Net debt ratio 27.9% 31.1% Net assets per share PLN 9.37 PLN 9.31

Transcription

1 CONDENSED CONSOLIDATED QUARTERLY REPORT OF THE CAPITAL PARK GROUP FOR Q1 2014

2 FINANCIAL HIGHLIGHTS Mar Dec PLN 000 EUR 000 PLN 000 EUR 000 Total assets 1,685, ,185 1,621, ,022 Investment property 1,416, ,608 1,321, ,686 Cash and cash equivalents 165,381 39,647 68,014 16,400 Equity 1,050, ,875 1,043, ,519 Non-current liabilities 548, , , ,622 Current liabilities 86,770 20,802 45,123 10,880 Net debt ratio 27.9% 31.1% Net assets per share PLN 9.37 PLN months of months of 2013 PLN 000 EUR 000 PLN 000 EUR 000 Operating income 10,934 2,610 10,102 2,420 Revaluation of properties 7,401 1,767 22,774 5,456 Pre-tax profit 3, ,140 3,388 Net profit 3, ,310 2,949 Cash flows from operating activities (3,218) (768) (1,170) (280) Cash flows from investing activities (60,864) (14,528) (9,255) (2,217) Cash flows from financing activities 161,449 38,537 (14,884) (3,566) 2

3 TABLE OF CONTENTS GENERAL INFORMATION... 4 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE CAPITAL PARK GROUP NOTES TO THE CONSOLIDATED QUARTERLY REPORT NOTES TO THE CONDENSED CONSOLIDATED QUARTERLY REPORT INTERIM CONDENSED FINANCIAL STATEMENTS OF CAPITAL PARK SPÓŁKA AKCYJNA

4 GENERAL INFORMATION OVERVIEW OF THE GROUP The Capital Park Group is one of the leading and most dynamically developing investment firms on the Polish real property market. For over ten years, the Group has been engaged in the execution and management of real property projects, specialising in complex property development and revitalisation projects that generate above-average margins. On December 13th 2013, Capital Park S.A. was first listed on the Warsaw Stock Exchange, and has since attracted leading pension funds and investment fund management companies as investors in its shares. PARENT Name: Legal form: Registered office: Country of incorporation: Principal business activities: Capital Park S.A. Joint-stock company (spółka akcyjna) ul. Marynarska 11, Warsaw, Poland Poland holding management activities development of building projects buying and selling of own real estate renting and operating of own real estate Registry court: District Court for the capital city of Warsaw in Warsaw, 13th Commercial Division of the National Court Register National Court Register (KRS) number: Industry Identification Number (REGON) PRESENTED PERIODS The condensed consolidated and separate quarterly financial statements contain data for the period January 1st March 31st The comparative data in the consolidated and separate financial statements is presented: in the consolidated and separate statements of profit or loss and other comprehensive income, and the consolidated and separate statements of cash flows for the period January 1st March 31st 2013, in the consolidated and separate statements of financial position at December 31st 2013 and March 31st 2013, in the consolidated and separate statements of changes in equity for the periods January 1st March 31st 2013 and April 1st December 31st 2013, and has been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (IFRS). 4

5 MEASUREMENT OF ITEMS DENOMINATED IN FOREIGN CURRENCIES The following exchange rates are used in these financial statements: EUR/PLN Jan 1 - Mar Jan 1 - Dec Jan Mar Exchange rate effective for the end of the reporting period Average exchange rate in the reporting period LARGE HOLDINGS OF SHARES IN CAPITAL PARK S.A. At the reporting date, the shareholders holding at least 5% of total voting rights at the General Meeting of the Parent were as follows: Number of shares % ownership interest Number of voting rights % of total voting rights Shareholder CP Holdings S. à r. l. 77,759, % 77,759, % Jan Motz 2,765, % 5,530, % Other % % Total 104,744, % 107,509, % At the date of this report, the shareholders holding at least 5% of total voting rights at the General Meeting of the Parent were as follows: Number of shares % ownership interest Number of voting rights % of total voting rights Shareholder CP Holdings S. à r. l. 77,759, % 77,759, % Jan Motz 2,796,976 2,67% 5,562, % Other 24,187, % 24,187, % Total 104,744, % 107,509, % SHARES HELD BY MEMBERS OF THE MANAGEMENT AND SUPERVISORY BOARDS At the date of this condensed consolidated quarterly report, Capital Park S.A. shares or rights to Capital Park S.A. shares held by members of the Supervisory and Management Boards of the Company were as follows: Shares in the Company held by members of the Management Board May Dec Jan Motz President of the Management Board 2,796,976 shares 2,765,241 shares Jerzy Kowalski Member of the Management Board 2,783,741 shares 2,765,241 shares Michał Koślacz Member of the Management Board 18,245 shares no shares held Marcin Juszczyk Member of the Management Board no shares held no shares held Members of the Supervisory Board do not held shares of Capital Park S.A. RIGHTS TO SHARES (OPTIONS) VESTED AND EXERCISED The objective of the Incentive Scheme is to provide incentives that will encourage, retain and motivate the Eligible Persons (at the scheme inception date members of the Company's Management Board) to work towards the 5

6 Company's shareholder value growth. These incentives consist in enabling the Eligible Persons to acquire Company Shares. At the date of this report, pursuant to Resolution No. 12/01/2013 of the Supervisory Board of December 19th 2013, on January 3rd 2014, Martin Juszczyk and Michał Koślacz, were each allotted as part of the Incentive Scheme 302,012 Series A subscription warrants carrying rights to acquire the same number of Series D shares of the Company, at a price of PLN 1 per share. The allotted subscription warrants may be converted into Company shares not earlier than one year after the date of allotment, that is January 3rd There were no changes in the Incentive Scheme in the first quarter of STRUCTURE OF THE GROUP Below is presented a list of companies directly and indirectly related to the Parent, consolidated as at March 31st 2014: Ownership interest and No. Name Registered office Principal business activity voting rights held (%) 1 Alferno Investments Sp. z o. o. Warsaw Development of building projects 2 Art Norblin Sp. z o. o. 1 Warsaw Development of building projects 3 Aspire Investments Sp. z o. o. Warsaw 4 Calista Investments Sp. z o. o. w Warsaw likwidacji 5 Camael Investments Sp. z o. o. Warsaw 6 Capital Park Gdańsk Sp. z o. o. Warsaw 7 Capital Park Kraków Sp. z o. o. Warsaw Development of building projects and 8 Capital Park Racławicka Sp. z o. o. Warsaw 9 Capital Park Opole Sp. z o. o. 2 Warsaw 10 Capital Park Opole Sp. z o. o. Sp. Kom. w likwidacji 3 Warsaw 11 Capital Park TMI Sp. z o. o. Warsaw 12 Capone Investments Sp. z o. o. Warsaw 13 CP Development S. à r. l. Luxembourg Activities of holding companies 14 CP Management Sp. z o. o. Warsaw ; management of Group s projects 15 CP Property Sp. z o. o. 11 Warsaw Activities of holding companies 15% 16 CP Property Sp. z o. o. "SPV1" SKA 4 Warsaw Retail 15% 17 CP Property Sp. z o. o. "SPV2" SKA 4 Warsaw Retail 15% 18 CP Property Sp. z o. o. "SPV3" SKA 4 Warsaw Retail 15% 19 CP Property Sp. z o. o. "SPV4" SKA 4 Warsaw Retail 15% 20 CP Property Sp. z o. o. "SPV5" SKA 4 Warsaw Retail 15% 21 CP Property Sp. z o. o. "SPV6" SKA 4 Warsaw Retail 15% 22 CP Retail BV The Netherlands Activities of holding companies 6

