BRIEF ASSESSMENT OF THE COMPANY’S SITUATION, TAKING ACCOUNT OF THE INTERNAL AUDIT AND RISK MANAGEMENT SYSTEMS

I. COMPANY’S FINANCIAL SITUATION AND MARKET POSITION

Having got acquainted with the financial statements of the Company and the Impel Group, the Supervisory Board concluded that the financial situation did not put at risk continuation of the Company’s and its Group’s operations.

The Impel Group is one of Poland ’s major companies providing its clients with comprehensive services supporting their core businesses. The Group enjoys a stable position on the market, and is a market leader as far as its core products are concerned. Despite a significant competitive pressure and growing customer requirements regarding the quality of service, in 2008, the Group acquired new clients and increased its turnover, with revenue exceeding PLN 1 billion.

While pursuing its new strategy, i.e. focusing on developing its core business, the Impel Group initiated the process of transferring the property development business to the special purpose company – Vantage Development SA Another step in this process was the disposal of shares in Promedis Sp. z o.o. In an effort to acquire strategic investors in the Group’s selected lines of business, a joint venture company – Autogrill Polska Sp. z o.o. – was incorporated in January 2009.

By the end of 2008, there were three Business Units within the Group: JB‑1 Facility Management, JB-2 Security, and JB-3 Distribution. The remaining companies were independent units and companies supporting the Impel Group.

As of July 1 st 2008 , the start-up of key subsystems of the integrated IT System was completed on schedule, and the system’s full implementation is scheduled for completion by December 2009.

In 2008, the Impel Group reported a significant increase in profitability. EBIT generated in 2008 totalled PLN 21,482,000 surpassing the result achieved in the previous year by PLN 11,885,000. An increase in operating efficiency from 1.0% to 2.1% was achieved by companies of the Group through renegotiations of the existing contracts, reflecting the increase in labour costs, and optimisation of service provision processes based on a well-developed system of third-party subcontractors .

The net profit of PLN 41,655,000 earned in 2008 was higher by PLN 35,371,000 than the result generated in 2007. The result achieved in 2008 includes the significant amount of proceeds from the sale of shares in Promedis sp. z o.o.

Subsidies remain an important factor influencing the Group’s results. The Group intends to maintain the reduced and stabilized share of subsidies in sales revenue, enabling it avoid higher risk.

II. INTERNAL AUDIT SYSTEM

In the Impel Group there functions a system of internal regulations comprising applicable acts (including procedures, instructions or regulations) governing the Group’s operation. The observance of internal regulations is monitored by superiors, as part of their functional supervision, and by the Internal Audit Department, which conducts audits on the basis of annual plans of internal audit, approved by the Management Board of Impel SA

Books of accounts of the Group’s respective undertakings are kept by the Accounting Centre operating within Impel Accounting sp. z o.o., which renders accounting and bookkeeping services for the benefit of Impel SA and other Group’s undertakings. The books of accounts are kept in accordance with uniform accounting rules and the binding law i.e. IFRS/IAS, internal procedures for provision of the service, and accounting principles adopted by the Group.

Financial statements and reports are drawn up according to detailed procedures adopted by the Company. Pursuant to the provisions of law in force the Company submits its financial statements for review or audit, respectively, conducted by a registered auditor.

The structure of Impel Accounting sp. z o.o. includes a tax department which carries out the Group’s Tax Strategy including tax advice, advice on major transactions, and audits of tax risks which may occur within the Group. The tax department also exercises control over documents generated with respect to transactions among related undertakings, in the context of their conformance to the requirements of Art. 9a of the Act on Corporate Legal Tax.

III. RISK MANAGEMENT SYSTEM

The risk management system underwent no significant modifications in the past year. The Corporate Management Board (Management Board of Impel SA) is responsible for managing risk relevant for the Impel Group, whereas at the level of Business Units such responsibility is assumed by their respective Management Boards. The risk is identified and monitored during the process of development and verification of the Impel Group’s strategy.

