POLNORD GROUP CONSOLIDATED QUARTERLY REPORT FOR THE PERIOD OF THREE MONTHS ENDED 31 MARCH 2009

Transcription

1 POLNORD GROUP CONSOLIDATED QUARTERLY REPORT FOR THE PERIOD OF THREE MONTHS ENDED 31 MARCH 2009 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS GDYNIA, 14 MAY 2009

2 CONSOLIDATED INCOME STATEMENT in PLNk Item 01 Jan Mar Jan Dec Jan Mar 2008 Income from sales Income f rom sales of goods and products from related parties Income f rom sales of serv ices from related parties Income f rom lease from related parties Costs of sales ( ) ( ) ( ) Gross profit (loss) on sales Rev aluation of inv estment property Distribution costs ( 443) ( 7 655) ( 677) Administrativ e expenses ( ) ( ) ( ) Other operating income Other operating costs ( 9 286) ( ) ( 216) Gross profit (loss) on operating activity Financial income Financial costs ( 6 490) ( ) ( 3 939) Prof it on disposal of a subsidiary 55 Share in prof it of an associate Gross profit (loss) Income tax ( 3 567) ( ) ( 7 222) Net profit (loss) on continued operations Discontinued operations Gross prof it (loss) on discontinued operations f or the f inancial y ear ( 139) ( 1 439) ( 117) Income tax on prof it f rom discontinued operations Net profit / (loss) for the financial year Attributable to: Shareholders of the parent company Minority shareholders CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME in PLNk Item 01 Jan Mar Jan Dec Jan Mar 2008 Net profit / (loss) for the financial year Other comprehensive income: ( 5 066) ( ) ( 95) Foreign exchange dif f erences on translation ( 41) 467 ( 95) Ef f ectiv e portion of gains and losses on cash f low hedge instruments ( 6 204) ( ) Income tax on other comprehensiv e income Comprehensive income for the period Attributable to: Shareholders of the parent company Minority shareholders Annualised ratios: Net earnings (loss) (annualised) Net earnings (loss) on continued operations (annualised) Weighted av erage number of ordinary shares Weighted av erage diluted number of ordinary shares net earnings (loss) per ordinary share (PLN) net earnings (loss) on continued operations per ordinary share (PLN) diluted net earnings (loss) per ordinary share (PLN) diluted net earnings (loss) on continued operations per ordinary share (PLN)

3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) in PLNk Item 31 Mar Dec Dec 2007 ASSETS Fixed assets Property, plant and equipment Inv estment property Intangible assets Inv estments in subsidiaries, jointly controlled entities, and associates Inv estments in associates accounted f or using the equity method Financial assets Def erred tax assets Long-term receiv ables Goodwill Other f ixed assets Current assets Inv entories Trade and other receiv ables Inv estments in securities held f or trading Current portion of long-term f inancial assets Other current f inancial assets Amounts receiv ables due to VAT and other taxes Income tax receiv ables Prepaid expenses and accrued income Short-term deposits Cash and cash equiv alents Available-for-sale assets TOTAL ASSETS LIABILITIES Equity (attributable to shareholders of the parent company) Share capital Share premium Foreign exchange dif f erences on translation of a f oreign entity ( 339) ( 262) ( 113) Other reserv es Accumulated prof it or loss ( ) Minority interests Total equity Long-term liabilities Interest-bearing bank loans and borrowings Prov isions Other liabilities Def erred tax liability Accrued expenses and def erred income Current liabilities Trade and other liabilities Current portion of bank loans and borrowings Short-term rev olv ing loans Other short-term loans and borrowings Liabilities due to VAT and other taxes Income tax liabilities Other f inancial liabilities Accrued expenses and def erred income Prepay ments receiv ed Prov isions Liabilities directly associated with available-for-sale assets Total amounts payable TOTAL LIABILITIES

4 CONSOLIDATED CASH FLOW STATEMENT in PLNk Item 01 Jan Mar Jan Mar 2008 Cash flows from operating activity Gross profit / (loss) on continued operations Gross profit / (loss) on discontinued operations ( 139) ( 117) Adjusted by: ( ) ( ) Share in profit (loss) of affiliates accounted for using the equity method Amortisation Interest and dividends, net ( 908) ( 2 416) (Profit) / loss on investment activity ( 115) 221 (Increase)/ decrease in receivables ( ) ( ) (Increase)/ decrease in inventories ( ) ( ) Increase/ (decrease) in liabilities, except for loans and borrowings ( 212) Change in prepayments and accruals ( ) Change in provisions ( 1 980) Income tax paid ( 163) 728 Other ( ) Net cash from operating activity ( ) ( ) Cash flows from investment activity Inflows Disposal of property, plant and equipment and intangible assets Disposal of investment property 100 Disposal of financial assets 832 Dividends received Interest received Other Outflows ( 697) ( 878) Acquisition of property, plant and equipment and intangible assets ( 284) ( 868) Acquisition of investment property Acquisition of financial assets ( 10) Acquisition of a subsidiary subject to deduction of the acquired cash Debt repayments Loans granted ( 400) Other ( 13) Net cash from investment activity Cash flows from financial activity Inflows Inflows from issue of shares Inflows from loans/borrowings raised Other Outflows ( ) ( ) Repayment of liabilities under finance lease ( 185) ( 157) Repayment of loans/borrowings ( ) ( ) Dividends paid to shareholders of the parent company Dividends paid to minority shareholders Interest paid ( 6 018) ( 4 177) Other ( ) Net cash from financial activity Net increase in cash and cash equivalents Net foreign exchange differences 3 (62) Cash as at the period beginning Cash as at the period end, including: Restricted cash DISCONTINUED OPERATIONS in PLNk Items 01 Jan Mar Jan Mar 2008 Net cash flows Cash flows from operating activity ( 74) Cash flows from investment activity Cash flows from financial activity Net cash inflows / (outflows) ( 74) 4

