thousand. The equity of the Group as at that date amounted to PLN 677,167 thousand. According to Note 28.1.3 of the additional information to the consolidated financial statements, the shareholding structure of the Parent Company as at 31 December 2016 was as follows:

Shareholder Number of shares Number of voting rights

Nominal value of shares

Proportion of share capital

Holding Wronki SA 2,715,771 5,431,542 5,431,542 34.93% ING OFE 555,952 555,952 1,111,904 7.15% Other shareholders 4,503,550 4,505,457 9,007,100 57.92% Total 7,775,273 10,492,951 15,550,546 100.00% In the period from 01 January 2016 to 31 December 2016 and after the balance sheet date until the date of signing the consolidated financial statements, there were no changes in the shareholders having more than 5% of votes at the General Meeting of the Parent Company. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

Amica Spółka Akcyjna Group The Parent Company's Management Board as at 27 April 2017 (date of signing of the consolidated financial statements) was composed of:

- Mr Jacek Rutkowski - President of the Management Board, - Mr Jarosław Drabarek – First Vice-President of the Management Board, - Mr Wojciech Kocikowski, Vice-President of the Management Board, - Mr Marcin Bilik – Vice-President of the Management Board - Mr Piotr Skubel – Vice President of the Management Board, - Ms Alina Jankowska-Brzóska – Vice-President of the Management Board

In the period from 01 January 2016 to 27 April 2017 (date of issue of this report), there were following changes in the composition of the Management Board:

- As a result of expiry of the term of office, the mandate of the Vice-President of the Management Board, Tomasz Dudek, expired on 31 May 2016,

- As a result of expiry of the term of office, the mandate of the Vice-President of the Management Board, Andrzej Sas, expired on 31 May 2016,

- Pursuant to the Resolution of the Annual General Meeting of 01 June 2016, Mr Jarosław Drabarek was appointed as a Member of the Management Board. Pursuant to the Resolution of 01 June 2016, he was appointed as the First Vice-President of the Management Board.

- Pursuant to the Resolution of the Annual General Meeting of 01 June 2016, Ms Alina Jankowska-Brzóska was appointed as a Member of the Management Board. Pursuant to the Resolution of 01 June 2016, she was appointed as the Vice-President of the Management Board.

- Pursuant to the Resolution of 01 June 2016, Mr Marcin Bilik was appointed as the Vice-President of the Management Board.

2. Composition of the Capital Group

On the 31 December 2016, Amica Spółka Akcyjna Group comprised (directly and indirectly) the following subsidiaries:

Company Name Method of consolidation

Auditor's opinion Name of entity, which audited financial statements

Balance sheet date as of which the financial statements were prepared

Amica S.A. Complete consolidation Unqualified

Grant Thornton Polska Sp. z o.o. Sp. k. 31/12/2016

Amica Far East Ltd. Complete consolidation Not audited Not audited 31/12/2016

Hansa Ukraina OOO Complete consolidation Not audited Not audited 31/12/2016

Amica Commerce s.r.o. Complete consolidation Unqualified Proxy-Audit s.r.o. 31/12/2016

Amica International GmbH Complete consolidation Unqualified

Dr. Beermann WP Partner GmbH 31/12/2016

Amica Handel i Marketing Sp. z o.o.

Complete consolidation Qualified

Grant Thornton Frąckowiak Sp. z o.o. Sp. k. 31/12/2016

Amica Electromesticos S.L. Complete consolidation Not audited Not audited 31/12/2016

Nowe Centrum Sp z o.o. Complete consolidation Unqualified

Grant Thornton Frąckowiak Sp. z o.o. Sp. k. * 31/12/2016

The Cda Group Limited Complete consolidation Unqualified UHY Hacker Young LLP 31/12/2016

© 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


Company Name Method of consolidation Auditor's opinion

Name of entity, which audited financial statements

Balance sheet date as of which the financial statements were prepared

Gram A/S Complete consolidation Unqualified PriceWaterhouseCoopers 31/12/2016

HANSA 000 Complete consolidation See the clarification FinExpertiza 31/12/2016

InTeco Business Solutions Sp. z o.o.

Complete consolidation Unqualified


Profi Enamel Sp. z o.o. Complete consolidation Unqualified


Nova Panorama Sp. z o.o Complete consolidation Unqualified


Marcelin Management Sp. z o. o.

Complete consolidation Unqualified Grant Thornton Frąckowiak

Sp. z o.o. Sp. k. * 31/12/2016

* The scope of works covered the review of the financial statements In the consolidated financial statements of the Group as at 31 December 2016, investments in the following (directly and indirectly) related parties and joint ventures were measured using the equity method: Company Name Line of business Sideme S A. Societe Industrielle d’Equipement Moderne Commercial activities Compared to the previous year, there has been no changes as regards the consolidated companies.

3. Consolidated financial statements for the previous year The Group's consolidated financial statements for the year ended 31 December 2015 (previous financial year) were audited by Jan Letkiewicz, a key statutory auditor No. 9530, acting on behalf of Grant Thornton Frąckowiak Spółka z ograniczoną odpowiedzialnością sp. k. As a result of the audit of the consolidated financial statements, the statutory auditor issued an unqualified opinion. The Group’s consolidated financial statements for the year ended 31 December 2015 were approved by the General Meeting of the Parent Company on 01 June 2016. The consolidated financial statements of the Group for the financial year ended 31 December 2015 (the previous financial year) as well as the opinion of the statutory auditor, resolutions of the General Meeting on approval of the consolidated financial statements and the report on the activities of the Group were submitted on 16 June 2016 to the National Court Register. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


4. Information on the entity authorised to audit financial statements and the statutory auditor Grant Thornton Frąckowiak Spółka z ograniczoną odpowiedzialnością sp. k. with its registered office in Poznan, ul. Abpa. Antoniego Baraniaka 88E, is an entity authorised to audit financial statements, entered in the list maintained by the National Council of Statutory Auditors in Poland, under the number 4055. The person in charge of the audit of the financial statements on behalf of Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. was the statutory auditor, Jan Letkiewicz, entry no. 9530. Grant Thornton Frąckowiak Spółka z ograniczoną odpowiedzialnością sp. k was selected by the Supervisory Board on 11 May 2016 to perform the audit of the consolidated financial statements of the Group for the financial year ended 31 December 2016. We conducted the audit of these consolidated financial statements on the basis of the agreement concluded with the Parent Company's Management Board on the 02 June 2016.

5. Scope and timing of the audit The purpose of our audit was to express a written opinion and a report on whether the consolidated financial statements for the financial year ended 31 December 2016 accurately and clearly communicate the financial and asset position as well as the financial result of the Group in accordance with International Accounting Standards, International Financial Reporting Standards and related interpretations announced in the form of European Commission regulations and the adopted accounting principles (policies). The audit involved performing procedures designed to obtain evidence of the amounts and disclosures presented in the consolidated financial statements. The selection of audit procedures depends on the auditor's judgment, including assessment of the risk of material misstatement of the consolidated financial statements, due to fraud or error. When assessing that risk, the auditor considers internal control in relation to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures appropriate to the circumstances and not to express an opinion on the effectiveness of the Company's internal control. The audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Parent Company's Management Board as well as evaluating the overall presentation of the consolidated financial statements. During the audit of the items of the consolidated financial statements and the consolidated documentation, we used the tests and samples relevant for the financial auditing. On the basis of these tests and samples we are satisfied with regard to the correctness of the audited positions. The audit limited to selected samples was also applied to tax settlements and tax obligations, and consequently differences may arise between our conclusions and the results of inspections conducted by the tax authorities. ©2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

Amica Spółka Akcyjna Group Our audit was not aimed at identification or clarification of occurrences, which, if indeed occurred, could be basis for criminal proceedings by relevant authorities. Furthermore, the audit did not cover other issues, which could occur outside the Group’s accounting system, but had no effect on the consolidated financial statements audited by us. We performed the audit of the Group's Consolidated Financial Statements for the financial year ended 31 December 2016 in the period from 14 November 2016 to 27 April 2017.

6. Declaration of independence Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. K, members of the general partner’s management board, the network to which the authorized entity belongs, the statutory auditor in charge of the audit and other persons participating in the audit satisfy the conditions for expressing an unbiased and independent opinion on the audited consolidated financial statements of the Group as set forth in Article 56 of the Act of 7 May 2009 on statutory auditors and their self-government organisation, entities authorised to audit financial statements and public oversight (Journal of Laws of 2016, Item 1000, as amended).

7. Accessibility of information and statements received The Management Board of the Parent Company has provided us with a written statement dated 27 April 2017 on the completeness, accuracy and correctness of the audited consolidated financial statements, further stipulating that between the balance sheet date and the audit end date there were no events that could materially affect the Group's financial and asset position, and would require disclosure in the audited consolidated financial statements. The Parent Company's Management Board reaffirmed their responsibility for the signed consolidated financial statements, and further declared that in the course of the audit, they provided us with all the financial statements of the consolidated companies, information and other required documents and communicated to us the clarifications necessary to express our opinion on the audited consolidated financial statements. We believe that the evidence obtained provided us with sufficient basis to express an opinion on the consolidated financial statements and, therefore, there were no limitations to the scope of our review. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


8. Consolidated balance sheet ASSETS (thousands PLN) 31/12/2016 31/12/2015 31/12/2014 FIXED ASSETS 532,026 508,797 409,487 Intangible assets 129,815 138,559 48,868 Property, plant and equipment 306,813 276,534 232,316 Investment property 27,507 37,614 57,044 Investment in affiliated companies 7,656 7,244 - Derivative financial instruments 19,191 8,379 3,757 Other long-term financial assets 13,280 14,729 16,341 Deferred income tax assets 27,764 25,738 51,161 CURRENT ASSETS 949,279 897196 684,376 Inventory 338,961 346,931 230,826 Receivables from deliveries and services and other receivables. 469,866 410,769 320,788 Receivables from current income tax - 9,272 2,547 Derivative financial instruments 11,233 27,647 43,507 Other short-term financial assets 9,183 9,384 2,767 Other short-term non-financial assets 34,722 26,613 28,257 Cash and equivalents 85,314 66,580 55,684 Fixed assets classified as designated for sale 10,657 10,167 TOTAL ASSETS 1,491,962 1,416,160 1,093,863 LIABILITIES (thousands PLN) 31/12/2016 31/12/2015 31/12/2014 EQUITY CAPITAL 677,167 593,568 533,925 Equity capital allocated to shareholders of the Parent Company 678,517 594,848 535,218 Non-controlling shares (1,350) (1,280) (1,293) NON-CURRENT LIABILITIES 143,167 193,132 66,137 Credit, loans and other debt instruments 126,193 159,169 44,217 Derivative financial instruments 2,109 10,175 7,918 Other liabilities - 9,176 - Liabilities from employee benefits 7,505 6,187 7,645 Non-current provisions 4,903 5,790 3,606 Long-term deferred charges and accruals 2,457 2,635 2,751 CURRENT LIABILITIES 671,628 629,460 493,801 Liabilities from deliveries and services and other liabilities. 453,558 445,937 365,987 Liabilities from income tax 16,845 2,896 - Credit, loans and other debt instruments 74,537 76,509 49,404 Derivative financial instruments 9,030 7,289 6,785 Current provisions 110,235 90,018 71,076 Current deferred charges and accruals 7,423 6,811 549 TOTAL LIABILITIES: 1,491,962 1,416,160 1,093,863 The Consolidated Financial Statements of the Company for the year 2014 were not audited by Grant Thornton Polska. ©2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


9. Consolidated statement of comprehensive income (thousands PLN) 2016 2015 2014 CONTINUING OPERATIONS Revenue from sales 2,474,889 2,088,668 2,028,295 Cost of basic operating activities 2,303,079 1,927,975 1,893,007 Other operating revenue 13,553 8,895 11,549 Other operating costs 30,319 22,935 16,186 Profit (loss) on operating activities 155,044 146,653 130,651 Financial revenue 5,147 8,858 40,748 Financial costs 22,383 32,663 70,381 Share in the result of associates accounted under the equity method 412 403 _ Profit (loss) before tax 138,220 123,251 101,018 Income tax 29,741 26,066 23,221 Net profit (loss) on continued activities 108,479 97,185 77,797 DISCONTINUED ACTIVITIES - - - Net profit (loss) on discontinued activities - - - Net profit (loss) 108,479 97,185 77,797 TOTAL OTHER INCOME Revaluation of liabilities from employee benefits (593) 853 (1,308) Revaluation of land and buildings - - 52 Cash flow hedging (3,844) (8,975) 21,053 Exchange gain (loss) of a foreign entities (2,517) (8,546) (14,001) Net assets hedging 13,165 - - Income tax relating to other comprehensive income items 233 2,584 (6,703) Other comprehensive income after tax 6,444 (14,084) (907) Comprehensive income 114,923 83,101 76,890 Comprehensive income attributable to: - shareholders of the Parent Company 114,993 83,088 77,177 - non-controlling entities (70) 13 (287) The Consolidated Financial Statements of the Company for the year 2014 were not audited by Grant Thornton Polska.

10. Basic data and key performance indicators The information and financial indicators presented below for the years 2014, 2015 and 2016, illustrates the Capital Group's financial situation in this period. All indicators have been calculated on the basis of information contained in the consolidated financial statements of the Capital Group for the years ending on the 31 December 2016 and on the 31 December 2015. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

Amica Spółka Akcyjna Group KPI value KPI Calculation formula 2016 2015 2014*** Sales revenue (thousands PLN) 2,474,889 2,088,668 2,028,295 Net financial result ** (thousands PLN)

108,479 97,185 77,797

Equity capital ** (thousands PLN)

677,167 593,568 533,925

Total assets (thousands PLN) 1,491,962 1,416,160 1,093,863 Return on assets (ROA) (%)

closing balance of net financial results / total assets 7.3% 6.9% 7.1%

return on equity (ROE)(%) net financial result / opening balance of equity 18.3% 18.2% 16.5%

profit margin on sales (%)

Net profit margin on sales / revenue from the sale 6.9% 7.7% 6.7%

current ratio Total current assets / current liabilities 1.4 1.4 1.4 cash ratio cash / current liabilities 0.1 0.1 0.1

receivables turnover ratio (days) receivables from deliveries and services* x 365 days / sales revenue 69 72 58

liabilities turnover ratio (days) trade liabilities and other liabilities x 365 days / internal cost of sales 98 116 96

inventory turnover ratio (days) inventory x 365 days / internal cost of sales 73 91 61

sustainability of financing ratio (equity capital + long-term liabilities) / total liabilities 55.0% 55.6% 54.9%

debt-to-assets ratio (%) (total liabilities - equity) / total liabilities 54.6% 58.1% 51.2% Inflation indicator: annual average (%) -0.6 -0.9 0.0 from December to December (%)

0.8 -0.5 -1.0

* Before reduction by write-downs. ** equity capital includes capital allocated to shareholders of the Parent Company and minority shareholders; the net financial result includes the result allocated to shareholders of the Parent Company and minority shareholders. *** indicators for the years 2014 were calculated on the basis of financial data derived from the consolidated financial statements audited by another auditor. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


11. Going concern In Note 6 of the additional information to the audited consolidated financial statements of the Group for the year ended 31 December 2016, the Management Board of the Parent Company communicated that these consolidated financial statements of the Group were prepared on the assumption that the Group would continue its operations for a period of not less than 12 months from 31 December 2016 and that there are no circumstances indicating any threat for the Group's going concern. During our audit, we have not identified any circumstances that could lead us to believe that the Group is unable to continue its activities for at least 12 months from the balance sheet date i.e. 31 December 2016, as a result of deliberate or enforced cessation or significant limitation of its current activities.

12. Financial year The financial statements of all Capital Group companies, underlying the consolidated financial statements, were prepared as at 31 December 2016 and include financial information for the reporting period from the 01 January 2016 to the 31 December 2016.

13. Accounting principles (policy) and methods of presentation of financial information In Note 10 to the consolidated financial statements for the year ended 31 December 2016, the Management Board of the Parent Company presented accounting policies and methods of presentation of financial data of the Capital Group.

14. Consolidated goodwill and gains from a bargain purchase The principles for goodwill consolidation, principles for goodwill impairment and the information allowing to assess changes in the carrying amount of goodwill during the period from 01 January 2016 to 31 December 2016 are disclosed in Note 10.10.1 and in Note 22 of the Additional Information and Explanatory Notes to the consolidated financial statements.

15. Equity capital The level of equity shown in the consolidated balance of the 31 December 2016 complies with the consolidation documentation. Non-controlling interests as at 31 December 2016 amounted to PLN 1,350 thousand. Financial information concerning equity is presented in Notes 28 and 29 to the consolidated financial statements. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


16. Consolidation exclusions Concerning companies included in consolidation exclusion is conducted for:

- mutual settlements (receivables and liabilities), - internal turnover (revenue and costs), - results not achieved by companies included in the consolidation, recognised in the value of their assets, - dividends

are in accordance with consolidation documentation.

17. Sale of shares in a subsidiary In the financial year ending on the 31 December 2016 of the Capital Group there was no shares in subsidiaries were disposed of.

18. Completeness and correctness of consolidation documentation As a result of our audit, we have found that the consolidation documentation is complete and accurate and that it meets the material requirements to be satisfied by the consolidation documentation. In particular it concerns exclusions arising from consolidation adjustments.

19. Asset and liability structure of consolidated balance The Company's asset and liability structure is presented in the consolidated financial statements for the year ended 31 December 2016. The information shown in the consolidated financial statements is in accordance with the consolidated documentation.

20. Items affecting the capital group's financial result Characteristics of items affecting the Capital Group's financial result are presented in the audited consolidated financial statements for the year ended 31 December 2016. The information shown in the consolidated financial statements is in accordance with the consolidated documentation.

21. Additional information concerning the adopted accounting policy and other clarifications. Additional information about the adopted accounting policies and other explanatory notes to the consolidated financial statements for the financial year ended 31 December 2016 have been prepared in all material respects in accordance with International Accounting Standards, International Financial Reporting Standards and related interpretations published in the form of European Commission regulations, and to the extent not regulated by these Standards – pursuant to the requirements laid down in the Accounting Act and the implementing provisions issued on the basis thereof. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.


22. Report of the activity of the capital group We familiarised ourselves with the report of the Parent Company's Management Board on the activity of the Capital Group for the financial year ending on the 31 December 2016. In our opinion, the information included in the report on activities of the Group takes into account the provisions of Article 49 paragraph 2 of the Accounting Act of 29 September 1994 (consolidated text: Journal of Laws of 2016, item 1047 as amended) and is consistent with the information presented in the attached consolidated financial statements. Furthermore, in the light of our knowledge on the Group and its environment acquired during the audit of the consolidated financial statements, we have not identified any material misstatements in the report on activities of the Group. This report contains 12 pages. Jan Letkiewicz Statutory auditor No 9530 Key Statutory Auditor conducting the audit on behalf of Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k., Poznań, ul. Abpa. Antoniego Baraniaka 88E, an entity authorized to audit financial statements, entry number 4055 Poznań, 27 April 2017. © 2017 Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością sp. k. All rights reserved.

Letter of the President of the Management Board of Amica Spółka Akcyjna – 2016 Annual Report

Letter of the President of the Management Board of Amica Spółka Akcyjna

Ladies and Gentlemen, Dear Shareholders, On behalf of the Management Board of “Amica Spółka Akcyjna”, I am pleased to present the

Financial Statements of our Company and the Consolidated Financial Statements of Amica Group for the financial year 2016, along with the description of the most important events of the past reporting period (included in the Report on the Activities of the Company and of the Group). Despite the difficult macroeconomic environment, our last year's achievements translated into a recognizable increase in the Group’s sales revenue, for another year in row, reaching the level of PLN 2,474.9 million, which means a year-to-year increase of more than 18% (cf. PLN 2,088.7 million in 2015). Compared to the previous year, Amica's net profit growth amounted to 164%. The results achieved demonstrate that the direction of development we have chosen is right and prove the appropriateness of the decisions made.

The year 2016 was another year of our intense activity in foreign markets not only in terms of

generating revenue from the sale of products but also in terms of further expansion of growth-potential assets, as evidenced by acquisition (completed in the current year) of 100% control over the French company “Sideme” (Societe Industrielle d’Equipement Moderne Sideme Société Anonyme), a distributor of household appliances with 45 years of tradition on the French market (one of the three biggest markets of Europe). On the one hand, it will strengthen our position on this market by letting Amica Group gain access to Sideme’s distribution channels, while on the other hand, Sideme will be able to take advantage of our vast portfolio of kitchen appliances and the ability to develop a common purchasing base for commercial goods.

With the earlier acquisition of The CDA Group Ltd (in 2015), we have clearly defined the

main directions of our development towards the challenging and prestigious markets of the Western Europe, which aligns perfectly with our HIT2023 Strategy aimed at achievement of the sales revenue of EUR 1.2 billion and generating the EBITDA of EUR 107 million by 2023.

Nevertheless, we also remain active in the field of investments designed to expand the

production potential in Wronki. In 2016, the Company continued the intensive work to construct the A-class high rack warehouse (a high bay warehouse featuring highly advanced technological solutions and full automation of the loading process), one of the largest in the country, which is going to allow us for the substantial reduction in the cost of storage of the manufactured heating equipment and more efficient use of storage space (full commissioning of this project for the purpose of the company’s commercial operations is scheduled for the turn of 2nd and 3rd quarter of this year).

In the past year, after 20 years of pursuing business activity under the name of “Amica

Wronki S.A.”, the Shareholders made a symbolic decision to shorten the existing name under which the Company operates in the market (by omitting the segment “Wronki”) and highlight the brand “Amica” in the company’s commercial name, thereby aligning the corporate brand with the product brand and ensuring the consistency of the image of the company and of the brand.

1 | Page

Letter of the President of the Management Board of Amica Spółka Akcyjna – 2016 Annual Report

In September 2016, we were honoured with the Emerging Market Champions Award in category of “Polish Foreign Investments” by the Kronenberg Foundation operating at Bank Handlowy w Warszawie S.A. in recognition of the consistently implemented foreign expansion plan. As emphasized in the justification, “Amica” is a strong Polish brand, which effectively operates internationally within the framework of the ten-year development strategy adopted in 2014.

Nowadays, Amica is present in over 50 countries, in Europe, Asia, Middle East and

Australia, operating eight commercial subsidiaries scattered throughout Europe, employing more than three thousand employees and generating annual sales revenue of nearly EUR 600 million (of which 70% originates abroad). Our major foreign customers come from Germany, UK, Scandinavia and Russia. In line with our strategy, we intend to expand in other significant European markets such as France, Spain, Benelux countries and Italy. The base of our success are Amica, Gram, Hans and CDA brands, which are firmly rooted and recognizable on the local markets.

Amica’s greatest success is the trust of millions of our customers. It is they who ensure the

strength of our brand.

***** We are facing a very demanding time; however, we have the energy and willingness to work

further on the systematic increase in revenue and we are ready to satisfy the needs of our customers, which raises hope that despite the challenging macroeconomic and geopolitical environment, 2017 will bring the expected benefits for Amica Group.

Whilst presenting this annual report for the year 2016, I would like to emphasize the

enormous contribution and stress the great role played by our staff in the achievement of the economic and financial results as well as the dynamic development of our organization in such a highly competitive economic environment. Thus, I would like to take the opportunity to thank all the employees, both myself and on behalf of other members of the Management Board, for their involvement, creativity and competence. It is thanks to you that we can successfully implement our goals and objectives.

Traditionally, I would like to say the words of thanks to the Management Board, both of the

past and present term as well as to all the Members of the Supervisory Board, who supported us throughout 2016. Your work deserves the highest recognition.

I would like to thank all our partners, stakeholders and shareholders for everything that

shaped the nature of our cooperation and common relationships. I sincerely believe that we will continue to be a reliable and trustworthy partner for all of you.

Best Regards,

Jacek Rutkowski President of the Management Board

Amica Spółka Akcyjna

2 | Page

1

AMICA Spółka Akcyjna Group

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

Legal status as of 27 April 2017

AMICA Spółka Akcyjna Group Consolidated Financial Statements for the year ended 31 December 2016

(in thousands PLN)

2

SELECTED CONSOLIDATED FINANCIAL DATA OF THE CAPITAL GROUP............................................. 5 CONSOLIDATED Statement of comprehensive income ........................................................................................ 6 CONSOLIDATED Balance Sheet ........................................................................................................................... 8 CONSOLIDATED Cash flow account .................................................................................................................... 8 Consolidated statement of changes in equity ......................................................................................................... 10 Accounting Principles (Policy) and Additional Explanatory Notes ....................................................................... 11 Overview ................................................................................................................................................................ 11 1. Information on the Parent Company ............................................................................................................... 11 2. Composition of the Parent Company's Management Board and Supervisory Board ...................................... 11 3. The Nature of the Group's Business ................................................................................................................ 12 4. Information on the Capital Group ................................................................................................................... 12 5. Approval of the financial statement ................................................................................................................ 13 6. The basis for preparation of the consolidated financial statements ................................................................. 13 7. Significant values based on professional judgement and estimations ............................................................. 14

Professional judgement ........................................................................................................................ 14 Uncertainty of estimates and assumptions ........................................................................................... 15

8. Changes in standards or interpretations applied .............................................................................................. 16 9. Reassessment ................................................................................................................................................... 22 10. Significant Accounting Policies ...................................................................................................................... 22

Presentation of financial statements ..................................................................................................... 22 Operating segments .............................................................................................................................. 22 Rules of consolidation .......................................................................................................................... 23 Business Combinations ........................................................................................................................ 24 Investment in associates ....................................................................................................................... 24 Fair value adjustment ........................................................................................................................... 25 Conversion of items expressed in foreign currencies ........................................................................... 26 Property, plant and equipment ............................................................................................................. 27 Investment property ............................................................................................................................. 28 Fixed assets classified as designated for sale ....................................................................................... 28 Intangible assets ................................................................................................................................... 28

10.11.1. Goodwill ............................................................................................................................... 29 Lease .................................................................................................................................................... 30 Impairment loss of non-financial fixed assets ...................................................................................... 30 Borrowing costs ................................................................................................................................... 31 Financial assets .................................................................................................................................... 31 Impairment loss of financial assets ...................................................................................................... 32

10.16.1. Assets disclosed at amortized cost ........................................................................................ 32 10.16.2. Financial assets carried at cost .............................................................................................. 32 10.16.3. Financial assets available for sale ......................................................................................... 33

Embedded derivatives .......................................................................................................................... 33 Derivative financial instruments and hedging instruments .................................................................. 33

10.18.1. Fair value hedge .................................................................................................................... 34 10.18.2. Cash flow hedge ................................................................................................................... 34 10.18.3. Hedges of net investments in foreign operations .................................................................. 34

Inventory .............................................................................................................................................. 35 Receivables from deliveries and services and other receivables. ......................................................... 35 Cash and equivalents ............................................................................................................................ 35 Interest bearing bank loans, borrowings and debentures...................................................................... 35


(in thousands PLN)

3

Liabilities from deliveries and services and other liabilities. ............................................................... 36 Provisions ............................................................................................................................................. 36 Employee benefits ................................................................................................................................ 36 Deferred charges and accruals ............................................................................................................. 37 Revenue ............................................................................................................................................... 37

10.27.1. Sales of goods and products.................................................................................................. 37 10.27.2. Interest .................................................................................................................................. 37 10.27.3. Dividends .............................................................................................................................. 37 10.27.4. Revenue from lease (operating lease) ................................................................................... 37 10.27.5. Government subsidies ........................................................................................................... 37

Tax 38 10.28.1. Current income tax ............................................................................................................... 38 10.28.2. Deferred tax .......................................................................................................................... 38 10.28.3. Goods and services tax (Value Added Tax).......................................................................... 38

Net profit per share .............................................................................................................................. 39 11. Operating segments ......................................................................................................................................... 39 12. Investment in associates .................................................................................................................................. 41 13. Revenue and costs ........................................................................................................................................... 42

Other operating revenue ....................................................................................................................... 42 Other operating costs ........................................................................................................................... 42 Financial revenue ................................................................................................................................. 43 Financial costs ...................................................................................................................................... 43 Costs by type ........................................................................................................................................ 43 Depreciation of tangible fixed assets and amortisation of intangible assets ........................................ 43 Cost of employee benefits .................................................................................................................... 43

14. Income tax ....................................................................................................................................................... 44 Tax burdens .......................................................................................................................................... 44 Reconciliation of effective tax rate ...................................................................................................... 44 Deferred income tax ............................................................................................................................. 44

15. Social assets and liabilities due to Company Social Provision Fund .............................................................. 45 16. Profit per share ................................................................................................................................................ 46 17. Dividends paid and proposed for payment ...................................................................................................... 47 18. Tangible fixed assets ....................................................................................................................................... 47 19. Lease ............................................................................................................................................................... 49

Liabilities due to financial leasing agreements and leasing agreements with a purchase option ......... 49 20. Assets classified as designated for sale ........................................................................................................... 50 21. Investment property ......................................................................................................................................... 50 22. Intangible assets .............................................................................................................................................. 52 23. Other assets ..................................................................................................................................................... 55

Other financial assets ........................................................................................................................... 55 Other non-financial assets .................................................................................................................... 56

24. Employee benefits ........................................................................................................................................... 56 Pensions and other post-employment benefits ..................................................................................... 56

25. Inventory ......................................................................................................................................................... 57 26. Receivables from deliveries and services and other receivables. .................................................................... 58 27. Cash and equivalents ....................................................................................................................................... 59 28. Stated capital ................................................................................................................................................... 59

Stated capital ........................................................................................................................................ 59 28.1.1. Nominal value of shares ................................................................................................................ 59


(in thousands PLN)

4

28.1.2. Shareholders' rights ....................................................................................................................... 59 28.1.3. Major shareholders ........................................................................................................................ 59

29. Other types of capitals ..................................................................................................................................... 60 Supplementary capital .......................................................................................................................... 60 Other reserves ...................................................................................................................................... 60 Retained profit and dividend restrictions ............................................................................................. 60 Non-controlling interest ....................................................................................................................... 61

30. Credit, loans and other debt instruments ......................................................................................................... 61 31. Provisions ........................................................................................................................................................ 62

Changes in provisions .......................................................................................................................... 62 Provision for warranty repairs and returns ........................................................................................... 62 Reserve for sales bonuses .................................................................................................................... 63 Reserve for marketing services and commissions ................................................................................ 63 Reserve for salaries and holiday leave ................................................................................................. 63

32. Trade payables, other payables and accruals ................................................................................................... 63 Liabilities from deliveries and services and other financial liabilities (Current) ................................. 63 Other non-financial liabilities .............................................................................................................. 63 Deferred charges and accruals ............................................................................................................. 64

33. Reasons for differences between balance sheet changes in certain items and changes arising from the cash flow statement ................................................................................................................................................. 64

34. Investment liabilities ....................................................................................................................................... 65 35. Contingent liabilities ....................................................................................................................................... 66 36. Lawsuits .......................................................................................................................................................... 66 37. Tax settlements ................................................................................................................................................ 66 38. Used electrical and electronic equipment. ....................................................................................................... 66 39. Information on subsidiaries ............................................................................................................................. 66

Parent Company of the entire Group.................................................................................................... 68 Entity with significant influence over the Group ................................................................................. 68 Conditions of transactions with affiliated entities ................................................................................ 68 Remuneration of the Group's Senior Management .............................................................................. 69

39.4.1. Remuneration paid to members of the Management Board and members of the Supervisory Board of the Group ........................................................................................................................ 69

39.4.2. Remuneration paid to other members of key management personnel ........................................... 71 40. Information on remuneration of an auditor or an entity authorized to audit financial statements ................... 71 41. Objectives and principles of financial risk management ................................................................................. 71

Interest-rate fluctuations risk................................................................................................................ 72 Currency risk ........................................................................................................................................ 72 Goods price risk ................................................................................................................................... 73 Credit risk............................................................................................................................................. 74 Liquidity risk ........................................................................................................................................ 74 Fair values of particular classes of financial instruments ..................................................................... 75 Items of income, expense, gains and losses recognized in the profit and loss account by categories of

financial instruments ............................................................................................................................ 76 Interest-rate fluctuations risk................................................................................................................ 78 Hedging instruments ............................................................................................................................ 79

42. Capital management ........................................................................................................................................ 81 43. Employment structure ..................................................................................................................................... 82 44. Other information ............................................................................................................................................ 82 45. Events after the balance date ........................................................................................................................... 83


(in thousands PLN)

5

SELECTED CONSOLIDATED FINANCIAL DATA OF THE CAPITAL GROUP in thousands of PLN in thousands of EUR SELECTED FINANCIAL DATA 2016 2015 2016 2015

1 Net revenue from sales of products, goods and material 2,474,889 2,088,668 567,154 499,168 2 Profit (loss) on operating activities 155,044 146,653 35,530 35,048 3 Profit (loss) before tax 138,220 123,251 31,675 29,456 4 Net profit (loss) allocated to company shareholders 108,549 97,172 24,875 23,215 5 Net profit (loss) allocated to minority shareholders -70 13 -16 11 6 Net cash flows from operating activities 195,889 58,686 44,891 14,025 7 Net cash flows from investment activities -85,262 -149,314 -19,539 -35,684 8 Net cash flows from financial activities -92,245 101,842 -21,139 24,339 9 Total net cash flows 18,382 11,215 4,212 2,680

10 Total assets 1,491,962 1,416,160 337,243 332,315 11 Non-current liabilities 143,167 193,132 32,361 45,320 12 Current liabilities 671,628 629,460 151,815 147,709 13 Equity capital allocated to shareholders 678,517 594,848 153,372 139,578 14 Equity capital allocated to minority shareholders -1,350 -1,280 -305 -292 15 Share capital 15,551 15,551 3,515 3,649 16 Number of shares 7,775,273 7,775,273 7,775,273 7,775,273 17 Number of own shares for disposal 0 0 0 0 18 Number of own shares for redemption 0 0 0 0 19 Profit (loss) per ordinary share allocated to shareholders of the Parent Company 13.96 12.50 3.20 2.99 20 Book value per share (PLN / EUR) 87.27 76.51 19.73 17.95 21 Paid dividend per share (PLN / EUR) 4.00 3.00 0.92 0.74

