MANAGEMENT BOARD REPORT ON THE OPERATIONS OF ROBYG S.A. CAPITAL GROUP FOR THE YEAR ENDED 31 DECEMBER 2011

Transcription

1 MANAGEMENT BOARD REPORT ON THE OPERATIONS OF ROBYG S.A. CAPITAL GROUP FOR THE YEAR ENDED 31 DECEMBER 2011 Warsaw, 14 March

2 1. BASIC INFORMATION ABOUT THE CAPITAL GROUP The ROBYG S.A. Capital Group (the Group ) is composed of ROBYG S.A. (the Company ) and its subsidiaries ( Subsidiaries ) listed in Section 2 of these financial statements. The Group was created in April 2008 as a result of a reorganization process that included contribution in kind of a number of entities to ROBYG S.A. as well as the purchase or setting up of some entities by ROBYG S.A. The Group is operating primarily in the property development sector, i.e. the Group builds and sells residential real estate. Key corporate information about ROBYG S.A.: ROBYG S.A. has its registered office at ul. L. Rydygiera 15 in Warsaw (01-793), Poland ROBYG S.A. was established based on its articles of association of 14 March 2007 ROBYG S.A. was entered in the Register of Business Entities maintained by the District Court for the capital city of Warsaw in Warsaw, XII Commercial Department of the National Court Register, Entry No. KRS ROBYG S.A. was assigned statistical REGON number DESCRIPTION OF THE ORGANISATION OF THE CAPITAL GROUP Detailed information about entities constituting the Group (together with jointly controlled entitles and affiliates) as at 31 December 2011 and 31 December 2010 is listed in the table below: Company name Registered office Business activities % held by the Group in share capital as at 31 December 2011 ROBYG S.A. % held by the Group in share capital as at 31 December 2010 Holding and financing activities. n/a n/a ROBYG Development Sp. z Real property development and sales of apartments on its own behalf % % MZM Properties Sp. z Holding and financing activities % % ROBYG Park Sp. z Real property development and sales of apartments on its own behalf % % ROBYG Morena Sp. z Real property development and sales of apartments on its own behalf % % ROBYG City Apartments Sp. z Real property development and sales of apartments on its own behalf % % ROBYG Marina Tower Sp. z Real property development and sales of apartments on its own behalf % % ROBYG Wilanów II Sp. z Real property development and sales of apartments on its own % % 2

3 Company name Registered office Business activities % held by the Group in share capital as at 31 December 2011 behalf. % held by the Group in share capital as at 31 December 2010 Jagodno Estates Sp. z Real property development and sales of apartments on its own behalf % % Buforowa Sp. z Real property development and sales of apartments on its own behalf % (1) % (1 ) ROBYG Sp. z Real property development and sales of apartments on its own behalf % % ROBYG Marketing i Sprzedaż Sp. z o. o. Organization of the sales process for the apartments built by the Group s companies % % ROBYG Jabłoniowa Sp. z Real property development and sales of apartments on its own behalf % % ROBYG Zarządzanie Sp. z Project management and auxiliary services % % ROBYG Construction Sp. z Construction and building services % % ROBYG Kameralna Sp. z Real property development and sales of apartments on its own behalf % n/a P-Administracja Sp. z Real estate management services % (2) n/a ROBYG Jabłoniowa 2 Sp. z (9) Real property development and sales of apartments on its own behalf % (3) n/a ROBYG City Apartments 2 Sp. z (9) Real property development and sales of apartments on its own behalf % (4) n/a ROBYG Development 2 Sp. z (9) Real property development and sales of apartments on its own behalf % (5) n/a ROBYG Osiedle Zdrowa 2 Sp. z (9) Real property development and sales of apartments on its own behalf % (6) n/a ROBYG Ogród Jelonki Sp. z Real property development and sales of apartments on its own behalf % (7) n/a ROBYG Osiedle Kameralne Sp. z (9) Real property development and sales of apartments on its own behalf % (8) n/a Wilanów Office Center Sp. z Office and commercial space development, sales and management % n/a 3