As part of building the Impel Group’s strategy the following main areas of risk were diagnosed:

1. Commercial risk – including a threat of selling contracts with too low margins, which would not ensure a satisfactory profitability. Vice-President of the Management Board responsible for Commercial Issues deals with monitoring of this area and takes relevant steps.
2. Operating risk – including a risk of incurring costs which are higher than the ones anticipated in calculations for contracts, as a result of e.g. price rises, and related to a large scale of the Group’s operating activity. Monitoring and reducing this type of risk is the responsibility of Operational Office Director at the level of Impel SA, and of respective Presidents at the level of Business Units and Product Lines. The Group operates on the basis of approved budgets, and the monthly information regarding their fulfilment is provided by the controlling function.
3. Risk inherent in human resources management – related mainly to the situation on the labour market, causing problems with acquiring skilled and unskilled labour and an increase in costs of labour. Management of risk in this area, at the level of Impel SA, remains at the discretion of the HR Director, and at the level of Business Units – of their respective HR Directors.
4. Investment risk – including threats related to the investment process. Vice-President of the Management Board responsible for Financial Issues takes care of minimising risk in this area. In addition, in Impel SA there operates an Investment Committee which analyses significant investments and provides advice on them.
5. Financial risk – threats connected with ensuring the funds for the Impel Group’s operation and development, safe liquidity ratios and the Group’s planned financial result. Monitoring and counteracting this type of risk are assigned to Vice-President of the Management Board responsible for Financial Issues. At the level of Impel SA the financial functions are performed by a dedicated Financial Centre. The budget for each subsequent year, prepared annually, is approved by the Management Board of Impel SA and presented to the Supervisory Board. In the course of a year the Management Board analyses current financial results by comparing them against the approved budget, using the management reporting system adopted in the Company. Upon each calendar month closing middle-level and senior managers in the economic function, supervised by the Impel Group’s Economic Director, analyse the Company’s financial results in comparison with budget assumptions.
6. Tax risk – including the risk connected with transactions concluded between related undertakings. This area is supervised by Vice-President of the Management Board responsible for Financial Issues.
7. Legal risk – including changes in the Company’s legal environment, especially modifications in the provisions regarding employment of the disabled. HR Director of Impel SA is responsible for monitoring of changes in the provisions of law and their bearing on the Impel Group’s operations. Furthermore, the Group considerably reduced the share of subsidies in revenue, and intends to keep it stabilized at the decreased level.

Efforts at improving profitability and increasing revenue in 2008 brought about a positive outcome. In 2009 special attention will be paid to monitoring and counteracting the risks related to the economic slowdown, in the aforementioned areas. Further steps will also be taken to keep and improve profitability. In the Supervisory Board’s opinion, the Impel Group has the potential to neutralize the adverse influence of the economic conditions on its standing.

ASSESSMENT OF OPERATIONS OF THE SUPERVISORY BOARD OF IMPEL SA IN 2008

The Supervisory Board of Impel SA operated until May 18th 2008 in the following make-up:

1. Prof. Krzysztof Obłój – Chairman of the Supervisory Board 
2. Dr Andrzej Malinowski – Vice-Chairman of the Supervisory Board 
3. Mariusz Matlakiewicz – Secretary of the Supervisory Board 
4. Sylwester Cacek 
5. Piotr Pawłowski.

Due to the resignation of Mr Sylwester Cacek from his position as Member of the Supervisory Board, on May 19th 2008, the General Meeting of the Company appointed Mr Piotr Urbańczyk as a new Member of the Supervisory Board. As the Supervisory Board consists of five people, it functions as a whole and no committees have been distinguished within its composition.

In 2008 the Supervisory Board held its meetings five times, and their agendas were similar to those of 2007. The Supervisory Board’s priorities included:

1. fulfilment of the statutory obligations of corporate supervision, in particular support for the Management Board in formulation of a plan for further development, implementation of a new organisational structure, and an ambitious implementation of the SAP system;
2. analysis of efficiency of financial results of Impel SA and individual companies of the Impel Group;
3. supervision over the efficiency of the process of acquiring new companies; 
4. increasing the importance of the human resources management process, which is a key process in a company providing services whose main assets are people. In addition, the Supervisory Board spent much time analysing the options for running property development business by Impel SA, the buyback scheme, and the disposal of Promedis Sp. z o.o.

In the Supervisory Board’s opinion the first objective was accomplished effectively by acceptance of an ambitious plan and regular discussion on the Group’s results and organisational changes intended to improve the whole Company’s operation.

The second objective and the third objective were also fulfilled. Impel SA reduces its dependence on subsidies year by year. Concurrently, however, the performance of some of the Group’s undertakings is not satisfactory from the Supervisory Board’s point of view, but either they provide services complementary to the main services (facility management and security) or the costs of business discontinuation are very high at present and the possibilities of rising prices are limited due to fierce competition. Therefore, in 2009 the Supervisory Board will cooperate with the Management Board on achievement of the objective, i.e. reaching sustainable efficiency of all companies of the Group.