7 No. Name Registered office 23 Cressida Investments Sp. z o. o. Warsaw 24 Dakota Investments Sp. z o. o. Warsaw 25 Delphine Investments Sp. z o. o. w likwidacji 2 Warsaw 26 Diamante Investments Sp. z o. o. Warsaw 27 Doria Investments Sp. z o. o. Warsaw 28 DT-SPV 12 Sp. z o. o. 5 Warsaw 29 Elena Investments Sp. z o. o. 2 Warsaw 30 Emily Investments Sp. z o. o. w likwidacji Warsaw 31 Emir 30 Sp. z o. o. Warsaw 32 Felipe Investments Sp. z o. o. w likwidacji Warsaw 33 Foxy Investments Sp. z o. o. 2 Warsaw 34 Principal business activity Ownership interest and voting rights held (%) Fundacja Otwartego Przemysłu na Woli Art Norblin 6 Warsaw Foundation 35 Hazel Investments Sp. z o. o. Warsaw 36 Makai Investments Sp. z o. o. Warsaw 37 Marcel Investments Sp. z o. o. Warsaw 38 Marco Investments Sp. z o. o. Warsaw 39 Marlene Investments Sp. z o. o. Warsaw 40 Nerida Investments Sp. z o. o. Warsaw 41 Octavio Investments Sp. z o. o. Warsaw 42 Orland Investments Sp. z o. o. Warsaw 43 Pablo Investments Sp. z o. o. Warsaw 44 Patron Willanów S. à r. l. 7 Luxembourg Activities of holding companies 64% 45 Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych 8 Warsaw Private equity investment fund 15% 46 Roan Investments Sp. z o. o. Warsaw 47 Sagitta Investments Sp. z o. o. Warsaw 48 Sander Investments Sp. z o. o. Warsaw Development of building projects 49 Sapia Investments Sp. z o. o. Warsaw Development of building projects 50 Sapia Investments Sp. z o. o. Sp. Kom. 9 Warsaw Development of building projects 67% 51 Rezydencje Pałacowa Sp. z o. o. 10 Warsaw Development of building projects 64% 52 Silverado Investments Sp. z o. o. 12 Warsaw 7

8 No. Name Registered office 53 RM1 Sp. z o. o. 10 Warsaw 54 Tetrao Investments Sp. z o. o. Warsaw 55 Vera Investments Sp. z o. o. 2 Warsaw Principal business activity Ownership interest and voting rights held (%) 56 Vika Investments Sp. z o. o. 2 Warsaw Development of building projects 57 Zoe Investments Sp. z o. o. Warsaw Notes: 1 Subsidiary of CP Development S. à r. l. 2 Subsidiaries of CP Management Sp. Ltd. 3 Subsidiary of CP Opole Sp. z o.o. and CP Management Sp. Ltd. 4 Subsidiaries of Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych and CP Property Sp. z o.o. (general partner, holds 1% of shares in each company, and 0.1% share in the companies' profits). The Group holds indirectly 15% of the share capital in these companies; however, it has full power to control the entities under relevant management contracts. 5 Subsidiary of Cressida Investments Sp. z o.o., Roan Investments Sp. z o.o. and CP Management Sp. Ltd. 6 Subsidiary of Art Norblin Sp. Ltd. 7 The Group holds 50% of the share capital and voting rights at Patron Wilanów S. à r. l., and the right to a 64% share in its profits. The Group consolidates the company using the proportionate method, as it controls the company jointly with a JV Partner. 8 Subsidiary of CP Retail B. V. The Group holds 15% of certificates, however, however, it has full power to control the entities under relevant management contracts. 9 Subsidiary of Sapia Investments Sp. Ltd. A 33% interest in the company is held by a third party. 10 Subsidiaries of Patron Willanów S. à r. l. The Group indirectly holds 50% of the share capital and voting rights in Rezydencje Pałacowa Sp. z o.o. and RM1 Sp. z o.o., as well as the right to a 64% share in their profits. The Group consolidates these companies using the proportionate method, as it controls the company jointly with a JV Partner. 11 Subsidiary of Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych. The Group indirectly holds 15% of shares in the company's share capital. 12 Subsidiary of DT-SPV 12 Sp. z o. o. 64% Basis of full consolidation of the assets, liabilities, profit or loss of the FIZ AN Group entities, i.e. subsidiaries of CP Retail B.V., that is: CP Property Sp. z o.o.; CP Property Sp. z o.o. "SPV 1" SKA; CP Property Sp. z o. o. "SPV 2" SKA; CP Property Sp. z o. o. "SPV 3" SKA; CP Property Sp. z o.o. "SPV 4" SKA; CP Property Sp. z o.o. "SPV 5" SKA; CP Property Sp. z o. o. "SPV 6" SKA and Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych ( FIZ AN ; closed end private equity investment fund). On May 13th 2013, Capital Park S.A. and Open Finance Towarzystwo Funduszy inwestycyjnych S.A. ("TFI") executed an agreement to establish an investment fund, whose capital business activity will be to pay dividends to investors in FIZAN certificates. Under the agreement and pursuant to Art of the Act on Investment Funds, the management of FIZAN investment portfolio was transferred to CP Management Sp. z o.o., a subsidiary of CP S.A. with qualified asset-management resources. On May 16th 2013, CP Management, a subsidiary of Capital Park S.A., executed an agreement with TFI for the management of FIZAN. Under the agreement CP Management Sp. z o.o. has full discretion to make decisions regarding FIZAN s investment policy; in particular, it may make investment decisions concerning FIZAN assets, place bids and negotiate terms of transactions to buy or sell assets. CP Management Sp. z o.o. also renders services to the Special Purpose Vehicles in which FIZAN invests, i.e.: CP Property Sp. z o.o. "SPV 1" SKA; CP Property Sp. z o.o. "SPV 2" SKA; CP Property Sp. z o. o. "SPV 3" SKA; CP Property Sp. z o.o. "SPV 4" SKA; CP Property Sp. z o.o. "SPV 5" SKA; CP Property Sp. z o.o. "SPV 6" SKA. In 8