4 Company name Registered office Business activities % held by the Group in share capital as at 31 December 2011 FORT Property Sp. z Real property development and sales of apartments on its own behalf. % held by the Group in share capital as at 31 December % (10) n/a Source: the Company (1) indirect share through Jagodno Estates Sp. z ; (2) direct share ROBYG S.A. 17%, and indirect 83% through ROBYG Marina Tower Sp. z (3) indirect share through ROBYG Jabłoniowa Sp. z ; (4) indirect share through ROBYG City Apartments Sp. z ; (5) indirect share through ROBYG Development Sp. z ; (6) indirect share through ROBYG Wilanów II Sp. z ; (7) indirect share through ROBYG Ogród Jelonki Sp. z, a company jointly controlled by the Group and Wildetio Ltd; (8) a company jointly controlled by the Group and Wildetio Ltd, indirect share through ROBYG Ogród Jelonki Sp. z (9) The Group acquired these companies under different names, but on 8 April 2011the Group changed their names to the ones presented in the above table (10) On 12 October 2011, the Group purchased 49% of share capital in FORT Property Sp. z and on 6 February 2012, the Group acquired the remaining 51% of the company s share capital As at 31 December 2011 (and as at 31 December 2010), the percentage share in the total number of votes held by the Company in the subsidiaries corresponds to the percentage held in the share capital of those entities. On 3 March 2011 the Company acquired 5 new companies: ROBYG Jabłoniowa 2 Sp. z, ROBYG City Apartments 2 Sp. z, ROBYG Development 2 Sp. z, ROBYG Osiedle Zdrowa 2 Sp. z and ROBYG Osiedle Kameralne Sp. z On 16 March 2011 and on 23 March 2011, ROBYG S.A. set up two new entities ROBYG Kameralna Sp. z and P-Administracja Sp. z On 24 March 2011 the Company obtained control over Wilanów Office Center Sp. z whereas on 31 March 2011 the Company purchased 50% of shares in ROBYG Ogród Jelonki Sp. z. On 12 October 2011 the Company purchased 49% of shares in Fort Property Sp. z Details concerning these transactions are described in Note 18 to consolidated financial statements of the ROBYG S.A. Capital Group prepared for the period of 12 months ended 31 December ROBYG Development Sp. z, ROBYG Development 2 Sp. z, ROBYG Park Sp. z, ROBYG Morena Sp. z, ROBYG City Apartments Sp. z, ROBYG City Apartments 2 Sp. z, ROBYG Marina Tower Sp. z, ROBYG Wilanów II Sp. z, ROBYG Osiedle Zdrowa 2 Sp. z, Jagodno Estates Sp. z, Buforowa Sp. z, ROBYG Jabłoniowa Sp. z, ROBYG Jabłoniowa 2 Sp. z, ROBYG Sp. z, ROBYG Ogród Jelonki Sp. z, ROBYG Osiedle Kameralne Sp. z, ROBYG Kameralna Sp. z, Fort Property Sp. z and Wilanów Office Center Sp. z are all special-purpose vehicles (hereinafter SPV ) that were incorporated to implement property development projects. Each SPV was incorporated to carry out a separate development project. Wilanów Office Center Sp. z is an SPV that was purchased to implement office and commercial space property development projects. ROBYG Zarządzanie Sp. z is a management company rendering project management and other support services to all SPVs in the ROBYG S.A. Group as well as to other entities. ROBYG Construction Sp. z is a company rendering construction and building services to the SPVs in the ROBYG S.A. Group. ROBYG Marketing i Sprzedaż Sp. z (previously ROBYG Wrocław II Sp. z ) is a company rendering residential and commercial unit sale services for the benefit of SPVs in ROBYG S.A. Group. P-Administracja Sp. z was set up to manage and administer the real properties built by the Group s companies. 4

5 All entities forming the Group have an unlimited period of operation. Aside from the events listed above, no other changes occurred in the Group s structure in the period of 12 months ended 31 December 2011 and until the date of approval of this report. 3. STATEMENT OF THE MANAGEMENT BOARD As at the date of the approval of this report, the Company s Management Board did not find any circumstances that indicated a threat to the continuation of business activities of the companies constituting the Group. 4. INFORMATION ABOUT OPERATIONS PROJECTS AND PRODUCTS OF ROBYG S.A. CAPITAL GROUP 4.1 Products The Group offers its clients the following types of units as part of its core activity: Apartments Apartments are residential units built in multi-family buildings with a bold and refined architectural design, built within gated and guarded residential communities with underground parking garages, and located in attractive locations within urban agglomerations and near recreational areas. Apartments include units with wide shutters, balconies, and terraces, with a ceiling height of about 2.9 m. Apartments are built in buildings with common areas that have a high standard of finishing. Higher-standard flats Higher-standard flats include residential units in buildings located in attractive urban locations. Similar to apartments, higher-standard flats are built within guarded, gated residential communities and include underground parking garages. However, unlike apartments, the common areas of the buildings in which the higher-standard flats are located are characterised by a somewhat lower finishing quality than is found with apartments, a smaller floor area, a higher number of residential units accessible from a given hallway, and a ceiling height of about 2.7 m. Standard flats Standard flats are intended by the Group to include functional units build in multi-family buildings with standard architectural solutions, characterised by the optimal use of the floor area of the unit and standard finishing of the common areas. Commercial units that are part of residential investments Commercial units are additional units offered by the Group as part of the residential buildings that it builds, which are intended for commercial use, mainly for stores, restaurants, and services. Revenues from the sale of these premises comprise a small share of the total revenues from the operating activities of the Group; nonetheless, they increase the attractiveness of the Group s development projects by offering clients amenities and additional infrastructure. Single family homes The Group offers single family semi-detached homes. Commercial and office units Commercial and office units are new products in the Group s offer which will be offered as part of the ROBYG Business Center project implemented by Wilanów Office Center Sp. z The Group also intends to offer 5

6 commercial units as part of a local shopping centre and individual commercial buildings that will be built as part of the Lawendowe Wzgórza project. 4.2 The Group s Property Development Projects Completed stages of development projects in the period of 12 months ended 31 December 2011 The table below contains summary of the information regarding the completed stages of the Group s projects as at 31 December 2011: No. of contracted units in respect of which: Project name project stages Nowa Rezydencja Królowej Marysieńki - Stages VIII-X Osiedle Zdrowa - Stage V Lawendowe Wzgórza Stage II Słoneczna Morena Stage Ib Słoneczna Morena Stage II Total usable area of units No. of units constructed in constructed sq.m Sales revenues recognized Sales revenues not recognized Total TOTAL Source: the Company Stages of property development projects under implementation In the period of 12 months ended 31 December 2011, the Group launched the following stages of development projects: Project name project stages Osiedle Zdrowa - Stage II Osiedle Zdrowa - Stage III City Apartments - Stage III Lawendowe Wzgórza Stage III Lawendowe Wzgórza Stage IV Słoneczna Morena Stage III Albatross Towers - Stage I No. of units to be constructed Total usable area of units to be constructed in sq. m. No. of units for which preliminary sales agreements have been signed Start of construction Planned completion of construction Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2013 TOTAL Source: the Company The Group continued the implementation of the following stages that were started in 2010: 6