5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in PLNk Share capital Share premium Exchange dif f erences f rom translation of a f oreign entity Other reserv es Accumulated prof it / (loss) Total Minority interests Total equity As at 01 January ( 209) ( 9 743) Error corrections Item Attributable to shareholders of the parent company Change of accounting policies ( ) ( ) ( ) As at 01 January 2008 (restated) ( 113) ( ) Issue of shares Cost of share issue ( 97) ( 97) ( 97) Management Option Scheme Total comprehensiv e income ( 27) ( 68) As at 31 March ( 140) ( 3 005) Issue of shares Cost of share issue ( 119) ( 119) ( 119) Management Option Scheme Prof it / loss carry f orward 205 ( 205) Total comprehensiv e income ( 122) (11 331) As at 31 December ( 262) As at 01 January Change of accounting policies ( 498) ( 6 286) ( ) ( ) ( ) As at 01 January 2009 (restated) ( 262) Management Option Scheme Total comprehensiv e income ( 77) ( 4 989) As at ( 339)

6 OFF-BALANCE SHEET ITEMS in PLNk Contingent liabilities Item 31 Mar Dec Dec 2007 Liabilities under bank guarantees granted primarily as security f or perf ormance of commercial contracts Other contingent liabilities Total contingent liabilities NOTES TO THE FINANCIAL STATEMENTS GENERAL INFORMATION POLNORD SA is the Parent Company in the POLNORD Group. Full name (company): POLNORD Spółka Akcyjna Registered Office: Gdynia, ul. Śląska 35/37 KRS (National Court Register ) number: NIP (tax identification number): REGON (statistical registration number): Polish Classification of Activities (PKD) (2007): 4110 Z development and sale of real estates The core business of the POLNORD Group is construction and sale of residential and commercial property. POLNORD SA delivers development projects either independently or through special purpose vehicles. Unless the context requires otherwise, the terms used herein, such as the Company, POLNORD, the Parent Company, or other terms of similar meaning and any variations thereof, refer to POLNORD SA, whereas the Group, the POLNORD Group, or other terms of similar meaning and any variations thereof, refer to the Group including POLNORD SA and entities subject to consolidation. COMPANIES SUBJECT TO CONSOLIDATION Apart from POLNORD SA, the following companies were directly included in the consolidation for the period from 01 January 2009 to 31 : 1) POLNORD - ŁÓDŹ I Sp. z o.o. - full consolidation - registered office - Łódź 2) POLNORD - ŁÓDŹ II Sp. z o.o. - full consolidation - registered office - Łódź 6

7 3) POLNORD - ŁÓDŹ III Sp. z o.o. - full consolidation - registered office - Łódź 4) POLNORD WARSZAWA WILANÓW I Sp. z o.o. - full consolidation - registered office - Warsaw 5) POLNORD WARSZAWA WILANÓW II Sp. z o.o. - full consolidation - registered office - Warsaw 6) POLNORD WARSZAWA WILANÓW III Sp. z o.o. - full consolidation - registered office - Warsaw 7) PD Development Sp. z o.o. - full consolidation - registered office - Gdańsk 8) Osiedle Tęczowy Las PD DEVELOPMENT Sp. z o.o. S.K.A. - full consolidation - registered office - Gdańsk 9) POLNORD - BALTIC CENTER Sp. z o.o. - full consolidation - registered office - Gdańsk 10) POLNORD - APARTAMENTY Sp. z o.o. - full consolidation - registered office - Gdańsk 11) PROKOM - Projekt Sp. z o.o. - full consolidation - registered office - Warsaw 7

8 12) POLNORD Sopot I Sp. z o.o. - full consolidation - registered office - Warsaw 13) Lublin Property I Sp. z o.o. - full consolidation - registered office - Lublin 14) POLNORD Inżynieria Sp. z o.o. - full consolidation - registered office - Warsaw - core business - engineering and installation works 15) POLNORD Szczecin I Sp. z o.o. - full consolidation - registered office - Szczecin 16) POLNORD Sopot II Sp. z o.o. - full consolidation - registered office - Warsaw 17) POLNORD - INVEST Sp. z o.o. - full consolidation - registered office - Warsaw - core business - lease of office premises 18) Osiedle Zielone Nieruchomości Sp. z o.o. - full consolidation - registered office - Gdynia - core business - property management 19) POLNORD - Wydawnictwo Oskar Sp. z o.o. - full consolidation - registered office - Gdańsk - core business - publishing house 20) Pomorskie Biuro Projektów GEL Sp. z o.o. - full consolidation - registered office - Sopot - shareholding % 8