* Financial data were converted to EUR according to the following currency exchange rates: 31/12/2016 31/12/2015 Currency exchange rates for the profit and loss account and cash flow statement 4.3637 4.1843 exchange rate for calculating the balance sheet items 4.4240 4.2615


(in thousands PLN)

Accounting principles (policies) and additional explanatory notes to the consolidated financial statement included on pages 11 to 85 shall constitute an integral part of this statement

6

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2016

Year ended 31 December 2016


Continued activities Note Revenue from sales of goods and products 2,442,177 2,055,096 Revenue from sale of services 32,712 33,572 Revenue from sales 2,474,889 2,088,668 Own sales costs 1,692,175 1,397,992 Gross profit/(loss) on sales 782,714 690,676 Other operating revenue 13.1. 13,553 8,895 Cost of sales 266,443 214,580 General administrative expenses 344,461 315,403 Other operating costs 13.2. 30,319 22,935 Profit/(loss) on operating activities 155,044 146,653 Financial revenue 13.3. 5,147 8,858 Financial costs 13.4. 22,383 32,663 Share in the result of associates accounted under the equity method 12 412 403

Gross profit/(loss) 138,220 123,251 Income tax 14. 29,741 26,066 Net profit/(loss) on continuing operations 108,479 97,185 Discontinued activities Profit/(loss) for the financial year on discontinued operations - -

Net profit/(loss) for the financial year 108,479 97,185 Profit/(loss) allocated to: 108,479 97,185 Shareholders of the Parent Company 108,549 97,172 Non-controlling shareholders -70 13 Net other comprehensive income Items to be reclassified to the profit / (loss) in subsequent reporting periods: 7,037 -14,937

Exchange gain (loss) of a foreign entities -2,517 -8,546 Net assets hedging 13,165 Cash flow hedging -3,844 -8,975 Share in other total revenue of affiliates or subsidiaries Income tax associated with other total revenues 233 2,584 Items not to be reclassified to the profit / (loss) in subsequent reporting periods: -593 853

Revaluation of liabilities from employee benefits -593 853 Revaluation of land and buildings 0 0 Total net other comprehensive income 6,444 -14,084 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 114,923 83,101 Comprehensive income allocated to: 114,923 83,101


(in thousands PLN)


7

Shareholders of the Parent Company 114,993 83,088 Non-controlling shareholders -70 13 Profit (loss) per share (in PLN):

– basic profit for the period, allocated to shareholders of the Parent Company (in PLN) 13.96 12.50

– basic profit from continuing operations for the period, allocated to shareholders of the Parent Company (in PLN)

13.96 12.50

– diluted profit for the period, allocated to shareholders of the Parent Company (in PLN) 13.96 12.50

– diluted profit from continuing operations for the period, allocated to shareholders of the Parent Company (in PLN)

13.96 12.50


(in thousands PLN)


8

CONSOLIDATED BALANCE SHEET as at 31 December 2016

Note 31 December 2016 31 December 2015 ASSETS Fixed assets 532,026 508,797 Property, plant and equipment 18. 306,813 276,534 Investment property 20. 27,507 37,614 Intangible assets 21. 129,815 138,559 Investment in affiliated companies 12. 7,656 7,244 Derivative financial instruments 40. 19,191 8,379 Other long-term financial assets 22. 13,280 14,729 Deferred tax assets 14. 27,764 25,738 Current Assets 949,279 897,196 Inventory 24. 338,961 346,931 Receivables from deliveries and services and other receivables. 25. 469,866 410,769

Receivables from income tax 0 9,272 Derivative financial instruments 40. 11,233 27,647 Other short-term financial assets 22. 9,183 9,384 Other short-term non-financial assets 22. 34,722 26,613 Cash and equivalents 26. 85,314 66,580 Assets classified as designated for sale 10,657 10,167 TOTAL ASSETS 1,491,962 1,416,160 LIABILITIES Total equity capital 677,167 593,568 Equity capital allocated to shareholders of the Parent Company: 678,517 594,848

Stated capital 27. 15,551 15,551 Supplementary capital 28. 504,846 450,793 Exchange gain (loss) of a foreign entity -15,278 -12,761 Other reserve capitals 28. 25,460 16,500 Retained profit / Uncovered loss 28. 147,938 124,765 Non-controlling shares -1,350 -1,280 Non-current liabilities 143,167 193,132 Credit, loans and other debt instruments 29. 126,193 159,169 Non-current provisions 30. 4,903 5,790 Liabilities from employee benefits 7,505 6,187 Derivative financial instruments 40. 2,109 10,175 Other liabilities 0 9,176 Long-term deferred charges and accruals 31. 2,457 2,635 Current liabilities 671,628 629,460 Liabilities from deliveries and services and other liabilities. 31. 453,558 445,937 Credit, loans and other debt instruments 29. 74,537 76,509 Derivative financial instruments 40. 9,030 7,289 Liabilities from income tax 16,845 2,896 Current deferred charges and accruals 31. 7,423 6,811 Current provisions 30. 110,235 90,018 Total liabilities 814,795 822,592 TOTAL LIABILITIES 1,491,962 1,416,160

CONSOLIDATED CASH FLOW ACCOUNT


(in thousands PLN)


9

for the year ended 31 December 2016 Year ended 31

December 2016 Year ended 31

December 2015 Cash flows from operating activities Gross profit/(loss) 138,220 123,251 Adjustments by items: 57,669 -64,565 Net (profit) loss share of subsidiaries and affiliates consolidated by equity method -412 -403

Depreciation 45,507 37,012 Currency translation gains (losses) -11,483 -13,396 Interest and profit sharing (dividend) 13,045 11,289 Profit (loss) on investing activities 3,904 1,933 Change in provisions 19,811 19,668 (Increase) / decrease in inventories 15,636 -105,383 (Increase) / decrease in receivables -37,566 -97,180 (Increase) / decrease in liabilities -12,965 83,652 Change in prepayments and accruals -3,294 2,937 Result on derivatives -12,741 -29,698 Cash flows related to hedging 27,448 35,408 Other 14,407 9,795 Income tax paid -3,628 -20,199 Net cash flows from operating activities 195,889 58,686 Cash flows from investment activities Disposal of fixed assets and intangible assets 189 69 Purchase of fixed assets and intangible assets -83,348 -73,633 Purchase of investments in subsidiaries, associates and joint ventures -9,176 -86,018 Interest received 23 749 Repayment of loans granted 11,135 6,429 Loans granted -9,800 -11,700 Flows of trade derivatives 5,715 14,790 Net cash from investing activities -85,262 -149,314 Cash flows from financial activities Payment of liabilities arising from financial leases -5,021 -3,741 Inflows from credits/loan taken 11,301 57,384 Repayment of loans/credits -35,943 -18,025 Issuance of debt securities 0 131,308 Redemption of debt securities -15,902 -30,000 Dividends paid out -31,301 -23,525 Interest paid -15,379 -11,559 Other 0 0 Net cash from financial activities -92,245 101,842 Net increase / (decrease) in cash and cash equivalents 18,382 11,215 Balance sheet change in cash, including: 18,734 11,229 Net exchange rate differences -352 -14 Opening balance of cash 66,932 55,717 Closing balance of cash 85,314 66,932


(in thousands PLN)

10/84

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period of twelve months ended 31 December 2016

Allocated to shareholders of the Parent Company

Stated

capital Supplementary

capital Own

shares

Exchange gain (loss) of a foreign

entity

Revaluation of hedging

instruments capital

Revaluation of a defined benefit plan

Other reserve capitals

Retained profits Total

Non-controlling

interest

Total equity capital

As at 01 January 2016 15,551 450,793 0 -12,761 8,135 -777 9,142 124,765 594,848 -1,280 593,568 Net profit/(loss) for the year 108,549 108,549 -70 108,479 Other net comprehensive income for the period -2,517 9,554 -593 6,444 6,444

Comprehensive income for the year 0 -2,517 9,554 -593 108,549 114,993 -70 114,923

Sales of own shares 0 0 Re-booking of financial result to equity capital 54,114 -54,114 0 0

Dividends -31,262 -31,262 -31,262 Other changes -61 -1 -62 -62 As at 31 December 2016 15,551 504,846 0 -15,278 17,689 -1,370 9,141 147,938 678,517 -1,350 677,167

As at 01 January 2015 15,551 413,392 0 -4,215 14,526 -1,630 9,142 88,452 535,218 -1,293 533,925 Net profit/(loss) for the year 97,172 97,172 13 97,185 Other net comprehensive income for the period -8,546 -6,391 853 -14,084 -14,084

Comprehensive income for the year 0 -8,546 -6,391 853 97,172 83,088 13 349

Sales of own shares 0 0 Re-booking of financial result to equity capital 37,533 -37,533 0 0

Dividends -200 -23,326 -23,526 -23,526 Other changes 68 68 68 As at 31 December 2015 15,551 450,793 0 -12,761 8,135 -777 9,142 124,765 594,848 -1,280 593,568


Accounting Principles (Policy) and Additional Explanatory Notes (in thousands PLN)

11

ACCOUNTING PRINCIPLES (POLICY) AND ADDITIONAL EXPLANATORY NOTES

Overview

1. Information on the Parent Company

Amica Spółka Akcyjna Capital Group ("Group") is composed of Amica Spółka Akcyjna ("Parent Company", "Company") and its subsidiaries (see Note 4). The consolidated financial statements of the Group cover the period of 12 months ended 31 December 2016 and comprise comparative data for the period of 12 months ended on 31 December 2015. The Parent Company is registered in the register of entrepreneurs - the National Court Register maintained by the District Court in Poznań - Nowe Miasto and Wilda in Poznań, 9th Commercial Division of the National Court Register, under the number KRS 000017514. The Parent Company was issued the business statistical number REGON 570107305. The Parent Company's shares are listed on the Warsaw Stock Exchange. The Parent Company's registered office is situated in Wronki (64-510) at ul. Mickiewicza 52. The Parent Company's registered office is also the primary location of the Group's business activities.

2. Composition of the Parent Company's Management Board and Supervisory Board

As at 31 December 2016, the Parent Company's Management Board was composed of: • Mr Jacek Rutkowski - President of the Management Board • Mr Jarosław Drabarek – First Vice President of the Management Board • Mr Marcin Bilik - Vice President of the Management Board • Ms Alina Jankowska-Brzóska – Vice President of the Management Board • Mr Wojciech Kocikowski - Vice President of the Management Board • Mr Piotr Skubel – Vice President of the Management Board

The following changes in the composition of the Management Board took place in 2016: End of term of office (2013-2016), effective as of 01 June 2016: Tomasz Dudek (Vice-President of the Management Board), Andrzej Sas (Vice President of the Management Board) Appointment of new members, effective as of 01 June 2016: Jarosław Drabarek– (First Vice President of the Management Board), Alina Jankowska-Brzóska – (Vice President of the Management Board). In the period after the balance sheet date until approval of the consolidated financial statements, there were no changes to the membership in the Management Board. The Parent Company's Supervisory Board on the 31 December 2016 was composed of:

• Mr Tomasz Rynarzewski – Chair of the Supervisory Board/ Chair of the Operating Activities Committee

• Mr Dariusz Formela – Independent Member of the Supervisory Board (Vice Chairman of the Supervisory Board)

• Mr Jacek Bartmiński – Independent Member of the Supervisory Board/ Chair of the Audit Committee • Mr Tomasz Dudek – Member of the Supervisory Board • Mr Piotr Sawala – Member of the Supervisory Board • Mr Paweł Wyrzykowski – Member of the Supervisory Board

The following changes in the composition of the Supervisory Board took place in 2016:



12

End of term of office (2013-2016), effective as of 01 June 2016: Zbigniew Derdziuk (Member of the Supervisory Board), Grzegorz Golec (Vice-Chair of the Supervisory Board/ Independent Member of the Supervisory Board), Bogdan Gleinert (Member of the Supervisory Board), Wojciech Kochanek (Member of the Supervisory Board), Bogna Sikorska (Independent Member of the Supervisory Board) Appointment of new members, effective as of 01 June 2016: Dariusz Formela – Independent Member of the Supervisory Board (Vice-Chairman of the Supervisory Board), Jacek Bartmiński – Independent Member of the Supervisory Board/Chair of the Audit Committee, Tomasz Dudek – Member of the Supervisory Board, Piotr Rutkowski – Member of the Supervisory Board, Paweł Wyrzykowski – Member of the Supervisory Board. After the balance sheet date, there were no changes in the composition of the Supervisory Board.

3. The Nature of the Group's Business

The Group's core business is: • Manufacture and sale of electric and gas-fired domestic appliances; • Sale of domestic appliances; • Sales of maintenance, heating, hotel, and catering services; • Rental and leasing activities.

More information of the business activities of the Group can be found in Note 11 on operating segments.

4. Information on the Capital Group

The direct parent of the Group is Holding Wronki S.A., which is responsible for preparation of the financial statements to be made public. The ultimate controlling party of the Group is Mr Jacek Rutkowski, who (being a natural person) is not obliged to prepare financial statements for public use (IAS.24.13). Amica S.A. Group includes the Parent Company and the following subsidiaries:

Unit Company's

registered office Principal economic activity

Company's percentage share in the capital Functional

currency 31 December 2016

31 December 2015

Amica International GmbH Germany commercial activities 100% 100% EUR

Amica Commerce s.r.o. the Czech Republic commercial activities 100% 100% CZK

Gram Domestic A/S Denmark commercial activities 100% 100% DKK

Hansa OOO Russia commercial activities 100% 100% RUB

Amica Far East Ltd. Hong Kong purchasing process mediation services 100% 100% HKD

Inteco Business Solutions Sp. z o.o. Poland Consulting and IT services 80% 80% PLN

Nova Panorama Sp. z o.o. Poland real estate management 100% 100% PLN

Nowe Centrum Sp. z o.o. Poland real estate management 100% 100% PLN Amica Handel i Marketing Sp.

z o.o. Poland marketing and promotional services 100% 100% PLN

Marcelin Management Sp. z o. o. Poland

hospitality and catering services, real estate

management, 100% 100% PLN

Hansa Ukraina OOO Ukraine commercial activities 100% 100% UAH

Amica Electrodomesticos S.L. Spain commercial activities 100% 100% EUR

THE CDA GROUP LIMITED United Kingdom commercial activities 100% 100% GBP

Profi Enamel Sp. z o.o. Poland manufacturing activities 100% 100% PLN



13

In the consolidated financial statements prepared as at 31/12/2016, the shares in the first subsidiary have been measured using the equity method. Detailed information on subsidiaries is presented in Note 12. In the period covered by the consolidated financial statements, there were no transactions that would affect the reorganization of the Group. The Parent Company and of the consolidated companies of the Group have been established for an indefinite term. The Group holds 80% of shares in Inteco Business Solution Sp. z o.o. with its registered office in Poland. The capital allocated to non-controlling interest of the subsidiary for the reporting period is PLN -1,350 thousand The share in the equity capital of the subsidiary as at the end of the reporting period amounted to 20%. Below is presented the summary on the subsidiary holding non-controlling interest:

Year ended 31 December 2016 Year ended 31 December 2015

Fixed assets 218 224 Current Assets 4,461 2,963 Equity capital 1,530 1,015 Short-term liabilities and provisions 3,149 2,173 Revenue from sales 17,403 19,182 Net profit 1,351 836 Paid dividend allocated to non-controlling shares 167 200

As at 31 December 2016 and 31 December 2015, the share in the general number of voting rights held by the Group in subsidiaries is equal to the Group's share in the capital of these subsidiaries.

5. Approval of the financial statement

The present financial statements prepared for the year ended 31 December 2016 (along with comparative data) were approved for publication by the Parent Company's Management Board on 27 April 2017.

Basis for preparation and accounting policies

6. The basis for preparation of the consolidated financial statements

The Consolidated Financial Statements of the Group have been prepared in accordance with the International Financial Reporting Standards (“IFRSs”), as adopted by the European Union for annual periods beginning on or after 01 January 2016. Some companies of the Group maintain their accounting books in accordance with the accounting principles (policy) set out in the Act of 29 September 1994 on accounting (the "Act") as amended and the regulations issued thereunder ("Polish Accounting Standards"). The consolidated financial statements include adjustments not disclosed in the Group's accounting books, presented in order to approximate financial statements of such entities with the IFRS. Other statements of the companies are prepared in accordance with the principles of the IFRS. The Parent Company's functional currency and the presentation currency used in these consolidated financial statements is Polish zloty, while all amounts are expressed in thousands of PLN. Financial statements of foreign



14

companies for the purpose of consolidation have been converted into Polish currency in accordance with the principles presented in the accounting policy below. The Group uses the direct consolidation method and has chosen the method of accounting for gains or losses on translation that is consistent with that method. This consolidated financial statement has been prepared with the assumption that the business of the Group companies is to continue operating in the foreseeable future. On the date of approval of these financial statements, there are no circumstances that could be regarded as a threat to the continued business operations of the Group companies.

7. Significant values based on professional judgement and estimations

Professional judgement In the process of applying accounting principles (policy), the Management Board made the following assessments, which exerted the greatest impact on the reported carrying amounts of assets and liabilities. Recoverable amount of inventories The cost of inventories may not be recoverable if the inventories are damaged, poorly rotating or their selling price fell below their purchase price/cost of manufacture. The Group operates a procedure for quarterly analysis of the above mentioned cases. The results of the analysis indicating the reduction of the recoverable amount of inventories are included in the Group’s books and described in Note 24. Fair value of derivatives Derivatives executed by the Group have been measured at their fair value using the expert method as well as own tools for calculation of this value. As at the balance sheet date, the Group compared the fair value of these derivatives, as recognized in the books, with the valuation provided by the banks, taking into account the market exchange rates and interest rates, based on these figures. No significant differences were reported. Under the estimates associated with the hedge accounting, the Group not only measures the instruments but also assesses the assumptions regarding the cash flows to e hedged. Classification of leases The Group classifies leasing as operational or financial leasing in accordance with the evaluation of the distribution of risk relating to the control over the leased object between the lessor and the leaseholder. This assessment is based on the economic substance of particular transactions. Provisions for warranty repairs, employee benefits, bonuses and marketing services Provisions for warranty repairs, employee benefits, bonuses and marketing services are revalued on a quarterly basis, using the Company’s own analytical tools. All the requirements concerning the provisions have been taken into account in the Group's books. Depreciation rates



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The Group conducted the annual process of updating the depreciation rates for fixed assets and intangible assets, based on the useful life analysis. There were no significant differences between the previous and newly verified new rates applied to measure the useful life. Impairment losses on receivables and loans The Group evaluates the receivables and loans which are subject to recognition of the impairment loss. The assessment is based on the debtor's financial situation.

Uncertainty of estimates and assumptions Described below are basic assumptions concerning the future and other key sources of uncertainty occurring on the balance date, which are associated with major risks of significant adjustment to carrying value of assets and liabilities in the next financial year. The Group has made assumptions and estimates about the future based on the knowledge acquired during the preparation of the Financial Statements. The present assumptions and estimates may change as a result of future events due to changes in the market or changes that are beyond the control of the Company. Such changes are reflected in the estimates or assumptions at the time of occurrence.

Revaluation of provisions from employee benefits

Provisions for employee benefits are determined with the use of the Group's in-house tool. The assumptions adopted for this purpose are described in Note 23.

Deferred Tax Assets

The Group recognizes deferred tax assets based on the assumption that future taxable income will allow for its use. Worse tax results in the future could render this assumption unfounded.

Fair market value of the financial instruments

The fair value of financial instruments, for which no active market exists, is determined using appropriate valuation techniques. While selecting the methods and assumptions regarding the time period to maturity and the likelihood of a hedged item and its effectiveness measurement, the Group relies on professional judgement. The method for determining the fair value of financial instruments is disclosed in the Note 40.1. The Group relies on professional judgment taking into account external factors arising from exchange rates and interest rates.

Depreciation rates

Depreciation rates are determined based on the expected useful economic lives of tangible fixed assets and intangible assets. The Group reviews the adopted useful economic lives based on current estimates annually.

Goodwill

Goodwill is initially recognized in accordance with IFRS 3. Values are not amortized, but instead, the impairment test is performed on an annual basis in accordance with IAS 36. Information about the tests carried out is provided in Note 21.

Provisions for warranty repairs

The basis for estimating the reserves for future warranty repairs are: the period covered by the guarantee, the historical unit cost of the repair, estimated product reliability, average share of spare parts in the repair cost, profitability of sale of spare parts. The value of the above mentioned variables may change in futures periods, simultaneously influencing the value of reserves. The Group reviews the adopted variables to reflect the Group's actual liability under the provision for warranty repair obligations. Impairment loss of assets



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The Group measures the value of fixed assets recognized in the financial statements as at the balance sheet date and determines any impairment loss of their value. Fixed assets are measured taking into account the final values and the estimated costs of dismantling, transfer and renovation of particular tangible fixed assets. Impairment loss of inventory The Group verifies the inventory turnover and the difference in the book price and possible sales price of inventory as the balance sheet date and recognizes impairment loss, if any, according to internal rule on a quarterly basis. Impairment loss of the shares held and loans The Group evaluates whether there is any permanent impairment of the shares held in subsidiaries and associates as well as loans. If there are any indications, the impairment test is performed. If the recoverable amount of the assets is less than its book value, the Group recognizes an impairment loss equal to the difference between the recoverable amount and the book value of the assets.

8. Changes in standards or interpretations applied

Changes in standards or interpretations in force and applied by the Group from 2016

New or amended standards and interpretations effective from 01 January 2016 and their impact on the consolidated financial statements of the Group:

• Amendment to IAS 19 “Employee Benefits” The changes involve clarification of the rules for accounting treatment in cases, when employees make contributions to cover the costs of defined benefit plans. The amendment has become effective in the European Union for annual periods beginning on or after 01 February 2015. The amendment had no material effect on the Group's financial statements.

• Amendments to IFRS 2, IFRS 3, IFRS 8, IAS 16, IAS 38, IAS 24 resulting from the “Annual Improvements Project: 2010-2012 cycle” has become effective in the European Union for annual periods beginning on or after 01 February 2015. Amendments to the standards include:

o IFRS 2: The Board clarified that the standard changes or introduces new definitions of the

following terms: market condition, service condition, vesting condition and performance condition. The amendment had no effect on the Group's financial statements.

o IFRS 3: The Board has further clarified the rules for contingent consideration after the acquisition date, to ensure compliance with other standards (primarily IFRS 9 (or IAS 39) and IAS 37). The amendment had no effect on the Group's financial statements.

o IFRS 8: The Board imposed on the entities combining their operating segments additional disclosure requirements related to such combined segments and their economic characteristics underlying such combinations. The amendment had no effect on the Group’s financial statements, since there was no aggregation of operating segments.

o IFRS 8: the amended standard prescribes that the requirement to disclose reconciliation of total segment assets and the assets disclosed in the balance sheet is mandatory only if the values of assets are disclosed by segments. The amendment had no effect on the Group’s financial statements, since the Group's management analyses the assets and liabilities of particular segments and accordingly discloses the values of assets and liabilities for each reportable segment.

o IFRS 16, IAS 38: The Board amended the rules for calculating the gross amount and the accumulated amortization of an asset (an intangible asset), where the revaluation model is applied.



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The amendment had no effect on the Group’s financial statements, since the Group does not use the revaluation model.

o IAS 24: The definition of a related party has been extended to entities providing key management personnel services. Relevant disclosures have been added as well. The amendment had no effect on the Group’s financial statements, since the responsibilities of the key management personnel have not been assigned to other entities.

• Amendment to IFRS 11 “Joint Arrangements”

Pursuant to the amendment, the acquirer of an interest in a joint operation in which the activity constitutes a business is required to apply the principles set out in IFRS 3 to the recognition of assets and liabilities of a joint operation, and thus, among others, measure the assets and liabilities at fair value and determine the goodwill. The amendment is effective for annual periods beginning on or after 01 January 2016. The amendment had no effect on the Group’s financial statements, since no such transactions took place.

• The amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible assets”

According to the amendment, the method for depreciation of fixed assets based on the revenue earned from the use of the asset is not allowed. In the case of intangible assets, the use of such methods has been limited. The amendment is effective for annual periods beginning on or after 01 January 2016. The amendment had no effect on the Group’s financial statements, since the Group uses only the straight-line depreciation method.

• Amendment to IAS 27 “Separate Financial Statements”

According to the amendment, any shares in the subsidiaries, joint ventures or associates, as disclosed in the separate financial statements, can be measured using the equity method. To date, IAS 27 provided only for valuation at purchase price or in accordance with IFRS 9/IAS 39. The amendment is effective for annual periods beginning on or after 01 January 2016. The amendment had no effect on the Group’s financial statements, since it applies only to separate financial statements.

• The amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture”

The amendment provides that the bearer plants (e.g. grapevines, fruit trees) will be excluded from the scope of IAS 41 and included in the scope of IAS 16 as internally generated fixed assets. Thanks to this change, it will not be necessary to measure these plants at fair value at each balance sheet date, as it was required until now by IAS 41. The amendment is effective for annual periods beginning on or after 01 January 2016. The amendment had no effect on the Group’s financial statements, since the Group does not engage in agricultural activity.

• Amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34 resulting from the “Exposure Draft for the 2012-2014 Annual Improvements Cycle”, which have become effective for annual periods beginning on or after 01 January 2016. Amendments to the standards include: o IFRS 5: the amendment of the standard stipulates that if the Group has reclassified assets from

‘assets held for sale’ directly to ‘assets held for distribution to owners’ or from ‘assets held for distribution to owners’ to ‘assets held for sale’, such a change means continuation of the original plan and the adjustments made are not reversed. The amendment had no effect on the Group’s financial statements, since no such transactions took place.

o IFRS 7: the amendment of the standard clarifies that the disclosure requirements relating to the items reported in net amounts, as applicable from 2013, do not apply to condensed interim financial statements, unless this information is required to be disclosed under the general



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principles of IAS 34. The amendment had no effect on the Group’s financial statements, since it applies only to condensed interim financial statements.

o IFRS 7: The amendment introduces a new indicator to evaluate whether the involvement in the assets transferred has been maintained. If the entity has transferred the assets, but has entered into a service agreement wherein the consideration is based on the amounts and maturity of the asset transferred, this means that the entity's has maintained involvement in the asset. The Group has analysed the concluded transactions and concluded that the amendment does not affect them.

o IAS 19: The standard allows the use of interest rates relevant for Treasury securities to discounted cash flows if the market for the securities of commercial entities is shallow. The amendment to the standard specifies that the depth of the market should be evaluated in terms of the currency of these securities, and not the country. The Group has analysed the situation in the securities market and concluded that the amendment does not affect its financial statements.

o IAS 34: The standard permits certain information required by IAS 34 for condensed interim financial statements to be presented in other documents accompanying such interim statements, for example, in the report on activities. If the information is contained in the accompanying documents, express references must be provided to the places where it is disclosed in the interim financial statements. Additional documents must be available to users on the same conditions and at the same time as the interim financial statements. Otherwise, the interim financial statements will be considered incomplete. The amendment applies to interim reports only and accordingly has no effect on these financial statements. The Group does not plan to use the option approved under the revised IAS 34.

• Amendment to IAS 1 “Presentation of financial statements”

The IASB, as a part of a larger project that is to lead to greater transparency and help avoid excessive disclosures in the financial statements, published a number of amendments to IAS 1. These amendments include the following aspects:

o The Council draws attention to the fact that disclosure of too much irrelevant information in the financial statements makes the financial statements unreadable and is contrary to the principle of materiality,

o the items of the statement of profit or loss and other comprehensive income as well as items of the statement of financial position, as required by the standard, can be disaggregated,

o the requirements for subtotals to be placed in the statement of profit or loss and other comprehensive income as well as in the statement of financial position has been added,

o the sequence of notes to the financial statements depends on the decision of the company; however, comprehensiveness and comparability in this regard must be ensured.

The amendment is effective for annual periods beginning on or after 01 January 2016. The Group has analysed its previous financial statements and concluded that it has been already applying the amended rules; therefore, its financial statements do not require changes.

• Amendment to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures”

The IASB added another exemption from consolidation or application of the equity method in the case of investment enterprises:

o if a mid-level parent company is a subsidiary of an investment enterprise, which recognizes its investments at fair value in accordance with IAS 39 / IFRS 9, then such a mid-level parent company cannot prepare consolidated financial statements,

o if the investor is a subsidiary of an investment enterprise, which recognizes its investments at fair value in accordance with IAS 39 / IFRS 9, then such an investor cannot apply the equity method in accounting for its investments in joint ventures and associates,

o the investment enterprise is required to consolidate subsidiaries that provide ancillary services; however, if such a subsidiary is itself an investment entity, it is not consolidated.



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The amendment is effective for annual periods beginning on or after 01 January 2016. The parent company is not an investment enterprise and does not belong to a group incorporating any investment enterprises; therefore, the amendments do not affect the consolidated financial statements of the Group.

Standards and interpretations effective in the version published by the IASB, but not approved by the European Union, are presented below in the section on standards and interpretations that have not entered into force.

Application of a standard or interpretation before it comes into force No voluntary early application of any standard or interpretation has been used in the present consolidated financial statement.

The published standards and interpretations that have not entered into force for periods beginning on 01 January 2016 and their effect on the Group

By the day the present consolidated financial statement was prepared, the following new or amended standards and interpretations had been published, in force for annual periods after 2016:

• The new IFRS 9 “Financial Instruments: Classification and Measurement”

The new standard will replace the current IAS 39. The changes introduced by the standard in the accounting for financial instruments include primarily:

o other categories of financial assets used to determine the method for measurements of assets; the assets are allocated to a certain category, depending on the business model relating to the assets,

o new hedge accounting requirements reflecting a greater degree of risk management, o a new model for impairment of financial assets, based on the expected losses and causing the need

for faster recognition of costs in the financial result.

The standard is effective for annual periods beginning on or after 01 January 2018. The Group is in the process of assessing the effect of this standard on the consolidated financial statement. The Group expects that the impairment model will have an impact on the financial statements; however, it is not able yet to determine the amount of the impact.

• New IFRS 14 “Regulatory Deferral Accounts”

The new standard applies only to first-time adopters of IFRS, which operate in the industry sectors such supply of gas, electricity or water, where the prices are regulated by the government. The standard permits to continue to account for the revenue from such activities in accordance with its previous accounting policies, both on initial adoption of IFRS and in subsequent financial statements. The new regulations will not affect the Company's consolidated financial statements, since the Group already applies IFRSs. The standard is effective for annual periods beginning on or after 01 January 2016, but it will not be approved for use in the European Union.

• New IFRS 15 “Revenue from Contracts with Customers”

The new standard replaces the previous IAS 11 and IAS 18 to ensure a consistent revenue recognition model. The new five-step model will make the revenue recognition dependant on obtaining the control of the good or service by the customer. In addition, the standard introduces additional disclosure requirements and guidance on several specific issues. The Group has not yet finished to analyse the impact of the standard on the financial statements; however the preliminary estimates indicate that revenue recognition will not change significantly. The standard is effective for annual periods beginning on or after 01 January 2018.



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• Amendment to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”

The previous rules governing the accounting for loss of control over a subsidiary provided for recognition of profit or loss, as at that moment. In turn, the rules for applying the equity method stipulated that the result of transactions with entities measured using the equity method should be recognized only up to the value of shares of other shareholders in those entities.

In a situation where the parent company sells or makes an in-kind contribution in the form of shares in a subsidiary to an entity measured using the equity method in such a way that it loses control over it, the above-cited regulations would conflict with each other. The amendment to IFRS 10 and IAS 28 resolves this conflict as follows:

o if the entity over which control was lost constitutes a business, the result on the transaction is recognized in full,

o if the entity over which control was lost does not constitute a business, the result is recognized only to the amount of the unrelated investors’ interests.

The entry into force of this amendment has been stopped.

• New IFRS 16 “Leases”

The new standard regulating the lease agreements (including rental and lease agreements) provides for a new definition of the lease.

Significant changes relate to the lessees: the standard requires that the right to use the asset and the corresponding financial liability must be recognized in the balance sheet for each lease agreement. The right to use the asset is then depreciated, while the liability is measured at amortized cost. The standard provides for the simplification of short-term contracts (up to 12 months) and assets of low value.

The accounting treatment of leases by the lessor is similar to the principles set out in the current IAS 17.

The Group has not yet decided which of the transitional provisions available would be applied. The amendments are effective for annual periods beginning on or after 01 January 2019.

• Amendment to IAS 12 “Income Taxes”

The IAS Council has detailed the rules for:

o recognition of deferred tax assets in the event of unrealised losses, o estimation of future tax consequences in order recognise deferred tax assets.

The Group believes that the amendment of the standard will have no material effect on its financial statements.

The amendments are effective for annual periods beginning on or after 01 January 2017.

• Amendment to IAS 7 “Statement of Cash Flow”

The amended standard requires the entities to disclose information that will allow users of the financial statements to assess changes in the entity's debt (i.e. changes in loans and borrowings).

The Group expects that the amendment of the standard will entail the need for supplementing the disclosures with new data.


• Amendment to IFRS 2 “Share-Based Payment”



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The IAS Council has dealt with three issues:

o the accounting for cash-settled share-based payment transactions that include a performance condition;

o the classification of share-based payment transactions with net settlement features and o Accounting for modifications of share-based payment transactions from cash-settled to equity-

settled.

The Group believes that the amendment of the standard will have no effect on its financial statements, since no transactions covered by the amendments have taken place.


• Amendment to IFRS 4 “Insurance Contracts”

In connection with entry into force of the new standard concerning financial instruments (IFRS 9) in 2019, the IAS Council has introduced transitional provisions (until entry into force of the new standard concerning insurance contracts) for application of the new accounting policies in the insurers’ financial statements. Otherwise their results would be exposed to considerable volatility.

Two alternative approaches have been proposed:

o adjustment of the volatility caused by IFRS 9 for some assets under a separate item in the statement of income and other comprehensive income,

o exemption from the application of IFRS 9 until the entry into force of the new standard concerning the insurance contracts (or 2021).

The amendment of the standard will have no effect on the Company's financial statements, since the Group does not engage in insurance activity.

The amendments are effective upon application of IFRS 9.