7 Project name project stages City Apartments - Stage II Osiedle Kameralne Stage I No. of units to be constructed Total usable area of units to be constructed in sq. m. No. of units for which preliminary sales agreements have been signed Start of construction Planned completion of construction Q Q Q Q 2012 TOTAL Source: the Company Planned stages of the property development projects to be launched in 2012 The table below presents a summary of information regarding the stages of development projects that the Group plans to launch in 2012: Project name project stages Nowa Rezydencja Królowej Marysieńki - Stage VII Planned No. of units Total usable area of units in sq. m. Planned start of construction Planned completion of construction Q Q 2013 City Apartments - Stage IV Q Q 2013 Osiedle Kameralne - Stage II Q Q 2013 Lawendowe Wzgórza Stage V Q Q 2013 Lawendowe Wzgórza Stage VI Q Q 2013 Lawendowe Wzgórza Stage VII Q Q 2013 Słoneczna Morena Stage IV Q Q 2013 Słoneczna Morena Stage V Q Q 2013 Słoneczna Morena Stage VII Q Q 2013 Young City (Bemowo) - Stage I Q Q 2013 Young City (Bemowo) - Stage II Q Q 2013 TOTAL Source: the Company In 2012, the Group plans to launch several development projects in the commercial and office segment. The table below presents a summary of information regarding the stages of those projects that are planned: Project name project stages ROBYG Business Center - Stage I Lawendowe Wzgórza Stage VI (nursery) Lawendowe Wzgórza Stage VII (store) Planned No. of units Total usable area of units in sq. m. Planned start of construction Planned completion of construction Q Q Q Q Q Q 2013 TOTAL Source: the Company 7

8 The Group s sales offer as at 31 December 2011 As at the end of 2011 the Group had in its offer 948 units in stages under implementation (including stages the construction of which had not started yet) and stages completed, of which 611 units were in Warsaw and 337 in Gdańsk. The table below presents a summary of the information regarding the number of contracted units in , taking into account cancellations: Year ended 31 December Project name Nowa Rezydencja Królowej Marysieńki Szczęśliwy Dom Osiedle Zdrowa City Apartments Słoneczna Morena Lawendowe Wzgórza Osiedle Kameralne Albatross Towers Total Source: the Company The table below presents a summary of information regarding the number of units from which the Group recognised revenues in 2010 and 2011: Project name Nowa Rezydencja Królowej Marysieńki For the year ended 31 December 2011 For the year ended 31 December 2010 Change (%) Szczęśliwy Dom Osiedle Zdrowa City Apartments Słoneczna Morena Lawendowe Wzgórza Total Source: the Company Sales revenues obtained from the individual projects of the Group were presented by value in Note 10.1 to the consolidated financial statements of the Group for the year ended 31 December Information about markets, clients, and sources of production materials As at 31 December 2011, the Group was implementing property development projects on the Warsaw and Gdańsk markets. The Group also owns real property in Wrocław, which it intends to use for residential construction as part of the Jagodno project, an investment being considered by the Group. For its projects, the Group acquires plots of land in urban agglomerations that are attractive in terms of size and achievable margins. For the year ended 31 December 2011, the Group generated sales revenues of PLN 160,470,000, while for the year ended 31 December 2010, the Group generated sales revenues of PLN 284,789,000. These were generated 8

9 from the sale of standard flats, higher-standard flats, apartments, single-family houses and commercial units. They were generated in the Warsaw and Gdańsk markets. The table below presents a summary of information regarding the number of units from which the Group recognised revenues in 2010 and 2011 divided by product segments (*): Number of units sold divided by product segments Apartments and higher-standard flats For the year ended 31 December 2011 For the year ended 31 December 2010 Change (%) Standard flats Single-family houses Commercial units Total Source: the Company (*)In its consolidated financial statements, the Group presented an analysis by segment, singling out basic operating segments based on the SPVs constituting the Group, as first and foremost, the Group analyses its results by SPVs. This division into product types is merely an additional analysis which is subordinate to the analysis by segment presented in the financial statements. The Group is not dependent on any of its clients because sales are dispersed among a wide, diverse, and constantly changing group of residential and commercial unit purchasers. The vast majority of the Group s clients are natural persons. The main costs incurred by the Group as part of its development activities are the costs of construction services performed by unrelated third-party entities as well as the costs of purchasing land for these investments. In the case of construction services, the contractors are selected through a process of internally organised tender procedures. The Group uses many construction and service companies operating on the Warsaw and Gdańsk markets and there was no dependence on one or any group of service providers. The following were the Group s largest contracting parties in the period of 12 months ended 31 December 2011, taking into account the net value of the services purchased in this period: Name of supplier value of services purchased in 2011 in PLN thousands FABET-Konstrukcje Sp. z Marex Budownictwo Sp. z ProConst Andrzej Brymas PB-I GRIMSAN Grzegorz Grzymała Firma Instalacyjno-Budowlana KONSTABET Goran Sp. z Total Source: the Company The amounts presented above constitute more than 50% of the Group s expenditures for construction services in the period of 12 months ended 31 December The same is true in the case of land; there is no dependence on one supplier or any group of suppliers. 5. EVENTS MATERIALLY AFFECTING THE GROUP S OPERATIONS AND THE FINANCING OF THE GROUP S OPERATIONS IN THE CURRENT PERIOD. 9