9 - core business - design services 21) PLP Development Group Z.S.A. - proportional consolidation - registered office - Novosibirsk - shareholding - 50% 22) POLNORD - KOKOSZKI Sp. z o.o.* - proportional consolidation - registered office - Gdańsk - shareholding - 50% 23) Fadesa Polnord Polska Sp. z o.o. (formerly Fadesa Prokom Polska Sp. z o.o.) - proportional consolidation - registered office - Warsaw - shareholding - 49% * POLNORD KOKOSZKI Sp. z o.o. was included in the consolidation for the period from 01 January 2009 to 27 March 2009, i.e. until disposal of its shares by POLNORD SA. Additionally, the consolidation included companies where POLNORD SA has indirect shareholding through: a) Fadesa Polnord Polska Sp. z o.o., where POLNORD SA holds 49% of shares: FPP Powsin Sp. z o. o. - proportional consolidation - registered office - Warsaw Osiedle Innova Sp. z o. o. - proportional consolidation - registered office - Warsaw a) PROKOM Projekt Sp. z o.o., where POLNORD SA holds 100% of shares: Skarbiec Nieruchomości 3 Sp. z o. o. - proportional consolidation - registered office - Warsaw - shareholding - 34% Skarbiec Nieruchomości 3 Sp. z o. o. SKA - proportional consolidation - registered office - Warsaw - shareholding % 9

10 COMPANIES EXCLUDED FROM CONSOLIDATION The consolidated statements did not include PMK BAU UND BAUBETREUUNGS GmbH under liquidation and Przedsiębiorstwo Zarządzające Lanta-PLP Sp. z o.o. which had not commenced their operations, as well as HYDROSSPOL Sp. z o.o. under liquidation which had discontinued its operations. Financial data of those companies are insignificant from the perspective of the consolidated financial statements. I. Preparation of the quarterly report 1. Preparation of the consolidated financial statements These financial statements have been prepared based on the same accounting policies applied to the last annual financial statements of the Group, except for the change in recognition of real estate development contracts, as discussed below. The consolidated financial statements are presented in thousands of Polish zloty, unless specified otherwise. The consolidated financial statements have been prepared based on an assumption that the Group s companies will continue as a going concern. Statement of compliance These financial statements have been prepared in accordance with the respective International Financial Reporting Standards (IFRS) adopted by the EU. IFRS comprise of standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC). The Group s companies maintain their accounts in accordance with the policies and practices generally adopted by Polish enterprises, based on the applicable Polish Accounting Standards (PAS). These consolidated financial statements include certain adjustments which have not been reflected in the accounts of the Group s companies and their purpose is to ensure that the financial statements comply with standards issued by the International Accounting Standards Board and the International Financial Reporting Interpretation Committee. The Group applied in these consolidated financial statements all International Financial Reporting Standards applicable for the periods starting 01 January 2009, as well as standards which became effective before 31. The Group has analysed the new standards and interpretations as well as any changes to the already existing standards and interpretations. The changes in standards and interpretations, except for the necessary new disclosures, do not affect any financial results presented in these consolidated financial statements. 10

11 Measurement currency and presentation currency Items disclosed in the financial statements of the Group s companies are shown in the currency of the main economic environment in which the given company operates (functional currency). The functional currency and presentation currency of the Parent Company is Polish zloty (PLN). The reporting currency of the Group s financial statements is Polish zloty (PLN). Some of the Group s companies use a functional currency other than Polish zloty (PLN). Financial statements of such companies, prepared in their functional currencies, are included in these consolidated financial statements following their translation to PLN in accordance with IAS 21. The following exchange rates were used for the balance sheet valuation purposes: 31 Mar Dec Dec 2007 USD EUR RUB The following exchange rates were used for the income statement valuation purposes: 01 Jan 31 Mar Jan 31 Dec Jan 31 Mar 2008 USD EUR RUB Changes in the accounting policies In July 2008, IFRIC published an interpretation no. 15 Agreements for the Construction of Real Estate which applies to financial statements prepared for periods commencing 01January 2009, and therefore, as of 2009, the Group changed its accounting policy used for valuating real estate development contracts from the percentage of completion method arising from IAS 11 to the completed contract method in accordance with IAS 18. Consequently, the Group changed the manner of disclosing its profits or losses on delivered real estate development contracts in subsequent reporting periods, however without affecting the profitability of such contracts. As of 01 January 2009, for real estate development contracts, the Group recognises its income (and the respective expense) from a contract at the moment when the control as well 11

12 as the significant risks and benefits arising from the ownership title to the given property are transferred to the buyer. The control and significant risks and benefits related to the ownership title to the subject of the sales transaction (an apartment) are transferred at the moment of executing the sales agreement in the form of a notarial deed. The Group adopted a policy where the result on real estate development contracts may be recognised earlier, i.e. at the date of handing over the apartment upon signing an acceptance certificate, if parties to the agreement fulfil certain conditions, including, in the first place, the buyer s payment of the full price for the apartment, and if it is the intention of the parties to conclude the final agreement and transfer the ownership title to the property under a notarial deed. The financial statements present appropriately restated data for comparative periods. The table below presents the effect of changes in accounting policies on financial statements for the comparative periods. 12

13 Effect of accounting policy changes on consolidated balance sheets ASSETS Item 31 Dec 2007 Change of accounting policy (from IAS 11 to IAS 18) 31 Dec 2007 (restated) Fixed assets ( 7 207) Inv estments in associates accounted f or using the equity method ( 6 585) Def erred tax assets ( 9 268) Goodwill Current assets Inv entories Trade and other receiv ables Amounts receiv able f rom customers ( ) TOTAL ASSETS LIABILITIES Equity (attributable to shareholders of the parent company) ( ) Foreign exchange dif f erences on translation of a f oreign entity ( 209) 96 ( 113) Other reserv es Accumulated prof it or loss ( 9 743) ( ) ( ) Total equity ( ) Long-term liabilities ( ) Def erred tax liability ( ) Current liabilities Amounts pay able to customers / Prepay ments receiv ed TOTAL LIABILITIES