• Amendments to IFRS 1, IFRS 12 and IAS 28 resulting from the “Exposure Draft for the 2014-2016 Annual Improvements Cycle”. Amendments to the standards include: o IFRS 1: deletion of certain short-term exemptions that were applied when transitioning to IFRS,

due to the fact that periods to which they related have passed and the exemptions no longer apply. The amendment will have no effect on the Group’s financial statements, since the Company has prepared the financial statements in accordance with IFRSs.

o IFRS 12: clarification that disclosures of interests in other entities required by this standard apply also where these interests are classified as held for sale in accordance with IFRS 5. The amendment will have no effect on the Group’s financial statements, since the Group does not classify interest as held for sale.

o IAS 28: clarification that in situations where IAS 28 allows the valuation of an investment either by equity method or at fair value (through venture capital organisations, mutual funds, etc. or shares in investment entities), that choice may be made separately for each such an investment. The amendment will have no effect on the Group’s financial statements, since the Group does not have the option to choose the method of measuring investments in associates and joint ventures at fair value.

The amendments will become effective for annual periods beginning on or after 1 January 2017 (IFRS 12) or 1 January 2018 (IFRS 1 and IAS 28).

• Amendment to IAS 40 “Investment Property”

The amendment clarifies the rules according to which the property is transferred to or from the category of investment property from or to fixed assets or inventories.



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First and foremost, such a transfer should only be made when there has been a change in use of the property and there is evidence of the said change in use. The standard clearly stipulates that a change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.

The amendment of the standard should be applied to all changes in use that occur after the entry into force of the amendment of the standard and to all investment properties held as of the effective date of the amendment.

The Group believes that the amendment of the standard will have no effect on its financial statements.


• New IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

The Interpretation specifies the rate to use be used for foreign currency transactions that include the receipt or payment of advance consideration in a foreign currency. According to the new interpretation, the advance consideration shall be recognised at the rate applicable at the date of its payment. Then, on the recognition of the profit and loss account of the income earned or the cost incurred or the asset purchased in a foreign currency, it shall be recognized at the exchange rate applicable as at the date of recognition of the advance consideration, rather than at the rate at which the income or the cost or the asset is recognized.

The interpretation is effective for annual periods beginning on or after 01 January 2018.

The Group intends to implement the above regulations within the times anticipated by the standards or interpretations.

9. Reassessment

Disclosures related to changes in estimates are presented in the respective notes to these statements.

10. Significant Accounting Policies

The consolidated financial statements have been prepared in accordance with the historical cost principle, except for land included in property, plant and equipment, investment property, derivative financial instruments and available-for-sale financial assets that are measured at fair value.

Presentation of financial statements The consolidated financial statements are presented in accordance with IAS 1.

The “Consolidated Statement of Comprehensive Income” is prepared by function, while the “Consolidated Cash Flow Statement” is prepared using the indirect method. In the event of retrospective changes in the accounting policies, presentation or correction of errors, the Group presents the statement of financial position prepared additionally as at the beginning of the comparative period if these changes are material for the comparative data presented as at the beginning of the comparable period. In such a situation, the presentation of notes to the third statement of financial position is not required.

Operating segments In differentiating operating segments, the Parent Company's Management Board considers product lines representing the main products supplied by the Group. Each segment is managed separately within a given product line, given the specific nature of the manufactured products requiring different technology, resources and approaches.



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In accordance with IFRS 8, the results of operating segments are derived from internal reports periodically verified by the Parent Company's Management Board. The Parent Company's Management Board analyses the results of the operational segments at the level of profit (loss) from operating activities. The measurement of the results of operating segments used in management calculations coincides with the accounting principles used in the preparation of the consolidated financial statements, except for the following areas:

• impairment of assets – when determining the segment results, impairment losses on fixed assets, including goodwill, are not taken into account,

Sales revenue disclosed in the consolidated statement of income does not differ from revenues presented under operating segments, except for revenues unallocated to segments and eliminations on consolidation relating to transactions between segments.

The Group's assets which cannot be directed allocated to the business of a given operating segment are not allocated to the assets of operating segments.

Rules of consolidation The consolidated financial statement includes the financial statement of the parent company and the financial statements of its subsidiaries drawn up for the year ending 31 December 2016. Control is understood as the ability to influence the financial and operating policy of a subsidiary to achieve economic benefits from its activities.

The financial statements of the parent company and the subsidiaries covered by the consolidated financial statement are prepared for the same balance day, i.e. 31 December. Where necessary, adjustments are made in the financial statements of subsidiaries to unify the accounting principles applied by the company with the principles applied by the Capital Group.

Companies whose financial statements are irrelevant from the point of view of the Capital Group's consolidated financial statements can be excluded from consolidation. Investments in subsidiaries classified as intended for sale is recognised in accordance with IFRS 5.

Subsidiaries are consolidated by the full method.

Full consolidation consists of combining the financial statements of the Parent Company and the subsidiaries by totalling up the full value of individual assets, liabilities, equity, revenue and costs. To represent the Capital Group in such a way as if it constituted a single economic entity, the following exclusions are made:

• on acquisition of control, goodwill or profit under IFRS 3 are recognized, • minority shareholders are defined as non-controlling shares and are presented separately, • accounts of settlements between companies in the Capital Group (revenue, costs, dividends) are

completely excluded, • profits and losses from transactions conducted within the Capital Group, recognised as inventory and

fixed assets in the balance, are excluded. Losses from transactions within the Group are analysed with regard to loss of asset value from the Group's perspective.

• deferred tax from transient differences resulting from exclusion of profits and losses achieved in transactions concluded within the Capital Group (in accordance with IAS 12).

Minority shares are shown as a separate item of equity capital and represent that part of the comprehensive income and net assets of subsidiaries, which belong to entities other than companies of the Capital Group. Group allocates the comprehensive income of the subsidiaries to the shareholders of the Parent Company and the entities controlling interests based on their share of ownership.

Transactions with non-controlling entities that do not result in loss of control by the Parent Company are treated by the Group as capital transactions:

• partial sale of shares to non-controlling entities — the difference between the sales price and the carrying amount of net assets of a subsidiary, attributable to the shares sold to the non-controlling entities, is recognized directly in equity under the retained earnings.



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• acquisition of shares from non-controlling entities — the difference between the purchase price and the carrying amount of net assets acquired from non-controlling entities is recognized directly in equity, in the retained earnings.

Business Combinations Business combinations covered by IFRS 3 are accounted for under the acquisition method.

On the acquisition date, the assets and liabilities of the acquiree are generally measured at fair value and, according to IFRS 3, assets and liabilities are identified, regardless of whether disclosed in the acquiree's financial statements prior to the acquisition.

The consideration paid in exchange for the control includes the assets, liabilities incurred and equity instruments issued, measured at fair value as at the acquisition date. An element of payment is also a contingent consideration, measured at fair value as at the acquisition date. The costs associated with the acquisition (consultancy, measurements etc.) do not represent a part of the acquisition consideration, but are recognized as the cost as of the acquisition date.

Goodwill (profit) is calculated as the difference of the two values:

• sum of the consideration paid for non-controlling interest (measured in proportion to the net assets acquired) and the fair value of the interest (shares) held in the acquiree prior to the acquisition date; and

• the fair value of the identifiable net assets acquired.

The surplus of the sum calculated as above over the fair value of the identifiable net assets acquired is disclosed in the assets of the consolidated statement of financial position as goodwill. Goodwill is equivalent to payments made by the acquiring company in anticipation of future financial benefits arising from the assets which cannot be individually identified or quantified. After initial recognition goodwill is calculated according to purchase price reduced by total write-offs due to impairment loss.

Where the aforementioned amount is lower than the fair value of the identifiable net assets acquired, the difference is immediately recognized. The Group includes profits from takeovers in the item other operating revenue.

Until 01 January 2010, the Group used the method of accounting for acquisitions as defined in IFRS 3 (2004).

In the case of mergers of companies under joint control, the Group does not apply the rules of IFRS 3, but instead settles such transactions by the share combination method as follows:

• assets and liabilities of the entity taken over are recognised in the balance. The balance is considered to be the value which was originally defined by the controlling entity, rather than the values resulting from the individual financial statement of the acquired company,

• intangible assets and contingent liabilities are recognised according to the principles applied by the entity before the merger, in accordance with the appropriate IFRS,

• no goodwill arises - the difference between the consideration paid and the acquired net assets of the controlled entity is recognized directly in equity under retained earnings,

• Non-controlling interests are measured in proportion to the carrying amount of the net assets of the controlled entity,

• comparative data is translated in such a way that the combination took place at the beginning of the comparative period. If the date when a subordinate relationship arose with a company is later than the beginning of the comparative period, the comparative data are presented from the moment when the relationship first arose.

Investment in associates Associates are those entities over which the Parent does not exercise control, but has a significant influence, by determining their financial and operating policies.

Investments in associates are initially stated at acquisition cost and subsequently accounted for using the equity method. On occurrence of the significant influence, goodwill is determined as the difference between the purchase price of the investment and the fair value of the net assets attributable to the investor.



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Goodwill is recognized in the carrying amount of the investment in associates.

The carrying amount of investments in associates is increased or decreased by:

• the share of the Parent Company in the result of the associate, • the share of the Parent Company in other comprehensive income of the associate, resulting from the

revaluation of tangible fixed assets and from foreign exchange differences on translation of foreign entities. These amounts are shown in relation to the relevant item of the “Consolidated statement of income and other comprehensive income”.

• profits and losses arising from transactions between the Group and the associate that are subject to exclusions in proportion to the interest held,

• proceeds from sharing of profit generated by the associate, which reduce the carrying amount of the investment.

The financial statements of the Parent Company and associates included in the consolidated financial statements using the equity method are prepared as at the same balance sheet date i.e. As at 31 December.

Fair value adjustment The Group measures the derivatives at fair value. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in a transaction carried out in the ordinary conditions of sale of an asset between market participants at the measurement date in the current market conditions. A fair value measurement assumes that the sale of an asset or transfer a liability occurs either:

- on the principal market for the asset or liability,

- in the absence of a principal market, on the most advantageous market for the asset or liability. Both the principal and the most advantageous market must be available to the Group. The fair value of an asset or a liability is measured on the assumption that market participants, when determining the price of an asset or liability, act in their best economic interest. The fair value of a non-financial asset takes into account the ability of a market participant to generate economic benefits through the biggest and best use of the asset or transfer to another market participant that would provide the greatest and best use of the asset. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to determine the fair value, with maximum use of relevant observable inputs and minimal use of unobservable inputs. All assets and liabilities that are measured at fair value or their fair value is disclosed in the financial statements are classified in fair value hierarchy as described below based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 - Quoted (unadjusted ) market prices on the active market for identical assets or liabilities,

- Level 2 - Valuation techniques for which the lowest level of input that is significant to the fair value measurement as a whole is directly or indirectly observable,

- Level 3 - Valuation techniques for which the lowest level of input that is significant to the fair value measurement as a whole is unobservable.

At each balance sheet date, in case of assets and liabilities existing at each balance sheet date in the financial statements, the Group assesses whether there have been any transfers between levels of the hierarchy by reassessing the classification of different levels, focusing significance on the input data at the lowest level, which is essential for the fair value measurement as a whole).

Summary of significant accounting policies and procedures relating to the fair value measurement.

The Vice–President of the Management Board for Financial Affairs of the Parent Company defines the rules and procedures for measurement of derivatives at fair value.



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The results obtained are compared with the measurement of instruments provided by financial institutions, and in the case of significant differences, the clarification process is implemented. Each quarterly change in fair value of derivative instruments during existence of a derivative is recognized in the accounts. For the purposes of the disclosure of the fair value measurement results, the Group has established classes of assets and liabilities based on the nature, characteristics and risks of particular components of assets and liabilities and the level in the fair value hierarchy as described above.

Conversion of items expressed in foreign currencies The consolidated financial statements are presented in Polish Zloty (PLN), which is also the functional currency of the Parent Company.

Transactions expressed in foreign currencies are converted to Polish zloty using the currency translation rates prevalent on the day the transaction is made. On the balance and date the assets and liabilities expressed in foreign currencies are converted to Polish Zlotys using the individual average currency exchange rates at the end of the reporting period as published by the National Bank of Poland. The resultant currency translation differences are recognised in the position of financial revenue (costs), or in situations subject to specific accounting principles, capitalised as the value of assets. Non-cash assets and liabilities recognised as historical cost expressed in foreign currency are presented at historical currency exchange rate on the day the transaction is made. Non-cash assets and liabilities recognised as fair value expressed in foreign currency are converted to fair value at the exchange rate prevalent on the day of conversion. Gains or losses arising from the translation of non-monetary assets and liabilities recognized at fair value are recognized in accordance with the recognition of gain or loss arising from changes in fair value (i.e. respectively, under other comprehensive income or under profit or loss, depending on where the change in fair value is recognized). The following currency exchange rates are adopted for balance valuation:

31 December 2016 31 December 2015 HKD 0.5387 0.5033

CZK 0.1637 0.1577

EUR 4.4240 4.2615

DKK 0.5951 0.5711

RUB 0.0680 0.0528

USD 4.1793 3.9011

GBP 5.1445 5.7862

UAH 0.1542 0.1622

The functional currencies of foreign subsidiaries are the currencies specified in Note 4. On the balance date the assets and liabilities of these international subsidiaries are converted to the Group's presentation currency at the exchange rates prevalent on the balance date and their statements of comprehensive income are converted at the average currency exchange rates for the reporting period. Currency translation differences from the conversion transactions are recognised under other total revenue and accumulated as a separate item of equity capital. When an international subsidiary is sold off, accumulated currency translation differences recognised in equity capital, relating to a specific foreign entity are recognised in profit or loss. Goodwill arising on the acquisition of a foreign entity and any adjustments related to the fair value measurement of assets and liabilities on the acquisition are treated as assets or liabilities of such a foreign entity and translated



27

at the average exchange rate set forth for a given currency by the National Bank Polish prevailing at the balance sheet date. The weighted average exchange rates for the respective financial periods were as follows:

31 December 2016 31 December 2015

HKD 0.5080 0.4867

CZK 0.1614 0.1534

EUR 4.3637 4.1843

DKK 0.5861 0.5610

RUB 0.0591 0.0621

USD 3.9435 3.7730

GBP 5.3405 5.7675

UAH 0.1543 0.1743

Property, plant and equipment Tangible assets are recognised at their purchase price or cost of production reduced by depreciation write-offs and write-offs due to the impairment loss. The initial value of fixed assets includes their purchase price increased by any costs directly associated with the purchase and adaptation of the asset to make it fit for use. This cost also includes the cost of replacement of machine or equipment components at the moment the costs are incurred, if recognition criteria are fulfilled. The costs incurred after the fixed assets are commissioned, such as costs of maintenance and repairs, debit the profit and loss account at the moment the costs are incurred. The purchase price of property, plant and equipment provided by the customers is measured at their fair value at the date of taking over control thereof. At the time of purchase, tangible assets are segregated into component parts of material value, to which a specific useful life can be applied. They include also part of the costs of major repairs. Depreciation is calculated using the linear method throughout the use period of a given asset component:

Type Period Buildings and structures 10 - 80 years Machines and equipment 3 - 50 years Means of transport 1 - 18 years Computers 1 - 5 years Leasehold improvements 5 - 15 years

The residual value, useful life and depreciation method are reviewed annually, if necessary – adjusted with effect from the next financial year. A fixed asset can be removed from the balance sheet when it is sold off or in the event when no economic benefits are expected from the continued use of such a fixed asset. Any profits or losses resulting from the removal of a given asset from the balance sheet (calculated as the difference between possible income from net sales and the carrying value of a given asset) are recognised in the profit and loss account for the period when such removal took place. The commenced improvements concern the assets under construction or assembly and are recognized at the purchase price or at the cost of manufacture, less any impairment losses. Tangible assets, which are under construction are not subject to depreciation until they are finalised and appointed to commence its useful life as a tangible asset.



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Investment property Investment property is recognised by its purchase price or cost of production, taking into account the cost of transaction. After initial recognition of the value of investment property it is reduced by depreciation and write-offs due to impairment loss. investment property is removed from the balance sheet when sold off or when a given investment property is permanently withdrawn from use, when no future benefits are expected from its sale. Any profits or losses resulting from the removal of investment property from the balance sheet are recognised in the profit and loss account for the period when such removal took place. Transfers of assets to investment property shall be made only when there is a change in the manner of their use, evidenced by ending the use of an asset by the owner or concluding of an operating lease agreement. If the asset occupied by the owner – Group – becomes an investment property, the Group applies the principles described in the Tangible fixed assets until change in the manner of use of such a property.

Fixed assets classified as designated for sale Fixed assets (groups of fixed assets) are classified by the Group as designated for sale if their balance will more likely be received from a sale transaction than from further use. This condition is only considered to have been met when an asset (asset group) is available in its current state for instant sale, keeping to the normal and customarily acceptable sales conditions, and the conduct of the transaction is highly probable within a year of the classification being changed. Non-current assets classified as held for sale are measured at the lower of carrying amount or fair value less costs to sell. Some fixed assets classified as designated for sale, such as financial deferred income tax assets are valued according to the same accounting principles as were applied by the Group before being classified as fixed assets designated for sale. Fixed assets classified as designated for sale are not subject to depreciation.

Intangible assets Intangible assets acquired separately or generated (if they meet criteria for development costs) are measured at initial recognition at the purchase price or at the cost of manufacture. The purchase price of intangible assets acquired by a transaction of a merger of business entities is equal to their fair value on the day of merger. After an initial recognition, intangible assets are recognised at their purchase price or cost of production reduced by depreciation and write-offs due to impairment loss. Expenditure on intangible assets developed by the company, excluding capitalised expenditure on development work, is not capitalised and is recognised in the cost of that period and in which this expenditure was incurred. The Group determines if the period of use of intangible assets is limited or unlimited. Intangible assets with limited period of use are subject to depreciation throughout their use and tests for impairment loss if there are any circumstances which would suggest that impairment loss has occurred. The period and the method of calculating depreciation of intangible assets with limited period of use are verified at least at the end of each financial year. Changes in the expected useful life or the expected method of consumption of economic benefits arising from a given asset component are recognised as change of the period or the depreciation method and are treated as changes to estimated values. A depreciation write-off of intangible assets with a limited useful time is recognised in profit and loss account in the category which reflects the function of a given intangible assets component. Intangible assets with an undefined useful time and those which are not in use are verified every year for possible impairment loss with relation to individual assets or to the cash generating centre. Useful life is verified every year and if necessary adjusted effective as of the next financial year.

Costs of research and development

Research costs are recognized under profit or loss, when incurred. Expenditures incurred for development works within the framework of a specific project are carried forward to the next period, if it can be deemed that they



29

would be recovered in the future. After the initial recognition of the development expenditures, the historical cost model is applied requiring the assets to be recognized at the purchase price/manufacturing costs less any accumulated amortization and accumulated impairment losses. Capitalized expenditures are amortized over the expected period of obtaining revenue from the sale of the project.

Summary of principles applied to Group's tangible assets is as follows:

Patents and licenses Costs development work

Computer software

Other – Copyright

Intangible assets being developed

Periods of use

Indefinite. For patents and licenses used under an agreement concluded for a definite period, the period of

the agreement plus additional period for which its use can be extended is

assumed.

1 to 5 years 3 to 11 years 5 years -

Depreciation method used

Assets with an indefinite useful life are neither amortized nor revalued. 1 - 5 years with the

linear method

3 - 11 years with the linear

method

5 years

- They are amortized over the term of the contract (3-10 years) – with the

linear method.

Developed internally or purchased

Purchased Developed internally Purchased Purchased Purchased and

developed internally

Impairment loss test

Indefinite useful life – annual test or

if there are any indications of impairment.

Annual test in the case of assets not commissioned for use and if there are any indications of

impairment.

Annual test if there are reasons to

believe that impairment

loss has occurred.

Annual test if there are

reasons to believe that impairment

loss has occurred.

Annual test if there are

reasons to believe that impairment

loss has occurred.

For the remaining – an annual assessment if there are any indications of impairment.

Any profits or losses resulting from removal of intangible assets from the balance sheet are evaluated as the difference between the net revenue from sales and the carrying value of a given asset component and are recognised in the profit and loss account at the moment of removal from balance sheet.

10.11.1. Goodwill Goodwill on acquisition of the entity is initially measured at the purchase price being the excess • over the sum of:

◦ the consideration paid, ◦ the amount of any non-controlling interest in the acquired entity and ◦ in case of a business combination achieved in stages, the fair value at the acquisition date of the share

capital of the acquired entity, previously held by the acquiring entity. • over the fair value set out as of the date of acquisition of the identifiable assets acquired and liabilities

assumed.



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After initial recognition, goodwill is disclosed at the purchase price reduced by any cumulated write-offs due to impairment loss. The impairment test is performed annually or more frequently if there are indications to do so. Goodwill is not subject to depreciation. At the acquisition date, any goodwill acquired is allocated to units, or groups of cash generating units, which can benefit from the combination synergy. Each unit or group of units to which goodwill has been allocated: • represents the lowest level within the Group at which goodwill is monitored for internal management

purposes and • for the most part, comprises several operating segments, given the inability to allocated them to one

segment. An impairment loss is determined by assessing the recoverable amount of the cash-generating unit to which goodwill is allocated. Where the recoverable amount of the CGU is less than its carrying value, the Company recognizes an impairment loss. Where goodwill forms part of a cash generating unit and there is a sale of part of the operations within that unit, when determining the gain or loss on disposal, the goodwill associated with the operations disposed of is included in its carrying amount. In such circumstances, the goodwill sold is determined based on the relative value of the operations disposed of and the remaining part of the cash generating unit.

Lease Group as a Lessee: Finance leases, which transfer substantially all the risks and rewards incidental to ownership of the leased item to the Group are recognized in the balance sheet at the inception of the lease at the lower of the following two values: fair value of the leased fixed asset or the present value of the minimum lease payments. The lease rent is divided into financial costs and reduction of the lease liability balance in a way that enables obtaining a fixed interest rate from the remaining liability. Finance charges are recognized under profit or loss, unless the capitalization requirements are met. Fixed assets used under finance leases are depreciated over the shorter of the two periods: estimated useful life of a fixed asset or the lease term. Lease contracts according to which the lessor keeps the whole risk and all benefits from ownership of the object of lease are considered operating lease contracts. Lease payments under an operating lease and subsequent lease payments are recognized as expenses in the profit or loss on a straight-line basis over the lease term. Contingent lease payments are recognized as costs in the period in which they become due.

Impairment loss of non-financial fixed assets At each balance sheet date, the Group assesses whether there is any indication of impairment of any of the non-financial fixed assets. If any such indication exists, or in case an annual impairment test is required, the Group estimates the recoverable amount of an asset or cash-generating unit to which such an asset belongs. The recoverable amount of an asset or cash-generating unit reflects the fair value less costs to sell the asset or the cash-generating unit respectively, or its value in use, depending on which one is higher. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those generated by other assets or groups of assets. If the carrying amount of an asset exceeds its recoverable amount, there is an impairment loss and a write-down to the specified recoverable amount is made. In assessing value in use, the forecast cash flows are discounted to their present value using a discount rate before tax that reflects the current market assessment of the time value of money and the risks specific to such an asset. Write-downs for impairment of assets used in continuing operations are recognized in those expense categories, which are consistent with the function of an asset, for which impairment has been identified. At each balance sheet date, the Group assesses whether there is any indication that an impairment loss hat was recognized in previous periods for a particular asset might no longer exist or might have decreased. If any such indication exists, the Group estimates the recoverable amount of the asset. A previously recognized impairment loss is reversed if and only if there is a change in the estimates used to determine the recoverable amount of the asset since recognition of the last impairment loss. In this case, the carrying amount of the asset is increased to its recoverable amount. An increased amount must not exceed the carrying amount that would have been determined (net of depreciation), had an impairment loss been not recognized in previous years in respect of that asset. A reversal of an impairment loss for an asset is recognized immediately as revenue. After a reversal of an



31

impairment loss, in subsequent periods, the amortization charge for the asset is adjusted in a way that over the remaining useful life of the asset allows systematic depreciation of its revised carrying amount, less its residual value.

Borrowing costs Borrowing costs are capitalized as part of the cost of manufacture of fixed assets, investment property and intangible assets. Borrowing costs include interest calculated using the effective interest rate method .

Financial assets Financial assets are divided into the following categories: • Financial assets held until due date, • Financial assets measured at fair value through profit or loss category, • loans and receivables • financial assets available for sale, Financial assets held to maturity are quoted on the active market. Financial assets are non-derivatives with fixed or determinable payments and fixed maturities that the Group has the intent and ability to hold until maturity, other than: • designated upon initial recognition as measured at fair value through profit or loss, • designated as available for sale, • qualifying as loans and receivables. Financial assets held until due are valued by a depreciated cost using the effective interest rate method. Financial assets held until due are classified as non-current assets, provided that their due date exceeds 12 months from the balance date. A financial asset measured at fair value through profit or loss is a financial asset that satisfies either of the following conditions: • is classified as held for trading. Financial assets are classified as held for trading if they are:

- acquired principally for the purpose of sale in the short term,

- part of the portfolio of identified financial instruments that are managed together and for which there is evidence of current profit,

- derivatives, except for derivatives constituting part of hedge accounting and financial guarantee agreements, • was, in accordance with IAS 39, classified into this category upon initial recognition. The financial assets measured at fair value through profit or loss are measured at fair value taking into account their market value at the balance sheet date, without taking into account the transaction costs. Changes in the value of these financial instruments are recognized in the profit and loss account as revenue (positive net changes in the fair value) or financial costs (negative net changes in the fair value). If a contract contains one or more embedded derivatives, the whole contract may be classified as financial assets measured at fair value through profit or loss. This does not include cases where the embedded derivative does not significantly modify the cash flows from the contract or it is clear without any or after a superficial analysis that if a similar hybrid instrument was first considered, the separation of the embedded derivative would be prohibited. Financial assets may be, at the initial recognition, classified as measured at fair value through profit or loss, if the criteria set below are met: (i) such a classification eliminates or materially decreases the incoherence of the recognition or measurement (accounting mismatch); or (ii) assets are a part of a group of financial assets which are managed and evaluated on the basis of fair value, according to the documented risk management strategy; or (iii) financial assets contain embedded derivatives which should be recognized separately. As at 31 December 2016, no financial assets were classified to the category of assets measured at fair value through profit or loss (as at 31 December 2015: zero). Loans and receivables are non-derivative financial assets with determined or determinable payments that are not quoted on the active market. They are stated in current assets unless their due date exceeds 12 months from the balance sheet date. Loans granted and receivables with the maturity period longer than 12 months from the balance sheet date are recognised as fixed assets.



32

Financial assets available for sale are non-derivative financial assets which were classified as available for sale or not belonging to any of the three categories of assets mentioned earlier. Financial assets available for sale are recognized at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. In the event of a lack of share market quotations on an active market and the inability to reliably define their fair price using alternative methods, the financial assets available for sale are valued as per purchase price less their value depreciating write-offs. The positive or negative difference between the fair value of financial assets available for sale (if their price is determined on the market or whose fair value can be measured in a reliable manner) and their purchase price, net of deferred tax, shall be recognized in other comprehensive income. A reduction in the value of assets available for sale as a result of an impairment loss is recognised as the financial cost. The purchase and sale of financial assets is a recognised on the day the transaction is made. Upon initial recognition, financial assets are measured at fair value plus – in the case of assets not classified as measured at fair value through profit or loss – transaction costs that are directly attributable to the acquisition. A financial asset is removed from the balance sheet when the Group loses its control over contractual rights incorporated in a given financial instrument. Typically this occurs when financial instrument is sold or when all cash flows associated with a given instrument are transferred to an independent third party. In a situation, when the Group:

• holds a legally enforceable right to offset the recognized amounts and • intends to settle on a net basis or simultaneously realize the asset and settle the liability.

financial assets and financial liabilities are set off and presented in the statement of financial position on a net basis.

• The Framework Agreement described in IAS 32.50 does not constitute grounds for the set-off, if both criteria described above are not met.

Impairment loss of financial assets At each balance sheet date, the Group assesses whether there is objective evidence that a financial asset or group of financial assets are impaired.

10.16.1. Assets disclosed at amortized cost If there is objective evidence that a loss has occurred due to impairment of loans granted and receivables measured at amortized cost, the amount of impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses on irrecoverable receivables that have not been incurred yet), discounted at the original (i.e. determined upon initial recognition) effective interest rate. The carrying amount of the assets is reduced through the use of allowance account. The amount of the loss is recognized in profit or loss. The Group first assesses whether there is objective evidence of impairment of particular financial assets that are individually significant, and the evidence of impairment of financial assets that are not individually significant. If the analysis shows that there is no objective evidence of impairment for an individually assessed financial asset, regardless of whether it is significant or not, the Group shall include the asset in a group of financial assets with similar credit risk characteristics and collectively assesses impairment thereof. Assets that are individually assessed for impairment and for which an impairment loss is or was recognized or it was found that the current write-off should not change, are not taken into account in the collective assessment of assets for impairment. If, in the next period, the impairment loss decreases and the decrease can be objectively related to an event following the impairment loss recognition, then the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in profit or loss, insofar as at the reversal date the carrying amount of the asset does not exceed its amortized cost.

10.16.2. Financial assets carried at cost Should there be any objective premises implying impairment loss on a non-listed equity instrument not stated at its fair value, since the fair value cannot be reliably determined, or a derivative instrument being correlated and needs to be accounted for by means of a delivery of such a non-listed equity instrument, then the amount of the write-off for impairment is determined as a difference between the carrying amount of the financial asset and the



33

present value of the future estimated cash flows discounted at the market rate of return for similar financial assets.

10.16.3. Financial assets available for sale Should there be any objective premises implying impairment loss on financial assets available for sale, the amount of the difference between the purchase price of the asset (net of any principal debt repayment and depreciation) and its current fair value, less any impairment loss on that asset previously recognized in profit or loss is removed from equity and recognized in profit or loss. Reversals of impairment losses on equity instruments classified as available for sale cannot be recognized in profit or loss. If in a subsequent period, the fair value of a debt instrument available for sale increases and the increase can be objectively related to an event occurring after the impairment loss recognition in profit or loss, the amount of the reversed impairment loss is recognized in profit or loss.

Embedded derivatives Embedded derivatives are separated from contracts and accounted for as derivatives if the following conditions are met: • the economic characteristics and risks of an embedded derivative are not closely related to the economic

characteristics and risks of the contract in which the instrument is embedded; • a separate instrument with the same terms as embedded derivative would meet the definition of a derivative; • a hybrid (combined) instrument is not measured at fair value and changes in fair value are not recognized in

the net profit or loss. Embedded derivatives are recognized in a similar way as other derivative instruments that are not designated as hedging instruments. The extent to which, in accordance with IAS 39, the economic characteristics and risks specific to the embedded derivative in a foreign currency are closely related to the economic characteristics and risks of the host contract (main contract) also covers the situations where the currency of the host contract is commonly used in contracts for purchase or sale of non-financial items in the market for a given transaction. The Group shall assess whether an embedded derivative should be separated upon its initial recognition. In the case of embedded derivatives acquired in a business combination transactions, the Group measures the embedded derivatives at the date of the combination, which is the date of their initial recognition by the Group.

Derivative financial instruments and hedging instruments Derivative instruments used by the Group to hedge the risks associated with interest rate and foreign currency exchange rate fluctuations include primarily forward exchange contracts, interest rate swaps and currency interest rate swaps. Such derivative financial instruments are measured at fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when the fair value is negative. Gains and losses arising from changes in fair value of derivatives that do not qualify for hedge accounting are moved directly to profit or loss in the financial year. The fair value of forward foreign exchange contracts is calculated by reference to current forward exchange rates (forward) in contracts with similar maturity profiles. The fair value of interest rate swaps is determined based on a valuation model taking into account observable market data, including in particular the current term interest rates. In hedge accounting, hedges are classified as: • fair value hedges against the exposure to changes in fair value of a recognized asset or liability, or • cash flow hedges against exposure to variability in cash flows that can be attributable to a particular risk

associated with a recognized asset, liability or future transaction or • Hedges of net investments in foreign operations The hedging of currency risk of the firm commitment is accounted as the cash flow hedge. On inception of the hedge, the Group formally designates and documents the hedge relationship as well as the risk management objective and hedge inception strategy. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the hedged risk and the method of assessing



34

hedge effectiveness in offsetting the exposure to changes in fair value of the hedged item or cash flows attributable to the hedged risk. It is expected that the hedge will be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk. Effectiveness of the hedge is assessed on an ongoing basis to determine whether it is highly effective in all the financial reporting periods for which it was established.

10.18.1. Fair value hedge A fair value hedge is a hedge against changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. In the case of fair value hedges, the carrying amount of the hedged item is adjusted for gains and/or losses arising from changes in fair value attributable to the hedged risk, the hedging instrument is measured at fair value and gains and losses on the hedging instrument and the hedged item are recognized in profit or loss. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit or loss. Changes in the fair value of the hedging instrument are also recognized in profit or loss. The Group discontinues hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the hedging relationship. Any adjustment to the carrying amount of a hedged financial instrument to which the amortised cost method applies, is amortized and the amortization is recognized in profit or loss. Amortisation may begin as soon as an adjustment, but no later than when the hedged item is ceased to be adjusted for changes in fair value attributable to the hedged risk.

10.18.2. Cash flow hedge A cash flow hedge is a hedge against the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss. Part of the profit or loss on the hedging instrument that is an effective hedge is recognized in other comprehensive income and the ineffective portion is recognized in profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses that were recognized in other comprehensive income and accumulated in equity are transferred to profit or loss in the same period or periods during which the assets acquired or liabilities assumed affect the profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment to which hedge of the fair value is to be applied,

• the gains or losses that were recognized in other comprehensive income are transferred to profit or loss in the same period or periods during which the assets acquired or liabilities assumed affect the profit or loss.

The Group discontinues hedge accounting when the hedging instrument expires or is sold, its use was terminated or it was exercised, or when a hedge no longer meets the conditions for applying the hedge accounting. In this case, the cumulative gain or loss on the hedging instrument that were recognized in other comprehensive income and accumulated in equity, are still recognized in equity until the forecast transaction occurs. If the Group no longer expects the forecast transaction to occur, then the total profit or loss accumulated in equity are recognized in net profit or loss for the current period.

