Apator S A : Report of the Supervisory Board 2022

Report on the activity of the Supervisory Board of Apator SA in 2022

Toruń, 31 May 2023

Report on the activity of the Supervisory Board of Apator SA in 2022

Table of contents

Entity name:	Apator Group
Period covered by the financial statements:	01 January 2022 - 31 December 2022

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Report on the activity of the Supervisory Board of Apator SA in 2022

1. Introduction

The Supervisory Board of Apator SA, acting under Art. 382(3) of the Commercial Companies Code, and Art. 15 sec. 11 of the Statute of Apator SA and 2021 Best Practice for GPW Listed Companies, would like to present the Report on the activity of the Supervisory Board of Apator SA in 2022 to the Ordinary General Shareholders Meeting.

This report is prepared in accordance with item 2.11 of the 2021 Best Practice for GPW Listed Companies and includes:

• information on the composition of the Board and its committee, with an indication of which Board members meet the independence criteria set out in the Act of 11 May 2017 on statutory auditors, audit firms and public supervision, and which of them do not have actual and significant ties with a shareholder holding at least 5% of the total number of votes in the Company, as well as information on the composition of the supervisory board in the context of its diversity;
• summary of the activities of the Board and its committee;
• an assessment of the Company's application of the principles of corporate governance and the manner of fulfilling the information obligations concerning their application laid down in the WSE Rules and in the regulations on current and periodic information provided by issuers of securities, together with information on the actions taken by the Supervisory Board to perform this assessment;
• a consolidated assessment of the Company's situation, including an assessment of the internal control systems, risk management, compliance and the internal audit function, together with information on the steps the Board has taken to make this assessment; this assessment shall cover all relevant controls, including in particular reporting and operational controls;
• an assessment of the reasonableness of the expenditure referred to in Rule 1.5 of the 2021 Best Practice for GPW Listed Companies, i.e. expenditure to support culture, sport, charities, media, community organisations, trade unions, etc;
• information on the degree of implementation of the diversity policy with regard to the Management Board and the Supervisory Board.

2. Composition of the Supervisory Board

In accordance with the Statute of Apator SA, the Supervisory Board may be composed of 5 to 7 members, elected by the General Meeting for 5 years for a common term of office. The reduction of the number of members of the Supervisory Board during the term of office to not less than 5 members does not require any addition to the composition of the Supervisory Board.

Throughout the reporting period covering 2022, the composition of the ninth-term Supervisory Board was as follows:

▪	Janusz Niedźwiecki	-	Chairperson of the Supervisory Board,
▪	Mariusz Lewicki	-	Deputy Chairperson of the Supervisory Board,
▪	Janusz Marzygliński	-	Member of the Supervisory Board,
▪	Danuta Guzowska	-	Member of the Supervisory Board,
▪	Kazimierz Piotrowski	-	Member of the Supervisory Board,
▪	Tadeusz Sosgórnik	-	Member of the Supervisory Board,
▪	Marcin Murawski	-	Member of the Supervisory Board.

The current term of office of the Supervisory Board ends on the day when the General Shareholders Meeting is held in 2025

Entity name:	Apator Group
Period covered by the financial statements:	01 January 2022 - 31 December 2022

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Report on the activity of the Supervisory Board of Apator SA in 2022

The composition of the Supervisory Board, which includes individuals with both business experience and expertise, backed by many years of professional practice, ensures that supervisory duties are properly and effectively performed and that the tasks and responsibilities assigned are duly performed.

Professional CVs of the members of the Supervisory Board are available on Apator SA's website in the "Investor Relations" tab.

2.1. Independence of Supervisory Board Members

In accordance with the requirements of the 2021 Best Practice for GPW Listed Companies, at least two members of the supervisory board meet the independence criteria set out in the Act of 11 May 2017 on statutory auditors, audit firms and public supervision and do not have actual and significant ties to a shareholder holding at least 5% of the total number of votes in the Company.

With reference to the Act of 11 May 2017 on statutory auditors, audit firms and public supervision, the independence criteria required under this Act are met by three Supervisory Board members: Janusz Niedźwiecki, Marcin Murawski and Kazimierz Piotrowski.

Furthermore, apart from the criteria listed in the aforementioned Act, Janusz Niedźwiecki and Marcin Murawski also meet the condition of having no actual and significant ties to a shareholder holding at least 5% of the total number of votes in the Company, as required by the 2021 Best Practice for GPW Listed Companies.