14 ASSETS Item 31 Dec 2008 Change of accounting policy (from IAS 11 to IAS 18) 31 Dec 2008 (restated) Fixed assets ( ) Def erred tax assets ( ) Goodwill Current assets ( 2 778) Inv entories Amounts receiv able f rom customers ( ) 0 TOTAL ASSETS ( ) LIABILITIES Equity (attributable to shareholders of the parent company) ( ) Foreign exchange dif f erences on translation of a f oreign entity 236 ( 498) ( 262) Other reserv es ( 6 286) Accumulated prof it or loss ( ) Total equity ( ) Long-term liabilities ( ) Def erred tax liability ( ) Current liabilities Accrued expenses and def erred income ( 44) Amounts pay able to customers / Prepay ments receiv ed TOTAL LIABILITIES ( ) Effect of accounting policy changes on unconsolidated balance sheets ASSETS Item 31 Dec 2007 Change of accounting policy (from IAS 11 to IAS 18) 31 Dec 2007 (restated) Fixed assets ( 1 842) Def erred tax assets ( 1 842) Current assets Inv entories Trade and other receiv ables Amounts receiv able f rom customers 628 ( 628) TOTAL ASSETS LIABILITIES Equity (attributable to shareholders of the parent company) ( 2 943) Accumulated prof it or loss ( ) ( 2 943) ( ) Total equity ( 2 943) Long-term liabilities ( 2 532) Def erred tax liability ( 2 532) 926 Current liabilities Amounts pay able to customers / Prepay ments receiv ed TOTAL LIABILITIES

15 Item 31 Dec 2008 ASSETS Change of accounting policy (from IAS 11 to IAS 18) 31 Dec 2008 (restated) Fixed assets Def erred tax assets Current assets ( 216) Inv entories ( 216) TOTAL ASSETS ( 183) LIABILITIES Equity (attributable to shareholders of the parent company) Accumulated prof it or loss ( ) 598 ( ) Total equity Long-term liabilities Def erred tax liability Current liabilities ( 954) Accrued expenses and def erred income 798 ( 44) 754 Amounts pay able to customers / Prepay ments receiv ed ( 910) TOTAL LIABILITIES ( 183) Revenues and financial results by segments For the period from 01 Jan 2009 to 31 Mar 2009 or as at 31 Mar 2009 Revenues Development activity Other Eliminations Not allocated items Total Discontinued operations Sales to external customers Sales between segments ( ) Total segment revenues ( ) Profit (loss) Profit (loss) on the segment ( 6 166) ( 135) Not allocated items Profit (loss) on continued operations before tax and financial expenses Continued operations Other Total operations ( 6 166) ( 135) Net financial expenses ( 1 073) ( 1 073) ( 4) ( 1 077) Gain on disposal of a subsidiary Profit (loss) before tax and minority interests ( 6 111) ( 139) Income tax ( 3 567) ( 3 567) ( 3 567) Net profit (loss) for the financial year ( 6 111) ( 139)

16 The amount of provisions disclosed in the consolidated financial statements as at 31 March 2009 was PLN 2,182,000 higher than at 31, while the income tax provision increased by PLN 3,788,000. The amount of provisions disclosed in the unconsolidated financial statements at 31 March 2009 was PLN 3,261,000 higher than at 31 December 2008, while the income tax provision increased by PLN 4,754,000. The contractual damages charged by the Group in the first quarter totalled PLN 10,827,000 and were recognised under other operating income in the income statement. At the same time, for the receivable resulting from the accrued damages, the Group recorded a revaluation charge of PLN 8,557,000 and recognised it under other operating costs in the income statement. II. Significant activities of the Group during the first quarter of 2009 with specification of all key events related to such activities In Q1 2009, the following significant events occurred within the Group: a) Agreements concluded with the dominant shareholder Agreement of 27 February 2009 On 27 February 2009, the Company concluded an agreement with Prokom Investments SA with its registered office in Gdynia ("Prokom"), the Company's dominant shareholder, specifying the terms of cooperation regarding acquisition of financing for the Company ("the Agreement"). Pursuant to the Agreement, Prokom undertook to take steps aimed at acquiring the total of PLN 100m for financing the Company's activities ("the Financing"), while the Company agreed to accept the Financing acquired by Prokom under the Agreement. Financing will be offered to the Company subject to borrowing agreements or other agreements of similar nature, on market terms, or as direct equity investment in the Company shares, while borrowings or agreements of similar nature will be unsecured and subordinated to the Company's bank loans. Financing will be granted to the Company by Prokom or another entity appointed by Prokom (Prokom or another entity appointed by Prokom will be hereinafter referred to as "the Financing Entity"), pursuant to agreements authorising the Financing Entity to demand conversion of either the entire or partial Financing amount, together with interest and other costs stipulated in the Financing documents, to the Company s equity ( the Demand ). If the Financing Entity informs of its intention to make a direct equity investment in the Company shares, the Demand will refer to issue of the Company shares on conditions stipulated in the Agreement. The Demand will be irrevocable and the Financing Entity may issue the Demand at any time of its choice or at the date stipulated in the Financing document. The take-up and payment for the shares, in exercising the Demand, will take place within 2 months from the Demand date. If the shares are not issued within the authorized capital, resolved by way of Resolution 2 of the Extraordinary Meeting of Shareholders of the Company of 23 March 2007, then the period for taking up and payment for the shares, in exercising the Demand, will be set for 4 months from the Demand date. 16