9 particular, CP Management Sp. z o.o. s services consist in property administration, negotiating terms of rental contracts with tenants, searching for additional sources of revenue, preparing investment budgets, settlements of service costs with tenants, and maintaining relations with external institutions. The terms of the agreements described above expose CP Management Sp. z o.o. to risks and benefits related to changes in FIZAN s net asset value, and to SPVs' results on property rentals. In accordance with IFRS 27, effective for financial statements for annual periods beginning on or after January 1st 2013, and with IFRS 10, which will take effect as of January 1st 2014, an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Given the provisions of the management agreements and the IFRS principles regarding control, the Capital Park Group assumes that it controls operations of these entities and is exposed to their profit or loss. Consequently, the Group consolidates profit or loss, assets and liabilities of the above mentioned entities with the full method, and discloses non-controlling interests corresponding to this part of the assets, liabilities, profit or loss which is attributable to the certificates sold to investors outside the Group. Change in the method of consolidation of the assets, liabilities, and profit or loss of jointly-controlled entities, that is: Patron Wilanów S. à r.l., Rezydencje Pałacowa Sp. z o.o. and RM 1 Sp. z o.o. In connection with the amendments to IFRS 11 "Joint Arrangements", published by the International Accounting Standards Board in June 2011 and effective for annual periods beginning on January 1st 2014, the Group discontinued presentation of the relevant portion of assets, liabilities and net profit or loss of the entities (the proportionate consolidation method could not be applied any more). In accordance with Appendix C to IFRS 11 "Joint Arrangements", the Group discloses only equity interests in jointlycontrolled entities (consolidation method changed from the proportionate method to the equity method). As a result, there were changes in the comparative data as at December 31st All Group s receivables from and liabilities towards these entities are classified as transactions with non-related entities. The change of the consolidation method had no effect on the Group's equity. REPRESENTATION OF THE MANAGEMENT BOARD The Parent s Management Board hereby represents that, to the best of its knowledge, this condensed consolidated quarterly report and the comparative data have been prepared in compliance with the applicable accounting policies applied by the Group, and give a true, fair and clear view of the Group s assets, financial standing and financial performance. During the preparation of these financial statements it was assumed that, to the best knowledge of the Group's Management Board, the Group would continue as a going-concern for at least 12 months from the date of these financial statements. These condensed consolidated quarterly financial statements have been prepared based on accounting policies consistent with the International Financial Reporting Standards, as endorsed by the European Union. 9

10 APPROVAL OF FINANCIAL STATEMENTS This condensed consolidated quarterly report was approved and signed by the Parent's Management Board on May 15th Warsaw, May 15th 2014 SIGNATURE OF THE PERSON WHO PREPARED THE FINANCIAL STATEMENTS: Małgorzata Koc Chief Accountant SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz President of the Management Board Jerzy Kowalski Member of the Management Board Marcin Juszczyk Member of the Management Board Michał Koślacz Member of the Management Board 10

11 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE CAPITAL PARK GROUP ASSETS Note Mar Dec Mar Non-current assets Investment property 1 1,416,607 1,321,653 1,200,052 Deferred tax assets 13,539 11,087 8,741 Other financial assets 2 32,185 32,850 26,562 Other non-current assets ,176 1,463,096 1,366,378 1,236,531 Current assets Inventory 4 31,774 33,733 35,715 Other receivables and other current assets 5 15, ,660 14,631 Trade receivables 6 4,644 2,243 3,751 Other financial assets 5,636 5,618 5,443 Cash and cash equivalents 7 165,381 68,014 39, , ,268 98,582 TOTAL ASSETS 1,685,976 1,621,646 1,335,113 EQUITY AND LIABILITIES Note Mar Dec Mar Equity Share capital 8 104,744 74,559 74,559 Statutory reserve funds 858, , ,809 Other capital reserves 11,260 9,526 15,452 Reserve capital under non-registered share capital and statutory reserve funds 0 217,185 0 Exchange differences on translating foreign operations (694) (1,804) (2,846) Retained earnings/(deficit) 5,018 (20,533) (20,533) Net profit/(loss) for the current period 4,380 25,551 12,312 Non-controlling interests 67,620 68,807 2,463 1,050,648 1,043, ,216 Borrowings from related parties ,322 Non-current liabilities Bank borrowings and other financial liabilities 9 428, , ,716 Liabilities under issue of notes 10 98,229 98,126 97,185 Other liabilities and provisions 11 7,582 3,287 3,785 Deferred tax liabilities 14,018 11,467 11, , , ,653 Current liabilities Bank borrowings and other financial liabilities 9 42,362 17,082 64,164 Liabilities under issue of notes 10 1,920 3,670 1,980 Trade payables 12 6,248 13,012 1,080 Other liabilities and provisions 11 36,240 11,359 4,698 86,770 45,123 71,922 TOTAL EQUITY AND LIABILITIES 1,685,976 1,621,646 1,335,113 11

12 3 months of months of 2013 Rental income 10,342 9,692 Direct property operating expenses (2,698) (1,848) Net operating profit 7,644 7,844 Income from Loss (gain) on disposal of investment property 0 0 Other revenue Cost of operation of SPVs (3,301) (3,397) General and administrative expenses* (3,752) (3,242) Renovation and repair of property (99) 0 Distribution costs 0 0 Gain on property revaluation 7,401 22,774 Operating profit 8,485 24,389 Interest income 1, Interest expense (3,036) (5,964) Gain on measurement of financial liabilities (2,785) (4,496) Profit before tax 3,988 14,140 Income tax (109) (1,777) Share in net loss of equity-accounted entities (686) (53) Net profit 3,193 12,310 Exchange differences on translating foreign operations 1,110 (995) Total comprehensive income 4,303 11,315 Net profit attributable to owners of the Parent 4,308 12,312 Net loss attributable to non-controlling interests (1,187) (2) Net earnings per share (PLN) for the year Basic Diluted The entire profit was generated from continuing operations. * general and administrative expenses include the valuation of Incentive Scheme in the amount of kpln 1,734 for 3 months of 2014 and kpln 612 for 3 months of 2013 respectively. General and administrative expenses excluding the valuation of Incentive Scheme amount to kpln for 3 months of 2014 and kpln for 3 months of

13 FOR Q (in PLN thousand) Share capital Statutory reserve funds Capital reserves from issue of shares pending registration Other capital reserves Exchange differences on translating foreign operations Retained earnings/(deficit) Net profit/(loss) for the current period Non-controlling interests Total equity Equity at Jan , , ,185 9,526 (1,804) (20,533) 25,551 68,807 1,043,100 Issue of shares 30, ,511 (217,185) ,511 Share-based payments , ,734 Changes in the Group's structure Profit distribution ,551 (25,551) 0 0 Total comprehensive income , ,380 (1,187) 4,303 Equity at Mar , , ,260 (694) 5,018 4,380 67,620 1,050,648 Equity at Jan , , ,840 (1,851) 94,362 (114,895) 2, ,289 Share-based payments Profit distribution (114,895) 114, Total comprehensive income (995) 0 12,312 (2) 11,315 Equity at Mar , , ,452 (2,846) (20,533) 12,312 2, ,216 Equity at Apr , , ,452 (2,846) (20,533) 12,312 2, ,216 Issue of shares , ,185 Share-based payments (2,343) (2,343) Changes in the Group's structure (3,583) (3,583) Profit distribution , ,239 Total comprehensive income , ,344 67,386 Equity at Dec , , ,185 9,526 (1,804) (20,533) 25,551 68,807 1,043,100 13