10 5.1 Concluded bank loan facility agreements and material changes to the bank loan facility agreements concluded by the Group s companies in the period of 12 months ended 31 December The new bank loan facility agreements that were concluded as well as the material changes to the bank loan facility agreements concluded by the Group s companies in the 12 months ended 31 December 2011 have been described in Note 25 to the Group s consolidated financial statements for the year ended 31 December Drawdowns and repayments of the bank loan facilities in the period of 12 months ended 31 December 2011 The bank loan facilities borrowed and repaid in 2011 are presented in the table below: Lending bank Borrower Bank loan facility Bank Millennium S.A. ROBYG S.A. revolving bank loan facility ROBYG revolving and Bank Millennium S.A. Development Sp. z investment bank loan (*) facility Bank Millennium S.A. ROBYG Wilanów II revolving bank loan Sp. z (*) facility Bank Millennium S.A. ROBYG Marina revolving credit Tower Sp. z facility Bank Zachodni WBK S.A. ROBYG Morena Sp. investment bank loan z facility Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. ROBYG City Apartments Sp. z (*) ROBYG Ogród Jelonki Sp. z (*) (**) ROBYG Jabłoniowa Sp. z (*) revolving and investment bank loan facility revolving and investment bank loan facility revolving and investment bank loan facility Drawdowns (in PLN thousands) Repayments (in PLN thousands) Total Source: the Company (*) The total drawdowns and repayments of bank loan facilities taking into account the drawdowns and repayments of bank loan facilities by companies to which organised parts of businesses were contributed: ROBYG Development 2 Sp. z, ROBYG City Apartments 2 Sp. z, ROBYG Jabłoniowa 2 Sp. z, and ROBYG Osiedle Kameralne Sp. z (to which the business of ROBYG Ogród Jelonki Sp. z was contributed). (**) In the consolidated financial statements of the Group for the period of 12 months ended 31 December 2011, the drawdowns and repayments of the bank loan facility granted to ROBYG Ogród Jelonki Sp. z and its 100% subsidiary ROBYG Osiedle Kameralne Sp. z were presented in the amount of 50% in accordance with the proportional consolidation of these companies in the Group. Other information concerning the type and level of interest rate, currency and maturity date of the bank loan facilities is presented in Note 25 to the consolidated financial statements of the Group as at 31 December Bonds issue In the period of 12 months ended 31 December 2011, the Company issued one tranche of bonds, the most important conditions of which were described below: D Series On 18 April 2011 the Company issued 400,000 of series D bearer bonds each with the nominal value of PLN 100 by way of public offering. The main conditions of the issued bonds are as follows: 10

11 The total nominal value of the issue amounted to PLN 40,000,000 The bonds bear an annual fixed interest rate calculated from the issue date until the date of the bonds buyout. The interest is be paid quarterly. The bond redemption date is 4 years from the issue date. The bonds have a built-in option element allowing the Issuer to redeem them earlier in accordance with the conditions of the issue. The security for the bond issue is a mortgage on the real property that is in perpetual usufruct by Wilanów Office Center Sp. z. The total value of the mortgage covers the nominal value of the bonds and accumulated interest. The funds raised from the bonds issue are designated for the financing of Stage I of the development project carried out by Wilanów Office Center Sp. z and for the financing of other financial needs of the Group. Introduction of series A, B, C, and D bonds to trading on the Catalyst market On 24 February 2011, 600,000 series A bonds with a nominal value of PLN 100 each and a redemption date of 1 October 2013 and 200,000 series B bonds with a nominal value of PLN 100 each and a redemption date of 16 November 2013 were admitted to trading on the Catalyst market. On 1 March 2011, 227,507 series C bonds with a nominal value of PLN 100 each and a redemption date of 2 December 2013 were admitted to trading on the Catalyst market. On 28 September 2011, 400,000 series D bonds with a nominal value of PLN 100 each and a redemption date of 18 April 2015 were admitted to trading on the Catalyst market. 5.4 Information about received and repaid related party loans in the period of 12 months ended 31 December 2011 The table below presents a list of loans from related parties in the period of 12 months ended 31 December 2011: Borrower Lender Loan or tranche disbursement date Repayment date Loan or tranche amount in thousands Currency ROBYG Wilanów II Sp. z POLNORD S.A PLN Source: the Company Manner of calculating interest Fixed interest rate The table below presents a list of loans (including interest) from related parties repaid in the period of 12 months ended 31 December 2011: Lender Loan currency Repayment amount (in PLN thousands) ROBYG B.V. PLN ROBYG B.V. USD ROBYG B.V. EUR LBPOL William II S.A.R.L. PLN LBPOL William II S.A.R.L. EUR 127 William II Finance S.A.R.L. PLN LBREP III BOGTODORSKA S.A.R.L. PLN

