Apator S A : Supervisory Report for 2023

Report on the activity of the Supervisory Board of Apator SA in 2023

Report on the activity of the Supervisory Board of Apator SA in 2023

Toruń, 28 May 2024

Report on the activity of the Supervisory Board of Apator SA in 2023

Table of Contents
Table of Contents	2
1.	Introduction	3
2.	Composition of the Supervisory Board	3
3.	Summary of Supervisory Board activities in 2023	4
4.	Audit Committee:	9
5.	Best Practice for GPW Listed Companies	12
6.	Internal Control System, Risk Management System, Compliance System and Internal Audit Function	14
7.	Consolidated Evaluation of the Company's Situation	17

8. Assessment of the reasonableness of expenditures incurred by the Apator Group in respect of sponsoring,

charity or other activities of similar nature

18

9. Information on the degree of implementation of the diversity policy with regard to the Management Board and

the Supervisory Board

19

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

1. Introduction

The Supervisory Board of Apator SA, pursuant to Article 382 sec. 3 of the Commercial Companies Code, and Article 15 sec. 11 of the Articles of Association of Apator SA and Best Practice for GPW Listed Companies 2021, would like to present the Report on the activity of the Supervisory Board of Apator SA in 2023 to the Ordinary General Shareholders Meeting.

This report is prepared in accordance with item 2.11 of the Best Practice for GPW Listed Companies 2021 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 Principle 1.5 of the Best Practice for GPW Listed Companies 2021, 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 Articles of Association of Apator SA, the Supervisory Board may be composed of 5 to 7 Members, elected by the General Meeting for the period of 5 years. Members of the Board are appointed for a joint 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 2023, 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 date of the 2025 General Shareholders Meeting.

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

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 Best Practices for GPW Listed Companies 2021, 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, in accordance with the requirements of the Best Practice for GPW Listed Companies 2021, in addition to the criteria listed in the aforementioned Act, Janusz Niedźwiecki and Marcin Murawski also meet the condition of having no actual and significant links with a shareholder holding at least 5% of the total number of votes in the Company.

2.2. Diversity among the Members of the Supervisory Board

In 2023 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:

50-65 y.o.:	42.9%
over 65 y.o.:	57.1%

3. Summary of Supervisory Board activities in 2023

3.1. Supervisory Board Meetings

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

In 2023, 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 2023, the Supervisory Board held 23 meetings, during which it took positions on matters on the agenda and adopted 66 resolutions (including 12 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.

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

3.2. Supervisory Board Supervision Areas

The Supervisory Board performs its actions based on special rights granted by the Articles of Association of Apator SA, Regulations of the Supervisory Board of Apator SA and principles of corporate governance specified in Best Practice for GPW Listed Companies 2021.

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 Best Practice for GPW Listed Companies 2021.

The areas of supervision of the Supervisory Board in 2023 included corporate and financial supervision of Apator SA and other domestic and foreign Apator Group companies. The Board's 2023 areas of special oversight concerned:

• changes in the composition of the Management Board of Apator SA
• approving the separate and consolidated financial budget,
• status of work on the Apator Group strategy,
• 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 and their impact on the current situation of the Apator Group and directions of development of particular segments and business lines,
• risks in terms of accelerating the pace of the "shift away" from gas,
• prospects for the Gas Segment, particularly in the context of the deterioration of the situation at GWi,
• 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:
• • participation of Apator SA in significant public tenders,
  • conclusion of a multi-purpose agreement with PKO BP SA,
  • conclusion of contract on cooperation and z o.o. transfer of property rights by and between Apator SA and Apator Telemetria sp,
  • amendment to the preliminary contract of sale of real estate located in Łódź,
  • conclusion of significant sales contracts by Apator Group companies on domestic and foreign markets,
• product and process quality management at Apator SA; analysing operations optimisation activities and visiting Apator SA production departments,
• reviewing transactions with affiliated entities,
• reviewing the Apator Group personnel policy, including the remuneration and bonus systems of Management Boards of Apator Group companies, as well as their remuneration levels,
• reviewing the implementation of the sponsorship policy,

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

• reviewing the dividend policy and recommending dividend payments,
• analysis of changes in law (compliance),
• amending the Regulations of the Management Board of Apator SA and the Audit Committee,
• attending Audit Committee meetings and analysing its decisions and recommendations, including on Internal Auditor's reports,
• compliance by the Apator SA Management Board with the information duties towards the Supervisory Board under the amendment to the Commercial Companies Code (Article 380 [1]), i.e.:
• • review of resolutions of the Management Board,
  • the condition of the Company and the Group, including with regard to its assets, as well as significant circumstances in the scope of its activities, in particular in the areas of operations, investments and human resources,
  • progress in the implementation of the set business directions,
  • transactions and other events or circumstances that materially affect or may materially affect the Company's or the Group's financial position, including its profitability or liquidity,
  • changes to the information previously submitted to the Supervisory Board, if these changes materially affect or are likely to affect the position of the Company and the Group.
• delegating the Chairperson of the Supervisory Board to independently perform supervisory activities for

the period from 1 January 2024 to the Ordinary General Shareholders Meeting of Apator SA in 2023