10.18.3. Hedges of net investments in foreign operations Hedges of net investment in foreign operations, including a hedge of a monetary item accounted for as a part of the net investment, are accounted for similarly to cash flow hedges. Gains or losses on the hedging instrument attributable to the effective portion of the hedge are recognized in other comprehensive income while any gains or losses relating to the ineffective portion of the hedge are recognized in profit or loss. On disposal of foreign operations, the amount of gains or losses recognized in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment.



35

Inventory Inventories are valued at the lower of the two values: the purchase price / the cost of manufacture and the realizable net selling price. The purchase price or the cost of manufacture of item of the inventories includes all costs of purchase, costs of processing and other costs incurred in bringing the inventories to their present location and condition – both for the current and previous years – and are determined as follows: Materials: - at purchase price determined according to the "first in-first out" rule. Finished products and work in progress

- Direct material and labour costs and suitable mark-up of indirect production costs established based on normal use of production capacity, excluding external financing costs.

Goods - at purchase price determined according to the "first in-first out" rule.

Obtainable net sales price is the estimated sales price established as a part of normal business reduced by the cost of finishing the product and estimated costs necessary to finalise the sales transaction.

Receivables from deliveries and services and other receivables. Receivables from deliveries and services are recognized and carried at original invoice amount less an allowance for doubtful receivables. Allowance for doubtful debts is recognized when collection of the full amount is no longer probable. If the impact of time value of money is substantial, the receivables' value is defined by discounting the forecast future cash flow do the current value. Discount rate reflecting current market time value of money evaluation is used. If a discounting method had been used, the increase of receivables resulting from the passing of time is presented as financial revenue. Other liabilities include, in particular, advance payments for future purchases of inventory and services. Advances are presented in accordance with the nature of the assets to which they refer – as fixed assets or current assets respectively. As non-monetary assets, advance payments are not subject to discounting. Budget receivables are presented under other non-financial assets, excluding corporate income tax receivables, which are presented as a separate item in the balance sheet. The Group applies factoring agreements in relation to the selected groups of trade receivables. Receivables are classified by the Group as covered by the factoring agreement upon acceptance of individual items by the Factor accordance with the agreement for payment.

Cash and equivalents Cash and current investments presented in the balance sheet include cash in bank accounts and in the cash register as well as current investments with an initial maturity date of not more than three months.

Interest bearing bank loans, borrowings and debentures. On initial recognition all bank loans, borrowings and debentures are formulated according to their fair value reduced by costs related to acquiring the loan. After initial recognition debentures, bank loans and borrowings subject to interest are priced according to depreciated cost with the use of the effective interest rate method. On defining the depreciated costs related to the acquisition of the loan as well as discounts and premiums obtained on settlement of the liability are taken into consideration. Revenues and expenses are recognized in profit or loss on deletion of a liability from the balance sheet and as a result of recognition using the effective interest rate method.



36

Liabilities from deliveries and services and other liabilities. current receivables for deliveries and services are calculated at the value requiring payment due to the insignificant effect of the discount. The financial liabilities measured at fair value through profit or loss include financial liabilities held for trading and financial liabilities initially classified as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near future. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial liabilities may be, at the initial recognition, classified as measured at fair value through profit or loss, if the criteria set below are met: (i) such a classification eliminates or materially decreases the incoherence, where both, the measurement and the principles for recognition of loss or profit are subject to other regulations; or (ii) liabilities are a part of a group of financial liabilities which are managed and evaluated on the basis of fair value, according to the documented risk management strategy; or (iii) financial liabilities contain embedded derivatives which should be recognized separately. The financial liabilities measured at fair value through profit or loss are measured at fair value taking into account their market value at the balance sheet date, without taking into account the transaction costs. Changes in the fair value of these instruments are recognized in profit or loss as financial income or expenses. Other financial liabilities which are not financial instruments evaluated by their fair value in the financial result are evaluated by depreciated cost using effective interest rate method. The Group excludes a financial liability from its balance sheet only when this liability expires, i.e. when contractual obligation has been fulfilled, discontinued or has expired. Replacement of an existing debt instrument by an instrument subject to substantially different terms, between the same parties, is treated by the Group as the derecognition of the original liability and the recognition of a new liability. Similarly, significant modifications of the terms and conditions of a contract related to an existing financial liability is recognized as the derecognition of the original and the recognition of a new liability. The differences in the respective carrying amounts resulting from the change are recognized in profit or loss. Other non-financial liabilities include in particular liabilities towards tax authorities on account of the goods and services tax, corporate income tax, personal income tax, social security liabilities and liabilities from advance payments received, which will be settled by the supply of products, goods, materials or services. Other non-financial liabilities are recognized at the amount payable. In relation to certain suppliers, the Group applies reverse factoring agreements ("supply chain financing"). Trade payables are reclassified to other liabilities after acceptance of payments by the financial institutions acting as parties to the factoring agreements.

Provisions The provisions are created when the Group has an obligation (legal or otherwise) resulting from past events or when it is probable that fulfilment of such obligation will cause outflow of economic benefits and the amount of such obligation can be reliably assessed. If the Group expects that costs covered by the reserve will be recovered, for instance pursuant to insurance policy, then such recoverable value is recognised as a separate asset component, but only when it is absolutely certain that the value will be indeed recovered. The expenses relating to specific provisions are presented in the statement of comprehensive income less of any reimbursements. In the event that the influence of the value of money is significant at the time, the amount of provisions is established by discounting the expected future cash flow to the current value using the discount rate which reflects current market estimations concerning the value of money at the time and any risk which may be associated with the given liability. If a discounting method had been used, the increase of the reserve resulting from the passing of time is presented as a financial costs.

Employee benefits Under the Group's remuneration schemes, the Company's employees are entitled to retirement bonuses. Retirement packages are issued as a once-off payment at the time of retirement. The amount of pension benefits is dependent on the period of employment and the employee's average remuneration. The Group recognizes a provision for future liabilities for retirement bonuses and jubilee awards to assign costs to the periods to which



37

they relate. Pursuant to International Accounting Standard 19 retirement payments are specific benefits after termination of employment. The present value of these liabilities for each balance sheet date is calculated with the use of the Company's in-house tool and verified by the actuary every few years. The accrued liabilities concern the period until the balance date and are equal to the discounted payments to be made in the future, taking into account the change of probability of payments. Demographic information and information on employment turnover is based on historical data. Re-measurement of liabilities due to employee benefits relating to defined benefit plans including actuarial gains and losses is recognized in other comprehensive income and is not subject to subsequent reclassification to profit or loss. The Group recognizes the following changes in net liabilities due to defined benefit plans respectively within the own cost of sales, general and administrative expenses and the sales expenses, which include: • the labour costs (including, among others, the current service costs, past service costs) • net interest on the net liability for defined benefit plans.

Deferred charges and accruals The Group discloses the prepaid expenses related to future reporting periods, including mainly rental rentals, in the assets under “Accruals and deferred income”.

“Deferred charges”, under liabilities, include deferred income, including cash received for financing fixed assets that are accounted for in accordance with IAS 20 “Government Grants”. Accrued expenses are recognized under “Trade and other payables”.

Revenue Income is presented as a value, at which it is possible for the Group to gain economic profits related to a given transaction and in circumstances in which the income value can be reliably assessed. Revenues are recognized at the fair value of the consideration received or receivable, net of value added tax (VAT) as well as rebates. Also the criteria listed below concern revenue presentation.

10.27.1. Sales of goods and products Revenue is presented if substantial risk and benefits from the ownership of the products and goods have been passed to the purchaser and the revenue value can be reliably assessed.

10.27.2. Interest Interest revenue is presented successively as it grows (with consideration of the effective interest rate method, which defines the discount rate for future cash revenue during the estimated financial instruments usage period) in relation to the balanced net value of a given element of the financial assets.

10.27.3. Dividends Dividends are presented when shareholders or stockholders receive a right to them.

10.27.4. Revenue from lease (operating lease) Revenue from renting investment properties is recognised using linear method throughout the rent period based on agreements in force.

10.27.5. Government subsidies If there is a justified certainty that a subsidy will be won and that all requirements related to it will be met, government subsidies are presented by their fair value. If a subsidy is related to a cost item, it is presented as income proportionally to costs which the subsidy is supposed to compensate. If a subsidy is related to an element of the assets, its fair value is presented in the future revenue account, and then, gradually, by equal annual write-offs, added to the profit and loss account throughout the estimated period of usage of an element of assets related to it.



38

Tax

10.28.1. Current income tax Payables and receivables on account of the current tax for current and past periods are measured at the amounts expected to be paid to the tax authorities (recoverable from tax authorities) applying the tax rates and tax laws that are legally or substantively enacted at the balance sheet date.

10.28.2. Deferred tax For financial reporting purposes, deferred tax is calculated using the liability method in respect of temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts disclosed in the financial statements. Provision for deferred tax is expressed in relation to all positive transitional differences: • except when provision for deferred tax arises as a result of initial recognition of business value or initial

recognition of the asset or liability during transaction not constituting a merger of business entities at the time of it taking place, which does not affect the gross profit, nor the taxable income or taxable loss, as well as

• in a case of transitional positive differences which arise as a result of investments into a subsidiary or associated company and participation in joint ventures – with the exception of cases when the transitional due dates are reversed and are subject to investor’s audit and when it’s probable that in the foreseeable future the transitional differences will not be reversed.

Deferred tax assets are recognised for all deductible temporary differences, unused tax allowances, and carry-forward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, assets, and carry-forward of unused tax losses can be utilized • except when assets from deferred taxes concerning negative transitional differences are created as a result of

initial entry of the asset or liability at the time of the transaction, which does not constitute the merger of the business entities and at the time of it taking place and they do not have any effect on the gross financial result nor on the taxable income or loss.

• For negative transitional differences as a result of investments in a subsidiaries or affiliated entities as well as participation in joint ventures, the assets from deferred tax are presented on the balance sheet only in the amount that is probable in the foreseeable future that the above mentioned transitional differences will reverse and such an income will be achieved, which will allow deduction of the negative transitional differences.

The carrying value of the asset from deferred tax is verified as of each balance date and is subject to a respective reduction by the amount, which reflects the unachievable taxable income thought to be probable, which would allow a partial or full utilisation of the asset from deferred income tax. An unrecognised deferred tax asset is re-assessed as at each balance sheet date, and recognised up to the amount which reflects the probability to derive in future such taxable income that will allow recovering the asset in question. The asset from deferred income tax and provisions for deferred tax are valued using tax rates, which as per assumptions will be effective at the time, when the asset or reserve will be utilised, adopting tax rates as the basis (and tax legislation) effective as of the balance date or such rates (tax legislation), which is known to be effective in the future on the balance date. The income tax on items registered outside profit and loss is recorded outside profit and loss: in other total income for items included in other total income or directly in the equity for items included directly in the equity. The Group offsets deferred income tax assets against deferred income tax liabilities provisions only and exclusively when it holds an enforceable title to offset receivables against current income tax liabilities, and when the deferred income tax is related to the same taxpayer and the same tax authority.

10.28.3. Goods and services tax (Value Added Tax) Revenues, expenses, assets and liabilities are recognised net of the amount of value added tax except: • where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation

authority, in which case value added tax is recognised as part of acquisition price of the asset or as part of the expense item as applicable, or



39

• receivables and payables that are recognized taking into account the amount of tax on goods and services. The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Net profit per share Net profit per share for each period is calculated by dividing the net profit allocated to shareholders of the Parent Company for the given period by the weighted number of shares in the given reporting period. The Group does not present diluted profit/loss per share, since there are no ordinary shares that could potentially dilute the results. The dilutive effect of the outstanding options is taken into account as additional share dilution.

11. Operating segments

Amica S.A. Group is a manufacturer and distributor of household appliances and its production activities are held in a single location in Wronki. For management purposes, the Group is organised in business units based on their products and services. The following operating segments are distinguished:

• Free-standing heating equipment segment includes free-standing cookers manufactured by Amica S.A.

• Built-in heating equipment segment includes built-in cookers and ovens manufactured by the Parent Company.

• Other heating equipment segment includes built-in hobs manufactured by the Parent Company. • Goods segment includes equipment imported for the purpose of resale, including refrigerators, washing

machines, microwave ovens, dishwashers and small appliances. None of the Group's operating segments have been combined with another segment to create the reporting segments. The accounting principles for the operating segments are the same as the accounting principles applied by the Company. The Management Board separately monitors business segment results in order to take decisions regarding allocation of resources, as well as to assess the effects of this allocation and the financial results. The basis for the assessment of performance is operating profit or loss, which in certain respects, are measured differently from operating profit or loss presented in the financial statements. Financing of the Group (including financial costs and revenues), certain operating expenses and income taxes are monitored at the Group level and are not allocated to the segments.



40

The table below presents the revenue and the results attributable to particular segments of activity for the year 2015 and for the year 2016 (in thousands of PLN).

For the period from 01/01/2016 to 31/12/2016

Free-standing heating

equipment

Built-in heating

equipment

Other heating

equipment Goods Other Total

Revenue from external clients 665,121 366,207 187,915 1,224,263 31,383 2,474,889

Own sales costs 438,524 235,585 117,958 877,115 22,993 1,692,175

Operating sector result 226,597 130,621 69,958 347,148 8,390 782,714 Operating expenses allocated to the segment 117,749 76,819 36,236 247,568 0 478,372

Operating sector result 108,848 53,802 33,722 99,580 8,390 304,342 Result from other operating activities and non-allocated costs

149,298

Group's operating profit 155,044

Result from financial activities -16,824

Group's gross profit 138,220

Obligatory result burden -29,741

Group's net profit 108,479

For the period from 01/01/2016 to 31/12/2015

Free-standing heating

equipment

Built-in heating

equipment

Other heating

equipment Goods Other Total

Revenue from external clients 674,605 349,805 151,140 877,920 35,198 2,088,668

Own sales costs 425,607 223,310 89,021 635,321 24,733 1,397,992

Operating sector result 248,998 126,495 62,119 242,599 10,465 690,676 Operating expenses allocated to the segment 126,871 67,015 29,527 196,775 0 420,188

Operating sector result 122,127 59,480 32,592 45,824 10,465 270,488 Result from other operating activities and non-allocated costs

123,835

Group's operating profit 146,653

Result from financial activities -23,402

Group's gross profit 123,251

Obligatory result burden -26,066

Group's net profit 97,185

Breakdown of the Group’s revenue by geographical area in thousands of PLN (geographical segmentation):

Year ended

31 December 2016 Year ended 31 December

2015 Sale of products and goods 2,382,911 1,990,695 Poland 731,184 698,303 East 418,533 357,952 North 221,553 199,757 South 170,964 148,273 West 840,677 586,410 Other sales, including: 91,978 97,973 -spare parts and materials 60,595 62,468 - services 31,383 35,505 TOTAL 2,474,889 2,088,668



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The above information on income is based on data on the registered offices of the Group's customers. Given the confidentiality of data, the Group does not present revenue from external customers by product type. The Group's customer base does not include actors, accounting for a turnover in excess of 10% of the Group's total revenue. The assets of the individual segment are monitored only at the level of tangible fixed assets and inventory, while reconciliation of these items to their carrying amounts is presented in the tables below. The majority of the fixed assets assigned and unassigned to segments is located in Poland.. Figure for the period from 01/01 to 31/12/2016

Total heating equipment Goods Other

Total allocated to the

segments Unallocated Total

Product inventories 66,415 204,731 - 271,146 - 271,146 Semi-finished product and work-in-progress inventories 6,980 - - 6,980 - 6,980

Inventories of materials 48,556 - - 48,556 - 48,556 Spare parts 0 - - 0 12,279 12,279 Total inventories 121,951 204,731 0 326,682 12,279 338,961 Total fixed assets and intangible assets 108,541 108,541 328,087 436,628

Figure for the period from 01/01 to 31/12/2015

Total heating equipment Goods Other

Total allocated to

the segments Unallocated Total

Product inventories 59,454 225,834 - 285,288 - 285,288 Semi-finished product and work-in-progress inventories 7,399 - - 7,399 - 7,399

Inventories of materials 43,876 - - 43,876 - 43,876 Spare parts 0 - - 0 10,368 10,368 Total inventories 110,729 225,834 0 336,563 10,368 346,931 Total fixed assets and intangible assets 177,733 177,733 237,360 415,093

12. Investment in associates

All Group investments in associates are accounted for using the equity method. The information on associates individually significant to the Group is presented below: The principal

place of business and the country

of registration

Nature of relationship

with the Group /

Business line

Share in the equity capital

Share in voting rights

31/12/2016

Carrying amount Fair value

SIDEME SA France commercial activities 39.29% 39.29% 7,656 7,656

Balance of investments 7,656 The principal financial figures of the individually significant associates are as follows:

as at 31/12/2016



42

Fixed assets 8,702 Current Assets 146,616 Total assets 155,318 Liabilities 139,838 Capitals 15,480 Total liabilities 155,318 Revenue from sales 370,282 Net profit (loss) on continued activities 1,047 Net profit (loss) 1,047 Other comprehensive income - Comprehensive income 1,047 Dividends paid to the Group -

13. Revenue and costs

Other operating revenue



EU subsidies 195 230 Compensation received, fines 6,670 4,690 Income from additional warranty 54 192 Surplus on inventory 743 648 Free shipments 1,681 762 Result on sale of financial assets 2,499 - Reversal of the provision for unjustified bonuses - 1,469 Other items 1,711 904 13,553 8,895

To identify the transactions related to other operating revenue by type – the Company adopted a criterion that the transaction value must exceed PLN 100,000. Transactions which do not meet this criterion are presented under other items.

Other operating costs



Loss on sales of non-financial fixed assets 3,802 1,392 Revaluation of warehouse 1,555 333 Gain on revaluation of receivables 5,329 7,006 Social activities and nursery costs 1,070 648 Costs associated with termination of employment 770 - Shortages and damage 410 1,058 Replacement of faulty equipment 100 156 Donations 732 855 Inventory scrapping 1,768 1,551 Creation of a provision for retirement benefits 801 208 Contributions to community organizations 685 406 Impairment loss on real estate * 7,000 7,500 Settlements with insurer - 534 Advance payments for non-completed deliveries 5,121 - Other operating costs 1,176 1,288 30,319 22,935

**The impairment loss on real property investments is described in Note 20.



43

Financial revenue



Interest revenue 933 1,218 Revenue from derivatives 4,197 7,498 Other 17 142 Total financial revenue 5,147 8,858

Financial costs



Interest on credit and loans 6,497 4,662 Interest on the bonds issued 3,309 523 Financial cost from factoring 4,553 5,576 Interest on other liabilities 609 588 Financial costs from financial leases 1,531 1,681 Costs of derivatives 1,630 7,176 Surplus of currency translation losses over gains 4,254 12,457 Total financial costs 22,383 32,663

Costs by type

Note Year ended 31 December 2016


Depreciation 13.6. 45,507 37,012 Use of materials and energy 670,318 602,426 Third-party services 200,593 187,184 Taxes and fees 24,245 26,367 Cost of employee benefits 13.7. 275,467 217,308 Other costs by type 225,368 223,678 Value of goods and materials sold 885,431 667,222

Total expenses by nature, including: 2,326,929 1,961,197 Items included in own cost of sales 1,692,175 1,397,992 Items included in cost of sales 266,443 214,580 Items included in general and administrative

expenses 344,461 315,403

Change in product inventory -15,063 -25,491 Cost of services for own needs -8,787 -7,731

Depreciation of tangible fixed assets and amortisation of intangible assets



Own sales costs 22,103 21,549 General administrative expenses 9,769 4,233 Cost of sales 13,635 11,229 Other - - Total amortisation of intangible assets and depreciation of tangible fixed assets 45,507 37,012

Cost of employee benefits Year ended Year ended



44

31 December 2016 31 December 2015 Remuneration 237,996 184,179 Cost of Social Security contributions 27,824 24,376 Cost of retirement benefits 81 - Other cost of employee benefits 9,566 8,752 Total cost of employee benefits 275,467 217,308

14. Income tax

Tax burdens The main elements of the tax burden for the years ended 31 December 2016 and 31 December 2015 are as follows: Year ended 31

December 2016 Year ended 31

December 2015 Recognized in profit or loss Current income tax Current debit due to deferred income tax 29,534 13,096 Adjustments of current income tax from previous years 0 0 Deferred income tax Associated with the occurrence and the reversal of transitional differences 207 12,970 Taxes recognised in the consolidated profit and loss account 29,741 26,066 Statement of changes in equity capital Current income tax Tax associated with the sale of own shares - - Tax burden disclosed in equity 0 0

Statement of comprehensive income Deferred income tax Tax on net profit /(loss) due to changes in the effective portion of cash flow hedges -233 -2,584

Tax on effective portion of cash flow hedges settled during the year 0 0 Tax benefit/(tax burden) disclosed in other comprehensive income -233 -2,584

Reconciliation of effective tax rate Reconciliation of income tax from gross profit before tax according to statutory tax rate, with income tax calculated according to the Group's effective tax rate for the years ended 31 December 2016 and 31 December 2015 is as follows:



Gross profit before tax 138,465 123,251 Tax at the statutory local tax rates applicable in the countries of offices of the related companies 40,837 23,009

Adjustments of current income tax from previous years -459 609 Tax associated with the use of previously unrecognised tax losses -1,211 0 Tax costs associated with costs not being permanently deductible costs 2,355 8,554 Adjustment of tax related to revenue not being permanently associated with the tax base -14,134 -3,351

Change in deferred tax related to temporary differences 4,501 -2,691 Deduction from income -70 -82 Other -2,078 18 Tax according to the effective tax rate of 21.42 % (2015:21.15 %) 29,741 26,066 Income tax (liability) recognized in the consolidated profit or loss 29,741 26,066

Deferred income tax Deferred income tax results from the following items:

Balance Statement of comprehensive income Total other income



45

31

December 2016

31 December

2015

31 December

2016

31 December

2015

31 December

2016

31 December

2015 Provisions from deferred taxes

Revenues recognized on a cash basis 2,551 184 22 -102 - -

IAS Amortization - difference in net value resulting from periods of use 5,407 4,893 445 155 - -

Provision – derivatives 4,598 6,397 -1,068 -1,242 -4,174 -1,479

Revaluation of tangible fixed assets 421 362 - - - -

Provision for investment allowance in 1997 439 460 -21 -21 - -

Asset from trademark disclosure 14,354 14,354

Other 2,610 2,121 -476 1,906 - -

Provisions from deferred taxes 30,380 28,771 -1,098 696 -4,174 -1,479

Deferred tax assets Provisions for jubilee awards and retirement bonuses 1,718 272 -331 -40 - -

Provisions for warranty repairs 3,262 3,479 521 -310 - -

Provisions for bonuses, royalties 7,004 4,822 9 -649 - -

SEZ eligible assets 0 0 9,994 - -

Derivatives 893 1,105 376 - 3,941 -1,105

Asset from trademark disclosure 32,238 34,926 2,688 2,688

Other 13,029 9,905 -1,958 591 - -

Deferred tax assets 58,144 54,509 1,305 12,274 3,941 -1,105

Debit due to deferred income tax - - 207 12,970 -233 -2,584 Assets / Net provisions for deferred tax, including:

Deferred income tax assets - continued operations 58,144 54,509 1,305 12,274 3,941 -1,105

Provision for deferred tax - continued operations 30,380 28,771 1,098 696 -4,174 -1,479

For all items of temporary differences between the carrying amounts and tax bases of assets and liabilities, deferred tax provisions or deferred tax assets were established.

15. Social assets and liabilities due to Company Social Provision Fund

Company Social Provision Fund Act of 4 March 1994 with subsequent amendments states that Company Social Provision Fund is established by Polish employers with more than 20 full-time employees. The Parent Company and some domestic subsidiaries have established such a fund and makes periodic allocations to it in the basic amount. The aim of the Fund is to finance social activities. The Group excluded the assets and liabilities of the fund, since they did not comply with the definition of assets and liabilities of the Group. The tables below show the analysis of assets, liabilities and expenses of the Fund.



Cash 198 274



46

Fund liabilities 199 338 Fund receivables - - Off-set balance -1 -64

Year ended Year ended 31 December 2016 31 December 2015

Impairment losses on the Fund in the accounting period 3,710 2,878

16. Profit per share

The basic profit per one share is calculated by dividing the net profit for the period allocated to the Group's ordinary shareholders by the weighted average number of issued ordinary shares appearing in the period. The Group holds no dilutive instruments. Profit and the number of shares used to calculate profit per share:


Net profit 108,479 97,185 Net profit allocated to ordinary shareholders, applied in calculation of diluted profit per share 108,479 97,185


Weighted average number of issued ordinary shares applied in the calculation of profit per share 7,775,273 7,775,273

Effect of dilution: - -

Stock options - -

Redeemable preference shares - - Adjusted weighted average number of ordinary shares used to calculate diluted earnings per share 7,775,273 7,775,273


Profit (loss) per ordinary share (PLN) 13.96 12.50



47

17. Dividends paid and proposed for payment

The dividend per share paid in July 2016 concerning the year 2015 amounted to PLN 4 per share (dividend paid for the year 2014 amounted to PLN 3 per share). The Management Board of Amica S.A. has recommended that the dividend to be paid in 2017 for the year 2016 shall amount to PLN 5.5 per share.

18. Tangible fixed assets

Land Buildings

and structures

Machines and

equipment

Means of transport

Other tangible assets:

Property, plant and equipment in production

Advance payments for

property, plant and equipment in production

Total fixed assets

As at 31/12/2016 Gross balance 3,844 156,496 223,618 26,527 106,828 13,550 16,744 547,607 Accumulated depreciation and adjustment write-offs 0 36,792 131,684 14,670 57,648

240,794

Net balance 3,844 119,704 91,934 11,857 49,180 13,550 16,744 306,813 Reclassified as fixed assets designated for sale. 0 Adjusted net balance 3,844 119,704 91,934 11,857 49,180 13,550 16,744 306,813

As at 31/12/2015

Gross balance 3,755 136,890 200,978 23,179 87,411 31,912 4,099 488,224 Accumulated depreciation and adjustment write-offs 0 33,493 113,979 12,018 52,200

211,690

Net balance 3,755 103,397 86,999 11,161 35,211 31,912 4,099 276,534 Reclassified as fixed assets designated for sale. 0 Adjusted net balance 3,755 103,397 86,999 11,161 35,211 31,912 4,099 276,534

Land Buildings Machines Means of Other tangible Property, plant Advance Total fixed



48

and structures

and equipment

transport assets: and equipment in production

payments for property, plant and equipment in production

assets

for the period from 01/01/2016 to 31/12/2016 Net carrying value as at 1.01.2016. 3,755 103,397 86,999 11,161 35,211 31,912 4,099 276,534 Acquisition of the Company - - - - - - - 0 Increases (purchase, production, leasing) - 20,037 22,726 6,016 10,601 50,157 12,645 122,182 Decreases (sale, liquidation (-) transfer to fixed assets) - -5,080 -3,470 -2,341 -4,210 -51,027 - -66,128 Other changes (reclassification, transfer, etc.) - 4,649 118 -16 12,741 -17,492 - 0 Depreciation in accordance with the depreciation plan (-) - -4,668 -17,790 -5,010 -9,250 - - -36,718 Depreciation write-offs for liquidated or sold assets. - 1,567 3,349 2,118 4,196 - - 11,230 Net exchange differences (+/-) 89 -198 2 -71 -109 - - -287 Net carrying amount as at 31/12/2016 3,844 119,704 91,934 11,857 49,180 13,550 16,744 306,813

for the period from 01/01/2016 to 31/12/2015 Net carrying value as at 1.01.2015. 3,671 90,142 74,613 6,875 30,243 18,151 8,621 232,316

Acquisition of the Company - - 233 2,407 2,623 - - 5,263

Increases (purchase, production, leasing) 84 20,523 27,323 5,308 10,103 83,848 - 147,189

Decreases (sale, liquidation (-) transfer to fixed assets) - -2,550 -13,486 -1,998 -8,806 -70,087 -4,522 -101,449

Other changes (reclassification, transfer, etc.) - -282 109 - -57 - - -230

Depreciation in accordance with the depreciation plan (-) - -5,577 -15,362 -2,979 -7,393 - - -31,311

Depreciation write-offs for liquidated or sold assets. - 1,140 13,498 1,551 8,645 - - 24,834

Net exchange differences (+/-) - 1 71 -3 -147 - - -78

Net carrying amount as at 31/12/2015 3,755 103,397 86,999 11,161 35,211 31,912 4,099 276,534



49

The carrying amount of plant and equipment as at 31 December 2016 under finance leases and leases with purchase option amounts to PLN 10,217 thousand (as at 31 December 2015: PLN 13,335 thousand). Land and buildings with the carrying amount of PLN 68,230 thousand (as at 31 December 2015: PLN 68,112 thousand) are subject to a registered pledge to secure bank loans granted to the Company (Note 29). The capitalized borrowing costs associated with the investment credit in the financial year ended 31 December 2016 amounted to: PLN 175 thousand - fixed assets under construction; PLN 10 thousand - intangible assets in development (in the year ended 31 December 2015: PLN 139 thousand – fixed assets under construction; PLN 37 thousand - intangible assets in development). The borrowing costs have been based on the market interest rates. As at 31 December 2016, the Group committed to incur capital expenditures for tangible fixed assets amounting to PLN 44,621 thousand. These amounts will be allocated for infrastructure development and upgrade of the cooker factory processes. As at the balance sheet date, all funds are in use. The Group has presented the amounts of the incurred contractual obligations for the acquisition of tangible fixed assets in Note 33.

19. Lease

Liabilities due to financial leasing agreements and leasing agreements with a purchase option

The most important financial lease agreements include the group of agreements associated with the lease of computer equipment. Computer equipment leasing agreements are concluded for a period of 2.5-3.5 years, after which the Group has the right to purchase the leased property. The Group does not exercise this right. Lease payments are based in most cases on a variable rate computed based on WIBOR. As at 31 December 2016 and 31 December 2015, future minimum lease payments under such agreements and the present value of net minimum lease payments are as follows:

31 December 2016 31 December 2015

Minimum fees Current fees Minimum fees Current fees

For a period of 1 year 9,516 8,416 10,269 9,038 For a period of 1 to 5 years 9,804 9,203 10,200 9,363 More than 5 years - - - - Total minimum lease payments 19,320 17,619 20,469 18,401 Minus financial costs 1,701 2,068 Running value of minimum lease payments, including: 17,619 - 18,401 -

Current - 8,416 - 9,038 Long-term - 9,203 - 9,363

Land Buildings

and structures

Machines and

equipment

Means of transport

Other tangible assets:

Property, plant and

equipment in production

Total

As at 31/12/2016 Gross balance - - 20,396 12,682 170 - 33,248 Accumulated depreciation and adjustment write-offs - - 10,179 5,339 111 - 15,629

Net balance - - 13,335 7,343 446 - 17,619 As at 31/12/2015 Gross balance - - 21,852 6,804 866 - 29,522 Accumulated depreciation and adjustment write-offs - - 8,516 2,185 420 - 11,121

Net balance - - 13,335 4,619 446 - 18,401



50

20. Assets classified as designated for sale

The value of assets held for sale as at the balance sheet date amounted to PLN 10,657 thousand (cf. PLN 10,167 thousand as at 31/12/2015) and corresponds to the market value of the property. The impairment loss recognized as at 31/12/2016 amounted to PLN 490 thousand. In 2015, pursuant to a preliminary contract for sale of the property, whereby the contract was to be completed by 31/12/2015, the property was classified as an asset held for sale. In 2016, the Subsidiary's Management Board received information that prior to the finalization of the contract, additional actions would be required to complete the contract, so the finalization of the contract was postponed to Q1 2018. It has not changed the intention to sell the property. The Management Board decided that the circumstances disclosed justify extending the period of holding the property as an asset for sale.

21. Investment property

The investment property includes: • Real property located in Gorzów Wielkopolski include a shopping centre and a part of a logistics centre. • The property located in Wronki includes the sports facilities.

Changes in the balance during the reporting period were as follows:



Opening balance as at 01 January 2016 37,614 57,044 Changes: - sale of investment in real estate - -866 - capitalised expenditure 172 581 - reclassified as assets available for sale - -10,167 - depreciation write-off -8,000 -7,500 - other-depreciation -2,279 -1,478 Closing balance as of 31 December 2016 27,507 37,614

The investment in the real property located in Gorzów Wielkopolski (shopping centre) has been tested for impairment both as at 31/12/2016 and as at 31/12/2015. As a result of these tests, the Group recognized an impairment loss in the amount of PLN 8,000 thousand (2016), PLN 7,500 thousand (2015) and PLN 3,000 thousand (2014). The cumulative value of the impairment loss for this property is PLN 18,500 thousand. Below are the main assumptions affecting the impairment test result conducted in 2016:

• The recoverable value of the investments in property was determined based on the value in use while applying the forecasts of future cash flows based on the property operator's financial budget for the year 2017 approved by the Management Board and the Company's strategy to revitalise the Shopping Centre, as approved by the Management Board.

• The forecasts of future cash flows were based on a discount rate of 9.5 %. The growth rate applied to extrapolate the cash flows generated by the Shopping Centre beyond the five-year period is 0.5%.

The value in use of the real property is most sensitive to the following variables:

• EBIT forecast • applied discount rate;



51

The projected cash flows from operating activities (EBIT) in the years 2017-2023 are based on the company’s revitalization strategy, as approved by the Management Board of the Company, assuming the redesign of the existing premises in order to adjust them to the expectations of tenants and elimination of unused space, thus increasing the rental income. Discount rate – The discount rate reflects the risk inherent to the company operating in the real estate market, estimated by the Management Board. This is an indicator used by the Management Board to assess the effectiveness of operating (performance) and future investment proposals. The Management Board shall adopt the baseline scenario as the most likely and best describing the value in use of assets. Based on the above assumptions, the Management Board believes that an additional impairment loss of PLN 8,000 thousand should be recognized in the financial statements in relation to their value recorded in the books of the Group. The impairment loss has been recognized under other operating activities. In the opinion of the Management Board, based on the assumption that the lease activity would be continued, the fair values of other properties classified as investment property do not differ from their carrying amounts.