12 LBREP III Marina Tower S.A.R.L. PLN EdR Real Estate (Eastern Europe) Finance S.A.R.L. EUR Nanette Real Estate Group N.V. USD 1 POLNORD S.A. PLN 600 Wildetio Limited PLN Total PLN Total EUR Total USD Source: the Company The table below presents a list of loans from related parties converted to the minority interest in the Group s equity that were repaid in the period of 12 months ended 31 December 2011: Lender Borrower Repayment amount (in PLN thousands) Nanette Real Estate Group N.V. Jagodno Estates Sp. z LBREP III Bogtodorska S.A.R.L. Jagodno Estates Sp. z Nanette Real Estate Group N.V. ROBYG Marina Tower Sp. z LBREP III Marina Tower S.A.R.L. ROBYG Marina Tower Sp. z Total Source: the Company In the period from 1 January 2011 until 31 December 2011, the Company issued investment notes with a nominal value totalling PLN 3,400,000 to ROBYG Ogród Jelonki Sp. z The receivables under the investment notes were transferred together with the business of ROBYG Ogród Jelonki Sp. z as part of the reorganisation of the Group to ROBYG Osiedle Kameralne Sp. z The reorganisation of the Group was described in Note 11.2 to the consolidated financial statements of the Group as at 31 December 2011 and in Note 5.8 to this report. In the aforementioned period, the Company did not redeem any investment notes. The value of the liabilities under investment notes taken up by ROBYG Osiedle Kameralne Sp. z as at 31 December 2011 was PLN 3,470,000, of which PLN 3,400,000 constituted the nominal value of the notes, while PLN 70,000 constituted the interest. In the consolidated financial statements of the Group for the period of 12 months ended 31 December 2011, the value of issued notes was presented in the amount of 50% in accordance with the proportional consolidation of this company in the Group. 5.5 Information about related party loan agreements terminated in the period of 12 months ended 31 December 2011 The Group did not terminate any related party loan agreements which existed in Guaranties and warranties granted and received in the period of 12 months ended 31 December 2011 Guarantees granted As at 31 December 2011, the Company was the guarantor of certain liabilities of its subsidiaries in relation to bank loan facility agreements concluded by the aforementioned subsidiaries and related parties with the financing banks. In addition, on 15 June 2011, the Company granted a guarantee to IGI Komfort Sp. z of up to PLN 1,000,000 as security in relation to the preliminary conditional real property purchase agreement 12

13 concluded by the Company s subsidiary ROBYG Kameralna Sp. z and IGI Komfort Sp. z The table below presents a list of the guarantees that were granted as at 31 December 2011: Related party Financing bank Subject of the guarantee Guarantee amount in PLN thousands ROBYG Development 2 Sp. z ROBYG Development 2 Sp. z ROBYG Osiedle Zdrowa 2 Sp. z ROBYG City Apartments Sp. z ROBYG City Apartments 2 Sp. z ROBYG City Apartments 2 Sp. z ROBYG Jabłoniowa Sp. z ROBYG Jabłoniowa Sp. z ROBYG Jabłoniowa 2 Sp. z ROBYG Jabłoniowa 2 Sp. z ROBYG Osiedle Kameralne Sp. z ROBYG Osiedle Kameralne Sp. z ROBYG Morena Sp. z ROBYG Morena Sp. z ROBYG Zarządzanie Sp. z Bank Millennium S.A. Bank Millennium S.A. Bank Millennium S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Nordea Bank Polska S.A. Bank Zachodni WBK S.A. Bank Zachodni WBK S.A. ING Lease (Polska) Sp. z liabilities in relation to the investment tranche financing the NRKM project (stages V and VII) liabilities in relation to the revolving tranche financing the NRKM project (stages V and VII) liabilities in relation to the revolving tranche financing the Osiedle Zdrowa project (stage III) liabilities in relation to the revolving tranche financing the City Apartments project (stage II) liabilities in relation to the revolving tranche financing the City Apartments project (stages III-VI) liabilities in relation to the interest of the investment tranche financing the City Apartments project (stages III-VI) liabilities in relation to the revolving tranche financing the Lawendowe Wzgórza project (stages I-VI) liabilities in relation to the investment tranche financing the Lawendowe Wzgórza project (stages I-VI) liabilities in relation to the revolving tranche financing the Lawendowe Wzgórza project (stages VII and up) liabilities in relation to the investment tranche financing the Lawendowe Wzgórza project (stages VII and up) liabilities in relation to the revolving tranche financing the Osiedle Kameralne project liabilities in relation to the investment tranche financing the Osiedle Kameralne project liabilities in relation to the bank loan investment tranche financing the Słoneczna Morena project corporate guarantee in relation to other costs of the Słoneczna Morena project Guarantee on the first demand regarding the liabilities related to the lease agreement for offices leased by the subsidiary ROBYG Zarządzanie Sp. z from ING Lease (Polska) Sp. z From Until indefinitely indefinitely