2.2. Diversity of Supervisory Board Members

In 2022 and at the date of publication of this Report, the diversity ratio of the Supervisory Board members in terms of gender and age is as follows:

• gender ratio on the Supervisory Board:

women:14.3%

men:85.7%

• Supervisory Board member age range:

30-49 y.o.:	14.2%
50-65 y.o.:	42.9%
over 65 y.o.:	42.9%

3. Summary of Supervisory Board Activities in 2022

3.1. Supervisory Board Meetings

In accordance with the Statute, the Supervisory Board meets quarterly, or more often if necessary, at the invitation of the Chairperson of the Board.

In 2022, the Supervisory Board operated based on the adopted meeting schedule. The agenda was established on a case-by-case basis by the Chairperson of the Supervisory Board, based on the situation of the Company and the Apator Group, as well as the legal requirements, and the information needs of the Supervisory Board; it was then sent to the Supervisory Board members in notices of meetings well in advance.

In 2022, the Supervisory Board held 23 meetings, during which it took positions on matters on the agenda and adopted 45 resolutions (including 10 by circulation).

Irrespective of regular meetings, the Supervisory Board members were in constant, direct contact with the Management Board to comprehensively supervise the activities of the Company and the Apator Group.

Entity name:	Apator Group
Period covered by the financial statements:	01 January 2022 - 31 December 2022

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Report on the activity of the Supervisory Board of Apator SA in 2022

3.2. Supervisory Board Supervision Areas

The Supervisory Board carries out its activities based on the specific powers granted by the Statute of Apator SA, the Regulations of the Supervisory Board of Apator SA and the principles of corporate governance specified in 2021 Best Practice for GPW Listed Companies.

The Supervisory Board exercised constant supervision over Company and Group activities in all areas of its operations and supervised the work of the Management Board by:

• examining materials received from the Management Board at the Supervisory Board's request,
• obtaining information and detailed explanations from the members of the Management Board and other Company employees during the meetings of the Supervisory Board,
• activities of the Audit Committee and attending its meetings,
• activities of the statutory auditor who, on behalf of the Supervisory Board, reviewed and audited the financial and accounting documentation and the financial statements prepared on its basis.

All members of the Supervisory Board exercised due diligence in the performance of their duties using their knowledge and experience and effectively carried out their statutory tasks, guided in their actions by the interests of the Company and the Group. Apart from exercising its supervisory function, the Supervisory Board supported the Management Board with expertise in strategic areas, in line with the 2021 Best Practice for GPW Listed Companies.

The areas of supervision of the Supervisory Board in 2022 included corporate and financial supervision of Apator SA and other domestic and foreign Apator Group companies. The Board's 2022 areas of special oversight concerned:

• approving the separate and consolidated financial budget,
• analysing the separate and consolidated financial results, including economic parameters in terms of profitability, liquidity, net debt, working capital (especially inventories) and the extent to which these have been achieved in relation to the approved budget,
• analysing the macroeconomic environment and risks arising from it (including the war in Ukraine) and their impact on the current situation of the Apator Group and directions of development of particular segments and business lines,
• examining the materialising risks of the accelerating transition away from gas and the write-off of R&D work at GWi, which operates in the Gas Segment,
• approving the updated business strategy of the Apator Group,
• appointing the Management Board of Apator SA for the next term of office,
• consenting for Apator SA to dispose of rights or incur liabilities exceeding PLN 20 mln in value and issuing opinions on such actions towards the Apator Group, in particular:
• • Apator SA's participation in significant public tenders (Energa, PGE, Tauron Dystrybucja),
  • conclusion of a multi-product agreement with ING Bank Śląski SA,
  • conclusion by the subsidiary Apator Powogaz SA of the final contract concerning its new headquarters in Q1 2022, i.e. the acquisition of land and a production and warehouse building with office and employee facilities in Jaryszki from Jan Konieczny and JAKON INWEST 2 sp. z o.o.,
  • conclusion of significant product sales contracts by Apator Group companies on domestic and foreign markets,
• analysing relocation stages of Apator Powogaz SA and visiting its new facility after relocation, including a summary of total expenditures incurred, which amounted to PLN 54 mln in 2 years,
• product and process quality management at Apator SA; analysing operations optimisation activities and visiting Apator SA production departments,
• optimising Apator Group assets, including the sale of real estate in Łódź scheduled for 2023 (preliminary agreement) and in Świdnica (agreement executed in December 2022),

Entity name:	Apator Group
Period covered by the financial statements:	01 January 2022 - 31 December 2022

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