17 If the Demand is issued, the Company will undertake, within the timeframe set in the Demand, any activities necessary to increase the Company's share capital by way of issue of new shares of the Company ("New Shares") in exchange for cash contribution, at the issue price per one New Share equal to the arithmetic mean of 180 days of the Company s share closing quotation at the Warsaw Stock Exchange ( WSE ) prior to the Demand date or, at the discretion of the Financing Entity, at issue price per one New Share equal to the closing price of the Company shares listed on the WSE, as at the date immediately preceding the Demand date, in each case accounting for the effects of any division of shares. The New Shares will be issued firstly from within the authorized capital of the Company and the Company will ensure sufficient amount of the authorized capital allowing for issue of the New Shares. In case of the Demand for conversion of the non-repaid Financing amount, in full or in part, the New Shares will be paid up by way of agreed offsetting of the Financing Entity s receivable against the Company s receivable due to payment for the New Shares. In case Prokom performs the Agreement so that financing is offered by the Financing Entity that is not Prokom, the Company will pay Prokom a fee of 2% on the amount of Financing granted by such other entity. Financing subject to the Agreement will be acquired within one year from conclusion thereof. Agreement of 26 On 26, POLNORD SA concluded an investment agreement ( the Agreement ) with Prokom Investments SA with its registered office in Gdynia ( Prokom ), a dominant shareholder of the Company, whereby the parties undertook to dispose of the real estate and conduct the issue of shares addressed to Prokom. Pursuant to the Agreement, Prokom will sell to the Company the real estate ("the Real Estate"), geodetically separated from the remaining part of the real estate, corresponding to 1/3 of the real estate, with the total area of ha, located in Dopiewiec n/poznań, for the net price of PLN 24,000,000, i.e. the gross price of PLN 29,280,000 ("the Gross Sale Price"). The Real Estate is included in the local spatial development plan and according to that plan it is earmarked for development of multi-apartment residential buildings and partially for educational and cultural purposes. The Company intends to execute within the Real Estate a housing development project with the net sellable area of at least 120,000 sq. m. At the same time, the Company's Management Board undertook to adopt a resolution on the increase of the share capital within the authorized capital, by way of issue of new shares addressed to Prokom, with the issue value equal to the Gross Sale Price, subject to the following conditions: 17

18 (i) The share issue price will equal the arithmetic mean of 30 days of the Company s share closing quotation at the WSE, preceding the date of conclusion of the Agreement, namely will amount to PLN 23.13; (ii) The number of newly issued shares for Prokom will total 1,265,888; (iii) The Resolution of the Company s Management Board to increase the share capital will be adopted by 02 April The Resolution will provide for a possibility to pay for the new shares by way of offsetting the amount due against the Gross Sale Price. The aforesaid Resolution has been adopted. If within six months from the date of the aforementioned Resolution, Prokom fails to prove that it is the owner of the Real Estate, not encumbered with any third-party rights, Prokom will immediately contribute to the Company the amount of PLN 29,280,000 in cash, in order to pay for the new shares discussed above. b) Modification of the Management Option Scheme On 26 February 2009, the Company s Supervisory Board adopted resolutions on modification of the Management Option Scheme Regulations ( the Regulations ) with regard to a change of the share issue price for Warrants of A1, A2, A3 and A4 series ("the Warrants") and extension of the date by which it is possible to exercise the right to take up the Shares, arising from the Warrants, under the Management Option Scheme ( the MO Scheme ). The issue price of the Shares taken up as a result of exercising the rights arising from the Warrants amounted to PLN With the aforesaid resolutions, the Supervisory Board of the Company amended the Regulations by defining the issue price for the Shares taken up as a result of exercising rights from Warrants as equal to the arithmetic mean of the Company's share closing quotation at the Warsaw Stock Exchange of 30 days preceding the resolution adoption date, reduced by 10%, i.e. as PLN The discussed resolutions became effective as of the date of their adoption but with regard to the Eligible Persons that are members of the Supervisory Board, holding 96,754 Warrants in total, they will become effective as of the date of the General Meeting of Shareholders of the Company adopting the resolution on consent to change the issue price of the Shares taken up by members of the Supervisory Board and on consent to extend the maximum period for the members of the Supervisory Board to exercise their rights from the Warrants taken up under the Management Option Scheme, and setting such extended date on 31 December On 02, the Eligible Persons that are not members of the Company s Supervisory Board, who enrolled in the Management Option Scheme on 04 December 2007, holding the total of 323,922 Warrants, issued statements accepting the aforesaid amendment of the Regulations. Following receipt of the statements, pursuant to requirements of the International Financial Reporting Standards, the Company must measure the fair value of the MO Scheme modification. The Company s payroll costs for the first quarter of 2009 were increased by PLN 2.8m. However, the Management Board stresses that the abovementioned charge to the Company s financial result is non-monetary and does not affect current cash flows of the Company. c) Sale of a plot of land in Wilanów for an educational complex 18