14 OPERATING ACTIVITIES 3 months of months of 2013 Profit/(loss) before tax 3,988 14,140 Foreign exchange gains/(losses) 2,404 4,541 Interest and profit distributions (2,955) 3,360 Profit/(loss) from investing activities (3,804) (18,922) Change in receivables 1,696 (4,977) Change in liabilities, net of borrowings and other debt instruments (3,255) 1,325 Valuation of employee share plan 1, Change in other assets (2,432) (1,358) Change in provisions (486) (597) Impairment losses Amortisation and depreciation Other adjustments (175) 4 Total adjustments (7,004) (15,201) Cash from operating activities (3,016) (1,060) Income tax (paid)/refunded (202) (110) A. Net cash from operating activities (3,218) (1,170) INVESTING ACTIVITIES Cash provided by investing activities Other cash provided by investing activities 39 0 Interest on deposits 1, Cash used in financing activities Purchase of investment property (62,065) (9,480) Purchase of financial assets 0 (127) Purchase of intangible assets and property, plant and equipment (105) 0 B. Net cash from investing activities (60,864) (9,255) FINANCING ACTIVITIES Cash provided by financing activities Proceeds from issue of shares 132,355 0 Proceeds from borrowings and other debt instruments 43, Cash used in financing activities Interest paid (1,826) (12,029) Repayment of borrowings and other debt instruments, lease payments (12,750) (3,659) C. Net cash from financing activities 161,449 (14,884) D. Total net cash flows 97,367 (25,309) E. Net (decrease)/increase in cash and cash equivalents: 97,367 (25,309) F. Cash and cash equivalents at beginning of the year 68,014 64,351 G. Cash and cash equivalents at end of the year 165,381 39,042 14

15 NOTES TO THE CONSOLIDATED QUARTERLY REPORT The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) approved by the International Accounting Standards Board (IASB) and the Standing Interpretations Committee (SIC), as endorsed by the European Union and in effect on March 31st The data contained in the consolidated financial statements is presented in thousands of the Polish złoty (the Group s functional currency and presentation currency), rounded to the nearest thousand. The consolidated financial statements have been prepared applying a historical cost convention, except for investment property and derivative financial instruments measured at fair value through profit or loss, and liabilities arising from issued notes measured at amortized cost. a) Subsidiaries Subsidiaries are all entities over which the Group has control and power to govern their financial and operating policies. Such power is usually, but not always, derived from the holding of the majority of voting rights in the entity s governing bodies. While assessing whether the Group controls a given entity, the existence and effect of potential voting rights which may be exercised or converted at a given time are taken into consideration. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Any excess of the acquisition cost over the fair value of the Group s interest in the identifiable net assets acquired is recognised as goodwill. If the acquisition cost is lower than the fair value of the net assets of the acquiree, the difference is recognised directly in profit or loss. Income and expenses, receivables and payables, and unrealised gains and cash flows arising from inter-company transactions are eliminated. Unrealised losses are also eliminated, but only to the extent there is no evidence of impairment of the asset transferred in the transaction. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. b) Shares and certificates held by non-controlling interests and transactions with them Shares and certificates held by non-controlling interests include non-group interests in consolidated companies. Shares and certificates held by non-controlling interests at the non-controlling interest's proportionate share of the recognised amounts of the associated entity's 's net assets Identified shares and certificates held by non-controlling interests in net assets of consolidated subsidiaries are recognised separately from the parent s ownership interest in such net assets. Shares and certificates held by non-controlling interests in net assets include: 15

16 the value of shares and certificates held by non-controlling interests at the original combination date, calculated in accordance with IFRS 3, changes in equity attributable to shares and certificates held by non-controlling interests from the combination date to the reporting date. Profit and loss and each component of other comprehensive income are attributed to owners of the parent and noncontrolling interests. Total comprehensive income is attributed to owners of the parent and non-controlling interest even if as a result the value of shares and certificates held by non-controlling interests is negative. c) Consolidated companies These consolidated financial statements for the period ended March 31st 2014 cover the entities listed in section 1.8 of these statements. d) Methods of accounting Subsidiaries with respect to which the Group has the full power to control their financial and operating policies are consolidated with the full method. In the case of subsidiaries of CP Retail B.V. (listed in section 1.8 above), in which the Group holds a 15% equity interest, equity holdings of non-controlling interests capital were determined. The shares held by the Group in Sapia Investments Spółka z ograniczoną odpowiedzialnością Spółka Komandytowa, representing less than a interest in its share capital, are classified in consolidated equity as non-controlling interests. The interests held in entities jointly controlled by the Company, that is: Patron Wilanów S. à r. l., Rezydencje Pałacowa Sp. z o. o. and RM 1 Sp. z o.o., are consolidated by the Group using the equity method, which means that the Group includes only net profit/(loss) of those entities in its consolidated data (in proportion to the Group's share in net profit/(loss) of those companies). The principles and detailed rules for consolidation of the financial data of subsidiaries are described in section 1.8 of this condensed quarterly report. Investment property Investment property includes land and buildings owned, held in perpetual usufruct or leased by a Group Company, which are used to generate economic benefits from their fair value growth or rental income (or both). Investment property measured at fair value also includes investment property under construction, i.e. before it is placed into service, as well as projects planned by the Group for the coming years. Investment property is initially measured at cost, including transaction costs, i.e. costs directly related to the purchase transaction (legal fees, taxes and charges relating to the purchase of property). Any subsequent capital expenditure incurred by the Group companies increases the initial value of investment property. Such capitalised expenditure includes primarily: construction costs, costs of architectural design, costs of advisory services, borrowing costs (interest on borrowings, fees and commissions, foreign exchange differences on the measurement of borrowings denominated in foreign currencies), legal costs, taxes, charges and other public dues (mainly perpetual usufruct charges and real property taxes payable during the construction period), costs incurred in connection with 16

17 any present or future income planned to be generated by the companies (marketing costs related to a specific project, costs of tenant acquisition and costs of adapting the rented space to tenants' requirements, which can be attributable to specific rental contracts executed for a specific period), and costs of auxiliary services charged from the SPVs by CP Management Sp. z o. o., a Group Company, for managing property development projects. After its initial recognition as described above, at least once a year at the end of every financial year, investment property is measured by independent expert, at fair value which reflects market conditions at the reporting date. Fair value is defined as the amount at which a property could be exchanged in an arm's length transaction between informed and willing parties. Fair value reflects, in particular, rental income from existing rental contracts, reasonable and justified expectations of rental income from future contracts as viewed by the market, as well as reliably estimated cash inflows from investment property. Gains or losses arising from changes in the fair value of investment property are recognised in the statement of comprehensive income in the period in which they arise. Properties for which disposal agreements have been concluded are measured at the selling price specified under such disposal agreements. In all other cases, the Parent's Management Board adopts a conservative approach and determines the fair value based on the lower of the available valuation estimates. The valuation process is based on the following sources: estimate surveys prepared by independent expert appraisers, managerial valuations and in-house appraisals of properties. Property valuations are updated at least once a year at the end of every financial year. For the purposes of quarter or half-year financial statements, if valuation in the form of an estimate survey is not made at the reporting date, the property value is adjusted for the EUR/PLN exchange rate quoted at the reporting date or for the capital expenditure incurred in the reporting period (for on-going projects). The income approach, i.e. the discounted cash flow (DCF) method or the direct capitalisation method for smaller properties, is the main valuation approach used by the Group to value its properties. The comparative approach, i.e. the peer-to-peer method or the adjusted average price method, is also used depending on the type of property or the local market. For on-going projects, a mixed approach is adopted. The Group's investment property is divided into four main business segments: office, mixed-use, retail, and value added. For detailed description of the segments, see Note 24. Other financial assets Financial assets are classified into the following categories: Assets held to maturity, Assets at fair value, Loans and receivables, Assets available for sale. Assets held to maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities, which the Group has the positive intention and ability to hold to maturity. Such assets are measured at amortised cost using the effective interest method. At the reporting date, the Group did not carry any assets held to maturity. 17