14 Total Related party ROBYG Kameralna Sp. z Beneficiary of the guarantee IGI Komfort Sp. z Subject of the guarantee Guarantee granted by the Company to IGI Komfort Sp. z as security in relation to the preliminary conditional real property purchase agreement concluded by the Company s subsidiary ROBYG Kameralna Sp. z and IGI Komfort Sp. z Guarantee amount in PLN thousands From Until Total Source: the Company In addition, the Company and some entities from the Group were the guarantors of payments to contracting parties for the delivery of goods ordered by them in relation to the implementation of the Group s development projects. The table below presents a list of the guarantees granted to the Group s contracting parties as at 31 December 2011: Guarantor Contracting Party CEMEX Polska Sp. z Stal-Service Sp. z Subject of the guarantee Maximum amount (PLN thousands) ROBYG S.A. for the delivery of goods ROBYG Construction Sp. z for the delivery of goods ROBYG Stal-Service Sp. z Construction Sp. z for the delivery of goods ROBYG CEMEX Polska Construction Sp. z for the delivery of goods 500 Sp. z 2011 CEMEX Polska ROBYG S.A. for the delivery of goods Sp. z 2011 ROBYG Stal-Service Sp. z Construction Sp. z for the delivery of goods ROBYG CEMEX Polska Construction Sp. z for the delivery of goods 800 Sp. z 2011 ROBYG CEMEX Polska Construction Sp. z for the delivery of goods 500 Sp. z 2011 ROBYG CEMEX Polska Construction Sp. z for the delivery of goods 500 Sp. z 2011 ROBYG CEMEX Polska Construction Sp. z for the delivery of goods Sp. z 2011 ROBYG Stal-Service Sp. z Construction Sp. z for the delivery of goods Total Source: the Company Guarantees received From Until The table below presents a list of the guarantees that were received by the Group s companies from contracting parties as at 31 December 2011: 14

15 Company Contracting Party Type Currency Amounts (thousands) From Until Robyg Construction Sp. Bracia Bertrand Sp. z promissory note z Sp. k agreement PLN Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Proconst Andrzej Brymas promissory note PLN Robyg Construction Sp. "Parkadia"- Dagmara z Sieczkowska promissory note PLN Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. Fabet-Konstrukcje Sp. z z bank guarantee PLN Robyg Construction Sp. Fabet-Konstrukcje Sp. z promissory note z agreement PLN Robyg Construction Sp. Komfort Life Instalacje z Sp. z promissory note PLN Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. Zbrojstal-Pomorze Sp. z z promissory note PLN Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Construction Sp. z "ESBUD" Piotr Sagan promissory note PLN Robyg City Apartments Sp. z "Dierre Polska" Sp. z bank guarantee PLN Robyg City Apartments Sp. z "ESBUD" Piotr Sagan promissory note PLN Robyg Construction Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg City Apartments Sp. z "Dierre Polska" Sp. z bank guarantee PLN Robyg City Apartments PPU Elektroenergetyka insurance Sp. z Czupryński Edward guarantee PLN Robyg City Apartments Sp. z Schindler Polska Sp. z bank guarantee EUR Robyg Wilanów II Sp. z Adpol Sp. z bank guarantee PLN Robyg Development Sp. bank guarantee Schindler Polska Sp. z z PLN Robyg Morena Sp. z Robyg Wilanów II Sp. z Pol-Dróg Gdańsk Sp. z guarantee of the proper performance of the agreement PLN Schindler Polska Sp. z bank guarantee PLN TOTAL PLN TOTAL EUR

16 Source: the Company 5.7 Sale and leaseback transaction On 8 February 2011, the Group as the lessee sold and leased from the lessor ING Lease (Polska) Sp. z the commercial units used as the registered office of the Group. For financial reporting purposes, the transaction is treated as a financial lease due to the fact that the Group is obligated to repurchase the subject of the lease after it ends. Basic information regarding the lease agreement: Total initial value of the subject of the lease PLN 5,525,000 Lease term 7 years The following security for the lessor was agreed upon: o o o a financial guarantee of ROBYG S.A. regarding all payments arising out of the lease agreement the assignment of receivables arising out of sublease agreements an obligation to maintain the specified debt service coverage ratios 5.8 Other material events Acquisition of new property development projects Wilanów Office Center Sp. z On 24 March 2011, the Group purchased 51% of the shares in Wilanów Office Center Sp. z, which is a perpetual usufructuary of real property located in the Wilanów District in Warsaw with a total area of 3 ha from Wildetio Ltd., which is a Cyprus-based company involved in other property development projects with Nanette Real Estate Group N.V. (one of the Significant Shareholders of the Company(*)). The Company estimates that the real property indicated above allows for the construction of approximately 35,000 square metres of useable floor space. (*) Significant Shareholders of the Company: Nanette Real Estate Group N.V. along with its subsidiary ROBYG B.V. and LBPOL William II S.A.R.L. ROBYG Ogród Jelonki Sp. z On 31 March 2011, the Group purchased 50% of the shares in ROBYG Ogród Jelonki Sp. z from one of the Significant Shareholders of the Company, Nanette Real Estate Group N.V. ROBYG Ogród Jelonki Sp. z is the owner of real property located in the Bemowo-Jelonki District in Warsaw with a total area of 37,000 square metres allowing for the construction of about 600 residential units with a total useable floor space of approximately 38,000 square metres. The sale price for the shares is PLN 18,000,000. Payment for the shares will take place in two instalments, where the first instalment of PLN 9,000,000 was paid within 10 business days from the date of the signing of the sale agreement, while the second instalment will be paid within 10 business days from the receipt by ROBYG Ogród Jelonki Sp. z of a local zoning plan for residential purposes decision pertaining to the second stage of the project being implemented by ROBYG Ogród Jelonki Sp. z ROBYG Kameralna Sp. z 16