19 On 22 April 2009, POLNORD SA concluded a sale agreement ( the Agreement ) with the Capital City of Warsaw ( the Buyer ) regarding a plot of land with the area of 45,700 sq. m., located in Warsaw Wilanów ( the Plot ), near the Temple of Providence. In accordance with the Resolution no. XLV/1410/2008 of the City Council of the Capital City of Warsaw dated 11 December 2008, the Buyer purchased the Plot for the purpose of constructing educational facilities in Wilanów Zachodni District. The Buyer intends to construct a complex of educational facilities on the Plot in order to meet the urgent needs of residents of all residential estates located in Pola Wilanowskie. Presently, the educational complex programme provides that the Buyer is to construct, among others, the following facilities on the Plot: a nursery school, a primary school, a lower secondary school, a sports and recreation centre with a sports hall and open outdoor green areas with sports fields. The Company s Management Board stresses the non-commercial nature of the said investment and the fact that the modern educational complex constructed by the Buyer will significantly increase investment attractiveness of the remaining real estates held by the Company in Wilanów area. The net sale price of the Plot is PLN 33.8m, while the gross price amounts to PLN 41.3m. In accordance with the information disclosed in the consolidated report for Q4 2008, dated 25 February 2009, the Company included all the resulting accounting operations related to conclusion of the Agreement in the net financial result for 2008, in the Disclosure no. 39 of the Financial Statements for 2008, dated 22 April III. Factors and events, particularly of extraordinary nature, which significantly affect the financial results In the first quarter of 2009, the extraordinary factor that influenced the presented financial performance was the modification of the Management Option Scheme, as discussed in item II b). IV. Notes on seasonal and cyclical nature of the Group s operations Considering the fact that the real estate development projects are measured based on the completed contract method under the IAS 18, the amount of income from sales of apartments depends on dates of completing the housing development projects and handing over the apartments to buyers. Following the change of the accounting policy for measurement of real estate development contracts, the Group no longer applies the percentage of completion method (IAS 11), and therefore, the financial statements do not reflect the progress of construction works and advance sales. V. Issue, repurchase, and repayment of non-equity and equity securities Under the Bond Issue Programme, which the POLNORD SA reported in its current report no. 44/2008 of 26 May 2008, the Company issued in Q a total of 450 bonds with the nominal value of PLN 100,000 each, covered by a guaranteed purchase agreement with BRE Bank SA by 30 May 2009 which was also reported by the Company in the aforementioned 19

20 current report. The guaranteed purchase agreement s limit totals PLN 50,000,000, however subject to the information provided in section VII. a) As at 31 December 2008, the debt totalled PLN 15,000,000. b) As at 31, the debt totalled PLN 45,000,000. c) The value of bonds issued in Q totalled 45,000,000, of which: 7/2009 series bonds Number of bonds -100 Total nominal value PLN 10,000,000 Issue date 28 January 2009 Redemption date 29 April

21 8/2009 series bonds Number of bonds -100 Total nominal value PLN 10,000,000 Issue date 06 February 2009 Redemption date 07 May /2009 series bonds Number of bonds Total nominal value PLN 10,000,000 Issue date 11 February 2009 Redemption date 13 May /2009 series bonds Number of bonds - 50 Total nominal value PLN 5,000,000 Issue date 11 Redemption date 29 May /2009 series bonds Number of bonds -100 Total nominal value PLN 10,000,000 Issue date 19 Redemption date 29 May 2009 d) The value of bonds redeemed in Q totalled 15,000,000, of which: 5/2008 series bonds Number of bonds Total nominal value PLN 10,000,000 Issue date 07 November 2008 Redemption date 06 February /2008 series bonds Number of bonds - 50 Total nominal value PLN 5,000,000 Issue date 10 December 2008 Redemption date 11 VI. Information about the distributed (or declared) dividends In Q1 2009, POLNORD SA did not declare or distribute any dividends. 21

22 VII. Events which occurred after the date of preparing the condensed quarterly financial statements and were not disclosed in such statements but may significantly affect future financial results On 06 May 2009, POLNORD SA entered into agreements with BRE Bank SA in Warsaw ( the Bank ), regarding organisation and execution of the Bond Issue Programme up to the total amount of PLN 50,000,000 ( the Programme ). Under the Programme, the Company may issue unsecured or secured bearer bonds in a dematerialised form ( the Bonds ). The Bonds will not be issued under any public offer. On 06 May 2009, the Company also concluded a guaranteed sale agreement with the Bank, whereby the Bank undertook to purchase any of the Bonds not acquired by other investors, during the period from 06 May 2009 to 05 May The total maximum nominal value of the Bonds to be taken up by the Bank under the agreement may not exceed PLN 35,000,000. The aforementioned agreement supersedes the agreement reported by the Company in its current report of 26 May The Company stresses that as at the balance sheet date, the amounts payable under the bonds were disclosed under other short-term loans and borrowings. On conclusion of the said guaranteed sale agreement, the liability arising from the agreement became a long-term liability as of 06 May 2009, with the repayment date by 05 May Moreover, under the aforementioned balance sheet item, the Company also recorded, among others, its debt arising from the overdraft facility agreement, for which the repayment date was 30 June 2009 as at the balance sheet date. In accordance with the annex signed after the balance sheet date, the Company may overdraw its current account up to PLN 25,000,000 until 30 June Therefore, the Company has no obligation to repay the aforementioned debt in VIII. Changes in contingent liabilities or contingent assets As at 31, conditional liabilities arising from guarantees granted by POLNORD SA totalled PLN 411,263,000, compared to PLN 411,220,000 as at 31 December As at 31, guarantees granted to the Company totalled PLN 51,690,000, compared to PLN 74,090,000 as at 31 December As at 31, conditional liabilities of the Group amounted to PLN 7,844,000, compared to PLN 7,037,000 as at 31 December As at 31, guarantees granted to the Group totalled PLN 53,465,000. Compared to 31 December 2008, the amount of the guarantees decreased by PLN 22,400,