In the reporting period, the Group generated rental income and recognized direct cost of property maintenance as follows:

Year ended Year ended 31 December

2016 31 December

2015 Rental income from investment property 6,862 7,418 Direct operating expenses related to investment property 5,835 5,939



52

22. Intangible assets

Trademarks Patents and licenses

Computer software

Cost of completed

development work

Goodwill Other

intangible assets

Intangible assets being developed

Advance payments for

intangible assets

Total intangible

assets

As at 31/12/2016 Gross balance 83,421 9,766 7,572 11,923 52,475 5,317 5,381 88 175,943 Accumulated depreciation and adjustment write-offs 12,490 6,975 5,825 6,928 9,877 4,033 0 0 46,128

Net balance 70,931 2,791 1,747 4,995 42,598 1,284 5,381 88 129,815

Reclassified as fixed assets designated for sale. - - - - - - - - 0

Adjusted net balance 70,931 2,791 1,747 4,995 42,598 1,284 5,381 88 129,815

As at 31/12/2015 Gross balance 75,970 8,496 10,551 10,388 54,082 5,090 5,076 89 169,742 Accumulated depreciation and adjustment write-offs 315 6,298 8,139 4,822 8,483 3,126 0 31,183 Net balance 75,655 2,198 2,412 5,566 45,599 1,964 5,076 89 138,559 Reclassified as fixed assets designated for sale. - - - - - - - - 0 Adjusted net balance 75,655 2,198 2,412 5,566 45,599 1,964 5,076 89 138,559

Trademarks Patents and Computer Cost of Goodwill Other Intangible Advance Total



53

licenses software completed development

work

intangible assets

assets being developed

payments for intangible

assets

intangible assets

for the period from 01/01/2016 to 31/12/2016

Net carrying value as at 1.01.2016. 75,655 2,198 2,412 5,566 45,599 1,964 5,076 89 138,559 Acquisition of the Company - - - - - - - - 0 Increases (purchase, production, leasing) 5,500 1,487 406 1,829 - - 13,705 - 22,927 Decreases (sales, liquidation, adoption as intangible assets) (-) - - - - - - -13,400 -1 -13,401 Other changes (reclassification, transfer) - - - - - - - - 0 Depreciation in accordance with the depreciation plan (-) -565 -894 -956 -2,400 - -741 - - -5,556 Depreciation write-offs for liquidated or sold assets. - - - - - - - - 0 Net exchange differences (+/-) -9,659 0 -115 0 -3,001 61 - - -12,714 Net carrying amount as at 31/12/2016 70,931 2,791 1,747 4,995 42,598 1,284 5,381 88 129,815

for the period from 01/01/2016 to 31/12/2015 Net carrying value as at 1.01.2015. 7,474 1,431 3,190 3,338 23,893 2,680 6,634 228 48,868 Acquisition of the Company 68,351 - - - 21,718 - - - 90,069 Increases (purchase, production, leasing) 1,486 494 3,625 - - 6,526 - 12,131 Decreases (sales, liquidation, adoption as intangible assets) (-) - -89 -830 - - - -8,084 -139 -9,142 Other changes (reclassification, transfer) - - - - - - - - 0 Depreciation in accordance with the depreciation plan (-) -16 -716 -1,256 -1,396 - -713 - - -4,097 Depreciation write-offs for liquidated or sold assets. - 88 830 - - - - - 918 Net exchange differences (+/-) -154 -2 -16 -1 -12 -3 - - -188 Net carrying amount as at 31/12/2015 75,655 2,198 2,412 5,566 45,599 1,964 5,076 89 138,559

Description of hedges on intangible assets: The Group has no hedges on intangible assets. As at the balance sheet date, the Group had no contractual liabilities related to the acquisition of intangible assets.



54

Goodwill Goodwill arising on a business combination was allocated to a group of cash-generating units corresponding to the overall business of the entities acquired. The adopted approach is the most natural way to allocate the goodwill and is in line with the direction of management analysis at the Group level.



The carrying amount of goodwill arising on the acquisition of the following entities:

Gram Domestic A/S 7,389 7,164 Amica International GmbH 12,414 12,414 The CDA Group 18,492 21,718 Amica Handel i Marketing Sp. z o.o. 74 74 Marcelin Management Sp. z o.o. 4,229 4,229 Total carrying value 42,598 45,599

In the period ended 31 December 2016 and 31 December 2015, the following changes in goodwill took place:



Goodwill at the beginning of the period 45,599 23,893 Increase in goodwill as a result of the acquisition 0 21,718 Currency translation differences related to a foreign entity -3,001 -12

Carrying value at the end of the period 42,598 45,599

Permanent impairment tests were performed for the following cash generating units: Amica International, Gram, Marcelin Management, The CDA S.A.

· Goodwill of Amica International

The recoverable value of the cash generating unit was determined based on a value in use calculated using the cash flow projections based on financial budgets covering a five-year period, as approved by the senior management. The forecasts of cash flows were based on the pre-tax discount rate of 4.64%, while the cash flows exceeding the five-year period are extrapolated using a 1% growth rate i.e. at the level expected by the Management Board, based on the market data.

· Goodwill of Gram The recoverable value of the cash generating unit was also determined based on a value in use with the cash flow projections based on financial budgets covering a five-year period, as approved by the senior management. The forecasts of cash flows were based on a discount rate before tax effect at the level of 4.64%. The growth rate applied to extrapolate cash flows of the company in this segment beyond the five-year period is set at 0%, as expected by the Management Board of the Company, based on the market data. · Goodwill of Marcelin Management The recoverable value of Marcelin Management as a cash generating unit to which the goodwill of PLN 4,229,000 was also determined based on a value in use with the cash flow projections based on financial budgets covering a fifteen-year period, as approved by the senior management. The forecasts of cash flows were based on a discount rate before tax effect at the level of 4.5%. The growth rate applied to extrapolate cash flows of the company in this segment beyond the five-year period is 1%. This growth rate corresponds to the level expected by the Management Board, based on the market data. · Goodwill of CDA Group



55

The recoverable value of CDA Group, as a cash generating unit to which the goodwill of PLN 18,492 thousand was also determined based on a value in use, with the cash flow projections based on financial budgets covering a seven-year period, as approved by the senior management. The forecasts of cash flows were based on a discount rate before tax effect at the level of 4.64%. The growth rate applied to extrapolate cash flows of the company in this segment beyond the five-year period is 1%. This growth rate corresponds to the level expected by the Management Board, based on the market data. Key assumptions used to calculate the value in use The calculation of value-in-use for the aforesaid cash generating units is most sensitive to the following variables: · gross margin; · discount rates; · growth rate used to extrapolate cash flows beyond the budget period. Gross margin – gross margins are based on average values to be achieved in the period of 2017-2021 (in the case of Marcelin Management, the period of 2016-2030; in the case of CDA, the period of 2017-2021). Discount rate – the discount rate reflects the risk inherent to teach cash generating unit, as estimated by the management. This is an indicator used by the management to assess the effectiveness of operating (performance) and future investment proposals. In determining the discount rate for each cash generating unit, the EURIBOR rate was taken into account. Estimated growth rate – growth rates are based on the published management estimates, relying on the market data Sensitivity to changes in assumptions As regards the estimates of the above-mentioned values in use of the cash generating units, the management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of a unit to materially exceed its recoverable amount.

23. Other assets

Other financial assets



Loans granted 21,994 23,530 Assets available for sale 192 192 Other receivables 132 246 Other 145 145 Total 22,463 24,113 short-term 9,183 9,384 – long-term 13,280 14,729

The loans disclosed above were granted to the subsidiaries and bear interest at market conditions. The amount of PLN 19,056 thousand from the total amount presented above accounts for the loans granted to Arcula Sp. z o.o. They have a long-term nature and were hedged by assignment of the rights to the investment account.



56

The Management Board of the parent confirms the assumptions underlying the valuation of assets disclosed in the consolidated financial statements for the year 2016. There were no indications of impairment of loans.

Other non-financial assets



Budget receivables 22,171 19,339 Advances for inventories 1,491 136 Deferred charges and accruals 11,060 7,138 Total 34,722 26,613 – short-term 34,722 26,613 – long-term 0 0

24. Employee benefits

Pensions and other post-employment benefits The companies of the Group pay retirement bonuses to the retiring employees in the amount specified in the Labour Code or as provided for under individual life insurance and retirement schemes. Therefore, based on a valuation carried out using an internal tool or based on actuarial valuation, some of the Group companies create provisions for the current value of the liabilities related to retirement bonuses. Summary of benefits, the amount of the provision, and the reconciliation of changes during the accounting period are presented in the following table: Retirement and

pension benefits Other Total

Opening balance as at 01 January 2016 6,187 - 6,187 Costs of present and future employment 1,001 - 1,001 Actuary profits and losses 317 - 317 Closing balance as at 31 December 2016 7,505 0 7,505 Current provisions - - 0 Non-current provisions 7,505 - 7,505

Retirement and pension benefits Other Total

Opening balance as at 01 January 2015 7,645 - 7,645

Costs of present and future employment 311 - 311

Actuary profits and losses -1,769 - -1,769

Closing balance as at 31 December 2015 6,187 0 6,187

Current provisions - - 0

Non-current provisions 6,187 - 6,187

Key assumptions adopted for the valuation of employee benefits at the reporting date are as follows: Amica S.A.



Discount Rate (%) 3.2 3.5 Expected inflation rate (%) 2.5 - Employee turnover ratio (%) - -

Predicted salary increase factor (%) annual 1.25 semi-annual 1.25

annual 2.25 semi-annual 2.25

The average remaining period of employment - -



57

Sensitivity analysis

Effect on the estimated provisions for the change of the adopted discount rate by one percentage point:

Increase Decrease

(in thousands of PLN)


31 December 2016 Effect on the aggregate current service cost and interest cost 222 839 Impact on the liabilities under the defined benefit plan 222 839 31 December 2015 Effect on the aggregate current service cost and interest cost 149 176 Impact on the liabilities under the defined benefit plan 149 176

Effect on the estimated provisions for the change in probability of payment of severance pay by 10% compared to the base amount:

Increase Decrease (in thousands of PLN) (in thousands of PLN)

31 December 2016 effect on the aggregate current service cost and interest cost 534 528

Impact on the liabilities under the defined benefit plan 534 528

31 December 2015

effect on the aggregate current service cost and interest cost 273 4

Impact on the liabilities under the defined benefit plan 273 4

25. Inventory

The following inventory items are recognised in the Group's financial statements:



Materials: At the purchase price / cost of manufacture 49,205 44,400 According to recoverable net value 48,556 43,876

Work in progress (at the cost of manufacture) 6,980 7,399 Finished goods:

At the purchase price / cost of manufacture 66,477 59,454 According to recoverable net value 66,415 59,454

Goods: At the purchase price / cost of manufacture 206,602 226,693 According to recoverable net value 204,731 225,834

Spare parts 12,279 10,368 Total inventories at the lower of the two values: purchase price (cost of manufacture) and the net realizable value 338,961 346,931

As at 31 December 2016, the Company recognized a write-down on inventory to the net realizable amount of PLN 2,582 thousand (cf. PLN 1,383 thousand in 2015). Revaluation of inventory related to materials, finished products and goods and resulted from the application of the policy of creating inventory write-downs due to the their flow turnover ratios. In the financial year, the amount of PLN 1,199 thousand was recognised as the cost (in 2015, PLN 333 thousand was accounted for as the cost). As at 31 December 2016, the Group's inventory with the value of PLN 108,541 thousand (cf. PLN 129,697 thousand in 2015) was used as the collateral of the Group's financial liabilities.



58

26. Receivables from deliveries and services and other receivables.

Trade receivables and other receivables recognised by the Group as receivables and loans are as follows:



Receivables from provision of deliveries and services 469,449 401,537 Other receivables from third parties - 9,232 Total receivables (net) 469,449 410,769 Allowance for uncollectible accounts 13,140 20,095 Gross receivables 482,589 430,864

Terms of transactions with related parties are set out in the Note 38. Trade receivables are non-interest bearing and generally have 75-day payment deadlines. In order to improve cash flow from operating activities, the Group used factoring without recourse during the financial year. As at the balance sheet date, the Group reported the receivables assigned to factoring companies in the amount of PLN 152,712 thousand (cf. PLN 152,712 thousand as at 31/12/2015). These receivables have been removed from the balance sheet of the Group, since the risks associated therewith have been transferred to the factor. The Group runs a policy to sell only to verified customers. As a result, the management believes there is no additional credit risk beyond the level specified by the allowance for uncollectible trade receivables of the Group. On 31 December 2016, trade receivables in the amount of PLN 13,140 thousand (as of 31 December 2015: PLN 20,095 thousand) were considered uncollectible and therefore written down. Changes in allowance for uncollectible receivables were as follows: Year ended Year ended

31 December 2016 31 December 2015 Impairment allowance as at 1 January 20,095 16,935

Increase 4,776 12,086 Use 11,731 8,664 Unused amounts reversed (reversal of impairment) 0 262 Impairment allowance as at 31 December 13,140 20,095

The subsidiary, Hansa, has recorded the receivables worth PLN 8.7 million from a customer declared bankrupt. The Company has not recognized an impairment loss of these receivables, since these were insured. As at the date of these statements, the receivables are sought from the Insurer before the court of higher level. In the opinion of the law firm in charge of the case and the Management Board, the charges raised and the fact that the case has been referred for re-examination have no impact on the final outcome of the case but only delay the payment date. Below is the analysis of trade receivables, which as of 31 December 2016 and 31 December 2015 were past due but not considered to be uncollectible and not subject to impairment. The receivables have been analysed, taking into account the collateral used.

Total Not overdue Overdue, but collectible

< 30 days 30 – 60 days

60 – 90 days

90 – 120 days >120 days

31 December 2016 469,449 412,286 37,548 4,578 1,517 10,619 2,901

31 December 2015 401,537 360,663 32,104 4,108 1,975 1,320 1,367



59

27. Cash and equivalents

Interest on money held in the bank is calculated according to variable percentage rates, which are dependent on the interest rate for one-day bank deposits. Short-term deposits are created for a period from one day up to one month depending on the Group's current needs with regard to money, and interest on them is calculated according to the percentage rates set for them. The fair value of cash and cash equivalents as at 31 December 2016 amounts to PLN 85,314 thousand (31 December 2015: PLN 66,580 thousand). As at 31 December 2016, the Company had unused loans in the amount of PLN 199,501 thousand (cf. 188,033 thousand as at 31 December 2015), with respect to which, all the conditions precedent have been satisfied. The balance of cash and cash equivalents disclosed in the consolidated cash flow account consisted of the following items: Year ended

31 December 2016 Year ended

31 December 2015 Cash in hand and at bank 84,190 63,735 Current deposits 1,124 2,845 Other - - 85,314 66,580

28. Stated capital

Stated capital

Share capital Year ended

31 December 2016

Year ended

31 December 2015

Registered "A" shares with a nominal value of PLN 2 per share 2,717,678 2,717,678

B ordinary "A"/"B" shares with a nominal value of PLN 2 per share 5,057,595* 5,057,595

7,775,273 7,775,273

* including 2,381,881 shares of A series and 2,675,714 shares of B series

28.1.1. Nominal value of shares All issued shares have a nominal value of PLN 2 per share and have been fully paid.

28.1.2. Shareholders' rights Some of the registered shares of series A are preference shares in that each such share carries 2 (two) votes at the AGM. Other shares of A and B series are ordinary bearer shares.

28.1.3. Major shareholders

As at 31/12/2016 Number of shares Number of voting rights

Nominal value of shares Share of capital

Holding Wronki S.A. 2,715,771 5,431,542 5,431,542 34.93%

ING OFE* 555,952 555,952 1,111,904 7.15%

Other shareholders 4,503,550 4,505,457 9,007,100 57.92%

Total 7,775,273 10,492,951 15,550,546 100.00%



60

As at 31/12/2015 Number of shares Number of voting rights

Nominal value of shares Share of capital


ING OFE* 555,952 555,952 1,111,904 7.15%


Total 7,775,273 10,492,951 15,550,546 100.00%

* Data indicated based on the content of the notifications received by the Company from its Shareholders, and drawn up under Article 69 of the Public Offering Act of July 29, 2005.

29. Other types of capitals

Supplementary capital The supplementary capital was created out of the share premium in the amount of PLN 107,732 thousand, resulting from the issue of shares in the Parent Company. In addition, the supplementary capital was raised from statutory deductions from profits generated in the previous financial years and was adjusted by the amount resulting from the redemption of shares by the amount of PLN 28,481 thousand and PLN 11,713 thousand, resulting from the merger with a subsidiary, Sidegrove, in previous years. In 2014, the Parent Company sold all its treasury shares. The shares were sold pursuant to the Resolution of the Annual General Meeting of the Company dated 27 June 2013, which changed the previous objective of the Buy-Back Programme, which was redemption, to further sale of the own shares bought back. The earnings from the sale of shares, net of the incomes tax, in the amount of PLN 8,420 thousand were allocated to the supplementary capital.

Other reserves Other reserves __ Total As at 01 January 2016 9,141 – 9,141 Payment transactions in shares – – –

As at 31 December 2016 9,142 – 9,142

As at 01 January 2015 9,142 – 9,142 Payment transactions in shares – – –

As at 31 December 2015 9,142 – 9,142

The reserve capital of PLN 9,412 thousand was created in the subsidiaries Amica International and Amica Commerce, using the retained profits.

Retained profit and dividend restrictions The statutory financial statements of the companies: Marcelin Management Sp. z o.o., Nova Panorama Sp. z o.o., Nowe Centrum Sp. z o.o., Inteco Business Solutions Sp. z o.o., and Profi Enamel Sp. z o.o. are prepared in accordance with the Polish accounting standards. Amica Handel i Marketing Sp. z o.o. prepares its financial statements according to IFRSs. Dividends may be paid based on the profit determined in the separate annual financial statements prepared for statutory purposes. Pursuant to the requirements laid down in the Code of Commercial Companies, the parent company is required to create supplementary capital to cover losses. At least 8% of the profit for a given financial year as recognized in the separate financial statements of the parent company shall be transferred to this category of the capital, until



61

the capital reaches at least one third of the share capital of the parent company. The use of supplementary capital and the capital reserve remains at the discretion of the General Meeting; however, some of the supplementary capital representing one third of the share capital can only be used to absorb the loss disclosed in the separate financial statements of the Parent Company and is not divisible for other purposes. In the case of foreign companies within the Group, the limitations related to the distribution of capital and dividend payments arise from local commercial law and are respected by the managers of these companies. As at 31 December 2016, there are no other restrictions on the payment of dividends.

Non-controlling interest The non-controlling shares shown in the Group's equity capital apply to the subsidiary Inteco Business Solutions Sp. z o.o.


Opening balance -1,280 -1,293 Dividends paid by subsidiaries - - Total net comprehensive income (profit/loss) for the period -70 13 Closing balance -1,350 -1,280 The table below presents the selected financial data of the subsidiary, which holds non-controlling interest.



ASSETS 4,679 3,188 A. Fixed assets 218 225 B. Current assets 4,461 2,963 LIABILITIES 4,679 3,188 A. Equity capital 1,530 1,015 B. Short-term liabilities and provisions 3,149 2,173

30. Credit, loans and other debt instruments



Current 74,537 76,509 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 8,416 9,038

Current account overdraft 32,972 31,775 Bonds 15,999 15,951 Loans - - Investment credits 17,150 19,745 Long-term 126,193 159,169 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 9,203 9,363

Bonds 79,699 95,697 Loans 342 74 Investment credits 36,949 54,035

The Group does not include any instruments such as credits and loans as financial instruments to be measured at fair value through profit or loss. All credit, bank loans and other debt instruments are recognised according to the depreciated cost based on the effective interest rate. The fair value of loans, borrowings and other debt instruments is presented in the tables above. The following table summarizes the securities of the loans taken:


Pledge on fixed assets 68,230 68,112



62

Cession of liabilities 30,801 42,063 Appropriation of current assets 108,541 129,697 Total securities on the Group's assets 207,572 239,872

All loans bear interest at variable interest rates. The summary of loans held as at 31 December 2016 is presented below. As at 31/12/2016, the Company satisfies all the covenants provided for in the agreements. Disclosures concerning the types and scope of risks to which the Group is exposed due to loans incurred are presented in the table below

No.

Amount of the Agreement


Amount as of 31/12/2016


Credit repayment deadline

Interest Type of credit

1 5,000 0 2017 WIBOR O/N + mark-up WORKING-CAPITAL CREDIT

2 5,000 0 2017 WIBOR O/N + mark-up WORKING-CAPITAL CREDIT

3 5,000 0 2017 Wibor 1M + mark-up WORKING-CAPITAL CREDIT



6 23,000 6,765 2018 Wibor 3M + mark-up INVESTMENT CREDIT





11 47,600 32,492 2017 Internal rate+ mark-up WORKING-CAPITAL CREDIT


13 13,272 533 2017 Libor 1M + mark-up WORKING-CAPITAL CREDIT

Total 286,572 87,071

31. Provisions

Changes in provisions Current provisions Non-current provisions 31/12/2016 31/12/2015 31/12/2016 31/12/2015 Provisions for sales bonuses 20,681 8,402 - - Provisions for warranty repairs 31,030 30,307 4,903 5,790 Provisions for salaries and holiday leave 45,521 38,208 - - Provisions for marketing and commission fees 3,890 7,953 - - Other Provisions 9,113 5,148 - - 110,235 90,018 4,903 5,790

Provision for warranty repairs and returns The Group creates a provision for the expected costs of warranty repairs of products sold in the past 2 financial years based on the level of repairs and returns recorded in previous years. It is anticipated that the majority of these costs will be incurred in the next financial year, and all such costs will be incurred within 2 years from the date of the balance sheet. Assumptions used to calculate the provision for warranty repairs and returns are based on current sales levels and current information available about returns and 2 or 1 year warranty periods for all products sold.



63

Reserve for sales bonuses Conditions of creating provisions for sales bonuses resulting from the agreements with customers. Provisions are recognized on the sale of products to the customer and used after verifying that the recipient has met the turnover conditions provided for in the contracts and on issuing or receiving the relevant document in this regard. These provisions are based on monthly, quarterly and annual sales thresholds. The value of provisions remaining at the balance sheet date results from not receiving the appropriate document from the recipient to allow recognition of use of the provisions.

Reserve for marketing services and commissions

The Group creates a provision for the costs of marketing activities and commission on sales on certain markets. The assumptions used to calculate the provision for commissions are based on a detailed calculation of sales completed, under the terms agreed with each client. In contrast, the provision for marketing activities is based on the actual completed activities in various markets, for which the Group has not yet received any summaries or documents, until the closing date of the financial statements.

Reserve for salaries and holiday leave This group of provisions contains estimated value of the provision for employee holiday leaves and the estimated value of the entitlements conferred on the authorities of the Parent Company and a group of key managers of the Parent Company, based on the level of the consolidated result before tax. The rights will be implemented after the approval of the financial statements for 2016.

32. Trade payables, other payables and accruals

Liabilities from deliveries and services and other financial liabilities (Current)



Liabilities from deliveries and services Towards affiliated entities 1,564 424 Towards other entities 365,197 354,804 366,761 355,228 Financial liabilities Interest payable Other financial liabilities 7,784 8,333 7,784 8,333 Other liabilities Liabilities due to employees from the remuneration 8,645 6,932 Liabilities under factoring 29,907 35,865 Other liabilities 40,461 39,579 79,013 82,376 Total 453,558 445,937

Terms and conditions of the above financial liabilities: • liabilities from deliveries and services are non-interest-bearing and typically are settled within 75 days. • other liabilities are non-interest-bearing with an average 1 month payment period. Terms of transactions with related parties are set out in the Note 38.

Other non-financial liabilities

Year ended Year ended



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31 December 2016 31 December 2015 Liabilities from tax, customs and other 392 272 Value Added Tax 24,735 25,739 Personal Income Tax 2,209 1,938 Liabilities from social security 7,199 6,864 Other 5,926 4,766 Other non-financial liabilities - Total 40,461 39,579 – short-term 40,461 39,579 – long-term 0 0

The amount resulting from the difference between liabilities and receivables from value added tax is paid to the appropriate tax office every quarter.

Deferred charges and accruals



Deferred income arising from:

Government subsidies* 2,554 2,749 Other 7,326 6,697 Total 9,880 9,446 – short-term 7,423 6,811 – long-term 2,457 2,635

*In 2005, Amica S.A. signed a contract with the Ministry of Economy and Labour to subsidise the company's expansion and change the products of Amica S.A. This financing took place under the auspices of the Branch Operational Programme for Increased Competitiveness in Companies. As part of the project, the Company was obliged to increase expenditure on Material Fixed Assets and employ the appropriate number of workers. The share in additional financing of the Material Fixed Assets by the Programme was 25% of the increased expenditure. In the reporting period, the value recognized in other operating income due to the assignment of subsidies in parallel to depreciation and amortization, amounted to PLN 195 thousand (cf. PLN 144 thousand in 2015). The Company met all the conditions of the contracts signed as part of the programme for obtaining government assistance, and shows no contingent liabilities arising from this. In accordance with the accounting policy of the Amica S.A., cash received to finance the acquisition or creation of fixed assets, including fixed assets under construction and development work, if it does not increase the equity capital subject to other legislation, is recognised in the pre-payments and accruals. Sums categorised as part of this item gradually increase the remaining operating revenue parallel to depreciation or remittance write-offs of fixed assets or costs of development work financed from these sources.

33. Reasons for differences between balance sheet changes in certain items and changes arising from the cash flow statement

The reasons for the differences between balance sheet changes in certain items and changes arising from the cash flow statement are presented in the following tables:


31 December 2016

31 December 2015



65

Change resulting from the statement of financial position/balance sheet change in the Inventory 7,970 -116,105

change in exchange differences 7,666 10,722

Change in the Inventory resulting from the statement of cash flows / cash flow account 15,636 -105,383

Change resulting from the statement of financial position/balance sheet change in the Provisions 20,648 19,668

change in exchange differences -837

Change in the Provisions resulting from the statement of cash flows / cash flow account 19,811 19,668

Change resulting from the statement of financial position/balance sheet change in the Receivables -63,305 -75,131

income tax

other

change in exchange differences 25,739 -12,609

Change in the Receivables resulting from the statement of cash flows / cash flow account -37,566 -97,180

Change resulting from the statement of financial position/balance sheet change in the Deferred Charges And Accruals -3,490 2,793

changes in subsidies 196 144

Change in the Deferred Charges And Accruals resulting from the statement of cash flows / cash flow account -3,294 2,937

Change resulting from the statement of financial position/balance sheet change in the Liabilities, except for credits and loans -4,820 69,951

compensation of tax liabilities, taxes 0 1,079

factoring -5,958 11,573

change in exchange differences -2,187 1,049

other

Change in the Liabilities, except for credits and loans resulting from the statement of cash flows / cash flow account -12,965 83,652

Change resulting from the statement of financial position/balance sheet change in the Cash 18,734

10,896 currency translation differences -352 319

Change in Cash resulting from the statement of cash flows / cash flow account 18,382 11,215

The Group classifies deposits under cash due to the fact that these funds are available upon request.

34. Investment liabilities

As at 31 December 2016, the Group committed to incur capital expenditures for tangible fixed assets amounting to PLN 44,621 thousand. These amounts will be allocated for infrastructure development and upgrade of the cooker factory processes.



66

35. Contingent liabilities

As at the balance sheet date, the Group had only the guarantees granted by the Parent Company as collateral for loans, tax liabilities and credit lines of its subsidiaries.

36. Lawsuits

As at the balance sheet date, there were no proceedings concerning liabilities or receivables of the Issuer or its subsidiaries, whose value would be at least 10% of the Issuer’s equity as well as two or more proceedings related to liabilities or receivables whose total value would amount to at least 10% of the Issuer’s equity, and accordingly there are no disclosures in this regard.

37. Tax settlements

Tax settlements and other areas subject to regulations (e.g. customs or foreign exchange) may be subject to inspections by administrative bodies, which are authorized to impose severe fines and penalties. No references to the established regulations in Poland results in a lack of clarity and consistency in the existing regulations. Often the differences in opinions as to the interpretation of tax regulations, both within state authorities and between authorities and enterprises, lead to uncertainties and conflicts. These facts show that tax risks in Poland is significantly higher than those typically found in countries with more developed tax systems. According to the Group, as at 31 December 2016, an adequate provision for known and quantifiable risks were created. At the date of preparation of these statements, no tax proceedings were conducted at the Company.

38. Used electrical and electronic equipment.

On 21 October 2005, most of the provisions of the Law on Waste Electrical and Electronic Equipment ("WEEE") entered into force. It requires operators placing electrical and electronic equipment on the market (manufacturers and importers) to arrange and finance the collection from the sales points of waste equipment, processing, recovery, including recycling, and disposal of waste equipment. From 1 January 2008, the operator placing household equipment on the market is obliged to ensure collection of waste household equipment from private households. Obligations arising from these rules are implemented by the Parent Company through an agreement signed with Biosystem Elektrorecykling S.A. As a result of this agreement, the Company incurred costs related to the organization and recovery of the waste equipment in 2016 in the amount of PLN 1,989 thousand (cf. PLN 2,391 thousand in 2015).

39. Information on subsidiaries

Amica Wronki is controlled by Holding Wronki S.A., which holds 34.93% of shares in Amica Wronki S.A. The remaining shares are owned by many shareholders, including employees. Shareholders holding more than 5% of shares in Amica S.A. are listed in the Note 27. In the year ended 31 December 2016, there were no transactions between the Group and the Parent Company of the entire Group, except for transactions resulting from the employment relationship. (In the year ended 31 December 2015, the value of these transactions amounted to zero).



67

All consolidated subsidiaries have prepared the financial statements as at 31/12/2016. The Group employs a procedure designed to verify the related parties among the members of the Management Board, the Supervisory Board and the key personnel. The verification process allowed to identify the parties presented below: Parties related to the Parent Company include key management staff, subsidiaries subject to the consolidation requirement as well as other related parties to which the Company includes entities controlled by the owners of the Company. The Group identifies the following related parties:

• Consolidated subsidiaries satisfying the definition of control in accordance with IFRS 10, listed in Note 4

• Other related parties: KKS Lech Poznań, Fundacja Amicis, Arcula Sp. z o.o (formerly Quota SPV 4 Sp. z o.o.), Axoneo Sp. z o.o. (formerly Antiqua Investment Sp. z o.o.), Sideme S.A., Sidepar.

• Key personnel of the Group (executives) and the Supervisory Board • Parent companies: Holding Wronki S.A., Invesco Sp. z o.o.

The following table presents total value of transactions with subsidiaries for the current and the previous financial year.

Name of the subsidiary Revenues from core business Cost of core business 31/12/2016 31/12/2015 31/12/2016 31/12/2015

Holding Wronki SA 46 43 3,328 3,213 KKS LECH Poznań 4,922 5,234 3,695 955 Invesco Sp. z o.o. 2 3 - - Antiqua Sp. z o.o. 7 3 - - Fundacja Amicis (Amicis Foundation) 53 43 - - Sideme S.A. 27,549 6,542 754 399 Sidepar 215 68 - 18 Arcula Sp. z o.o. 13 7 - - Total 32,807 11,943 7,777 4,585

Name of the subsidiary Trade receivables Trade liabilities

31/12/2016 31/12/2015 31/12/2016 31/12/2015 Holding Wronki SA 7 4 741 354 KKS LECH Poznań 4,997 4,012 818 70 Invesco Sp. z o.o. - - - - Antigua Sp. z o.o. - 4 - - Fundacja Amicis (Amicis Foundation) 7 5 - - Arcula Sp. z o.o. - 2 - - Sideme S.A. 5,861 2,072 5 - Sidepar 49 36 - - Key management of CDA - - - - Total 10,921 6,135 1,564 424

The following table provides the summary of loans granted to related parties for the current and previous financial years:

Company Year ended 31 December 2016


KKS Lech Poznań S.A. 2,919 4,501

Arcula Sp. z o.o. 19,056 19,022

TOTAL 21,975 23,523



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Loans granted to Arcula include both long-term and short-term loans. Pursuant to the agreements concluded, the interest will be repaid on semi-annual and quarterly basis. As at 31/12/2016, the loans to Arcula were secured by the assignment of rights to the investment account. Direct involvement of the Group in KKS Lech Poznan S.A. The Group presents in the balance sheet as at 31 December 2016 and 31 December 2015, the following the involvement in KKS Lech Poznań SA.

KKS (in thousands PLN) Year ended


31 December 2015

Trade receivables 4,997 4,012

Loans granted 2,919 4,501

TOTAL 7,916 8,513

The terms and conditions of the loan agreements and contracts for services with KKS Lech Poznań S.A. do not differ from the market terms and conditions. Given that the above-mentioned receivables are partially overdue, the Management Board considered whether there is any potential loss in their value and the need to recognize impairment losses. The Management Board took into account the previous history of payments due from KKS Lech Poznań S.A., debt repayment made after the balance sheet date and before the date of approval of these financial statements, the duration of the overdue period, the current financial situation of KKS Lech Poznań S.A. and the financial strategy for KKS Lech Poznan S.A. adopted for the coming years, based on the expected future financial performance and the club's ability to generate revenue. Based on the above, the Management Board is of the opinion that the risk of non-repayment of these debts in the future is limited and therefore did not makewrite-downs on the assets involved.

Parent Company of the entire Group In the financial year ended 31 December 2016, there were no transactions between the Group Companies and the Parent Company of the entire Group, except for transactions resulting from the employment relationships disclosed in Note 38.4.

Entity with significant influence over the Group No entity with significant influence over the Group has been identified.

Conditions of transactions with affiliated entities Transactions with related parties are related mainly to the sale of products, goods and services by the Parent Company to its subsidiaries. These operations take place under conditions equivalent to those that apply to transactions entered into on the market terms. Amica Wronki S.A. also acts as the lender in relation to its related parties. The loans were granted on the market terms. As at the balance sheet date, the Group recognized the loans granted to KKS Lech Poznań S.A. and Arcula Sp. z o.o. under its financial assets. The value of this loan is presented in the table above.



69

Other transactions between Group companies are related to services and take place under conditions equivalent to those that apply to transactions entered into on market terms.