17 On 15 June 2011, ROBYG Kameralna Sp. z concluded a conditional preliminary agreement for the purchase of real property with an area of 2.35 ha located in Warsaw in the Bemowo District. The net price of the real property determined in the preliminary agreement was PLN 14,000,000. The Group estimates that the real property covered by this agreement allows for the construction of about 300 residential units. The ultimate date for the conclusion of the final sales purchase agreement of the real property is 30 April Fort Property Sp. z On 12 October 2011, the Group purchased a 49 % stake in Fort Property Sp. z On 19 October 2011, Fort Property Sp. z concluded a conditional agreement for the purchase of real property located in Warsaw in the Bemowo District with a total area of 6.6 ha for PLN 42,916,000. On 6 February 2012, the Group purchased the remaining 51% stake in the company. The conditional increase of the Issuer s share capital and the issue of subscription warrants On 21 June 2011, the General Meeting of Shareholders of ROBYG S.A. decided to conditionally increase the share capital by no less than PLN 0.10 and no more than PLN 571,000 through the issue of 5,710,000 G-series ordinary bearer shares with a nominal value of PLN 0.10 per share. The purpose of the conditional share capital increase is to grant the right to the new series G-series shares to the holders of subscription warrants as part of the incentive scheme that is introduced in the Group. The subscription warrants were divided into series from A to E. Series A to C subscription warrants (in the amount of 3,061,500) were granted to selected members of the Management Board and the Supervisory Board of the Company (the details have been presented in the table below), whereas series D and E subscription warrants (in the amount of 2,648,500) were designated for the current and future employees of the Group (including persons cooperating with the Group on the basis of cooperation agreements). Series A, B, C, and D subscription warrants allow the entitled persons to take up a part of G-series shares in 3 equal tranches, the first tranche starting on 4 November 2011, the second tranche starting on 4 November 2012, and the third tranche starting on 4 November 2013, taking into account the closed periods in which subscription warrant rights cannot be exercised, while Series E warrants will entitle the holders to the take up the rest of G-series shares within the timeframe specified by the Company s Supervisory Board in a separate resolution, however not later than by 31 December Each warrant entitles its holder to one G- series share. The issue price for one G-series share granted for each A to C series warrants is 1 PLN whereas for shares granted for D and E series warrants it amounts to 0.10 PLN. The conditional share capital increase was registered by the registration court on 20 September Holders of subscription warrants Alex Goor Member of the Issuer s Supervisory Board Zbigniew Wojciech Okoński President of the Issuer s Management Board Eyal Keltsh Vice-President of the Issuer s Management Board Number of subscription warrants allotted to the member of the Management Board or Supervisory Board of the Issuer 1,020,500 series A subscription warrants 1,020,500 series B subscription warrants 1,020,500 series C subscription warrants Agreements that are material to the Group s business On 8 November 2011, Wilanów Office Center Sp. z, in which the Group holds 51% of the shares, concluded a lease agreement with ALMA Market S.A. The subject of the agreement is the lease of commercial space in a building being built by Wilanów Office Center Sp. z in Warsaw, in the Wilanów district. The lease agreement was concluded for a specified period of time, i.e. for 10 years (counting from the day falling after 120 days from the delivery date of the unit) with the option for ALMA Market S.A. to extend the agreement for two more consecutive 5-year periods. The value of the subject of the agreement does not exceed 10% of the Group s equity. 17

18 The Group recognises agreements to be material to the Group s business if their value exceeds 10% of the value of the Group s equity or if they are considered to be material to the Group for other reasons. Aside from the abovementioned agreement, the Group did not conclude any other agreements of this nature. Reorganisation of the Group s structure In 2011, the Group conducted its reorganisation for the purpose of optimising the Group s financial and operating activity. As part of the reorganisation, the Group made a series of transactions related to the transfer of organised parts and, in the case of ROBYG Ogród Jelonki Sp. z, the whole enterprise of certain entities operating as part of the Group. The reorganisation pertained to ROBYG Development Sp. z, ROBYG Wilanów II Sp. z, ROBYG City Apartments Sp. z, ROBYG Jabłoniowa Sp. z, and ROBYG Ogród Jelonki Sp. z, which transferred organised parts of the enterprises (and in the case of ROBYG Ogród Jelonki Sp. z, the whole enterprise) respectively to new entities that are their 100% subsidiaries: ROBYG Development 2 Sp. z, ROBYG Osiedle Zdrowa 2 Sp. z, ROBYG City Apartments 2 Sp. z, ROBYG Jabłoniowa 2 Sp. z, and ROBYG Osiedle Kameralne Sp. z The aforementioned new entities began the implementation of the subsequent stages of the following projects: Nowa Rezydencja Królowej Marysieńki, Osiedle Zdrowa, City Apartments, Lawendowe Wzgórza, and Osiedle Kameralne. As a result of the reorganisation, the Group recognised deferred tax assets and released deferred tax liabilities in the amount of PLN 28,760,000. The tax effects related to the reorganisation were described in Note 11.2 to the consolidated financial statements of the Group as at 31 December Payment of the dividend for 2010 On 21 June 2011, the Ordinary Shareholders Meeting of ROBYG S.A. adopted a resolution regarding the payment of the dividend for Conditions regarding the payment were as follow: The total net amount from the profit of the Company designated for the payment of the dividend for shareholders was PLN 18,017,000; value of the dividend per share: PLN 0.07; number of shares covered by the dividend: 257,390,000 (all of shares); dividend date: 7 July 2011; dividend payment date: 29 July Partial repayment of the minority interest in the Group s equity In the period of 12 months ended 31 December 2011, the Group repaid loans classified as equity-type instruments to the minority interest in the amount of PLN 10,000,000. These loans were repaid by ROBYG Marina Tower Sp. z and Jagodno Estates Sp. z to Nanette Real Estate Group N.V. (PLN 5,000,000), LBREP III Marina Tower S.A.R.L. (PLN 2,500,000) and LBREP III Bogtodorska Sp. z (PLN 2,500,000). 5.9 Description of the use of proceeds from the issue of securities in the period covered by the report In 2010, the Group debuted on the Warsaw Stock Exchange and conducted its first public share issue, the funds from which the Group designated for the purchase of development projects. In the period of 12 months ended 31 December 2011, partially using the aforementioned funds, the Group acquired stakes in three companies, of 18