23 IX. Organisational structure of the Group As at 31, the Group, where POLNORD SA is the parent company, included the following subsidiaries, jointly controlled entities and associates: No. Company name Registere d office Nominal value of shares (PLN) % of capital/ votes 1. POLNORD - ŁÓDŹ I Sp. z o.o. Łódź 2,750, % 2. POLNORD - ŁÓDŹ II Sp. z o.o. Łódź 50, % 3. POLNORD - ŁÓDŹ III Sp. z o.o. Łódź 50, % 4. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. Warsaw 50, % 5. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. Warsaw 50, % 6. POLNORD WARSZAWA - WILANÓW III Sp. z Warsaw 50, % o.o. 7. PD Development Sp. z o. o. Gdańsk 50, % 8. OSIEDLE TĘCZOWY LAS PD Development Sp. z Gdańsk 4,980, % o.o. S.K.A. 9. POLNORD - BALTIC CENTER Sp. z o.o. Gdańsk 50, % 10. POLNORD - APARTAMENTY Sp. z o.o. Gdańsk 50, % 11. PROKOM - Projekt Sp. z o.o. Warsaw 100, % 12. POLNORD Sopot I Sp. z o.o. Warsaw 50, % 13. Lublin Property I Sp. z o.o. Lublin 50, % 14. POLNORD Inżynieria Sp. z o.o. Warsaw 50, % 15. POLNORD Szczecin I Sp. z o.o. Szczecin 50, % 16. POLNORD Sopot II Sp. z o.o. Warsaw 50, % 17. POLNORD - INVEST Sp. z o. o. Warsaw 11,867, % 18. OSIEDLE ZIELONE - NIERUCHOMOŚCI Sp. z o.o. Gdynia 226, % 19. POLNORD - Wydawnictwo OSKAR Sp. z o. o. Gdańsk 50, % 20. Pomorskie Biuro Projektów GEL Sp. z o. o. Sopot 226, % 21. PMK BAU UND BAUBETREUUNGS GmbH under Eschborn 36, % liquidation (Germany) 22. PLP Development Group Z.S.A. Novosibirsk 1,103, % (Russia) 23. FADESA POLNORD POLSKA Sp. z o.o. Warszawa 8,134, % 24. Przedsiębiorstwo Zarządzające Lanta-PLP Sp. z Novosibirsk % o.o. * (Russia) 25. FPP Powsin Sp. z o.o. ** Warsaw 2,474, % 26. Osiedle Innova Sp. z o.o. ** Warsaw 3,454, % 27. Skarbiec Nieruchomości 3 Sp. z o.o. *** Warsaw 17, % 28. Skarbiec Nieruchomości 3 Sp. z o.o. S.K.A. *** Warsaw 5,000, % 29. HYDROSSPOL Sp. z o. o. under liquidation Gdańsk 15, % * indirect subsidiary controlled through PLP Development Group Z.S.A. ** indirect subsidiary controlled through Fadesa Polnord Polska Sp. z o.o. *** indirect subsidiary controlled through PROKOM PROJEKT Sp. z o.o. 23

24 On 07 January 2009, the District Court for the Capital City of Warsaw in Warsaw registered a change in the name of POLNORD SA s jointly controlled entity of from Fadesa Prokom Polska Sp. z o.o. to Fadesa Polnord Polska Sp. z o.o. On 27, POLNORD SA sold 25 shares in the capital of POLNORD KOKOSZKI Sp. z o.o., with the nominal value of PLN 1,000 each. X. Effects of changes in the Group s structure, including mergers, acquisitions or divestments of members of the Company s group, long-term investments, restructuring and discontinuation of operations In the presented period, there were no changes in the structure of the Group other than the changes indicated above. XI. Position of the Management Board with regard to feasibility of forecasts published earlier on for the given year, from the perspective of the results presented in the quarterly report and the forecast performance. POLNORD SA did not publish any forecast results for XII. Shareholders controlling at least 5% of the total number of votes at the General Meeting of Shareholders of the Company ordinary bearer shares as at 14 February PROKOM Investments SA in Gdynia holds 6,924,820 shares which represent a 38.23% share in the capital, 6,924,820 votes at the AGM which represent a 38.23% share in total votes at the AGM; 2. Osiedle Wilanowskie Sp. z o.o. in Gdynia (subsidiary of PROKOM Investments SA) holds 2,582,949 shares which represent a 14.26% share in the capital, 2,582,949 votes at the AGM which represent a 14.26% share in total votes at the AGM; 3. Templeton Asset Management Ltd. in Singapore holds 1,144,711 shares which represent a 6.32% share in the capital, 1,144,711 votes at the AGM which represent a 6.32% share in total votes at the AGM; Compared to the data as at 25 February 2009, as shown in the Notes to QSr 4 for the fourth quarter of 2008, the shareholding structure presented above did not change by 14 May XIII. Information on shares or rights to the shares (options) of POLNORD SA held by members of the management and supervisory bodies of POLNORD SA as at 14 May 2009 The current composition of the Management Board of POLNORD SA is as follows: Wojciech Ciurzyński - President of the Management Board Bartłomiej Kolubiński - Vice President of the Management Board Andrzej Podgórski - Vice President of the Management Board Piotr Wesołowski - Vice President of the Management Board. The current composition of the Supervisory Board of POLNORD SA is as follows: Ryszard Krauze Chairman of the Supervisory Board Dariusz Górka Member of the Supervisory Board 24