Remuneration of the Group's Senior Management

39.4.1. Remuneration paid to members of the Management Board and members of the Supervisory Board of the Group


31 December 2016 31 December 2015 Management Board of the Parent Company Current employee benefits (salaries and surcharges) 4,063 4,408 Post-employment benefits 772 - Benefits paid under the incentive program 11,094 9,090 Severance payments - - Total 15,929 13,498 Supervisory Board of the Parent Company Current employee benefits (salaries and surcharges) 638 625 Post-employment benefits 1 - Employee benefits in the form of shares - - Benefits paid under the incentive program 1,850 1,515 Post-employment benefits - - Total 2,489 2,140 18,418 15,638 Management of Subsidiaries Current employee benefits (salaries and surcharges) 7,613 5,951 Post-employment benefits - - Benefits paid under the incentive program 863 331 Severance payments - - Total 8,476 6,282 Supervisory Board of subsidiaries Current employee benefits (salaries and surcharges) 85 98 Post-employment benefits - - Employee benefits in the form of shares - - Benefits paid under the incentive program - - Post-employment benefits - - Total 85 98 8,561 6,380



70

Remuneration of the Parent Company's Management Board

In Amica S.A.: In subsidiaries

Total Remuneration

Benefits paid under

the incentive program

Post-employment

benefits

Remuneration

Other benefits

Post-employment

benefits

Period from 01/01 to 31/12/2016

Jacek Rutkowski 1,037 1,849 2,886 Alina Jankowska-Brzóska 390 390 Jarosław Drabarek 332 332 Mr Andrzej Kadziński 3 3 Piotr Skubel 677 1,849 2,526 Wojciech Kocikowski 676 1,849 2,525 Mr Tomasz Dudek 324 1,849 385 2,558 Marcin Bilik 676 1,849 2,525 Mr Andrzej Sas 283 1,849 387 10 2,529 Total 4,395 11,094 772 0 13 0 16,274 Period from 01/01 to 31/12/2015

Jacek Rutkowski 1,037 1,515 2,552 Piotr Skubel 677 1,515 2,192 Wojciech Kocikowski 676 1,515 2,191 Mr Tomasz Dudek 677 1,515 2,192 Marcin Bilik 677 1,515 2,192 Mr Andrzej Sas 664 1,515 24 2,203 Total 4,408 9,090 0 0 24 0 13,522

Remuneration of the Parent Company's Supervisory Board

In Amica S.A.: In subsidiaries

Total Remuneration

Other benefits

Post-employment

benefits Remuneration Other

benefits

Post-employment

benefits Period from 01/01 to 31/12/2016

Mr Tomasz Rynarzewski 165 370 30 565 Ms Bogna Sikorska 40 370 0.6 411 Mr Wojciech Kochanek 40 370 0.1 42 452 Mr Bogdan Gleinert 40 370 410 Zbigniew Derdziuk 36 0 36 Mr Grzegorz Golec 50 370 420 Formela Dariusz 63 63 Bartmiński Dariusz 49 49 Dudek Tomasz 57 57 Rutkowski Piotr 49 49 Wyrzykowski Paweł 49 49

638 1,850 0.7 42 30 0 2,561

Period from 01/01 to 31/12/2015 Mr Tomasz Rynarzewski 165 303 27 495



71

Ms Bogna Sikorska 97 303 400 Mr Wojciech Kochanek 97 303 25 425 Mr Piotr Sawala 0 Mr Bogdan Gleinert 97 303 400 Zbigniew Derdziuk 45.5 0 46 Mr Grzegorz Golec 123 303 426

625 1515 0 25 27 0 2,192

39.4.2. Remuneration paid to other members of key management personnel


Key management personnel of the parent company Current employee benefits (salaries and surcharges) 2,574 1,570 Post-employment benefits - - Employee benefits in the form of shares - - Benefits paid under the incentive program 2,712 2,020 Total remuneration paid to the key management personnel (except for members of the Management Board and the Supervisory Board) 5,286 3,590

40. Information on remuneration of an auditor or an entity authorized to audit financial statements

The following table shows the remuneration of the entities authorized to audit financial statements of the entire Group, paid or payable for the years ended 31 December 2016 and 31 December 2015, broken down by types of services:


Mandatory audit of the annual financial statements 642 642 Other attestation services 120 164 Tax advisory services 220 220 Other services 43 0 Total 1,025 1,026

41. Objectives and principles of financial risk management

In addition to derivatives, the main financial instruments used by the Group include bank loans, bonds, finance lease, cash and current deposits. The main purpose of these financial instruments is to raise funds for the Group's operations. The Group also possesses other financial instruments which include receivables and liabilities from deliveries and services which are formed directly in its ongoing activities. The Group enters also in the transactions involving derivatives, especially futures on interest rate swaps and foreign currency forward contracts. The purpose of these transactions is to manage interest rate risk and currency risk arising in the course of the Group's operations and arising under the financing sources used. The principle applied by the Group at present and throughout the period covered by the report is no trading in financial instruments. The main risks arising from the Group's financial instruments include interest rate risk, liquidity risk, foreign currency risk and credit risk. The Management Board reviews and agrees policies for managing each of these risks – the relevant principles are briefly discussed below. The Group also monitors the market price risk arising



72

from all its financial instruments held. The Group's accounting policies relating to derivatives are set out in Note 11. The Group recognizes the market risk as an interest rate risk and the currency risk. The Management Board believes that from the Group’s point of view, the risks presented in this chapter are generated primarily at the level of the Parent Company.

Interest-rate fluctuations risk The Company's exposure to the risk of interest rate fluctuations relates primarily to the non-current financial liabilities. The Group manages its interest cost using a mix of fixed rate and variable rate liabilities. The Group's objective is that from 80% to 100% of the loans and long-term credits should have fixed interest rates. To ensure that the solution adopted by the Company is successful from an economic point of view, the Company enters into interest rate swaps, whereby it agrees to swap, at specified intervals, the difference between the amount of interest accrued at a fixed and a variable interest rate on the agreed principal amount. These swaps are designated to hedge underlying debt liabilities. As at 31 December 2016, taking into account the effect of the interest rate swaps hedges, approximately 80% of the Company's credit liabilities were subject to fixed interest rates (including approximately 100% of long-term liabilities). Interest rate risk – sensitivity to fluctuations The following table shows the sensitivity of profit (loss) before tax to a reasonably possible fluctuations of interest rates, with all other variables held constant (in connection with the variable interest rate liabilities).

Increase/decrease Impact on profit or loss before tax

31 December 2016 PLN 10% -135 thousand PLN 31 December 2015 PLN 10% -25 thousand PLN

The above data on the sensitivity of the financial result to changes in interest rates are given assuming no relationships hedging the interest rate fluctuations.

Currency risk The Group is exposed to a foreign exchange risk arising from the transactions. Such risk arises as a result of the operating unit's sale or purchase transactions in currencies other than its functional currency. Approximately 50% of the Company's sales transactions are denominated in currencies other than the reporting currency of the operating unit performing the sales, while approximately 60% of the costs are denominated in the reporting currency. The Group is trying to negotiate the terms of the hedging derivatives in such a way as to match the terms of the hedged item and provide maximum effectiveness of the hedge. As at 31 December 2016, the Group hedged 50% of the sales transactions denominated in foreign currencies, and 24% of purchase transactions denominated in foreign currencies. It should be noted that a large part of the sales and purchase transactions are entered in the same foreign currencies, which provides a natural hedge against currency risk. The sensitivity analysis of the financial result in 2016 with respect to financial assets and liabilities of the Company and the volatility of EUR , GBP, CNY , RUB , USD, CZK and DKK to PLN is presented below.



73

The analysis of the sensitivity assumes a rise or fall in rates by 10 % compared to the closing rate for a particular balance sheet day. It must be noted that foreign currency derivatives entered into by the Company mostly offset the effect of exchange rate fluctuations and therefore it is assumed that exposure to currency risk demonstrated below is eliminated by the effect of derivatives. 2016

Currency fluctuations

Currency – impact of exchange rate fluctuations on the financial result Total

CNY CZK DKK EUR GBP RUB USD SEK

Appreciation of PLN 10% 8,512 -1,086 -563 -6,537 -2,599 -9,705 694 435 -10,849

Depreciation of PLN -10% -8,512 1,086 563 6,537 2,599 9,705 -694 -435 10,849

2015

Currency

fluctuations

Currency – impact of exchange rate fluctuations on the financial result Total

CNY CZK DKK EUR GBP RUB USD

Appreciation of PLN 10% 9,533 -2,092 0 -1,919 -2,216 -5,221 81 -1,834

Depreciation of PLN -10% -9,533 2,092 0 1,919 2,216 5,221 -81 1,834

Exposure to currency translation risk changes over the year depending on the volume of transactions conducted in that currency. However, the above analysis of this vulnerability can be considered representative of the Company's exposure to currency risk. The events which either directly or indirectly had an impact on the Group in 2016 included: - UK referendum on the EU exit (BREXIT) - US elections and expectations of further rate hikes in the US - continuation of the EU's asset purchase programme (QE) - rising oil prices and good results of Russian economy and the consequent strengthening of RUB - good condition of German economy One of the most important events for the Company was the outcome of the UK referendum (weakening of GBP). However, the effects have been substantially mitigated through a consistent currency risk hedging policy in this case, both with regard to the sales revenue and the valuation of assets (valuation of net assets of the UK company).

Goods price risk Commodities and materials risk



74

The Group’s policy for purchasing components is based mainly on raw materials, the prices of which have recently risen drastically. As a result of the Group’s effective strategies for purchasing of steel and other raw materials, the Group's financial targets have been met. We assume that in 2017, the prices of raw materials will continue to grow due to reversal of the business cycle, rising inflation as well as the overall improvement of the economic situation. If the price of steel changes by 1% compared to the level at the end of 2016, this will result in a change in the Company's financial result by PLN 0.8 million. The positive trends in the field of raw materials (falling costs) in recent years have positively influenced the purchasing costs of commercial goods in Amica Group. In 2016, despite the rising labour costs in China (the source accounts for more than 70% of the Group’s total volume of purchases) and the reversal of the trend in commodity prices, the budget assumptions have been met. In 2017, with the continued upward trend in commodity prices and further growth in other component costs such as labour costs, we can assume an increase in the costs of goods purchased in the Group compared to the previous year. An additional risk to be taken into account in this area is the introduction of more stringent environmental regulations by the Chinese authorities, which may also translate into higher costs for components and products. Any increase in the price of goods by 1% will represent additional costs for the Group of PLN 9 million.

Credit risk Credit risk is primarily related to the Group's receivables from customers in a situation where due to a business party's failure to meet its contractual obligations, the Group may incur a financial loss. The Company's credit risk is related mainly to trade receivables, loans, cash and derivatives. Group performs ongoing credit evaluations of its customers and in justified cases, requires appropriate securities. Furthermore, most of the Group's receivables are covered by a trade receivables insurance policy. Business partners, with whom the Group has no history of cooperation or sale transactions are concluded occasionally, make purchases in the form of prepayments. In contrast, trade credit is granted to customers with whom there is a positive history of collaboration and have credit rating based on both internal and external sources. Furthermore, due to ongoing monitoring of receivables, the Group's exposure to the risk of bad debts is not significant. Changes in impairment losses on receivables are disclosed in Note 25 In respect of other financial assets, such as cash and cash equivalents , financial assets available for sale and certain derivative instruments, the Group's credit risk arises from default of the counter party, while the maximum exposure to the credit risk is equal to the carrying amount of such instruments. As a part of the management of customer receivables, the Group uses standard factoring agreements.

Liquidity risk The Group monitors its risk of shortage of funds, using a recurring liquidity planning tool . This tool takes into account the maturity of investments and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operating activities. The Group's objective is to maintain a balance between continuity and flexibility of funding through the use of various sources of financing, such as bank overdrafts, bank loans, bonds, finance leases. The table on the next page shows the Group's financial liabilities as at 31 December 2016 and 31 December 2015 according to their maturity dates based on contractual undiscounted payments, except for derivative instruments reported at fair value as of the balance sheet date. 31 December 2016 Upon

request Up to 3 months

From 3 to 12 months

From 1 to 5 years

More than 5 years Total

Interest-bearing loans, bonds, leases - 40,241 34,297 126,193 - 200,730 Liabilities from deliveries and - 448,756 4,802 - - 453,558



75

services and other liabilities. Derivatives - 6,124 2,906 2,109 - 11,139

31 December 2015 Upon request

Up to 3 months

From 3 to 12 months

From 1 to 5 years

More than 5 years Total

Interest-bearing loans, bonds, leases - 27,866 122,313 85,498 - 235,678

Liabilities from deliveries and services and other liabilities. - 432,976 12,961 - - 445,937

Derivatives - 2,155 5,134 10,175 - 17,464

Fair values of particular classes of financial instruments The following table shows the comparison between carrying values and fair values of all financial instruments used by the Company, broken down into different classes and categories of assets and liabilities. Carrying amount Fair value

31

December 2016

31 December

2015

31 December

2016

31 December

2015 Financial assets – Loans and receivables Receivables from deliveries and services and other receivables. 469,449 410,769 469,449 410,769

Loans 21,994 23,530 21,994 23,530 491,443 434,299 491,443 434,299 Financial assets – measured at fair value through profit or loss

Hedging instruments – – Derivative financial instruments designated under the hedging relationship, including:

– –

- Currency forward contracts 17,083 28,128 15,543 28,128 - Embedded derivatives – – – – Total 17,083 28,128 15,543 28,128 Financial assets – measured at fair value through other comprehensive income

Derivative financial instruments designated under the hedge relationships – cash flow hedges 13,341 7,898 13,341 7,898

Total 13,341 7,898 13,341 7,898 Cash and equivalents 85,314 66,580 85,314 66,580

Carrying amount Fair value

31

December 2016

31 December

2015

31 December

2016

31 December

2015 Non-current financial liabilities – measured at amortized cost

Credit, loans and other debt financial instruments 126,193 159,169 126,193 159,169 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 9,203 9,363 9,203 9,363

Total 135,396 168,532 135,396 168,532 Current financial liabilities – measured at amortized cost



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Credit, loans and other debt financial instruments 66,121 67,471 66,121 67,471 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 8,416 9,038 8,416 9,038

Liabilities from deliveries and services 453,558 445,937 453,558 445,937 Other financial liabilities Total 528,095 522,446 528,095 522,446 Financial liabilities – measured at fair value through profit or loss

Hedging instruments – – Derivative financial instruments not designated under the hedging relationship, including: – –

- Currency forward contracts 6,216 1,853 6,216 1,853 - Embedded derivatives – – Total 6,216 1,853 6,216 1,853 Financial liabilities – measured at fair value through other comprehensive income

Derivative financial instruments designated under the hedge relationships – cash flow hedges 4,923 15,611 4,923 15,611

Total 4,923 15,611 4,923 15,611

According to the Group's assessment, the fair value of the cash and cash equivalents, current investments, trade receivables, trade payables, bank overdrafts and other Current liabilities does not differ from the carrying values, mainly due to the short maturity.

Items of income, expense, gains and losses recognized in the profit and loss account by categories of financial instruments



Interest revenue regarding financial instruments valued by their fair market price by the financial result Cash and equivalents (investments) 92 391 Loans and receivables 841 827 Interest revenue regarding financial instruments valued by their fair market price by the financial result 933 1,218

Profits from the evaluation of financial instruments measured as a fair market value by the profit and loss account:

Trade derivatives 4,197 7,498 Hedging derivatives 19,030 37,035 Derivative instruments closed as ineffective 10,276 17,952 Investment fund units Profits from the evaluation of financial instruments measured as a fair 33,503 62,485



77

market value by the profit and loss account: Currency translation gains (losses) (+/-): Cash and equivalents - - Loans and receivables - - Financial liabilities valued at amortised cost - - Currency translation gains (losses) (+/-) 0 0 Profit on the sale of financial assets held for sale - - Other financial revenue 17 0 Total financial revenue 34,453 63,703



Interest costs regarding financial instruments not valued by their fair market price by the financial result

Liabilities from financial leasing agreements 1,531 1,260 Credit in credit account 2,964 723 Investment credits 2,722 1,793 Loans 811 45 Debt securities 3,309 522 Interest on factoring 4,553 3,684 Liabilities from deliveries and services and other liabilities. 609 18 Interest costs regarding financial instruments not valued by their fair market price by the financial result 16,499 8,045

Losses from the evaluation and realisation of financial instruments measured as a fair market value by the profit and loss account

Trade derivatives 1,590 4,961 Hedging derivatives 4,890 15,937 Derivative instruments closed as ineffective 11,544 10,512 Losses from the evaluation and realisation of financial instruments measured as a fair market value by the profit and loss account 18,024 31,410

Currency translation gains/losses (+/-): Cash and equivalents -38,913 -38,746 Loans and receivables 21,133 33,085 Financial liabilities valued at amortised cost 32,765 31,552 Currency translation gains (losses) 14,985 22,162 Other financial costs 2,181 48,053 Total financial costs 51,689 87,508

Figures for the year 2016 presented in above tables differ from the financial income and expenses included in the statement of comprehensive income by the amount of PLN 29,306 thousand ( for 2015: PLN 54,845 thousand) i.e. changes in valuation and exercise of hedging financial instruments measured at fair value. In the statement of comprehensive income, these figures have an impact on the balance of other financial costs.



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Interest-rate fluctuations risk The following table presents the carrying value of the Group's financial instruments exposed to interest rate risk, broken down by age categories. Variable interest rate

31 December 2016 <1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years >5 years Total Cash assets 85,314 - - - - - 85,314 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 8,416 6,062 2,843 298 - - 17,619

Current account overdraft 32,972 - - - - - 32,972 Bonds 16,194 15,902 15,902 15,902 15,902 15,896 95,698 Investment credit 16,512 12,453 14,034 11,100 - - 54,099 Loans 342 - - - - - 342 Interest rate swap* 521 2154 2224 2351 2224 3718 13,192 160,271 36,571 35,003 29,651 18,126 19,614 299,236

31 December 2015 <1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years >5 years Total

Cash assets 66,580 - - - - - 66,580 Liabilities due to financial leasing agreements and leasing agreements with a purchase option 10,221 4,429 3,405 346 - - 18,401

Current account overdraft 31,775 - - - - - 31,775 Bonds 16,242 15,902 15,902 15,902 15,902 31798 111,648 Investment credit 21,775 17,352 12,453 11,100 11,100 - 73,780 Loans 23,530 - - - - - 23,530 Interest rate swap* 54 - - - - 104 158 170,177 37,683 31,760 27,348 27,002 31,902 325,872



79

Hedging instruments Material disclosures of hedging derivatives (including not formally representing hedges in accordance with IAS 39) are presented in the table below:

Maturity dates – in nominal values data in thousands of PLN

Hedging derivatives Currency Hedged item Company

Transaction nominal value in currency

Short-term instruments

(maturing before 31/12/2017)

Long-term instruments

(maturing after 31/12/2017)

Balance sheet

valuation of the

instrument recognised in equity

Deferred tax

Balance sheet valuation of

the instrument recognised in equity, net of deferred tax


the instrument recognised in

equity

Deferred as at

31.12.2015


the instrument recognised in equity, net of deferred tax

Change of the balance sheet

valuation recognised in equity as at

31/12/2016 in relation to

31/12/2015, net of

deferred tax

Valuation of instruments recognized in the result of the fourth

quarter of 2016. as at 31/12/2016 as at 31/12/2015

Forward contract EUR Revenue from sales Amica S.A. 39,400 28,400 11,000 -2,421 460 -1,961 2,073 -394 1,679 -3,640 0

Forward contract CNY Purchase of goods

Amica S.A. 405,800 275,800 130,000 3,494 -664 2,830 5,715 -1,086 4,629 -1,799 1,236 Amica International 399,200 219,200 180,000 199 -61 139 11,127 -4,117 7,010 -6,872 0

Forward contract EUR Purchase of goods Hansa 4,000 4,000 0 -807 153 -654 2,055 -411 1,644 -2,298 0 Forward contract RUB Sales receivables Amica S.A. 780,000 780,000 0 0 0 0 0 0 0 0 -3,942 Forward contract GBP Revenue from sales Amica S.A. 25,650 13,650 12,000 6,994 -1,329 5,665 -12,572 2,389 -10,183 15,848 236 Forward contract CZK Revenue from sales Amica S.A. 576,600 258,600 318,000 777 -148 630 -818 155 -663 1,292 -689 Forward contract CNH Purchase of goods CDA Ltd. 83,900 83,900 0 -398 80 -318 0 0 0 -318 744 Forward contract USD Purchase of goods Amica S.A. 3,000 2,750 250 888 -169 719 0 0 0 719 0 Forward contract USD Purchase of goods CDA Ltd. 1,280 1,280 0 -172 34 -137 0 0 0 -137 80 Forward contract EUR Purchase of goods CDA Ltd. 3,310 3,310 0 13 -3 10 0 0 0 10 -142

IRS Contract PLN Investment credit Amica S.A. 52,850 0 52,850 127 -24 103 -215 42 -173 276 -70

CIRS Contract GBP Net assets of the UK

company Amica S.A. 15,779 0 15,779 13,167 -2,503 10,664 5,176 -983 4,194 6,470 -29 Total 21,862 -4,173 17,690 12,541 -4,404 8,137 9,553 -2,576



80

In 2016, the Group included the profit of PLN 9,554 thousand (cf. PLN 6,391 thousand in 2015) from revaluation of cash flow hedges under other comprehensive income. The reserve from revaluation of cash flow hedges amounted to PLN 17,689 thousand as at 31/12/2016 (cf. PLN 8,135 thousand in 2015). The amounts transferred from the reserve from revaluation of hedging instruments to the financial result in connection with the realisation of hedged items have been included under financial expenses as positive receipts in the amount of PLN 16,592 thousand (cf. PLN 9,122 thousand in 2015). Additionally, in 2016, the Group recognized the amount of PLN 3,310 thousand (cf. PLN 432 thousand in 2015) due to the ineffectiveness of cash flow hedges under the financial result. During the period covered by the consolidated financial statements there were no transfers of cumulative amounts included in the revaluation reserve to the initial value of hedged items. Most of the derivative instruments were designated by the Group as cash flow and fair value hedges in accordance with the requirements of IAS 39 (Derivative hedging instruments). Hedging derivatives include derivatives formally not constituting collateral in accordance with IAS 39. Other derivatives are treated as instruments held for trading (trading derivatives). All derivative instruments are valued at their fair market value, established based on data from the market (exchange rates, interest rates).



Fixed assets: Trade derivatives Hedging derivatives 19,191 8,379 Long-term derivatives 19,191 8,379 Current assets: Trade derivatives Hedging derivatives 11,233 27,647 Short-term derivatives 11,233 27,647 Assets - derivatives 30,424 36,026 Long term liabilities: Trade derivatives Hedging derivatives 2,109 10,175 Long-term derivatives 2,109 10,175 current liabilities: Trade derivatives Hedging derivatives 9,030 7,289 Short-term derivatives 9,030 7,289 Liabilities - derivatives 11,139 17,464

Information on the fair value of financial instruments

The fair value is defined as the sum for which a given asset could be exchanged, and liability executed, under market conditions between well informed, interested and unconnected parties. In the case of financial instruments for which there exists an active market, their fair value is established based on parameters from the active market (sale and purchase prices). In the case of financial instruments for which there is no active market, the fair price is established according to evaluation techniques, with initial data of the model used at a maximum level being variable and coming from active markets (exchange rates, interest rates, etc). The table below presents the financial assets and liabilities measured by the Group at fair value, categorised at a defined level in the fair value hierarchy:

• level 1 - listed prices (unadjusted) from active markets for identical assets and liabilities,



81

• level 2 - initial data for valuation of assets and liabilities, other than prices noted as part of level 1, observable based on variables from active markets,

• level 3 - initial data for valuation of assets and liabilities, not established based on variables from active markets.

•

Class of financial instrument Level 1 Level 2 Level 3 Total fair market value

As at 31/12/2016 Assets: Shares in stock-exchange listed companies Stock, shares in non-stock-exchange listed companies Hedging derivatives 30,424 30,424 Trade derivatives Debt securities at fair value Total assets 30,424 30,424 Liabilities: Trade derivatives Hedging derivatives 11,139 11,139 Loans at fair value Total liabilities 11,139 11,139 Net fair value 19,285 19,285 As at 31/12/2015 Assets: Shares in stock-exchange listed companies Stock, shares in non-stock-exchange listed companies Hedging derivatives 36,026 36,026 Trade derivatives Debt securities at fair value Total assets 36,026 36,026 Liabilities: Trade derivatives Hedging derivatives 17,464 17,464 Loans at fair value Total liabilities 17,464 17,464 Net fair value 18,562 18,562

In the reporting period there were no transfers between Level 1 and Level 2 in the fair value hierarchy, and none of the instruments has been moved from/to Level 3 of the fair value hierarchy.

42. Capital management

The main objective of the Group's capital management is to maintain a strong credit rating and healthy capital ratios in order to support the Group's operations and increase value for its shareholders. The Group manages its capital structure and revises the same as a result of changes in the economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the dividend payments to shareholders, return capital to shareholders or issue new shares. In the year ended 31 December 2016 and 31 December 2015, no changes were introduced in the objectives, policies and processes in this area. The Company monitors the capital level based on the carrying amount of the equity and the capital reserve from revaluation of derivatives used as cash flow hedges. The Group calculates the ratio of capital to total financing sources based on this. In addition, to monitor its debt servicing ability, the Group calculates the debt (i.e. liabilities from leases, credit, loans and other debt instruments, net of cash) to EBITDA (result from operating activities adjusted by depreciation costs) ratio. Debt to EBITDA at Amica Wronki Capital Group is monitored by the banks as the control element contained in the loan agreements. According to the agreements, this ratio cannot exceed a value of 3.



82

Capital: Year ended 31 December 2016


Equity capital 677,167 593,568 Subordinated loans received from the owner Capital from valuation of hedging instruments securing cash flows (-) 12,761 -8,135 Capital 689,928 585,433 Equity capital 677,167 593,568 Credit, loans and other debt instruments 183,111 217,277 Financial leasing 17,619 18,401 Total sources of financing 877,897 829,246 Ratio of capital to total financing sources 0.79 0.71 EBITDA Profit (loss) on operating activities 155,044 146,653 Depreciation 45,507 37,012 EBITDA 200,551 183,665 Debt: Credit, loans and other debt instruments 183,111 217,277 Financial leasing 17,619 18,401 Debt 200,730 235,678 Cash and cash assets 85,314 66,580 Debt to EBITDA ratio 0.58 0.92

43. Employment structure

Employment in the Group as at 31 December 2016 and as at 31 December 2015 was as follows: Year ended


31 December 2015 Management Board of the Parent Company 6 6 Management Boards of the Group Companies 13 20 Administration 513 469 Sales Department 156 147 Production Department 1,796 1,748 Other 558 557 Total 3,042 2,947

44. Other information

Shareholders having directly or indirectly at least 5% of the total number of votes at General Shareholders’ Meeting of Amica S.A.

As at 31/12/2016 Number of shares Number of

voting rights Nominal value

of shares Share of capital


ING OFE* 555,952 555,952 1,111,904 7.15%


Total 7,775,273 10,492,951 15,550,546 100.00%


Shares owned by the Members of the Board of Amica S.A.

Owners name Number of shares as at Acquisition (disposal) Number of shares as at



83

31/12/2016 of shares 31/12/2015

Marcin Bilik* 11,900 - 11,900

Alina Jankowska-Brzóska*/** 1,015 1,015 -

Piotr Skubel* 5,121 1,428 3,693

* these shares are held by a person within statutory joint property of spouses ** Ms Alina Jankowska-Brzóska was appointed to the Management Board of the Issuer on 01 June 2016, (as at 31/12/2015, Ms Alina Jankowska-Brzóska was not a member of the Management Board of Amica S.A.).

Shares owned by the Members of the Supervisory Board of Amica S.A.

Owners name Number of shares as at

31/12/2016 Acquisition (disposal) of

shares Number of shares as at

31/12/2015

Mr Tomasz Rynarzewski 400 0 400

45. Events after the balance date

Respectively, on 22/03/2017 and on 28/03/2017, Amica S.A. acquired 21.41% and 39.29% of shares in CDA Group Ltd. in the commercial company incorporated under the French law – Sideme S.A. Societe Industrielle d’Equipement Moderne. The total purchase price of the aforesaid shares amounted to EUR 1,600,000 (PLN 7,105 thousand) and EUR 2,215,167 (PLN 9,742 thousand). At the same time, on 28/03/2017, the Company sold 100 shares in Sideme to Amica Handel i Marketing Sp. z o.o. As a result of the aforesaid transactions, as at 31/03/2017, the Company holds jointly 107,090 (99.91%) shares in Sideme with a total nominal value of EUR 1,606,350.

Approval for publication

This Annual Report prepared for the period from 01 January 2016 to 31 December 2016 (with comparative information) has been approved for publication by the Company's Management Board on 27 April 2017.

Signatures of all Members of the Board

Date Full name Position Signature



84

27/04/2017 Jacek Rutkowski President of the Management Board

27/04/2017 Jarosław Drabarek First Vice-President of the Management Board

27/04/2017 Marcin Bilik Vice President of the Management Board

27/04/2017 Alina Jankowska-Brzóska

Vice President of the Management Board

27/04/2017 Wojciech Kocikowski Vice President of the Management Board

27/04/2017 Piotr Skubel Vice President of the Management Board

Signature of the person responsible for the drawing up of the financial statement mentioned.

Date Full name Position Signature

27/04/2017 Michał Rakowski Chief Accountant / Proxy

MANAGEMENT BOARD'S REPORT ON THE ACTIVITIES OF AMICA S.A. GROUP FOR THE

YEAR 2016

(to the consolidated financial statements presented in accordance with the International Accounting Standards)

I. The most important information relating to the Group's consolidated results (in comparison to 2015):

EBITDA above PLN 200m Increase of gross profit by PLN 15m

Sales revenue increase of 18%.

Increase in sales in all international markets and on the domestic market

Improved working capital management

Successful market uptake of IN line ovens

2

II. Commentary on the market situation

Sales by region Poland

+ 4.7 pp y/y total share in sales

30.7%

• Amica recorded the sales growth of +4.7%. • Amica's sales of hobs increased by +9.1%, refrigeration equipment by +8.8%,

dishwashers by +16.6%, ovens by +4.3%, while the sales of free-standing cookers fell by -2.7%, and washing machines of -6.9%.

• In the heating equipment segment, Amica is the best-selling brand on the Polish market with market share of 32% (in terms of volume).

3

West


35.3%

• Sales in the German market grew by over +3.0%

[in EUR] over the year, which was attributable mainly to higher sales of refrigeration equipment (+6.5%) and washing machines and dishwashers (+6.1%).

• The increase in sales on the UK market was achieved by the newly acquired subsidiary, CDA.

• The expansion of the portfolio of heating products and the acquisition of new customers by Sideme ensured an increase in revenue on the French market by 85% year-on year.

North


9.3%

• The Gram’s sales are higher by +10.9% year-on-year [in EUR]. This growth was achieved mainly due to higher sales of products such as hobs (+61%) and ovens (+13%).

4

• Higher sales allowed to achieve higher market share in the category of hobs by 0.7 p.p. (by FEHA).

East


17.6%

• Higher sales in the region are attributable to a more stable situation in Russia, were

the sales increased by 21 % y/y [in RUB]. • The Russian subsidiary increased its market share in the segment of heating

equipment by 0.9 pp in terms of volume. • UKRAINE – Increase in sales by 20% [in EUR] in 2016, as compared to 2015, despite

the difficult market situation. The growth was achieved mainly due to higher sales of fridges, ovens and hobs.

• The higher sales in other Eastern markets by 8.8% [in EUR] was attributable to fridges and washing machines.

5

South


171.0 148.3

2015 2016

• On the Czech and Slovak markets, Amica Commerce reported a 12% increase in sales year-on-year [in CZK]. The highest increase was noted for ovens (+22% y/y) and fridges (+80% y/y). The increase was achieved by the consistent expansion of the product portfolio.

• Compared with the previous year, the sales in SEE countries grew by +9.5% [in EUR]. Increase of sales in Romania, Bulgaria and Hungary.

Structure of revenue.

The share of heating equipment in sales was 51% and decreased by 7pp, compared to the previous year This resulted from the acquisition of CDA, a commodity sales company, at the end of 2015.

7.2

6

Sales structure by product groups in 2016.

Free-standing cookers (27%)

Goods 50%

Built-in

cookers 15%

Hob

7

One of the key components of Amica Group's strategy is to provide the consumer with the full range of household appliances. As a result of implementation of this objective, the company increased the sale of goods. Detailed information on the product segments is included in Section 11 of the Group’s Consolidated Financial Statements.

III. Financial results

1. Profit and loss account

Profit and loss account (millions PLN) 2016 2015 Change Dynamics %

Revenue from sales 2,474.9 2,088.7 386.2 118% Gross profit on sales 782.7 690.7 92.0 113%

Gross profit on sales 31.6% 33.1% -1.4 pp Earnings Before deducting Interest and Taxes (EBIT) 155.0

146.7 8.4 106%

Operating profit margin 6.3% 7.0% -0.8 pp

EBITDA * 200.6 183.7 16.9 109%

EBITDA margin 8.1% 8.8% -0.7 pp

Gross profit 138.2 123.3 15.0 112%

Gross profit margin 5.6% 5.9% -0.3 pp

Net profit 108.5 97.2 11.3 112%

Net profit margin 4.4% 4.7% -0.3 pp

*EBITDA = EBIT + depreciation

EBIT = operating profit

Group's sales revenue for the year 2016 amounted to PLN 2,475 million and increased by PLN 386 million (by 18%). The Group generated the EBITDA margin higher by PLN 17 million (- 0.7 p.p.) exceeding the level of PLN 200 million. A slightly lower gross profit margin on sales stems mainly from a decline of profits in Russia and GBP/EUR exchange rate depreciation. In 2016, the gross profit increased by PLN 15.0 million. The Group also maintained a high profit margin of 5.6%.

8

2. Price of Amica S.A.'s shares in 2016

3. Salaries and information concerning employment of members of the management.

Total gross salaries in 2016 were PLN 238 million. The Group does not operate any profit sharing or motivation schemes based on the capital, bonds or subscription warrants. Information on the remuneration of members of the management is presented in Section 38.4. of the Annual Consolidated Financial Statements.