3.2.1. Delegating a Member of the Supervisory Board to Independent

Performance of Supervisory Activities

On 1 January 2023, the Supervisory Board of Apator SA delegated the member of the Supervisory Board Janusz Niedźwiecki to perform independently supervisory activities for the period until the Ordinary General Shareholders Meeting of Apator SA held on 28 June 2023.

In order to perform his duties, the delegated representative of the Supervisory Board examined the Company's documents, reviewed the Company's assets and requested the Management Board, proxies and persons employed by or cooperating with the Company to provide all information and explanations on the identified issues. Matters concerning the subsidiaries were also the subject of analysis and examination.

The Chairperson of the Supervisory Board provided information to the Supervisory Board at its meeting once a month on the supervisory activities undertaken and their results, together with the preparation of summary written reports on a bi-monthly basis. At the meeting held on 29 June 2023, the Chairperson gave a final account and the Supervisory Board, by Resolution No. 41/2023, positively assessed the activities performed by the Chairperson of the Supervisory Board, Janusz Niedźwiecki, as part of his supervisory activities and made no comments on the reports submitted by him.

3.2.2. General Shareholders Meeting of Apator SA

The Ordinary General Shareholders Meeting of Apator SA was held on 28 June 2023. The Supervisory Board issued a positive opinion on all motions, and representatives of the Board participated in this Meeting to ensure they were ready for substantive discussion during its course.

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

3.2.3. Summary of the Work of the Supervisory Board

The Supervisory Board believes that it has performed its duties properly and in accordance with formal and legal requirements in 2023, providing substantive support to the Management Board and appropriate supervision over all aspects of the activity of Apator SA and the Apator Group.

3.3. Human Resources Policy Implemented by the Supervisory Board

As part of the human resources policy, the Supervisory Board is responsible for:

• determining the number of Members of the Company's Management Board,
• appointing the President of the Management Board and then, on his request, the other members of the Management Board,
• determining the rules of remuneration for the Management Board in line with the adopted remuneration policy for Members of the Management Board,
• suspending all or individual Members of the Management Board for important reasons,
• dismissing Members of the Company's Management Board,
• delegating Members of the Supervisory Board to temporarily perform the duties of Members of the Management Board,
• representing the Company in an agreement between the Company and the Board Member as well as in a dispute between the Company and the Board Member,
• deciding on matters of conflict of interest for Management Board Members.

3.3.1. Composition of the Management Board of Apator SA in 2023

In accordance with Art. 16 of the Articles of Association of Apator SA, the Company's Management Board is composed of 1 to 6 members appointed by the Supervisory Board for 3 years for a common term of office.

From 1 January 2023 to 28 February 2023, the composition of the Management Board of Apator SA was as follows:

1. Arkadiusz Chmielewski - President of the Management Board of Apator SA, Director for Business Development of the Group,
2. Tomasz Łątka - Member of the Management Board of Apator SA, General Director.

On 28 February 2023, the Supervisory Board of Apator SA received the resignation of Arkadiusz Chmielewski from his position as President of the Management Board. On 1 March 2023, the Supervisory Board decided to appoint Maciej Wyczesany to act as the President of the Management Board of Apator SA for the current joint 3-year term, ending on the day of the Ordinary Shareholders Meeting of Apator SA to be held in 2025.

From 1 March 2023 to 27 September 2023, the composition of the Management Board of Apator SA was as follows:

1. Maciej Wyczesany - President of the Management Board, General Director,
2. Tomasz Łątka - Member of the Management Board, Director of Business Development of Automation and ICT Solutions.

On 27 September 2023, the Supervisory Board of Apator SA received the resignation of Tomasz Łątka from his position as the Member of the Management Board of Apator SA, Director of Business Development of Automation and ICT Solutions. The Supervisory Board decided that from 28 September 2023, the Management Board of Apator SA shall act in the following one-person composition:

1. Maciej Wyczesany - President of the Management Board of Apator SA, General Director.

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

The Supervisory Board of Apator SA, at the request of the President of the Management Board of Apator SA dated 20 November 2023, appointed Łukasz Zaworski to the position of Member of the Management Board of Apator SA effective from 22 November 2023 for the current joint 3-year term, ending on the day of the Ordinary General Shareholders Meeting of Apator SA to be held in 2025.