25 Bartosz Jałowiecki Member of the Supervisory Board Barbara Ratnicka-Kiczka Member of the Supervisory Board Zbigniew Szachniewicz Member of the Supervisory Board Wiesław Walendziak Member of the Supervisory Board. As at 14 May 2009, the following members of the Company s Management Board and Supervisory Board held the shares of POLNORD SA: - President of the Management Board - Wojciech Ciurzyński 2,447 shares; - Vice President of the Management Board Bartłomiej Kolubiński 2,620 shares; - Vice President of the Management Board Andrzej Podgórski 1,523 shares; - Member of the Supervisory Board - Dariusz Górka 11,000 shares; - Member of the Supervisory Board - Zbigniew Szachniewicz 21,360 shares. No other members of the management and supervisory bodies of POLNORD SA hold any shares of the Company. As a result of adoption of the Management Option Scheme Regulations ( the Regulations ) by the Supervisory Board of POLNORD SA, on 04 December 2007, and adoption of the relevant resolutions by the Extraordinary General Meeting of Shareholders of the Company on 26 February 2008 and 22 December 2008, the following members of the management and supervisory bodies acquired the rights to take up in total 319,714 Warrants of A1, A2, A3 series and 16,826 Warrants of A4 series, convertible to H series shares of POLNORD SA, with the nominal value of PLN 2.00 each ( the Shares ): - Wojciech Ciurzyński President of the Management Board -147,237 Warrants of A1, A2, A3 series; - Bartłomiej Kolubiński Vice President of the Management Board - 63,101 Warrants of A1, A2, A3 series; - Witold Orłowski Vice President of the Management Board 8,414 Warrants of A1, A2, A3 series (Management Board Member until 16 May 2008); - Piotr Wesołowski Vice President of the Management Board 21,034 Warrants of A1, A2, A3 series; - Dariusz Górka Member of the Supervisory Board 42,068 Warrants of A1, A2, A3 series; - Zbigniew Szachniewicz Member of the Supervisory Board 18,930 Warrants of A1, A2, A3 series; - Wiesław Walendziak Member of the Supervisory Board 18,930 Warrants of A1, A2, A3 series; - Barbara Ratnicka-Kiczka Member of the Supervisory Board 16,826 Warrants of A4 series. Compared to the data as at 25 February 2009, as shown in the Notes to QSr 4 for the fourth quarter of 2008, the ownership of shares and warrants held by the persons presented above did not change by 14 May On 31 July 2008, the Company s Supervisory Board adopted resolutions on amendment of the Regulations with regard to the Share issue price for the Warrants of A1, A2, A3 and A4 Series. 25

26 The issue price of the Shares taken up as a result of exercising the rights arising from the Warrants amounted to PLN With the aforesaid resolutions, the Supervisory Board of the Company amended the Regulations by defining the issue price for the Shares taken up as a result of exercising rights from Warrants as equal to the arithmetic mean of the Company's share closing quotation at the Warsaw Stock Exchange of 30 days preceding the resolution adoption date, reduced by 10%, i.e. as PLN The Resolutions became effective as of the date of their issue, however, in respect of the Eligible Persons who are members of the Supervisory Board, the Resolutions become effective as of the date of the Company s General Meeting of Shareholders adopting the resolution which approves the change of the issue price of the Shares taken up by members of the Supervisory Board. On 01 August 2008, the Eligible Persons that are not members of the Company s Supervisory Board, who enrolled in the Management Option Scheme on 04 December 2007, holding Warrants in the total amount of 323,922, issued statements accepting the aforesaid amendment of the Regulations. On 22 December 2008, the Extraordinary General Meeting of Shareholders of the Company adopted resolutions approving the change of the issue price of the Shares taken up by members of the Company's Supervisory Board. In addition, on 23 December 2008, the Eligible Persons who are members of the Company s Supervisory Board, holding 96,754 Warrants in total, issued statements accepting the aforesaid amendment of the Regulations. All the Warrants provided for in the MO Scheme, namely 420,676 Warrants, were issued under that Scheme. On 26 February 2009, the Supervisory Board adopted resolutions on another amendment of the Regulations with regard to change of the Share issue price for Warrants of A1, A2, A3 and A4 series ("the Warrants") and extension of the date by which it is possible to exercise the right to take up the Shares, arising from the Warrants, under the MO Scheme. The issue price of the Shares taken up as a result of exercising the rights arising from the Warrants amounted to PLN With the aforesaid resolutions, the Supervisory Board of the Company amended the Regulations by defining the issue price for the Shares taken up as a result of exercising rights from Warrants as equal to the arithmetic mean of the Company's share closing quotation at the Warsaw Stock Exchange of 30 days preceding the resolution adoption date, reduced by 10%, i.e. as PLN The discussed resolutions became effective as of the date of their adoption, however, with regard to the Eligible Persons who are members of the Supervisory Board, holding 96,754 Warrants in total, the resolutions will become effective as of the date of the Company s General Meeting of Shareholders adopting the resolution which approves the change of the issue price of the Shares taken up by members of the Supervisory Board, extends the maximum period for the members of the Supervisory Board to exercise their rights from the 26