In accordance with § 30 of the Company's Articles of Association, the management personnel of Amica S.A. is appointed (and dismissed) by the General Meeting. First of all, the General Shareholders' Meeting appoints the Chair of the Board. The General Shareholders' Meeting appoints the remaining Members of the Board at the request of the elected President of the Board. The Management Board, as well as its individual members, may be dismissed by the General Shareholders' Meeting before their tenure has ended.

9

4. Balance Sheet of Amica S.A. Group

[figures in millions of PLN]

Balance Sheet 2016 2015 Change %

Fixed assets 532.0 508.8 23.2 105% Current Assets 949.3 897.2 52.1 106% Assets held for sale 10.7 10.2 0.5 105%

Total assets 1,492.0 1,416.2 75.8 105%

Equity capital 677.2 593.6 83.6 114% Liabilities and provisions 814.8 822.6 -7.8 99%

Long-term 143.2 193.1 -50.0 74% Current 671.6 629.5 42.2 107%

Total liabilities 1,492.0 1,416.2 75.8 105%

The increase in fixed assets stems from investments made in 2016. The Group has also reduced the level of the net working capital. The balance of interest-bearing loans and borrowings decreased. In 2016, some of the long-term loans were repaid and some of securities were redeemed. In addition, dividends were paid out. The balance of interest-bearing loans and borrowings decreased. In 2016, some of the long-term loans were repaid and some of securities were redeemed. In addition, dividends have been paid out.

5. Information on credit and loans taken.

More information on the incurred loans and borrowings can be found in Section 29 of the Annual Consolidated Financial Statements for 2016.

6. Cash flows

Net cash flows 2016 2015 Change

on operating activities 195.9 58.7 137.2 on investing activities -85.3 -149.3 64.1

on financing activities -92.2 101.8 -194.1

Net cash flows 18.4 11.2 7.2

The Group generated PLN 137 million more on operating activities. This was primarily due to improved inventory management. The inventory as at the end of 2016 was lower than at the end of 2015, while the sales revenue grew by 18%. Detailed figures are included in the Annual Consolidated Cash Flow Statement.

1

7. Key performance indicators

Profitability ratios

Profitability ratios measure the ability of the Group or its individual assets and capitals to generate profit.

Ratio

2016

2015

Calculation formula

Gross profit margin on sales

31.6%

33.1%

Gross profit on sales * 100 % / Net revenue from sales of products, goods and material

Operating profit margin

6.3%

7.0%

Operating profit * 100 % / Net revenue from sales of products, goods and material

Gross profit margin

5.6%

5.9%

Gross financial result * 100 % / Net revenue from sales of products,

goods and material

Net profit margin

4.4%

4.7%

Net financial result * 100 % / Net revenue from sales of products, goods and material

10

Liquidity ratios

Financial liquidity ratios enable the assessment of whether the Group possesses sufficient financial resources to pay current liabilities.

Liquidity ratios Ratio name As at

31/12/2016

As at 31/12/2015

Calculation formula

Required value

Current ratio

1.41

1.43

Current assets / Current liabilities

1.6 – 2.0

Quick ratio

0.91

0.87

(Current assets – Inventory) / Current liabilities

0.8 – 1.0

Net working capital

277,651

267,736

Current assets - current liabilities

> 0

Liquidity ratios remained at a similar level compared to the previous year.

Gearing ratios

Analysis of the activity financing structure enables definition of the financing policy by defining the degree of its debt and the ability to service this debt.

Gearing ratios Ratio name As at

31/12/2016

As at 31/12/2015

Calculation formula Required value

Debt to total assets ratio

54.6%

58.1%

Total liabilities / total assets

0.5 – 0.7

Equity to debt ratio

1.20

1.39

Total liabilities / Equity

-

In 2016, the Group repaid some of its long-term debt, which had a positive effect on the debt ratios.

11

III. Information on research and development work performed in 2016

The following information refers to the work carried out in Amica S.A. 1. In 2016, the Company carried out a number of projects related to synergy of CDA’s

new products put on the UK market. The Company designed a range of built-in hobs, both electric and gas-fired, as well as built-in ovens. Some of the products were already sold in 2016.

2. New lines of free-standing cookers, both standalone and built-in, have been designed for domestic and foreign market. In cooperation with some clients from Western Europe, new dedicated families of heating equipment have been prepared.

3. The Company implemented many projects designed to improve the quality of goods and satisfy the customers’ requirements, among others, in the area of fittings.

4. A series of designs has been developed for the new markets.

IV. Information concerning environmental issues.

1. In the area of production operations:

In accordance with the adopted policy, the Group's objectives include optimization in all environmental impact areas, professional development of corporate relationships with business, social and environmental circles as well as development of grassroot initiatives and sustainable development standards. The basis of our activities are the legal acts relating to environmental protection and the obligations which they impose on the environment users. In addition, Amica S.A. has implemented the Integrated Management System. As part of the environmental management system according to ISO 14001, a periodic assessment of compliance with the current legal requirements is conducted. Each year, on the basis of the identified aspects, the Company develops the Environmental Program, specifying the activities designed to reduce the negative impact on the environment. As a reward for the model environmental management system, development of pro-ecological awareness in the region as well as stable corporate policy and strategy assuming the highest environmental standards, the Foundation Centre for Quality Research and Monitoring, distinguished our company with the "GREEN WAY" Certificate. Another distinction relates to "care for the environment." Amica's efforts in the area of sustainable development, both at the stage of design and at the stage of manufacture of products as well as the Company’s waste management policy gained recognition of the Association of Employers of Wielkopolska, the organizer of the contest being one of the elements of the project "CSR and Flexicurity - the basis of Wielkopolska-based companies."

12

2. In the area of the products produced:

Amica Group has offered environment-friendly products for many years. This is an expression of concern for the safety and health of users as well as care for the environment and very serious approach to the challenges facing us today. An increasingly important element of the Company's environmental strategy is the products life-cycle management, taking into account all the principles of eco-design, energy efficiency and recycling in terms of full responsibility for the marketed product (according to compliance assessment procedure). Therefore, the design stage takes into account all phases of product life and the selection of construction materials as well as the need for further recovery and recycling of waste equipment (in accordance with WEEE Directive) and the rational use of resources and materials.

V. Scope of CSR activities.

Amica S.A. has been making investments directed at employees and their environment for years. For the benefit of employees and their families, in the past two years, the Company has opened a nursery, kindergarten and a medical clinic. The employees may also use 21 summer cottages in Mierzyn near Międzychód. Furthermore, Amica provides great support for the initiatives undertaken by local communities, especially for the ones related to the promotion of sport, healthy lifestyle and environmental education. In 2016, the Company supported numerous local initiatives in the form, financially and organizationally. In turn, the Amicis Foundation, established in 2005, is helping the most needy members of society i.e. children, the elderly, the sick, the lonely, the homeless or addicted. Acting mostly in the region of Szamotuły and Wronki districts, the foundation supports educational and care institutions as well as local cultural initiatives.

Amica's serious approach to responsible and sustainable business management is demonstrated by the appointment of the CSR officer in the company and the organization of stakeholder panels in 2016. The purpose of the meetings was to get to know the opinions and expectations towards the company regarding responsible business management and its social role in the region. The foundation prepared and conducted meetings based on the guidelines defined in the international Stakeholder Engagement Standard. Stakeholders shared their views on Amica's responsible business and social activities in Wronki and the Region of Wielkopolska. The recommendations and expectations have been communicated directly to the Management Board of Amica S.A. and become the basis for defining priorities in the current “Strategy for Responsible Business and Sustainable Development of Amica S.A. for the years 2017-2023”.

13

VI. The Group's objectives for 2017.

The overall long term objective of the Group is increasing its value, which is to be achieved by: increasing profitability and market share in the Group's key markets such as Poland,

Russia, Germany, Scandinavia and England, investment in strengthening the brands of Amica, Gram, Hansa and CDA, efficient investment in product development and increase of the production capacity in

the segment of heating equipment, optimization of the profitability of the broad portfolio of the Group's complementary

goods, development on the new markets of Spain and France. Furthermore, the Group is seeking for the investment objectives, which will allow boost sales in the existing markets and expand into new markets. All actions are undertaken aimed at the expansion and strengthening of the company's position on the Polish market and strategic foreign markets. No less important factor in creating a strategy is to decrease the costs of purchase and production in cooperation with our suppliers, which is to further increase the operating profitability of the entire Group. Measures undertaken in the management area focus on promoting cooperation within project works and management by objectives.

VII. Profit sharing proposal.

The Management Board of Amica S.A. has recommended that the dividend to be paid in 2017 for the year 2016 shall amount to PLN 5.5 per share.

VIII. Information on the Capital Group.

1. Information on the companies of the Amica Group is presented in Item 4 of the

Annual Consolidated Financial Statements. 2. The Group does not operating profit sharing scheme. 3. The Group is not aware of many contracts which might in the future result in changes

of the proportions of shares held by the existing shareholders. 4. The limitations concerning transfer of ownership rights to securities issued by the

Issuer are stipulated in paragraph 8 of the Company Articles of Association. 5. Shareholders owning A series shares with voting right privileges in the Company have

priority when purchasing registered privileged series A shares offered for sale. A shareholder who has the intention to dispose of his shares is obliged to inform the Company's Management Board of his intention in writing, indicating the buyers, the number of shares, proposed price, conditions and the method of payment.

14

IX. Principles of corporate governance

The Corporate Governance Statement has been prepared based on the document entitled “Best Practice for GPW Listed Companies 2016”, as attached to Resolution No. 26/1413/2015 of the Supervisory Board of the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A.) of 13 October 2015 on the adoption of the “Best Practice for GPW Listed Companies 2016”.

[In accordance with § 91 section 5 point (4) of the Regulation of the Minister of Finance of 19 February 2009 on current and interim reports (…), the Corporate Governance Statement forms a separate part of the Report on the Company's Activities being an integral part of the Annual Report of Amica S.A. for the financial year 2016].

X. Other information.

1. On 02 June 2016, the Company entered into an agreement with an entity authorized to audit financial statements, Grant Thornton Frąckowiak sp. k. Information on remuneration is provided in the Annual Financial Statements in Item 39.

2. Information on the remuneration of members of the management is presented in items 38.4 of the Consolidated Annual Financial Statement,

3. Information on loans granted during the given financial year is contained in item 22 the Consolidated Annual Financial Statement.

4. The Group did not previously publish its financial result forecasts. 5. The principles adopted for managing equity resources are presented in item 41 of

the Consolidated Annual Financial Statement. 6. In 2016 there were no factors or unusual occurrences influencing the Company's

activity during the financial year. 7. In 2016 the Capital Group Companies fulfilled their credit obligations on time. In

2017 there are no anticipated threats to the punctual settling of liabilities, either from credit agreements or from liabilities from deliveries and services.

8. In 2017 the Group intends to undertake investment action in the production of heating appliances, both in the expansion of the production line and in new product lines. In addition, the investment plan provides for development of logistics and IT systems. Equity investments are also possible.

9. Information on the allowed warranties and guarantees is included in the Consolidated Financial Statement in pt 34.

10. Financial instruments are one of the significant risks and threats, to which the issuer is exposed. A detailed description of these risks is presented in paragraph 40.9 of the Annual Financial Statements.

11. Proceedings pending before a court, competent authority for the arbitration proceedings or public administration bodies are listed in item 35 of the Annual Financial Statements.

15

12. Information on material transactions entered into by the issuer or its subsidiaries, including amounts and the information specifying the nature of these transactions - the obligation is fulfilled through indicating the place where this information is presented in the financial statements, i.e. in paragraph 38 of the Annual Financial Statements.

13. The Group issued no bonds in 2016. It also purchased the bonds of the total value of 15.9 million PLN.

14. Evaluation of the feasibility of the intended investments, including capital investments in comparison with the resources available with regard for the possibility of change in the structure of financing this activity.

The volume of investments is determined by the size of financial resources available. Therefore, there is no risk in their implementation.

15. The characteristics of the external and internal factors significant for the Issuer’s

enterprise development and the description of the Issuer’s business development prospects at least by the end of the financial year following the year for which the financial statements, as included in the annual report, were prepared, taking into consideration the elements of the developed market strategy;

In line with its long-term strategy HIT2023, the Group effectively implements the diversification of sales. As a result, in 2015, the Group acquired CDA in the United Kingdom and purchased shares in Sideme, from France. In 2016, the effects of synergies were integrated and implemented in CDA. Gaining new markets will be followed by the development sales in these markets. In connection with the planned increase in sales, we plan to expand production capacity, build the logistics centre and increase efficiency. The investments will be carried out in Kostrzyn-Słubice Special Economic Zone.

16. All contracts concluded between the Issuer and Members of the Management

Board, envisaging compensation in the event of their resignation or dismissal from the position taken up without important cause or their dismissal taking place as a result of the merger of the issuer by takeover.

Not applicable

17. Information about the shareholders holding significant blocks of shares is presented

in Section 43 of the Annual Financial Statements. 18. Information on shares held by members of the Management Board and the

Supervisory Board is presented in Section 43 of the Annual Financial Statements. 19. Information about the composition of the Management Board and the Supervisory

Board of the Parent Company is presented in Section 2 of the Annual Financial Statements.

20. An indication of all the limitations with relation to exercising voting rights, such as limitations in executing voting rights for owners of particular parts or numbers of votes, time limits concerning the execution of voting rights or regulations which require that, when collaborating with the company, capital rights connected with securities are separate from the possession of securities.

16

Not applicable

21. Significant changes in the basic principles of managing the enterprise of the issuer and its capital group.

Not applicable

22. Information on significant agreements for the commercial operations of the Issuer,

including agreements known to the Issuer concluded between shareholders, insurance policy agreements, co-operation and other joint activity.

Not applicable.

17

Signatures of Members of the Board

Signatures of all Members of the Board Date Full name Position Signature 27 April 2017 Jacek Rutkowski President of the

Management Board

27 April 2017 Jarosław Drabarek

First Vice-President of the Management Board

27 April 2017 Marcin Bilik Vice President of the Management Board

27 April 2017 Alina Jankowska-Brzóska


27 April 2017 Piotr Skubel Vice President of the Management Board

27 April 2017 Wojciech Kocikowski


Statement of the Management Board of “Amica Spółka

Akcyjna” with its registered office in Wronki on application of the

Principles of Corporate Governance – “Best Practice for GPW

Listed Companies 2016”.

[This Corporate Governance Statement has been prepared based on the document entitled “Best Practice for GPW Listed Companies 2016”, as attached to Resolution No. 26/1413/2015 of the Supervisory Board of the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A.) of 13 October 2015 on the adoption of the “Best Practice for GPW Listed Companies 2016”.

*****

In accordance with § 91 section 5 point 4) of the Regulation of the Minister of Finance of 19 February 2009 on current and interim reports (…), The Corporate Governance Statement forms a separate part of the Report on the Company's Activities being an integral part of the Annual Statement of Amica SA for the financial year 2016].

Wronki, April 2017

Information on application by “Amica Spółka Akcyjna” of the recommendations and principles laid down in „Best Practice for GPW

Listed Companies 2016”

Wronki, 27 April 2017

2 | Page

Information on application by “Amica Spółka Akcyjna” of the recommendations and

principles laid down in „Best Practice for GPW Listed Companies 2016”

A. Set of corporate governance principles applicable to the Company and the place

where the text of the set of principles is publicly available

In 2016, “Amica Spółka Akcyjna” complied with the corporate governance principles laid down in

“Best Practice for GPW Listed Companies 2016”, as adopted by the Board of Board of the Warsaw

Stock Exchange pursuant to Resolution No 26/1413/2015 of 13 October 2015 on the adoption of “Best

Practice for GPW Listed Companies 2016”.

[The abovementioned regulations are available on the website of the Warsaw Stock Exchange at:

https://www.gpw.pl/lad_korporacyjny_na_gpw ].

B. The extent to which the Company has waived the provisions of the corporate

governance principles referred to herein, identification of those provisions and

clarification of the grounds for the waiver

“Amica Spółka Akcyjna” has resolved to apply the “Best Practice for GPW Listed Companies 2016”,

as issued by the Warsaw Stock Exchange”, except for the following:

1. ensuring real-life broadcast of the general meeting to the Shareholders of the Company – Rule

IV. R.2 item 1) and Rule IV.Z.2, Chapter IV “General Meeting, Shareholder Relations”*;

2. ensuring real-time bilateral communication where shareholders may take the floor during a

general meeting from a location other than the general meeting to the Shareholders of the

Company – Rule IV. R.2 item 2), Chapter IV “General Meeting, Shareholder Relations”*;

3. ensuring the possibility to exercise of the right to vote during a general meeting either in

person or through a plenipotentiary to the Shareholders of the Company – Rule IV. R.2 item

3), Chapter IV “General Meeting, Shareholder Relations”*;

4. making the remuneration of Members of the Supervisory Board independent of the Company's

financial performance – Rule VI.Z.3, Chapter VI “Remuneration” , (The remuneration of

members of the supervisory board should not be linked to options or other derivatives or any

other variable components, and neither should it be linked to the company's results)**,

And further decides that:

1. pursuant to Rule IZ1.15, Chapter I “Disclosure Policy, Investor Communications” (section on

the “diversity policy”), the Company – respecting the diversity policy in relation to the

https://www.gpw.pl/lad_korporacyjny_na_gpw




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Company and its key managers – will develop an official document and publish on its website

the applicable principles of this policy, taking into account in particular such components of

the diversity policy as: gender, direction of education, age, professional experience;

2. pursuant to Rule V.Z.6, Chapter V, “Conflict of Interest, Related Party Transactions”, based on

the previously existing internal regulations of the Company – regulations concerning the

principles and procedures of operation of the Company's corporate bodies – the Company will

propose relevant changes and modifications of the Regulations of the Management Board and

the Regulations of the Supervisory Board – addition of specific provisions according to which

a Member of the Management Board/Member of the Supervisory Board shall inform of any

conflicts of interest (or the possibility of its occurrence) and not participate in the

consideration of any such affairs (in particular, not participate in voting on matters where

there is or may potentially arise a conflict of interest);

3. pursuant to Rule VI.R.1., Chapter VI “Remuneration”, the Company will develop – in the form

of an official document – the principles of the applicable remuneration policy (and incentive

schemes) for Members of the Company bodies and its key managers, which will be closely

linked to the Company’s strategy, its short- and long-term objectives, long-term interests and

the economic and financial results and will further take into consideration the solutions for

avoiding discrimination on any grounds whatsoever.

C. Detailed information on application by “Amica Spółka Akcyjna” of the

recommendations and principles laid down in „Best Practice for GPW Listed

Companies 2016”

I. Disclosure Policy, Investor Communications

Listed companies should ensure adequate communications with investors and

analysts by pursuing a transparent and effective disclosure policy. To this end, they

should ensure easy and non-discriminatory access to disclosed information using

diverse tools of communication.

Recommendations

I.R.1. Where a company becomes aware that untrue information is disseminated in the media,

which significantly affects its evaluation, it should immediately publish on its website a

communiqué containing its position on such information, unless in the opinion of the

company the nature of such information and the circumstances of its publication give

reasons to follow a more adequate solution.

The principle is applied.




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I.R.2. Where a company pursues sponsorship, charity or other similar activities, it should publish

information about the relevant policy in its annual activity report.


I.R.3. Companies should allow investors and analysts to ask questions and receive explanations –

subject to prohibitions defined in the applicable legislation – on topics of their interest. This

recommendation may be implemented through open meetings with investors and analysts

or in other formats allowed by a company.


I.R.4. Companies should use best efforts, including taking all steps well in advance as necessary

to prepare a periodic report, to allow investors to review their financial results as soon as

possible after the end of a reporting period.


Detailed principles

I.Z.1. A company should operate a corporate website and publish on it, in a legible form and in a

separate section, in addition to information required under the legislation:

I.Z.1.1. basic corporate documents, in particular the company's articles of association;

I.Z.1.2. the full names of the members of its management board and supervisory board

and the professional CVs of the members of these bodies including information

on the fulfilment of the criteria of independence by members of the supervisory

board;

I.Z.1.3. a chart showing the division of duties and responsibilities among members of the

management board drawn up according to principle II.Z.1;

I.Z.1.4. the current structure of shareholders indicating those shareholders that hold at

least 5% of the total vote in the company according to information provided to the

company by shareholders under the applicable legislation;

I.Z.1.5. current and periodic reports, prospectuses and information memoranda with annexes, published by the company at least in the last 5 years;

I.Z.1.6. information on the dates of corporate events leading to the acquisition or limitation of rights of a shareholder, information on the dates of publication of financial reports and other events relevant to investors, within a timeframe enabling investors to make investment decisions;

I.Z.1.7. information materials published by the company concerning the company's strategy and its financial results;




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I.Z.1.8. selected financial data of the company for the last 5 years of business in a format enabling the recipient to process such data;

I.Z.1.9. information about the planned dividend and the dividend paid out by the company in the last 5 financial years, including the dividend record date, the dividend payment date and the dividend amount, in aggregate and per share;

I.Z.1.10. financial projections, if the company has decided to publish them, published at least in the last 5 years, including information about the degree of their implementation;

I.Z.1.11. information about the content of the company's internal rule of changing the company authorised to audit financial statements or information about the absence of such rule;

I.Z.1.12. a statement on compliance with the corporate governance principles contained in the last published annual report;

I.Z.1.13. a statement on the company's compliance with the corporate governance recommendations and principles contained herein, consistent with the information that the company should report under the applicable legislation;

I.Z.1.14. materials provided to the general meeting, including assessments, reports and positions referred to in principle II.Z.10, tabled to the general meeting by the supervisory board;

I.Z.1.15. information about the company's diversity policy applicable to the company's governing bodies and key managers; the description should cover the following elements of the diversity policy: gender, education, age, professional experience, and specify the goals of the diversity policy and its implementation in the reporting period; where the company has not drafted and implemented a diversity policy, it should publish the explanation of its decision on its website;

I.Z.1.16. information about the planned transmission of a general meeting, not later than 7

days before the date of the general meeting;

I.Z.1.17. justification of draft resolutions of the general meeting concerning issues and determinations which are relevant to or may give rise to doubts of shareholders, within a timeframe enabling participants of the general meeting to review them and pass the resolution with adequate understanding;

I.Z.1.18. information about the reasons for cancellation of a general meeting, change of its date or agenda, and information about breaks in a general meeting and the grounds of those breaks;

I.Z.1.19. shareholders' questions asked to the management board pursuant to Article 428 § 1 or § 6 of the Commercial Companies Code together with answers of the management board to those questions, or a detailed explanation of the reasons why no answer is provided, pursuant to principle IV.Z.13;

I.Z.1.20. an audio or video recording of a general meeting; I.Z.1.21. contact details of the company's investor relations officers including the full

name and e-mail address or telephone number.




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The Company observes the principles worded in I.Z.1.1. – I.Z.1.21, except for the Principle

set forth in I.Z.1.15.

I.Z.2. A company whose shares participate in the exchange index WIG20 or mWIG40 should

ensure that its website is also available in English, at least to the extent described in

principle I.Z.1. This principle should also be followed by companies not participating in

these indices if so required by the structure of their shareholders or the nature and scope

of their activity.


II. Management Board, Supervisory Board

A listed company is managed by its management board, whose members act in the

interest of the company and are responsible for its activity. The management board

is responsible among others for the company's leadership, engagement in setting

and implementing its strategic objectives, and ensuring the company's efficiency

and safety.

A company is supervised by an effective and competent supervisory board.

Supervisory Board members act in the interest of the company and follow their

independent opinions and judgement. The supervisory board in particular issues

opinions on the company's strategy, verifies the work of the management board in

pursuit of defined strategic objectives, and monitors the company's performance.

Recommendations

II.R.1. To ensure the highest standards of the management board and the supervisory board of

a company in efficient fulfilment of their obligations, the management board and the

supervisory board should have members who represent high qualifications and

experience.


II.R.2. Decisions to elect members of the management board or the supervisory board of a

company should ensure that the composition of these bodies is comprehensive and

diverse among others in terms of gender, education, age and professional experience.


II.R.3. Functions on the management board of a company should be the main area of the

professional activity of management board members. Additional professional activities of




7 | Page

management board members must not require so much time and effort that they could

adversely affect proper performance of functions in the company. In particular,

management board members should not be members of governing bodies of other entities

if the time devoted to functions in such other entities prevents their proper performance

in the company.


II.R.4. Supervisory board members must be able to devote the time necessary to perform their

duties.


II.R.5. If a supervisory board member resigns or is unable to perform his or her functions, the

company should immediately take steps necessary to ensure substitution or replacement

on the supervisory board.


II.R.6. Being aware of the pending expiration of the term of office of management board

members and their plans of further performance of functions on the management board,

the supervisory board should take steps in advance to ensure efficient operation of the

company's management board.


II.R.7. A company should allow its supervisory board to use professional and independent

advisory services necessary for the supervisory board to exercise effective supervision in

the company. In its selection of the advisory service provider, the supervisory board

should take into account the financial standing of the company.


Detailed principles

II.Z.1. The internal division of responsibilities for individual areas of the company's activity

among management board members should be clear and transparent, and a chart

describing that division should be available on the company's website.


II.Z.2. A company's management board members may sit on the management board or

supervisory board of companies other than members of its group subject to the approval

of the supervisory board.





8 | Page

II.Z.3. At least two members of the supervisory board should meet the criteria of being

independent referred to in principle II.Z.4.


II.Z.4. Annex II to the European Commission Recommendation of 15 February 2005 on the role

of non-executive or supervisory directors of listed companies and on the committees of

the (supervisory) board applies to the independence criteria of supervisory board

members. Irrespective of the provisions of point 1(b) of the said Annex, a person who is

an employee of the company or its subsidiary or affiliate or has entered into a similar

agreement with any of them cannot be deemed to meet the independence criteria. In

addition, a relationship with a shareholder precluding the independence of a member of

the supervisory board as understood in this principle is an actual and significant

relationship with any shareholder who holds at least 5% of the total vote in the company.


II.Z.5. Each supervisory board member should provide the other members of the supervisory

board as well as the company's management board with a statement of meeting the

independence criteria referred to in principle II.Z.4.


II.Z.6. The supervisory board should identify any relationships or circumstances which may

affect a supervisory board member's fulfilment of the independence criteria. An

assessment of supervisory board members' fulfilment of the independence criteria should

be presented by the supervisory board according to principle II.Z.10.2.


II.Z.7. Annex I to the Commission Recommendation referred to in principle II.Z.4 applies to the

tasks and the operation of the committees of the Supervisory Board. Where the functions

of the audit committee are performed by the supervisory board, the foregoing should

apply accordingly.

This Principle is applied by the Company in full.

[Comment: The Supervisory Board is assisted by the Audit Committee and the

Operating Committee. The Supervisory Board has not decised to establish the

Compensation Committee or the Nomination Committee].

II.Z.8. The chair of the audit committee should meet the independence criteria referred to in

principle II.Z.4.


II.Z.9. To enable the supervisory board to perform its duties, the company's management board




9 | Page

should give the supervisory board access to information on matters concerning the

company.


II.Z.10. In addition to its responsibilities laid down in the legislation, the supervisory board

should prepare and present to the ordinary general meeting once per year the following:

II.Z.10.1. an assessment of the company's standing including an assessment of the

internal control, risk management and compliance systems and the internal

audit function; such assessment should cover all significant controls, in

particular financial reporting and operational controls;


II.Z.10.2. a report on the activity of the supervisory board containing at least the

following information:

- full names of the members of the supervisory board and its committees;

- supervisory board members' fulfilment of the independence criteria;

- number of meetings of the supervisory board and its committees in the

reporting period;

- self-assessment of the supervisory board;

- an assessment of the company's compliance with the disclosure

obligations concerning compliance with the corporate governance

principles defined in the Exchange Rules and the regulations on current

and periodic reports published by issuers of securities;


II.Z.10.3. an assessment of the rationality of the company's policy referred to in

recommendation I.R.2 or information about the absence of such policy.


II.Z.11. The supervisory board should review and issue opinions on matters to be decided in

resolutions of the general meeting.


III. Internal Systems and Functions




10 | Page

Listed companies should maintain efficient internal control, risk management and

compliance systems and an efficient internal audit function adequate to the size of the

company and the type and scale of its activity.

Recommendations

III.R.1. The company's structure should include separate units responsible for the performance of

tasks in individual systems or functions, unless the separation of such units is not justified by the

size or type of the company's activity.


Detailed principles

III.Z.1. The company's management board is responsible for the implementation and

maintenance of efficient internal control, risk management and compliance systems and

internal audit function.


III.Z.2. Subject to principle III.Z.3, persons responsible for risk management, internal audit and

compliance should report directly to the president or other member of the management

board and should be allowed to report directly to the supervisory board or the audit

committee.


III.Z.3. The independence rules defined in generally accepted international standards of the

professional internal audit practice apply to the person heading the internal

audit function and other persons responsible for such tasks.


III.Z.4. The person responsible for internal audit (if the function is separated in the company)

and the management board should report to the supervisory board at least once per year

with their assessment of the efficiency of the systems and functions referred to in

principle III.Z.1 and table a relevant report.

The principle is not applied.

[Comment: The members of the management body of the Company together with the

Internal Auditor periodically evaluate the results of the audits carried out within the

Company in the field of parameterization of the degree of economic risk in particular

business processes / operations of the Company. The Management Board effectively

monitors the progress of both the problems/questions identified by the auditors and

the corrective action taken in these matters].




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III.Z.5. The supervisory board should monitor the efficiency of the systems and functions

referred to in principle III.Z.1 among others on the basis of reports provided periodically

by the persons responsible for the functions and the company's management board, and

make an annual assessment of the efficiency of such systems and functions according to

principle II.Z.10.1. Where the company has an audit committee, it should monitor the

efficiency of the systems and functions referred to in principle III.Z.1, which however

does not release the supervisory board from the annual assessment of the efficiency of

such systems and functions.


III.Z.6. Where the company has no separate internal audit function in its organisation, the audit

committee (or the supervisory board if it performs the functions of the audit committee)

should review on an annual basis whether such function needs to be separated.

The principle is not applied (given the existence of a separate internal audit unit within

the Company’s organizational structure).

IV. General Meeting, Shareholder Relations

The Management Board and the Supervisory Board of a listed company should

encourage the engagement of shareholders in matters of the company, in particular

through active participation in the General Meeting.

The general meeting should proceed by respecting the rights of shareholders and

ensuring that passed resolutions do not infringe on reasonable interests of different

groups of shareholders.

Shareholders who participate in a general meeting should exercise their rights in

accordance with the rules of good conduct.

Recommendations

IV.R.1. Companies should strive to hold an ordinary general meeting as soon as possible after the

publication of an annual report and set the date in keeping with the applicable legislation.


IV.R.2. If justified by the structure of shareholders or expectations of shareholders notified to the

company, and if the company is in a position to provide the technical infrastructure

necessary for a general meeting to proceed efficiently using electronic communication

means, the company should enable its shareholders to participate in a general meeting




12 | Page

using such means, in particular through:

1) real-life broadcast of the general meeting;

2) real-time bilateral communication where shareholders may take the floor during a

general meeting from a location other than the general meeting;

3) exercise of the right to vote during a general meeting either in person or through a

plenipotentiary.

The principle is not applied. [Comment: Acknowledging the significance of the content of the “Best Practice for GPW Listed Companies 2016” as a set of key principles indispensable to ensure management transparency, effective supervision and full respect for the rights of Shareholders, the Company has adopted to apply the “Best Practice for GPW Listed Companies 2016” with the exception of the rules concerning the on-line real-life broadcast of the general meetings and the possibility of two-way real-time communication/exercise of the right to vote during a general meeting either in person or through a plenipotentiary to Shareholders from a location other than the general meeting to the Shareholders of the Company, due to the high risk resulting from the imperfect IT infrastructure. The Company believes that the application of the above-mentioned arrangements for participation in the General Meeting: (i) is not justified , given the shareholding structure; (ii) furthermore, the Company is not able to provide the technical infrastructure necessary for the smooth conduct of the General Meeting by means of electronic communication; (iii) no expectations in this regard have been reported to the Company; (iv) the implementation of such solutions is also associated with excessively high costs of using such forms of communication; however, the Company does not rule out possible use of such broadcasting techniques when organizing future General Meetings, in particular if more effective technical capabilities for broadcasting the meetings are available, as compared to those offered now. Furthermore, the Company believes that the implementation of such solutions is also associated with excessively high costs of using such forms of communication; however, the Company does not rule out possible use of such broadcasting techniques when organizing future General Meetings, in particular if more effective technical capabilities for broadcasting the meetings are available, as compared to those offered now. The Company does not rule out either the possibility of providing the shareholders with the means of two-way real-time electronic communication during the General Meetings in the future, especially if there appear more effective technical capabilities for delivery of multimedia communications compared to those currently offered (at present, provision of suitable data transfer quality would require substantial rebuilding of the local telecommunications infrastructure, which is associated with very high costs; lack of adequate infrastructure entails risks likely to disrupt the smooth running of the AGM sessions].

IV.R.3. Where securities issued by a company are traded in different countries (or in different

markets) and in different legal systems, the company should strive to ensure that

corporate events related to the acquisition of rights by shareholders take place on the

same dates in all the countries where such securities are traded.




13 | Page

The principle is not applicable to the Company.

Detailed principles

IV.Z.1. Companies should set the place and date of a general meeting so as to enable the

participation of the highest possible number of shareholders.


IV.Z.2. If justified by the structure of shareholders, companies should ensure publicly available

real-time broadcasts of general meetings.

The principle is not applied (see comment to the Principle IV.R.2).

IV.Z.3. Presence of representatives of the media should be allowed at general meetings.


IV.Z.4. If the management board becomes aware a general meeting being convened pursuant

to Article 399 § 2 - 4 of the Commercial Companies Code, the management board should

immediately take steps which it is required to take in order to organise and conduct the

general meeting. The foregoing applies also where a general meeting is convened under

authority granted by the registration court according to Article 400 § 3 of the

Commercial Companies Code.