From 22 November 2023 to 18 December 2023, the composition of the Management Board of Apator SA was as follows:

1. Maciej Wyczesany - President of the Management Board of Apator SA, General Director,
2. Łukasz Zaworski - Member of the Management Board of Apator SA, Product Development Director

On 19 December 2023, the Supervisory Board appointed Robert Kowalski to perform the function of the Member of the Management Board of Apator SA for the current joint 3-year term, ending on the day of the Ordinary General Shareholders Meeting of Apator SA to be held in 2025.

From 19 December 2023, the composition of the Management Board of Apator SA was as follows:

1. Maciej Wyczesany - President of the Management Board of Apator SA, General Director,
2. Łukasz Zaworski - Member of the Management Board of Apator SA, Product Development Director,
3. Robert Kowalski - Member of the Management Board of Apator SA, Strategy Director of the Apator Group.

After the balance sheet date, i.e. 21 March 2024, Robert Kowalski resigned from the post of the Member of the Management Board of Apator SA effective 14 May 2024. The reason for the resignation is the appointment of Robert Kowalski to perform the function in the Management Board of a state-owned enterprise. In view of the above, from 15 May 2024 and as at the date of publication of this report, the composition of the Management Board of Apator SA is as follows:

1. Maciej Wyczesany - President of the Management Board of Apator SA, General Director,
2. Łukasz Zaworski - Member of the Management Board of Apator SA, Product Development Director.

3.3.2. Apator SA Management Board Remuneration System

As part of the remuneration policy, the Supervisory Board is responsible for:

• determining the rules of remuneration for the Management Board in line with the adopted remuneration policy for Members of the Management Board,
• preparing and presenting a report to the General Shareholders Meeting on the remuneration of the Members of the Management Board and the Supervisory Board,
• detailing the remuneration policy for Members of the Management Board and Supervisory Board, within the limits determined by the General Shareholders Meeting,
• deciding on temporary withdrawal from the application of the remuneration policy for Members of the Management Board and Supervisory Board within the limits specified in the remuneration policy,

The principles of the remuneration system for Management Board Members result from the Remuneration Policy for the members of the Management Board and Supervisory Board, adopted by the General Shareholders Meeting, which aims to support the long-term business strategy and long-term interests and stability of the Apator Group.

The full content of the Remuneration Policy is available at www.apator.comin the "Investor Relations" tab.

In compliance with the requirements of Art. 90d of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies of 29 July 2005 (consolidated text Dz. U. /Journal of Laws/ of 2022, item 2554 as amended), the Supervisory Board has prepared the 2023 remuneration report as a separate document containing data on remuneration levels.

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

4. Audit Committee:

4.1. Composition of the Audit Committee

An Audit Committee operates as part of the Supervisory Board. The term of office of the Audit Committee shall be the same for its Members and shall be similar to the term of office of the Supervisory Board. The

Committee'scompositiondidnotchangethroughout

2023 and was as follows:

▪	Marcin Murawski	-	Chairperson of the Committee,
▪	Mariusz Lewicki	-	Member of the Committee,
▪	Kazimierz Piotrowski	-	Member of the Committee.

4.2. Independence of the Audit Committee Members

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 two Audit Committee Members, i.e.: Marcin Murawski and Kazimierz Piotrowski.

The criteria for independence within the Audit Committee, as set out in the Best Practice for GPW Listed Companies 2021, are met by its Chairperson - Marcin Murawski.

4.3. Compliance with the Act on Statutory Auditors

The Supervisory Board of Apator SA declares that the regulations regarding the requirements to have knowledge and skills in the industry in which the issuer operates and in accounting or auditing of financial statements are complied with:

• Marcin Murawski and Mariusz Lewicki have knowledge and skills in accounting or auditing:
• • Marcin Murawski graduated from the Faculty of Management and Marketing at the University of Warsaw (specialisation: Corporate Finance); since 2003 he has been a Certified Public Accountant (PIBR No. 90053); since 2000 he has been a British Certified Public Accountant (ACCA No. 0251448) and a Certified Internal Auditor (exam in 2005). Additionally, Marcin Murawski has professional experience in accounting resulting from the following roles:
  • • 1997-2005- Employee in the Audit Department of the audit firm PwC (manager since 2002),
    • 2006 - 2012 - Director of Internal Audit Department at Warta S.A. Insurance Group,
    • from 2012 independent Member of Supervisory Boards and Member of Audit Committees of companies listed on the Warsaw Stock Exchange: (CCC SA - Chairperson of the Audit

Committee - until June 2019, Apator SA - Chairperson of the Audit Committee, GTC SA - Chairperson of the Audit Committee, Seco/Warwick SA - Chairperson of the Audit Committee),

RaiffaisenBankInternationalAG,Branch in Poland (Member of the Steering Committee) and Asseco Business Solutions SA - Member of the Supervisory Board).