18 Assets at fair value are measured at market value at the reporting date, excluding cost to sell. Any changes in the value of these instruments are recognised directly in the income statement as finance income or costs. The Group presents mainly derivatives, such as CAPs and Interest Rate Swaps (IRS), under this asset category. Loans and receivables. This category includes financial assets with fixed or determinable payments not classified as derivatives and not traded on any active market. They are disclosed under current assets if they mature within 12 months from the reporting date. Loans and receivables with maturities exceeding 12 months from the reporting date are classified as non-current assets. Assets available for sale are financial assets that are classified as available for sale and do not belong to any of the categories specified above. Other non-current assets Other non-current assets include: Property, plant and equipment Intangible assets Long-term prepayments and accrued income Non-current receivables Items of property, plant and equipment are recognised at cost less accumulated depreciation and impairment losses. Initial value of an item of property, plant and equipment comprises its cost plus any costs directly related to its acquisition and bringing it to working condition for its intended use. Depreciation is charged based on the straightline method over the estimated useful life of an asset: office equipment and other property, plant and equipment (3-5 years), computers (5 years), investments in leasehold property (10 years). Items of property, plant and equipment with low unit value, i.e. less than PLN 3,500, are expensed on a one-off basis at the time they are placed in service. The Group's property, plant and equipment includes mainly investments in leasehold property, such as expenditure on the arrangement of office premises and expenditure on equipment, fixtures and fittings of the real properties held by the Group companies. Intangible assets which are separately acquired or produced (if they meet the relevant criteria) are initially recognised at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment losses. Software is amortised with the straight-line method throughout its useful economic life, up to five years. The Group's intangible assets include mainly software and trademarks. The main items of the Group's non-current receivables include rental deposits paid under Group's rental contracts. At each reporting date, the Group assesses whether there is any indication that any of its non-financial non-current assets might be impaired. If the Group finds that there is such indication, or if the Group is required to perform annual impairment tests, the Group estimates the recoverable amount of a given asset or cash-generating unit to which a given asset belongs. In the financial year covered by these financial statements, there was no indication of impairment on non-financial assets. Inventory Only residential property development projects are presented by the Group under inventory. Inventory is recognised at the lower of acquisition or production cost or net realisable price. Production cost comprises: perpetual usufruct right or ownership title to land, construction costs related to work performed on construction sites by subcontractors, capitalised costs comprising planning and design costs, as well as other construction project costs, 18

19 including borrowing costs. Borrowing costs include mainly interest paid, fees and commissions, as well as foreign exchange differences on repayment of borrowings contracted to finance property development projects. The Group capitalises only those borrowings that are related to active property development or construction work stages of the investment process, in the periods covered by such work. If property development or construction work is suspended or discontinued, the borrowing costs related to the suspension period are recognised in profit or loss for the current period. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale. Other receivables and other current assets Other receivables include in particular receivables from the government and settlements related to deferred expenses. Receivables from the government include mainly VAT receivables recovered by the Group companies on an ongoing basis in the course of their investment activities. Other current assets include primarily prepayments and accrued income. Trade receivables Under trade receivables, the Group discloses mainly receivables under leases and service charges paid by tenants of operational office and retail projects. Trade receivables are recognised and carried at amounts initially invoiced, less any impairment losses on doubtful and unrecoverable receivables. The Group monitors on an ongoing basis the probability of payment of trade receivables. If it is determined that collection of a receivable is not certain, an impairment loss is estimated and recognised in profit or loss. When a receivable is deemed unrecoverable, the entire amount is charged to profit or loss. If the change in the time value of money is material, the value of a receivable is determined by discounting the projected future cash flows to their present value using a discount rate that reflects the current market estimates of the time value of money. If the discount method is applied, an increase in receivables over time is recognised as finance income. Cash and cash equivalents Cash and cash equivalents carried on the balance sheet comprise cash at banks and cash in hand, as well as shorttime deposits with original maturity of up to three months. Share capital Share capital and statutory reserve funds are measured at par value. Any difference between the fair value of consideration received and the par value of shares is recognised in statutory reserve funds under share premium account. Share issue costs incurred upon establishment of a joint-stock company or share capital increase reduce statutory reserve funds up to the amount of the excess of the issue proceeds over the par value of shares. Bank borrowings and other financial liabilities This item comprises mainly bank and other borrowings, liabilities under finance leases and financial instruments measured at fair value through profit or loss. Leases where the lessee retains substantially all the risks and benefits of the ownership of the asset are classified as finance leases. Financial liabilities at fair value through profit or loss are liabilities that meet either of the following conditions: (i) are classified as held for trading, or (ii) were designated by the Group as measured at fair value through profit or loss on initial recognition. A financial liability is classified as held for trading if: (i) it has been acquired or assumed principally for the purpose of selling or repurchasing it in the near term, (ii) it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking, or (ii) it is a derivative (other than a derivative which has been designated as, or is, an effective hedging instrument). Liabilities at fair value are measured at market value 19

20 at the reporting date, excluding cost to sell. Changes in the fair value of such instruments are recognised in the income statement as finance income or costs. At the reporting date, the Group did not carry any financial liabilities held for trading measured at fair value. The Group derecognises a financial liability when it is extinguished (that is when the obligation specified in the contract is either discharged or cancelled or expires). When a debt instrument between the same parties is replaced by another instrument whose terms are substantially different, the Group treats such replacement as if the former financial liability was extinguished and recognises a new liability. Similarly, material modifications to the terms of a contract concerning an existing financial liability are presented as extinguishment of the former and recognition of a new financial liability. Any differences in the respective carrying amounts arising in connection with the replacement are charged to profit or loss. Other liabilities and provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the Group anticipates that the costs for which provisions have been made will be recovered, e.g. under an insurance agreement, any such recovery is recognised as a separate item of assets, but only when it is practically certain to occur. Cost related to a given provision is recognised in profit or loss net of any recoveries. Other liabilities include chiefly rental deposits (security for rental contracts), retainages from general contractors (performance bonds and security deposits where no performance bond is provided), taxes payable, as well as liabilities under received prepayments, which are to be settled by delivery of merchandise and tangible assets, or performance of services. Other liabilities are measured at nominal amounts payable. Trade payables Current trade payables are measured at amounts payable. Operating income The Group classifies the following items as key operating income: rental income from lease of office and retail space, income from service charges, including fees towards the costs of using the properties, and income from services provided by Group companies under rental contracts, revenue from sale of services, other revenue. Revenue is measured at fair value of the consideration received or receivable, net of VAT and discounts, if any. Operating expenses The Group classifies the following items as operating expenses: cost of lease of office and retail space and cost of services provided to tenants under the rental contracts, costs of special purpose vehicles which mainly comprise costs of administration of companies, such as office expenses, legal costs and bank charges and taxes; these costs do not include costs of services provided to tenants in connection with their rental contracts; 20