IV.Z.5. The rules of general meetings and the method of conducting the meeting and adopting

resolutions must not restrict the participation of shareholders in general meetings and

the exercising of their rights. Amendments of the rules of the general meeting should

take effect at the earliest as of the next general meeting.


IV.Z.6. Companies should strive to ensure that the cancellation of a general meeting, change of

its date or break in its proceedings do not prevent or limit the exercising of the

shareholders' rights to participate in the general meeting.


IV.Z.7. A break in the proceedings of the general meeting may only take place in special cases,

defined at each time in the justification of the resolution announcing the break, drafted

on the basis of reasons provided by the shareholder requesting the break.


IV.Z.8. A resolution of the general meeting announcing a break should clearly set the date and

time when the proceedings recommence, and such date and time must not be a barrier

for most shareholders, including minority shareholders, to participate in the




14 | Page

continuation of the proceedings.


IV.Z.9. Companies should strive to ensure that draft resolutions of the general meeting contain

a justification, if it helps shareholders to pass a resolution with adequate understanding.

If a matter is put on the agenda of the general meeting at the request of a shareholder or

shareholders, the management board or the chair of the general meeting should request

presentation of the justification of the proposed resolution. In important matters and

matters which may give rise to any doubt of shareholders, the company should provide

a justification, unless it otherwise provides the shareholders with information necessary

to pass a resolution with adequate understanding.


IV.Z.10. Any exercise of the rights of shareholders or the way in which they exercise their rights

must not hinder the proper functioning of the governing bodies of the company.


IV.Z.11. Members of the management board and the supervisory board should participate in a

general meeting as necessary to answer questions asked at the general meeting.


IV.Z.12. The management board should present to participants of an ordinary general meeting

the financial results of the company and other relevant information contained in the

financial statements to be approved by the general meeting.


IV.Z.13. If a shareholder request information about the company, the management board of the

company should provide an answer to the shareholder's request within 30 days or

inform the shareholder of its refusal to provide such information where the

management board has made such decision pursuant to Article 428 § 2 or § 3 of the

Commercial Companies Code.


IV.Z.14. Resolutions of the general meeting should allow for a sufficient period of time between

decisions causing specific corporate events and the date of determination of the rights

of shareholders pursuant to such events.


IV.Z.15. A resolution of the general meeting concerning an issue of shares with subscription

rights should specify the issue price or the mechanism of setting the price or authorise

the competent governing body to set the price prior to the subscription right record date




15 | Page

within the timeframe necessary for investors to make decisions.


IV.Z.16. The dividend record date and the dividend payment date should be set so as to ensure

that the period between them is no than 15 business days. A longer period between these

dates requires a justification.


IV.Z.17. A resolution of the general meeting concerning a conditional dividend payment may

only contain such conditions whose potential fulfilment takes place before the dividend

record date.


IV.Z.18. A resolution of the general meeting to split the nominal value of shares should not set

the new nominal value of the shares below PLN 0.50, which could result in a very low

unit market value of the shares, and which could consequently pose a threat to the

correct and reliable valuation of the company listed on the Exchange.


V. Conflict of Interest, Related Party Transactions

For the purpose of this Section, 'related party' is defined under the International Accounting

Standards approved in Regulation No (EU) 1606/2002 of the European Parliament and of the

Council of 19 July 2002 on the application of international accounting standards.

Companies should have in place transparent procedures for preventing conflicts of

interest and related party transactions where a conflict of interest may occur. The

procedures should provide for ways to identify, disclose and manage such cases.

Recommendations

V.R.1. Members of the management board and the supervisory board should refrain from

professional or other activities which might cause a conflict of interest or adversely affect

their reputation as members of the governing bodies of the company, and where a conflict

of interest arises, immediately disclose it.


Detailed principles




16 | Page

V.Z.1. No shareholder should have preference over other shareholders in transactions

concluded by the company with shareholders or their related parties.


V.Z.2. Members of the management board or the supervisory board should notify the

management board or the supervisory board, respectively, of any conflict of interest

which has arisen or may arise, and should refrain from voting on a resolution on the issue

which may give rise to such a conflict of interest in their case.


V.Z.3. Members of the management board or the supervisory board must not accept any benefits

which might affect their impartiality and objectivism in making decisions or reflect

unfavourably on the assessment of the independence of their opinions or judgements.


V.Z.4. Where a member of the management board or the supervisory board concludes that a

decision of the management board or the supervisory board, respectively, is in conflict

with the interest of the company, he or she may request that the minutes of the

management board or the supervisory board meeting show his or her position.


V.Z.5. Before the company concludes a significant agreement with a shareholder who holds at

least 5% of the total vote in the company or with a related party, the management board

should request the supervisory board's approval of the transaction. Before giving its

approval, the supervisory board should evaluate the impact of the transaction on the

interest of the company. The foregoing does not apply to typical transactions and

transactions at arm's-length made as part of the company's operations between the

company and members of its group. If the decision concerning the company's significant

agreement with a related party is made by the general meeting, the company should give

all shareholders access to information necessary to assess the impact of the transaction

on the interest of the company before the decision is made.


V.Z.6. In its internal regulations, the company should define the criteria and circumstances

under which a conflict of interest may arise in the company, as well as the rules of conduct

where a conflict of interest has arisen or may arise. The company's internal regulations

should among others provide for ways to prevent, identify and resolve conflicts of interest,

as well as rules of excluding members of the management board or the supervisory board

from participation in reviewing matters subject to a conflict of interest which has arisen

or may arise.




17 | Page

The principle is not yet applied. (The Company will prepare the relevant regulations).

VI. Remuneration

A company should have a remuneration policy applicable at least to members of the

company's governing bodies and key managers. The remuneration policy should in

particular determine the form, structure, and method of determining the

remuneration of members of the company's governing bodies and key managers.

Recommendations

VI.R.1. The remuneration of members of the company's governing bodies and key managers

should follow the approved remuneration policy.


VI.R.2. The remuneration policy should be closely tied to the company's strategy, its short- and

long-term goals, long-term interests and results, taking into account solutions necessary

to avoid discrimination on whatever grounds.


VI.R.3. If the supervisory board has a remuneration committee, principle II.Z.7 applies to its

operations.

The principle is not applicable to the Company (given no compensation committee or

nomination committee within the Supervisory Board of the Company).

VI.R.4. The remuneration levels of members of the management board and the supervisory board

and key managers should be sufficient to attract, retain and motivate persons with skills

necessary for proper management and supervision of the company. Remuneration should

be adequate to the scope of tasks delegated to individuals, taking into account additional

functions, for instance on supervisory board committees.


Detailed principles VI.Z.1. Incentive schemes should be constructed in a way necessary among others to tie the level

of remuneration of members of the company's management board and key managers to

the actual long-term financial standing of the company and long-term shareholder value

creation as well as the company's stability.





18 | Page

VI.Z.2. To tie the remuneration of members of the management board and key managers to the

company's long-term business and financial goals, the period between the allocation of

options or other instruments linked to the company's shares under the incentive scheme

and their exercisability should be no less than two years.

The principle is not applied (the Company does not offer incentive schemes providing

for options or other share-based instruments of the Company).

VI.Z.3. The remuneration of members of the supervisory board should not be linked to options

or other derivatives or any other variable components, and neither should it be linked to

the company's results.

The principle is not applied.

[Comment: The Company notes that in 2013 the Company introduced a consistent

incentive scheme for members of the Management Board and the Supervisory Board

setting out the objectives and rules of remuneration for members of the Company's

corporate bodies, which is linked directly with the implementation of strategic and

financial plans adopted by Amica Group and oriented at creation of the Company’s

market value/maximization its value for the Shareholders (not relating directly to the

individual results of the Company). The Company believes that a tangible result of the

scheme are the economic and financial results achieved in recent years. In addition, the

Company believes that fixed remuneration of the supervisory board members and the

variable remuneration associated with the (voluntary) participation in the incentive

scheme should be treated separately. The Company does not rule out that the accepted

principles of remuneration of the Supervisory Board Members may be redefined in the

future.

VI.Z.4. In this activity report, the company should report on the remuneration policy including

at least the following:

1) general information about the company's remuneration system;

2) information about the conditions and amounts of remuneration of each

management board member broken down by fixed and variable remuneration

components, including the key parameters of setting the variable remuneration

components and the terms of payment of severance allowances and other amounts

due on termination of employment, contract or other similar legal relationship,

separately for the company and each member of its group;

3) information about non-financial remuneration components due to each




19 | Page

management board member and key manager;

4) significant amendments of the remuneration policy in the last financial year or

information about their absence;

5) assessment of the implementation of the remuneration policy in terms of

achievement of its goals, in particular long-term shareholder value creation and the

company's stability.

The principle is not applied (nevertheless, with regard to disclosure of compensation of

each member of the management body of the Company, the generally applicable laws

apply).

*****

D. Main characteristics of the internal control and risk management systems applied with the Company in relation to the process of preparing the financial statements and consolidated financial statements

The system of internal inspection and risk management in relation to the process of drawing

up financial statements is based on the accepted principles of the accounting policy and internal

regulation regarding maintenance of the Company's organisational structure which clearly allocates

responsibility, entitlements and subordination relationships as regards preparation of individual

parts of the financial statements, and in identifying, measuring and monitoring the methodology of

the reports' preparation.

The Issuer has implemented and maintains a corporate risk management system, which

ultimately is to encompass all the companies of “Amica Spółka Akcyjna” Group. Risk management is

part of the Capital Group's management system and applies both to business risks, generating only

negative effects and potential decline in its value (negative risks) as well as risks associated with the

strategy implementation, accompanying development opportunities associated with the value

creation (positive risks).

Risk management is ensured at every level of the organization's management, with particular

focus on the strategic level. The implementation of an effective risk management process enables to

specify the corporate risk appetite i.e. an acceptable risk level the Company is able to accept in the

context of its long- and short-term plans.

The risk management system supports the creation of corporate governance. As a result of its

introduction, the applied risk management solutions have been modified to allow the Management

Board and the Supervisory Board as well as the stakeholders to obtain timely, reliable, aggregated and

structured information on the risks and opportunities for the Issuer and its group and the methods of

using the same.




20 | Page

In pursuing its strategic goals, Amica S.A. and other companies of the Group improve the Risk

Management System functioning since 2010 by implementing the guidelines of the international

standard ISO 31000:2012 "Risk Management - Principles and guidelines".

The above-mentioned standard establishes the principles, the observance of which is essential

to ensure effective risk management and recommends that organizations should continuously

improve the risk management framework, which aims at integrating the risk management with the

overall organizational governance as well as its strategy and planning, management and reporting

processes.

The internal inspection system has a strong foundation in the organisational structure

communicated, which clearly indicates the lines of subordination and superiority and ensures

effective communication of information in the whole Company.

Each individual set of data to be included in the report covers the framework indicated in and

resulting from the regulations concerning periodic information published by stock issuing companies

- the reports themselves are prepared by the Company's Financial Department, verified by the Head

Accountant and accepted by the Management Board.

The most fundamental tasks of the internal inspection process as regards the process of

preparing report may be divided systematically into two categories:

a. the reliability, completeness and currency of annual reports (other financial

statements or reports of different types); the information contained in them must

be of the appropriate quality and integrity.

b. following the appropriate legislation and regulations - Management and employees

at other levels follow the generally applicable regulations, requirements, principles

and internal procedures.

The Risk assessment involves the conclusions drawn from the regular quarterly analytical tests

(audits) performed by the Internal Inspection Department (headed by the Manager for Audit and

Internal Inspection) regarding the degree of financial risk in the Company's individual business

processes and activities.

Following the leading global corporate standards and in response to stakeholders' expectations,

“Amica Spółka Akcyjna” has established and maintains a corporate risk management system, which

ultimately is to involve all Amica Capital Group companies. Risk management is part of the Capital

Group and its entities management system, and is a key element to a sustainable protection and

creation of its value. It applies both to business risks, generating only negative effects and potential

decline in its value (negative risks) as well as risks associated with the strategy implementation,




21 | Page

accompanying development opportunities associated with the value creation (positive risks). Risk

management is ensured at every level of the organization's management, with particular focus on the

strategic level.

The risk management system supports the creation of corporate governance. As a result of its

implementation, the applied risk management solutions have been modified to allow the Management

Board and the Supervisory Board as well as the stakeholders to obtain timely, reliable, aggregated and

structured information on the risks and opportunities for the Company and the Group and the

methods of using the same.

In pursuing its strategic goals, Amica Wronki Spółka Akcyjna and other Companies of the Amica

Group improve the Risk Management System functioning since 2010 by implementing the guidelines

of the international standard ISO 31000:2012 “Risk Management - Principles and Guidelines”.

It should be added that the IT systems implemented in the Company and the exploitation of

Information Technology create the possibility of scrupulous checks on data for a given settlement

period with data from previous periods and with planned results, updated in monthly cycles (within

the Company analytical models are applied, and used in everyday operations by internal analysts and

departments of internal inspection). In 2014 the Company finished implementation of the risk

management system, including risk analysis model, based on the COSO II and ISO 31000 (e-risk

software).

Regardless of the above, an independent external auditor verifies the contents of the annual

and mid-year financial statements, having unlimited access to the source materials which form the

basis of their production (Management effectively follows the progress of both the

problems/questions identified by the auditors and the corrective action taken in these matters).

E. Significant direct and indirect shareholdings

On 31 December 2016, the following entities were entitled to (at least) 5% of the total number of

votes at the General Shareholders' Meeting of Amica Spółka Akcyjna:

Shareholder

Number

of shares

Nominal

value of

shares

% of the

share

capital

subscribed

Value of

capital

subscribed

(in PLN)

Number

of votes

at the

GM

% of

votes at

the GM

Holding

Wronki S.A.

2,716,216

PLN 2

34.93%

PLN

5,432,432

5,432,432

51.77%




22 | Page

ING OFE*

555.952

PLN 2

7.15%

PLN

1.077.904

555.952

5.21%


[The criterion of significant share packages was adopted on the basis of the contents of art. 69 of the

Public Tendering/Conditions for Introducing Financial Instruments into Organised Trading

Systems/Public Companies Act of 29 July 2005].

After the balance sheet date i.e. 31 December 2016, the Company received no notices of change in

the shareholdings prepared under the Act of 29 July 2005 on public offering and conditions for

introduction of financial instruments to the organized trading system and on public companies.

F. Holders of any securities with special control rights and a description of those rights

The Company has not issued securities that would give special control rights to any shareholder

of Amica Wronki S.A.

G. Restrictions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the company’s cooperation, the financial rights attaching to securities are separated from the holding of securities

There are no restrictions whatsoever on voting rights, except to the extent applicable when electing

the Independent Members of the Supervisory Board, when each shareholder is entitled to vote

resulting from not more than 5%(five percent) of the total number of shares in the Company, each

share carrying one vote in such a vote.

H. Restrictions on the transfer of ownership of the Issuer’s securities The shareholders possessing series A preference shares have the priority when purchasing series

A registered preference shares offered for sale – the process of selling registered preference shares

may be carried out based on the principles stipulated in the § 8 of the Company’s Articles of

Association.

[The text of the Company's Articles of Association is available on the Company's website

http://www.amica.pl/].

I. Description of the principles for appointment and dismissal of executives and

their powers, in particular the right to decide on the issue or purchase of shares

http://www.amica.pl/




23 | Page

Pursuant to § 30 Section 1 of the Company’s Articles of Association, the Management Board is

composed of 3 (three) to 6 (six) persons, who are appointed and dismissed by the General

Shareholders' Meeting. First of all, the General Shareholders' Meeting appoints the President of the

Board. The General Shareholders' Meeting appoints the remaining Members of the Board at the

request of the elected President of the Management Board. Members of the Management Board are

appointed for a joint term of office.

The Management Board of the Company does not have powers to decide on the issue or

buyback of shares.

[The rules of operation of the Management Board are regulated by the Code of Commercial Companies,

the Company's Articles of Association and the Management Board Regulations (Company’s Articles of

Association and the Management Board Regulations are available on the Company’s website -


J. Principles for amending the Articles of Association Changing the provisions of the Company Articles of Association belongs to the exclusive

competencies of the General Shareholders' Meeting - a prerogative indicated in § 19 para 2 pt 3 of

the Company Articles of Association. The recent amendments to the Articles of Association of

“Amica Spółka Akcyjna” have been introduced by virtue of the resolutions of the Annual General

General Meeting of the Company No. 21/2016 – No. 24/2016 of 01 June 2016, in connection with

the initiative of the Company's Management Board to shorten the existing name under which the

Company operates in the market (by omitting the segment “Wronki”). The aforesaid changes have

been described in detail in the Current Report No. 31/2016 of 01 June 2016.

[The text of the Company's Articles of Association is available on the Company's website at


K. Operation of the General Meeting and its basic powers; description of the shareholders' rights and methods for their implementation, in particular, the principles resulting from the General Meeting's regulations, if such regulations have been adopted, unless such information results directly from the legislation

The Company's General Shareholders' Meeting operates on the basis of the Commercial

Companies' Code, the Articles of Association and the Operating Rules of the General Shareholders'

Meeting adopted pursuant to the Resolution No. 20/2010 of the Extraordinary General Shareholders'

Meeting of 16 February 2010 on approval of the Operating Rules of the General Shareholders' Meeting

(the amendment of the previous wording of the Rules was tied to the need to take account of

amendments to the Articles of Association of the Company introduced by the Extraordinary General

Meeting of Shareholders of Amica S.A. on 16 February 2010). These legal documents also define the

rights of shareholders.






24 | Page

[The Articles of Association and the Operating Rules of the General Meeting are available on the

Company’s website - http://www.amica.pl].

Proceedings of the General Shareholders' Meeting

Shareholders may participate and exercise their voting rights at the General Shareholders'

Meeting either in person or through appropriately authorised representatives. The representative of

a shareholder may be a member of his entity or an attorney, whose power of attorney must be granted

in writing to be valid. The letter of attorney is appended to the minutes of the General Shareholders'

Meeting. Company employees or Management members may not be attorneys at the General

Shareholders' Meeting.

Owners of registered shares are entitled to participate at the General Shareholders' Meeting if

they are entered on the stockholders ledger at least a week before the date of the General Shareholders'

Meeting.

Shareholders possessing publicly circulated bearer shares are entitled to participate in the

General Shareholders' Meeting if they lodge certification at the Management Office issued by a

stockbroking entity indicating the type and number of shares and the fact that these shares may not

be sold before the end of the General Shareholders' Meeting's session.

On entering the session chamber, Participants in the General Shareholders' Meeting present the

appropriate documents confirming their authorisation to take part in the General Shareholders'

Meeting.

The General Shareholders' Meeting is opened by the Chair of the Supervisory Board or, if he/she

is absent, by another member of the Supervisory Board entitled by him to do so. In the event of these

persons being absent, the General Shareholders' Meeting is opened by the President of the

Management Board or a person nominated by Management. If none of these persons is present at the

General Shareholders' Meeting, and Management has not nominated anyone to open the proceedings,

then the General Shareholders' Meeting may be opened by any of the participants.

In the event that the General Shareholders' Meeting has been called by proxy of a Court, the

General Shareholders' Meeting is opened by one of the shareholders who entered the motion to call

the General Shareholders' Meeting.

The General Shareholders' Meeting may only be chaired by a person entitled to participate in

the General Shareholders' Meeting.





25 | Page

The person opening the General Shareholders' Meeting first of all oversees the election of a Vote

Counting Commission, unless votes are to be counted electronically .

The Chair of the General Shareholders' Meeting is elected by secret ballot. The election may take

the form of an open ballot, if only one candidate is proposed and none of those present at the General

Shareholders' Meeting object to the conducting of an open ballot. During the election of the Chair of

the General Shareholders' Meeting, Shareholders and their representatives are entitled to the number

of votes stipulated by the Shareholders List.

The election of the Chair of the General Shareholders' Meeting begins by the candidates being

announced.

Once the candidates have been announced, the person opening the General Shareholders'

Meeting administers the voting for each candidate in the order in which they were announced. The

person who receives an absolute majority of votes becomes Chair of the General Shareholders'

Meeting.

In the event that nobody receives the required majority, the Chair is elected in a second round

of voting from between the two candidates with the highest number of votes.

The person elected Chair of the General Shareholders' Meeting takes over the function

immediately after the ballot results are announced.

Immediately after being elected, the Chair oversees the drawing up of an attendance register

containing a list of Participants in the General Shareholders' Meeting. The Chair checks that all the

Participants in the General Shareholders' Meeting have signed the attendance register.

The attendance register contains the Shareholder's full name or company, number of shares he

represents, and the number of votes these shares entitles him to. The attendance register should also

indicate: the full name of the individual acting on behalf of a Shareholder's entity, or the full name of

the attorney or other representative .

The attendance register is signed by all Participants in the General Shareholders' Meeting and

by the Chair.

Persons arriving at the General Shareholders' Meeting after its commencement are also entered




26 | Page

onto the attendance register. The fact of someone leaving the session before the General Shareholders'

Meeting has finished is also entered on the attendance register. The circumstances of the register

being updated during the course of the General Shareholders' Meeting are recorded in the minutes of

the session, with an indication of the reasons for the update and the date and time it was made.

At the request of Shareholders owning one tenth of the share capital represented at the current

General Shareholders' Meeting, the attendance register should be checked by a commission elected

for this purpose and consisting of at least three members. Those making such a request are entitled to

choose at least one member of the commission.

The General Shareholders' Meeting may pass a resolution to waive the secrecy of the ballot when

appointing members of the commission mentioned in paragraph 1.

The General Shareholders' Meeting ultimately decides whether or not someone is to be entered

on the attendance register after consultation with the commission.

The General Meeting also settles any doubts with regard to whether individual Participants

have the right to participate in the General Meeting, if the committee described in paragraph a has

not been appointed.

Members of the Management Board and Supervisory Board, and also persons appointed by

Management to serve the General Shareholders' Meeting, are entitled to participate in the General


Experts and Company employees whose presence is justified may also be invited by the

Management Board and Supervisory Board to participate in the General Shareholders' Meeting.

Conducting the Proceedings of the General Shareholders' Meeting.

The Chair of the General Shareholders' Meeting, in carrying out his function, takes actions to

ensure that the interests of all Shareholders are respected.

The duties of the Chair of the General Shareholders' Meeting include conducting the proceedings

of the General Shareholders' Meeting and realising each subsequent item on the agenda, including:

a. confirming the propriety of calling the General Shareholders' Meeting,

b. care for the correct and efficient running of the session,

c. granting and retracting leave to speak,

d. issuing the relevant instructions to retain order,




27 | Page

e. administering ballots and ensuring they are properly conducted,

f. announcing the results of voting,

g. settling any doubts regarding the regulations.

As far as is necessary to maintain proper conduct of the session, the Chair is entitled to issue

instructions to retain order.

In the course of discussion in particular points of order and in questions of order, each of the

Participants in the General Shareholders' Meeting may rise to speak after receiving the Chair's

consent. A Participant may not take the floor for longer than five (5) minutes, and the same

Participant may not take the floor more than twice during a discussion of the same matter. In

exceptional cases the Chair may extend the time allowed to take the floor.

In exceptional cases, a Participant in the General Shareholders' Meeting may lose his right to

speak, if his behaviour seriously hinders the conduct of the General Shareholders' Meeting's session,

or if the Participant's statements are irrelevant to the question under discussion.

The Chair may give the floor to referents of particular agenda items and Members of the

Management Board and Supervisory Board outside their turn and more than twice, in order for them

to provide explanations.

The Chair gives the floor out of sequence to participants declaring a formal motion. The Meeting

decides on formal motions after hearing the motion and one (1) opponent of the motion, where

necessary. A rejected formal motion may not be declared again during a discussion of the same

matter. A formal motion is understood as a motion concerning the manner of the proceedings rather

than the merits of a matter. Specifically, formal motions are motions concerning:

a. changes to the order of the agenda;

b. breaks in the proceedings;

c. closing the list of speakers; closing debates; voting without a debate,

d. removing an item from the agenda.

Once the discussion of a given matter is finished, the Chair may give the floor to the person

referring the same in order to respond to the questions of the participants of the General Meeting,

and then proceeds to a vote. From this moment on, Participants may only take the floor to propose

formal motions regarding the manner or order of voting.




28 | Page

In the event of several motions being proposed in the same matter, the farthest reaching is voted

on first.

After signing the attendance register, the Chair checks the propriety of the calling of the General

Shareholders' Meeting, and on ascertaining that the General Shareholders' Meeting has been called

properly he announces the number of shares represented at the General Shareholders' Meeting and

administers a vote with regard to accepting the agenda.

The General Shareholders' Meeting is entitled to change the order of individual items on the

agenda.

No item may be removed from the agenda if it has been put there at the Shareholders' request.

Motions in matters which have been removed from the agenda are considered not to have been put

forward.

The General Shareholders' Meeting may introduce additional matters onto the agenda and

debate them, but without the right to adopt resolutions.

The Chair of the General Shareholders' Meeting independently settles matters of order arising

during the conduct of the proceedings.

Specifically, matters of order include giving the floor, administering the election of

commissions to review particular matters, accepting motions

In matters of order, the interested parties may appeal to the General Shareholders' Meeting

against the Chair's decisions. A resolution of the General Shareholders' Meeting is binding.

In conducting individual matters included in the agenda, the Chair invites the Participants in the

General Shareholders' Meeting to propose motions and take the floor before passing a resolution.

Once the motions and statements of individual Participants in the General Shareholders' Meeting

are finished, the Chair closes the discussion and administers the voting.

While individual matters are being conducted, the Chair may give the floor to members of

Management, the Supervisory Board or other persons invited to the General Meeting's session. These

persons may also explain particular questions presented by Participants in the General Shareholders'

Meeting.




29 | Page

The Chair gives the floor to Participants in the General Shareholders' Meeting if their contribution

is relevant to the agenda item in question.

The Chair puts resolutions to the vote with their text as worded by Company Management.

At the request of participants in the General Shareholders' Meeting, it is permissible to change

the wording of a draft resolution and amend it, as long as this does not result in a resolution being

passed which is not relevant to the agenda item.

Voting on a draft resolution is preceded by its text being read out by the Chair of the General


After the draft resolution has been read out, participants in the General Shareholders' Meeting

may enter motions to amend the text of the resolution.

Each of the participants is also entitled to propose a new version of the text of the draft

resolution. The proposal of a new version of the text of the draft resolution is considered a proposal

of an amendment.

The Chair puts the amendments to the vote of the General Shareholders' Meeting. Each

amendment is put to the vote separately, and amendments achieving an absolute majority of votes

become a subject of the rest of the session.

After voting on the amendments to the draft resolution is finished, the Chair reads out the text

of the draft resolution to the General Shareholders' Meeting indicating which of the provisions have

been amended, then administers a vote on the adoption of the resolution.

Counting the votes is the responsibility of the Vote Counting Commission, unless voting has

taken place electronically. Once the voting is finished, the Vote Counting Commission or person

operating the electronic vote-counting system presents the Chair with a report of the ballot results.

On receiving this report, the Chair announces the results of the ballot and states either that the

resolution has been adopted, or that it has failed to receive the required majority and has not been

passed.




30 | Page

If a Participant raises an objection concerning the passing of a resolution, the Chair allows him

to present his justification. The grounds for the objection is included in the minutes.

In accordance with § 19 of the Company Articles of Association, the following should be subjects

of an Ordinary General Shareholders' Meeting:

a. examination and approval of the financial statements and the Management report into

the Company's activities, and the Supervisory Board's report for the previous financial

year,

b. passing a resolution in the matter of profit sharing or covering losses for the previous

financial year,

c. passing a resolution in the matter of granting receipts to the Company leadership,

d. passing a resolution in the matter of electing new Company leadership, if they are

elected by the General Shareholders' Meeting and its members' mandates expire on the

day of the General Shareholders' Meeting.

The exclusive competencies of the General Shareholders' Meeting also include:

a. appointing and recalling members of the Supervisory Board, except where provisions

regarding co-optation apply,

b. appointing and recalling Management,

c. changes to the Articles of Association,

d. issuing bonds, including bonds exchangeable for shares,

e. establishing the salary principles and the salaries of the Supervisory Board members,

f. merging or dissolving the Company and selecting liquidators,

g. sale and rental of a Company enterprise or establishing usage rights over it,

h. sale of the Company's factory properties,

i. claims against members of the Company’s authorities or founders for repairing damages

caused by their illegal behaviour.

In the financial year 2016, the General Shareholders' Meeting of the Issuer was convened by

the Management Board once – on 01 June 2016.

(Shareholders of the Company did not submit any requests for convening the General

Meeting).




31 | Page

The General Shareholders' Meetings were neither cancelled nor interrupted; none of the

adopted resolutions was not contested before the court.

L. The personnel and changes thereto over the previous financial year and the

description of the activities of the issuer's management, supervisory or administrative bodies and their committees. Pursuant to the current wording of § 30 of the Company's Articles of Association, the

Management Board consists of three to six persons appointed and dismissed by the General

Shareholders' Meeting. Members of the Management Board shall be appointed for a joint term of

office of 3 (three) years. Appointment of members of the Management Board for the joint term

office shall cause the mandate of a member of the Management Board appointed before the end

of the term of office of the Management Board to expire simultaneously with the mandates of other

members of the Management Board.

I. Management Board.

A. In the period from 01 January 2016 to 01 June 2016, the Company's Management Board

was composed of the following persons:

Mr Jacek Rutkowski, President of the Management Board,

Mr Marcin Bilik, First Vice-President of the Management Board,

Mr Tomasz Dudek, Vice-President of the Management Board,

Mr Wojciech Kocikowski, Vice-President of the Management Board,

Mr Andrzej Sas, Vice-President of the Management Board,

Mr Piotr Skubel, Vice-President of the Management Board,

- who held their functions in the management body during a joint term of office 2013 – 2016.

In the period from 01 June 2016 to 31 December 2016, the Management Board of the Issuer

was composed of:

Mr Jacek Rutkowski, President of the Management Board,

Mr Jarosław Drabarek – First Vice-President of the Management Board

Mr Marcin Bilik, Vice-President of the Management Board,

Ms Alina Jankowska-Brzóska, Vice-President of the Management Board

Mr Wojciech Kocikowski, Vice-President of the Management Board,

Mr Piotr Skubel, Vice-President of the Management Board,

[By the date of this statement, the composition of the Management Board has not changed].




32 | Page

[The rules of operation of the Management Board are regulated by the Code of Commercial Companies,

the Company's Articles of Association and the Management Board Regulations (Company’s Articles of

Association and the Management Board Regulations are available on the Company’s website - http://www.amica.pl/].

II. The Supervisory Board.

A. In the period from 01 January 2016 to 01 June 2016, the Company's Supervisory Board was

composed of the following persons:

Mr Tomasz Rynarzewski, Chair of the Supervisory Board,

Mr Grzegorz Golec – Vice-Chair of the Supervisory Board/ Independent Member of the

Supervisory Board,

Mr Zbigniew Derdziuk, Member of the Supervisory Board,

Ms Bogna Sikorska, Independent Member of the Supervisory Board,

Mr Bogdan Gleinert, Member of the Supervisory Board,

Mr Wojciech Kochanek, Member of the Supervisory Board,

- who held their functions in the supervisory body during a joint term of office 2013 – 2016.

B. In the period from 01 June 2016 to 31 December 2016, the Supervisory Board of the Issuer

operated in the following composition:

Mr Tomasz Rynarzewski, Chair of the Supervisory Board/Chair of the Operating

Committee

Mr Dariusz Formela, Vice-Chair of the Supervisory Board/ Independent Member of the

Supervisory Board,

Mr Jacek Bartmiński, Independent Member of the Supervisory Board/Chair of the Audit

Committee,

Mr Tomasz Dudek, Member of the Supervisory Board,

Mr Piotr Rutkowski, Member of the Supervisory Board,

Mr Paweł Wyrzykowski, Member of the Supervisory Board.

[By the date of this statement, the composition of the Supervisory Board has not changed].

C. The Audit Committee of the Supervisory Board of “Amica Spółka Akcyjna” was appointed on

01 June 2016 in connection with Article 86 paragraph 1 of the Act of 7 May 2009 on statutory

auditors and their self-government, entities authorized to audit financial statements and





33 | Page

public supervision, as a result of extending the number of the Supervisory Board members.

The Regulations of the Audit Committee have been approved by Resolution No 01/X/NK/2016

of the Supervisory Board of “Amica Spółka Akcyjna” of 04 October 2016 on the adoption of the

Regulations of the Audit Committee of the Supervisory Board of “Amica Spółka Akcyjna”. In

the period from 01 June 2016 to 31 December 2016, the Committee was composed of the

following period: Jacek Bartmiński, (Chair of the Audit Committee), Dariusz Formela

(Member of the Audit Committee), Paweł Wyrzykowski, (Member of the Audit Committee).

D. The Operating Committee of the Supervisory Board of “Amica Spółka Akcyjna” was appointed

on 01 June 2016 during formation of the Supervisory Board. The Regulations of the Operating

Committee have been approved by Resolution No 02/X/NK/2016 of the Supervisory Board of

“Amica Spółka Akcyjna” of 04 October 2016 on the adoption of the Regulations of the

Operating Committee of the Supervisory Board. In the period from 01 January 2016 to 31

December 2016, the Operating Committee was composed of the following persons: Tomasz

Rynarzewski (Chair of the Operating Committee), Tomasz Dudek (Member of the Operating

Committee), Piotr Rutkowski (Member of the Operating Committee).

[The principles of the Supervisory Board's functioning are regulated by the Commercial Companies' Code,

the Company Articles of Association and the Supervisory Board Regulations. [The Articles of Association and

the Supervisory Board Regulations are available on the Company's website - http://www.amica.pl/].

E. Diversity policy applicable to the governing, managing and supervising bodies of the Issuer

The Company has not yet developed and thus does not pursue the diversity policy (nevertheless,

when making any decision on the selection of executives, managers or supervisors, the Company

insists that all candidates should have high qualifications and extensive experience in relevant fields

of the Company's activity; characteristics such as age or sex of the candidate are not of primary

importance).


Jacek Rutkowski

President of the

Management Board


Jarosław Drabarek

First Vice President of the

Management Board






34 | Page

Marcin Bilik

Vice President of the

Management Board


Alina Jankowska-Brzóska


Management Board


Wojciech Kocikowski


Management Board


Piotr Skubel


Management Board


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