• Mariusz Lewicki graduated from the Faculty of Economic Sciences at the Nicolaus Copernicus University in Toruń in the field of economics and production organisation, he completed Postgraduate Studies in Tax

Lawand Postgraduate Studies in Commercial Law at the Faculty of Law and Administration at the Nicolaus Copernicus University. Additionally, Mariusz Lewicki has professional experience in accounting resulting from the following roles:

• 1991 - 1999 - Head of Accounting Department in state enterprise PZAE Apator and Apator SA (legal successor of PZAE Apator),
• 1994 - 2001 - Chief Accountant in Reuther Polska sp. z o.o. and Rotar Poland sp. z o.o.,

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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Report on the activity of the Supervisory Board of Apator SA in 2023

• • 1993-2013- Chief Accountant in ZPDZ "Nagro",
  • 2001 - 2007 - Financial Director, Proxy at Apator Control Sp. z o.o. (former subsidiary of Apator SA),
  • 2007-2013- Financial advisor at Z.P.H.U. Walter,
  • 2008 - 2018 - Deputy Chairperson of the Supervisory Board of PHS Hydrotor SA (2008 - June 2014), Chairperson of the Supervisory Board of PHS Hydrotor SA (July 2014 - June 2018), Chairperson of the Audit Committee of PHS Hydrotor SA (from June 2009 to June 2018), Member of the Audit Committee of PHS Hydrotor SA (July 2017 - June 2018),
  • from July 2018 to this day - President of the Management Board of PHS Hydrotor SA,
  • from 2009 to December 2015 - Chairperson of the Audit Committee of Apator SA, then Member of the Audit Committee of Apator SA to this day,
  • from May 2019 to this day - Chairperson of the Supervisory Board of Więcborskie Zakłady
    Metalowe Wizamor Sp. z o.o.
• All Members of the Audit Committee have knowledge and skills in the industry in which Apator SA operates:
• Marcin Murawski has knowledge and skills in Apator SA's industry acquired while performing the following functions:
• • from 2013 to this day - Member of the Supervisory Board of Apator SA - knowledge of the electrical machinery sector in the area of manufacturing of metering equipment and systems for energy utility distribution companies (electricity metering and switchgear),
  • from 2015 to this day - Member of the Supervisory Board and Chairperson of the Audit Committee of Seco/Warwick SA -knowledge of the electrical machinery sector in the area of mechanical equipment manufacturing.
• Mariusz Lewicki has knowledge and skills in Apator SA's industry acquired while performing the following functions:
• • from 2000 to this day - Member of the Supervisory Board of Apator SA, Deputy Chairperson of the Supervisory Board since 2010 - knowledge of the electrical machinery sector in the area of manufacturing of metering equipment and systems for energy utility distribution companies (electricity metering and switchgear),
  • from 2005 to this day - Chairperson of the Supervisory Board of Apator Mining sp. z o.o. (subsidiary of Apator SA) - knowledge of the electrical machinery sector in the area of manufacturing of machinery and equipment for the mining industry, a sector in which the company operated until the end of 2018,
  • from 2007 to this day - Chairperson of the Supervisory Board of Apator Metrix SA (a subsidiary of Apator SA) - knowledge of the electrical machinery sector in the field of manufacturing of metering gear for energy distribution companies (gas metering),
  • from 2014 to 2022 - Member of the Supervisory Board of Apator Elkomtech SA (a subsidiary of Apator SA) - knowledge of the electrical machinery sector in the field of manufacturing of systems supporting the work of energy services in the field of transmission and energy distribution (control and supervision systems),
  • from 2020 to this day - Member of the Supervisory Board of Apator Powogaz SA (a subsidiary of Apator SA) - knowledge of the water and sewerage sector in the field of manufacturing of water meters, heat meters and cost allocators,
  • from 2008 to this day - Deputy Chairperson of the Supervisory Board of PHS Hydrotor SA (2008
    - June 2014), Chairperson of the Supervisory Board of PHS Hydrotor SA (July 2014 - June 2018), Chairperson of the Audit Committee of PHS Hydrotor SA (from June 2009 to June 2018), Member of the Audit Committee of PHS Hydrotor SA (July 2017 - June 2018), President of the Management Board of PHS Hydrotor S.A. (since July 2018), Chairperson of the Supervisory

Name of the organisational unit:	Apator Group
Period covered by the financial statements:	1 January 2023 - 31 December 2023

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