21 general and administrative expenses, which include salaries, including the measurement of the shareoption plan, costs of consultants, office expenses, legal fees, bank charges and taxes incurred by the Parent (Capital Park S.A.) and its subsidiary CP Management Sp. z o.o. (the latter provides management services to other entities): cost of overhauls and maintenance of investment property, cost to sell, which includes commissions paid on the sale of investment properties, apartments and houses. Cost of residential property incurred in a given period is capitalised in inventory, and disclosed in the statement of comprehensive income on recognition of revenue, i.e. when all material rights and benefits resulting from the ownership of the property have been transferred. Gains/losses recognised as operating income/expenses The Group presents gains and losses on disposal and measurement of the following assets: gains and losses on disposal of investment property, i.e. proceeds from disposal less value of the property sold; gains and losses on sale of apartments and houses, i.e. proceeds less value of the apartments and houses sold, gains and losses on remeasurement of fair value of investment properties, which reflect the changing fair value of the properties in the period. impairment losses on residential property. Finance income and costs Interest income and expense are accounted for using the accrual method. Gain on valuation of financial instruments consist mainly of realised and unrealised foreign exchange differences arising in connection with repayment and measurement of financial liabilities as well as of gains on valuation of financial instruments used to secure repayment of loans and lease payments. Borrowing costs are charged to expense as incurred, except for costs related to production (construction) or acquisition of assets. In such a case, borrowing costs are capitalised, provided that it is probable that the item will generate future economic benefits. Borrowing costs are capitalised under investment property or inventory, depending on the type of the property. Current income tax Current income tax payable and receivable for the current period and for previous periods is measured at the amount expected to be paid to (or recovered from) taxation authorities. Deferred tax Deferred tax asset and liability are recognised for temporary differences between the carrying amount and the tax value of assets and liabilities in the consolidated financial statements. Deferred tax liability is recognised for taxable temporary differences: except to the extent that the deferred tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting pre-tax profit nor taxable profit (tax loss), and 21

22 in the case of taxable temporary differences associated with investments in subsidiaries or associates, and interests in joint ventures, unless the investor is able to control the timing of the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future, except to the extent that the deferred tax liability arises from the remeasurement of investment property to fair value in companies covered by the Group s restructuring plan. Deferred tax assets are recognised in relation to deductible temporary differences, unused tax credits, and unused tax losses brought forward, to the extent that it is probable that future taxable profits will be available against which the differences, credits and losses can be utilised: except to the extent that the deferred tax assets related to deductible temporary differences arise from the initial recognition of an asset or liability in a transaction which is not a business combination, and, at the time of the transaction, affects neither accounting pre-tax profit nor taxable income (tax loss), and in the case of deductible temporary differences arising from investments in subsidiaries or associates and interests in joint ventures, the related deferred tax assets are recognised in the statement of financial position to the extent it is probable that in the foreseeable future the temporary differences will be reversed and taxable income will be generated which will enable the deductible temporary differences to be offset. except to the extent that the deferred tax asset arises from the remeasurement of investment property to fair value in companies covered by the Group s restructuring plan. The carrying amount of deferred tax assets is revised at each reporting date and is subject to appropriate reduction to the extent it is no longer probable that taxable income sufficient for a partial or full realisation of the deferred tax assets would be generated. Deferred tax assets and deferred tax liabilities are calculated using tax rates expected to be effective at the time of realisation of particular asset or liability, based on tax rates (and tax legislation) effective at the reporting date or tax rates (and tax legislation) which at the reporting date are certain to be effective in the future. Income tax on items posted directly to equity is recognised in equity, and not in the statement of comprehensive income. The Group offsets deferred tax assets against deferred tax liabilities only if it holds an enforceable legal right to offset current tax receivables against current tax payables, and the deferred income tax is related to the same taxpayer. Dividend payment Dividends are recognised when the shareholder s right to receive payment is established. In the first quarter of 2014, the Group did not change any of its accounting policies. Items of the condensed consolidated quarterly financial statements are measured in the currency of the primary economic environment in which the Group operates ( functional currency ). The condensed consolidated quarterly financial statements are presented in the Polish złoty (PLN), which is the functional currency and presentation currency of the Group. 22

23 Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Any currency exchange gains or losses arising on settlement of such transactions or on balance-sheet measurement of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. While preparing the condensed consolidated quarterly financial statements, the Parent s Management Board has to make certain estimates and judgements, which affect the values and manner of presentation of items disclosed in the financial statements. The majority of estimates are based on analyses of the market conditions, as well as the laws and tax regulations effective in a given financial period. While the adopted assumptions, estimates and judgements are based on the Management Board s best knowledge, actual figures may differ from forecasts, particularly in the event of any changes in the market, legal or tax environment. The estimates and related assumptions are reviewed and any resulting changes are disclosed in the period in which they are made, or in the current and future periods if a change in estimate affects both current and future periods. Deferred tax on investment property revaluation The Group does not recognize deferred tax assets and liabilities for differences between carrying and tax value of properties due to planned exit through the sale of shares. The Group is currently reviewing the accounting policy in consultation with its auditor. Property acquisition On April 17th 2014, the Group through a special-purpose vehicle Aspire Investments Sp. z o. o. acquired a property (retail and service space) in Warsaw (KEN Street). This property has an area of m 2. In the first quarter of 2014, the Group companies continued projects started in previous years and carried out new investment projects. Registration of share capital increase On February 14th 2014, the District Court for the capital city of Warsaw in Warsaw, 13th Commercial Division of the National Court Register, registered increases in the Company s share capital from PLN 74,558,541 to PLN 104,744,107 through an issue of 20,955,314 Series C ordinary bearer shares offered in a public offering, and 9,230,252 Series E ordinary bearer shares offered in a private placement. Start of construction projects On February 18th 2014, the Group started the Street Mall Vis à Vis Łódź project, a small convenience-type shopping centre with a total leasable area of 5,646 m2. The project is located in Łódź, at ul. Zgierska, and is scheduled for completion in Q The investor is a special-purpose vehicle Diamante Investments Sp. z o.o.. 23

24 In the first quarter of 2014, there were no non-recurring factors or events that could have affected the Group s financial performance. The only factor that affected the Group's financial performance was the change of the consolidation method from the proportionate method to the equity method (for details, see sections 1.8 and 3.3. of this report). The Group s business is not subject to any significant seasonal or cyclical fluctuations. None. In the first quarter of 2014, the Company did not pay or declare any dividend. The Management Board did not publish or declare to publish any financial forecasts. There are no court, arbitration or administrative proceedings pending with respect to any liabilities or claims of the Capital Park Group companies whose value would represent 10% or more of the Capital Park Group s equity. None. None. 24