19 which two were implementing development projects and one acquired land for the implementation of a development project. In addition, through its subsidiary ROBYG Kameralna Sp. z, the Group concluded a preliminary conditional agreement for the purchase of real property located in the Bemowo District of Warsaw. The details regarding these transactions were described in Note 5.8 to this report. On 18 April 2011, the Company issued 400,000 series D bearer bonds with a nominal value of PLN 100 each by the way of a public offering. The funds from the bond issue are being used for the financing of Stage I of the development project being implemented by Wilanów Office Center Sp. z and to cover the Group s other financial needs in accordance with the terms and conditions of the issue Information about significant transactions concluded by the Company or its subsidiary with related parties under terms and conditions other than market conditions Neither the Company nor any of the Group s companies concluded transactions with related parties under terms and conditions other than market conditions in the period of 12 months ended 31 December Indication of proceedings being conducted before a court, an appropriate authority for arbitration proceedings, or a public administration authority Legal actions brought by tenants' management organisations In the period of 12 months ended 31 December 2011, three lawsuits were filed by tenants management organisations against certain companies from the Group regarding the removal of faults in the common areas of the buildings constructed by the Group. The total value of the claims filed by tenants management organisations amounted to PLN 15,518,000. In the opinion of the Management Board of the Company, the amounts claimed by the tenants management organisations are significantly overstated, premature, and in most cases unfounded in light of the fact that in justified cases, the Group removes all faults that are found on an on-going basis. In addition, a certain part of these claims will be satisfied at the expense of the subcontractors who performed the construction works in which the defects were found. Despite this, following an analysis performed by the technical department regarding the possible scope and scale of the repair works that are necessary to perform in order to remove the defects, as well as due to the fact that at the current stage, it is uncertain if and to what extent the costs of removing the defects will be covered by the subcontractors, the Group s Management Board decided to create a provision of PLN 1,250,000 for the expected costs of removing the faults found in the aforementioned buildings built by the Group. All significant court cases that are being conducted against the Group companies were described in the consolidated financial statements prepared for the year ended 31 December As at 31 December 2011, there were no proceedings conducted in the Group before a court, an appropriate authority for arbitration proceedings, or public administration authority, the value of which would jointly or individually constitute at least 10% of the equity of ROBYG S.A. Group Changes in the basic business management principles of the Company and its Capital Group In the period of 12 months ended 31 December 2011, there were no significant changes in the basic business management principles of the Company and its Capital Group. 19

20 6. THE ECONOMIC, FINANCIAL, AND REVENUE SITUATION OF THE GROUP IN THE PERIOD OF 12 MONTHS ENDED 31 DECEMBER The economic situation Assets The table below presents selected data from the Group s consolidated statement of financial position as at 31 December 2011: ASSETS 31 December 31 December Change in PLN thousands in PLN thousands (%) Total assets % Non-current assets % Investment properties % Land designated for development % Current assets, including % Inventories % Trade and other receivables % Cash and cash equivalents % Source: Consolidated Financial Statements of the Group for the period of 12 months ended 31 December 2011 As at 31 December 2011, total non-current assets of the Group were PLN 338,388,000. The most significant item of non-current assets of the Group as at that date were the investment properties, valued at PLN 141,626,000, and land designated for development classified as non-current assets, valued at PLN 131,070,000. As at 31 December 2011, non-current assets decreased by PLN 4,098,000, i.e. 1%, compared with 31 December The most significant change in 2011 was the decrease in land designated for development by PLN 77,305,000, i.e. 37% compared with its value as at 31 December 2010 as a result of the launch of the next stages of projects being implemented by the Group and the resulting transfer of the land pertaining to the stages being launched to inventories. Another significant change was the increase of value of investment properties by PLN 48,186,000, i.e. 52% as a result of the acquisition of new investment projects by the Group as well as the valuation of investment properties to fair value in As at 31 December 2011, the Group recognised the total value of current assets in the amount of PLN 878,077,000. The most significant class of current assets of the Group were inventories, with a value of PLN 687,580,000 as at the end of the discussed period, including flats under construction and land designated for development with a value of PLN 529,518,000, and cash and cash equivalents, with a value of PLN 128,551,000. Compared with the same period of 2010, the total value of the Group s current assets increased by 174,088,000, i.e. 25%. The greatest increase compared with the value as at the end of 2010 was an increase of PLN 182,450,000, i.e. 36% in inventories, mainly as a result of the acceleration of the construction of the next stages of development projects which was related to the transfer to this item of some land from non-current assets as well as with the acquisition of new development projects and their preparation for construction. The 20