Achievement of the fourth objective was hindered, similarly to the previous year, by rotation of the managerial staff responsible for the Group’s human resources policy. Despite this hindrance, the Supervisory Board assesses favourably completion of some tasks as part of the objective, including standardisation of processes of the human resources policy and adjustment of the structure of the Human Resources Department to business needs. The Supervisory Board states that improvement in the human resources policy will remain one of the business priorities in 2009.

Analysis of options for running property development business proved to be a difficult task, especially given the complicated ownership structure of properties (building plots) on which buildings are to be erected, the slump of the global economy and unstable situation on the property development market. This is why Impel SA decided to transfer the business to a separate company. Following a careful analysis and discussion, the Supervisory Board also approved a controlled, partial buyback of Impel SA shares. The transaction of the sale of Promedis Sp. z o.o. was being monitored due to the scale and the method of disposal. In the Supervisory Board’s opinion, the disposal transaction was a success and very favourably influenced the financial results of the year 2008.

In conclusion, the Supervisory Board believes that the structure of its composition reflects the needs of Impel SA, as an organisationally complex Group of companies rendering services. The Supervisory Board of Impel SA is composed of five people with complementary competences. Mr Piotr Urbańczyk is a specialist in finance and company management. Mr Mariusz Matlakiewicz is an IT specialist, who, having worked in the Company for many years, knows its problems and conditions. Mr Andrzej Malinowski, PhD, President of the Confederation of Polish Employers, is an economist with perfect understanding of the business reality and operation of private companies. Mr Piotr Pawłowski is President of Stowarzyszenie Przyjaciół Integracji (Association of Friends of Integration) and has expertise in the professional functioning of the disabled. Prof. Krzysztof Obłój is an academician and expert in strategic management. Owing to such composition, the Supervisory Board of Impel SA can operate effectively as a supervisory body, combining a general perspective of Impel SA as a company with its specific conditions (provision of a wide assortment of outsourcing services, high number of disabled employees and complexity of the financial and strategic systems, resulting from a multidivisional nature of the organisation).

All Members of the Supervisory Board of Impel SA are independent members who are not employed by the Company, or related to it. The Chairman and some Members of the Supervisory Board participated in the General Meeting of Impel SA shareholders in 2008.

In the beginning of 2009, the Supervisory Board decided to carry out a self-assessment of its operations based on a structured, anonymous questionnaire, designed by the Supervisory Board in 2008. The questionnaire included 15 closed questions (with replies on the scale 1 to 5), concerning general operations of the Supervisory Board, and its effectiveness as the supervision body. In addition, the questionnaire contained three open questions concerning strengths and weaknesses of the Supervisory Board, its competence in providing substantive support and supervision of the Company’s Management Board, as well as suggestions concerning improvements in the operations of the Supervisory Board. Results of the self-assessment will serve as basis for activities aimed at improving effectiveness of the Supervisory Board in the coming years.

The Supervisory Board submitting this information and the document entitled “BRIEF ASSESSMENT OF THE COMPANY’S SITUATION, TAKING ACCOUNT OF THE INTERNAL AUDIT AND RISK MANAGEMENT SYSTEMS” hereby states that in 2008, it fulfilled all its essential duties including those resulting from the application of Best Practice. While assessing the completion of the targets, it must be stated that the Supervisory Board set targets for itself and the Management Board, and the Supervisory Board is satisfied with their execution. The Company has achieved good economic results and continues to improve its operations. The Supervisory Board pins its great hopes on the implementation of the SAP system, which should streamline the operation of the Group. The implementation of that system is a costly undertaking, but it is indispensable given the complexity and the scale of the Group. While performing its obligatory activities, the Supervisory Board:
- analysed the Company’s financial statements for the year 2008, and the auditor’s opinion;
- analysed the Management Board’s report and its recommendations concerning the distribution of profit.

The Supervisory Board gave a positive opinion on the financial statements of Impel SA and the Management Board’s report on the operations of the Company in 2008. Following consultation with the auditor, the Supervisory Board found that in all crucial aspects the documents were prepared in compliance with binding legal regulations, accounting principles and standards, and in line with the actual records in the books. The Supervisory Board also analysed the consolidated financial statements of the Impel Group and the Management Board’s report on the operations of the Group in 2008, and found them to be reliable and enabling proper assessment of the Group’s situation. This is why the Supervisory Board recommends the General Meeting to approve the Management Board’s report on the operations of the Company and the financial statements for the year ending December 31st 2008, as well as the report on the operations of the Group and the consolidated financial statements of the Impel Group for the year ending December 31st 2008, and to approve the performance of duties by the members of the Management Board in 2008.