25 NOTES TO THE CONDENSED CONSOLIDATED QUARTERLY REPORT INVESTMENT PROPERTY The Group s portfolio is divided into business segments, which comprise the following four core sectors: (i) office, (ii) mixed-use, (iii) retail, and (iv) value added. In the first quarter of 2014, the Group stopped presenting the properties owned by its jointly-controlled entity under the Group's investment property. It followed from the change of the consolidation method from the proportionate method to the equity method (for more details, see section 1.8 and section 3.3. hereof). Type of project Office Mixed-use Retail Added Value Number of projects Interest at Mar Mar Dec Mar % 621, , ,167 31% 443, , ,328 18% 256, , ,503 7% 95,138 94,468 87, ,416,607 1,321,653 1,200,052 OTHER NON-CURRENT FINANCIAL ASSETS Mar Dec Mar Loans advanced 24,991 24,679 22,488 Financial instrument assets 7,175 7,448 0 Shares in companies ,074 TOTAL 32,185 32,850 26,562 OTHER NON-CURRENT ASSETS Mar Dec Mar Property, plant and equipment Long-term prepayments and accrued income Non-current receivables Intangible assets ,176 INVENTORY Under inventory the Group discloses four residential projects, whose total value at March 31st 2014 was PLN 31,774 thousand (December 31st 2013: PLN 33,733 thousand, March 31st 2013: PLN 35,715 thousand). In the first quarter of 2014, the Group stopped presenting residential projects of its jointly-controlled entity under inventory. It followed from the change of the consolidation method from the proportionate method to the equity method (for more details, see section 1.8 and section 3.3. hereof). 25

26 OTHER RECEIVABLES AND OTHER CURRENT ASSETS Mar Dec Mar Tax receivables 11,587 7,783 4,280 Current prepayments and accrued income 3,683 1,239 6,693 Current tax assets Receivables from share issue 0 136,210 0 Other receivables ,496 15, ,660 14,631 As at December 31st 2013, in receivables from share issue the Group disclosed cash of PLN 136,210 thousand, which at that date was held by the offering broker (Dom Maklerski mbanku S.A.). On February 14th 2014, the Commercial Court registered the increased share capital of Capital Park S.A. following the Company's initial public offering and the share capital increase resulting from the acquisition of shares by CP Holdings S. á r. l., the Company's shareholder. On February 17th 2014, the proceeds were made available to Capital Park S.A. Current prepayments and accrued income Mar Dec Mar Prepaid auxiliary services Costs of on-going projects Accrued income Issue costs 0 0 3,362 Lease payments Other prepayments and accrued income, including taxes 2, ,453 3,683 1,239 6,693 TRADE RECEIVABLES Mar Dec Mar Trade receivables 4,644 2,243 3,751 from other entities 4,896 2,418 3,774 impairment losses (252) (175) (23) Trade receivables (gross) 4,896 2,418 3,774 The Group does not carry and material disputed trade receivables. 26

27 CASH AND CASH EQUIVALENTS Mar Dec Mar Cash in hand and at banks: 57,140 47,988 19,426 Pekao S.A. 30,552 30,159 7,924 mbank S.A. 12,141 3, RBS 4,633 4,338 0 Raiffeisen Bank Polska S.A. 2,795 2,277 1,277 Getin Noble Bank S.A. 1,927 1,280 0 BZ WBK S.A. 1,704 2,633 2,772 Pekao Bank Hipoteczny S.A. 1, ,463 BNP Paribas Bank Polska S.A , PKO BP S.A ,268 DZ Bank Polska S.A Other (including cash in hand) 1,362 1, Other cash: 108,241 20,026 19,616 Short-term deposits with maturity of up to three months 105,367 18,511 4,208 Overnight deposits 2,874 1,515 15,408 Total 165,381 68,014 39,042 EQUITY The structure of the Company's share capital at March 31st 2014 is presented below: Series/issue and class of shares Series A, ordinary bearer shares carrying no preference rights Series B, ordinary bearer shares carrying no preference rights Series C, ordinary bearer shares carrying no preference rights Series E, ordinary bearer shares carrying no preference rights Series F, ordinary registered shares carrying voting preference Number of shares Par value (PLN) Par value of series / issue 100, ,000 71,693, ,693,301 20,955, ,230, ,765, ,765, Form of payment cash contribution cash contribution, non-cash contribution cash contribution cash contribution cash contribution Registration date December 17th 2010 October 13th 2011 February 14th 2014 February 14th 2014 December 5th 2013 The par value of all outstanding shares is PLN 1 (one złoty) per share. The shares are fully paid. 27

28 BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES Mar Dec Mar Bank borrowings 315, , ,346 Lease liabilities 153, ,422 79,847 Derivative financial instruments (IRS)* 1,792 1,438 1, , , ,880 Long-term bank borrowings and other financial liabilities 428, , ,716 Short-term bank borrowings and other financial liabilities 42,362 17,082 64,164 * Derivatives are used by the Group to hedge against the interest rate and EUR/PLN exchange rate risks related to liabilities incurred, and are not traded. Borrowings by maturity: Mar Dec Mar Up to one year 42,362 17,082 64,164 1 year to 3 years 158, , ,339 3 years to 5 years 80,236 73,110 4,093 More than 5 years 190, ,931 31, , , ,880 LIABILITIES UNDER NOTES IN ISSUE This item comprises the notes listed on the Catalyst market. On July 9th 2012, the Company issued 1 million bearer notes with a total nominal value of PLN 100m. The Group measures the notes at amortised cost (in accordance with IAS 39), which means that the amount of the liability follows from the notes cash-flow profile. OTHER LIABILITIES AND PROVISIONS Mar Dec Mar Other provisions and liabilities 33,972 8,880 1,268 Provisions for losses of joint-ventures 4, Security deposits from tenants 3,221 3,208 3,691 Taxes, customs duties, social security payable 1,727 2,014 3,173 Deferred income - prepayments for apartments/houses Performance bonds from general contractors Salaries and wages payable ,822 14,646 8,483 Other liabilities and provisions non-current 7,582 3,287 3,785 Other liabilities and provisions current 36,240 11,359 4,698 The significant increase in other liabilities and provisions is mainly attributable to unpaid liabilities and the recognition of liabilities related to uninvoiced work performed by the general contractor at the Eurcentrum Phase I and Royal Wilanów projects. At the date of this report, these liabilities were paid in full. 28

29 TRADE PAYABLES Mar Dec Mar to other entities 6,248 13,012 1,080 - to related entities Trade payables 6,248 13,012 1,080 GUARANTEES AND SURETIES AND OTHER SECURITY ESTABLISH ON THE GROUP S ASSETS On January 15 th 2013, in connection with the EUR 61,131 thousand investment credit facility advanced by PKO Bank Polski S.A. to Hazel Investments Sp. z o.o., the Company's subsidiary, Capital Park S.A. made a commitment to support the Royal Wilanów project and to cover any overrun of the project's costs up to a maximum amount of PLN 34,070 thousand, which represents 10% of the project's costs. On March 18th 2013, Capital Park S.A. signed a surety agreement with Alior Bank S.A. (the "Bank") providing for joint and several liability for a facility granted by the Bank to Diamante Investments Sp. z o.o., a subsidiary of the Company, for a total amount of PLN 32,366 thousand; at March 31st 2014 the amount disbursed under the facility was PLN 16,636 thousand. The surety will remain valid until such time as the Borrower obtains a valid occupancy permit, establishes a mortgage in favour of the Bank on land lots owned by the Borrower, and achieves a DSCR ratio not lower than 1.2 in a period of at least three consecutive months of operation, in accordance with the terms of the facility agreement. On June 26th 2013, Capital Park S.A., Bank Pekao S.A., and Dakota Investments Sp. z o.o, a subsidiary of the Company, executed a surety agreement whereby Capital Park S.A. provided to the Bank a guarantee of up to PLN 1,000 thousand in connection with a PLN 295,820 thousand credit facility agreement of June 27th 2012 executed by the Bank and the subsidiary for the financing of construction of the Eurocentrum office complex located at Al. Jerozolimskie in Warsaw. The surety agreement will remain valid until such time as the DSCR ratio for the constructed property (Eurocentrum - Stage 1) reaches 1.0, but no later than December 31st Capital Park S.A. also entered with the Bank into a cost-overrun guarantee agreement whereby the Company agreed to support the project (Eurocentrum - Stage 1) and cover any cost overruns up to the amount of PLN 23,600 thousand. Numbers of mortgages were established on properties owned by the Group companies, the total value of which at March 31st 2014 was PLN 1,131,993 thousand and EUR 245,550 thousand. CAPITAL MANAGEMENT The main objective of capital management is to maintain a safe capital structure. The Company manages its capital using the net debt ratio, calculated as net debt to the sum of total equity and net debt. Net debt ratio Mar Dec Mar Interest-bearing borrowings, lease liabilities and bonds 571, , ,045 Cash and cash equivalents (165,381) (68,014) (39,042) Net debt 405, , ,003 29

30 Total equity 1,050,648 1,043, ,216 Equity and net debt 1,456,507 1,514,507 1,183,219 Net debt ratio 27.9% 31.1% 36.5% RELATED-PARTY TRANSACTIONS In the period January 1st to March 31st 2014, Capital Park S.A. did not conclude any related-party transactions other than on an arm's length basis. 30

31 INTERIM CONDENSED FINANCIAL STATEMENTS OF CAPITAL PARK SPÓŁKA AKCYJNA ASSETS Mar Dec Mar Non-current assets Investments in subsidiaries 676, , ,275 Long-term loans advanced to subsidiaries 387, , ,0541 Deferred tax assets 7,790 7,501 4,357 Other non-current assets ,072,377 1,033, ,173 Current assets Short-term loans advanced to subsidiaries , Trade and other receivables 10, ,428 3,300 Current prepayments and accrued income ,435 Cash and cash equivalents 99,546 11,672 6, , ,980 35,616 TOTAL ASSETS ,207, ,789 EQUITY AND LIABILITIES Mar Dec Mar Equity Share capital 104,744 74,559 74,559 Share premium 858, , ,809 Capital reserves from issue of shares pending registration 0 217,185 Capital from measurement of share-option plan 3,468 1,734 4,077 Retained earnings/(deficit) 28,739 4,196 4,196 Net profit/(loss) for the current period 2,168 24,543 (251) 997, , ,390 Non-current liabilities Long-term loans from related parties 57,708 57,190 94,491 Liabilities under issue of notes 98,229 98,126 97,185 Liabilities under bank borrowings 41,338 40,919 0 Deferred tax liabilities 10,124 8,730 4, , , ,377 Current liabilities Liabilities under issue of notes 1,920 3,670 1,980 Trade payables 194 4, Other liabilities and provisions 841 2, ,955 10,294 3,022 TOTAL EQUITY AND LIABILITIES 1,207,793 1,207, ,789 31

32 3 months of months of 2013 Revenue 20 5 Dividend income 0 0 Other income 0 0 Personnel costs* (1,922) (612) Other expenses (299) (181) Impairment losses on shares in subsidiaries 0 0 Operating loss (2,201) (788) Interest income 9,593 6,804 Other finance income Interest expense (3,377) (5,962) Other finance costs (756) (318) Profit/loss before tax 3,273 (148) Income tax (1,105) (108) Net profit/loss 2,168 (251) Total comprehensive income 2,168 (251) Net earnings/loss per share (PLN) for the year Basic (0.0034) Diluted (0.0032) * general and administrative expenses include the valuation of Incentive Scheme in the amount of kpln 1,734 for 3 months of 2014 and kpln 612 for 3 months of 2013 respectively. General and administrative expenses excluding the valuation of Incentive Scheme amount to kpln for 3 months of 2014 and kpln for 3 months of

33 Capital reserves Share capital Share premium Capital from measurement of share-option plan from issue of shares pending registration Accumulated net profit/(loss) Net profit/(loss) for the year Total equity Equity at Jan , ,809 1, ,185 4,196 24, ,026 Issue of shares 30, ,510 0 (217,185) 0 0 1,511 Share-based payments 0 0 1, ,734 Profit distribution ,168 2,168 Equity at Mar , ,319 3, ,196 26, ,439 Equity at Jan , ,809 3,465 0 (649) 4, ,029 Share-based payments Profit for the year (251) (251) Equity at Mar , ,809 4,077 0 (649) 4, ,390 Equity at Mar , ,809 4,077 0 (649) 4, ,390 Share-based payments 0 0 (2,343) (2,343) Issue of shares , ,185 Profit for the year ,845 (4,845) 0 Profit distribution ,794 24,794 Equity at Dec , ,809 1, ,185 4,196 24, ,026 33

34 OPERATING ACTIVITIES 3 months of months of 2013 Profit/(loss) before tax 3,273 (143) Foreign exchange gains/(losses) 224 (119) Interest and profit distributions (dividends) (6,216) (842) Change in receivables 2,698 (3,046) Change in liabilities, net of borrowings and other debt instruments (7) 292 Valuation of employee share plan 1, Change in other assets (147) (95) Change in provisions (1,727) (35) Impairment losses 0 0 Other adjustments 0 0 Total adjustments (3,441) (3,233) Cash from operating activities (168) (3,376) A. Net cash from operating activities (168) (3,376) INVESTING ACTIVITIES Loan repayments received from related parties 1,269 0 Interest received 1, Proceeds from disposal of shares, repayment of additional contributions Acquisition of property, plant and equipment (58) 0 Acquisition of shares 0 (200) Loans granted to related parties (41,736) (15,131) B. Net cash from investing activities (39,493) (14,371) FINANCING ACTIVITIES Cash provided by financing activities Proceeds from issue of shares 132,355 0 Cash used in financing activities Interest paid (4,345) (5,120) Repayment of borrowings from related parties (475) 0 C. Net cash from financing activities 127,390 (5,120) D. Total net cash flows 87,874 (22,867) E. Net (decrease)/increase in cash and cash equivalents: 87,874 (22,867) F. Cash and cash equivalents at beginning of the year 11,672 29,260 G. Cash and cash equivalents at end of the year 99,546 6,393 Warsaw, May 15th 2014 SIGNATURE OF THE PERSON WHO PREPARED THE FINANCIAL STATEMENTS: Małgorzata Koc Chief Accountant SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz President of the Management Board Jerzy Kowalski Member of the Management Board Marcin Juszczyk Member of the Management Board Michał Koślacz Member of the Management Board 34

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