LESS MESS STORAGE INC. Form F4 Business Acquisition Report

Transcription

1 LESS MESS STORAGE INC. Form F4 Business Acquisition Report Item 1 Identity of Company 1.1 Name and Address of Company Less Mess Storage Inc. ( Less Mess or the Company ) c/o # West Georgia Street Vancouver, British Columbia V6E 3V7 1.2 Executive Officer Michael Raven, Corporate Secretary Item 2 Details of Acquisition 2.1 Nature of Business Acquired The Company purchased all of the issued and outstanding shares of five companies (the Acquired Companies ), three of which are incorporated in Poland (Krakowska House Sp. z o.o., Torunska House Sp. z o.o. and City Self-Storage Sp. z o.o.), and were purchased via a clean, Polish shelf company, Leodegrance Sp. z o.o., and two of which are incorporated in the Czech Republic (Selvaag Evropska Building A.S. and City Self-Storage S.R.O., purchased directly by Less Mess). Collectively, the five Acquired Companies operate five self-storage facilities, two of which are in Warsaw, Poland, and three of which are in Prague, Czech Republic. In the case of four of the five facilities, the Company also acquired the real estate on which such facilities operate. The fifth facility operates on a leased property and the lease agreement is due for renewal in The Acquired Companies own and operate two facilities near the centre of Warsaw, Poland: the Krakowska facility and the Torunska facility. The Krakowska facility is four kilometres from Warsaw s city center and its lot is approximately 26,000 square feet. The self-storage facility was opened in 2006, and has 695 rental storage rooms with a combined self-storage area of approximately 25,000 square feet net lettable area ( NLA ). In addition to the self-storage areas is a retail space and office on the ground floor. The self-storage section of the building has four levels, and there are two additional levels of rental office space totalling 20,400 square feet NLA above the storage area, with a separate entrance and elevator. The building also has an underground parking garage with 33 parking spaces, and additionally 10 ground level parking spaces. Average occupancy of the Krakowska facility in 2013 was 93%. The Torunska facility is eight kilometres from Warsaw s city center. The lot is approximately 32,000 square feet. The self-storage facility opened in 2007 and has 747 rental storage rooms with a combined selfstorage area of approximately 30,000 square feet, as well as a retail area. The self-storage section of the building has three levels, and the outdoor parking lot has 12 parking stalls. Average occupancy of the Torunska facility in 2013 was 80%. The Acquired Companies have three facilities located in Prague, Czech Republic: the Holesovice facility, the Dejvice facility and the Pankrac facility. The Holesovice facility and the Dejvice facility are owned by the Acquired Companies, while the Pankrac facility is a leased property. The Holesovice facility is three Less Mess Storage Inc. Form F4 Page 1 of 4

2 kilometres from Prague s city center and its lot is approximately 85,000 square feet. The original buildings on the site are comprised of a three-level main building and a two-level sub-building. These buildings were constructed in 1951 but were then converted through an extensive renovation for selfstorage purposes in There are 556 rental storage rooms with a combined self-storage area of approximately 54,000 square feet and a retail space. These buildings also house a storage area for ancillary products sold by the Acquired Companies throughout the Czech Republic and Poland, and an open plan office area. Average occupancy of the Holesovice facility in 2013 was 80%. The Dejvice facility is the newest facility of the five operated by the Acquired Companies. It is located five kilometres from Prague s city center, on the main road to the international airport, and its lot is approximately 30,000 square feet. The self-storage facility opened in 2008 and has 635 rental storage rooms with a combined self-storage area of approximately 28,000 square feet. The self-storage section of the building has six levels, and the outdoor parking lot has 34 parking stalls. Average occupancy of the Dejvice facility in 2013 was 67%. The Pankrac facility is the only facility of the five that is not owned by the Acquired Companies. The leased facility is located three kilometres from Prague s city center and consists of three floors of a car parking garage, converted to self-storage use in 2003, and a retail area. The Pankrac facility has 633 rental storage rooms with a combined self-storage area of approximately 25,000 square feet. The self-storage section of the building has three levels, and the outdoor parking lot has ten parking stalls. Average occupancy of the Holesovice facility in 2013 was 87%. 2.2 Acquisition Date April 28, Consideration Less Mess acquired the Acquired Companies for an aggregate purchase price of 14,000,000 Euros, 7,000,000 Euros of which was paid on closing and 7,000,000 Euros of which was vendor-financed through the assumption by Less Mess of existing debt owed by the Acquired Companies to the vendors. In connection with the acquisition, the Company completed a $7,000,000 equity offering and a $5,351,500 bond offering. The Company engaged Euro Pacific Canada Inc. (the Agent ) to act as agent for a private placement equity offering (the Equity Offering ) under which the Company raised $7,000,000 through the issuance of 7,000,000 common shares and 7,000,000 common share purchase warrants ( Warrants ). Each Warrant entitles the holder thereof to purchase an additional common share for two years at an exercise price of $1.40 per share. The Equity Offering closed in two tranches: $6,484,000 under the first tranche and $516,000 under the second tranche. All securities issued pursuant to the first tranche of the Equity Offering are subject to a four month hold period expiring on August 1, All securities issued pursuant to the second tranche of the Equity Offering are subject to a four month hold period expiring on August 5, In connection with the Equity Offering, the Agent and the members of the selling group received: (i) aggregate cash commission of $490,000; and (ii) an aggregate of 490,000 compensation options. Each compensation option is exercisable for one common share and one Warrant at an exercise price of $1.00 for two years. The Agent also received a $25,000 work fee. The Company also raised PLN 14,700,000 (approximately $5,351,500) by issuing bonds (the Bonds ) on April 24, 2014 through the Company s Polish subsidiary, Leodegrance Sp. z o.o.. The Bonds pay a quarterly coupon based on an annual interest rate of 5%, and the total cost of the Bond will be 18% IRR annualized, payable on redemption. There were no arrangement fees or commissions payable in connection with the Bonds, although the Company was required to pay the legal costs of the lender, 15,000 Euros (approximately $22,500). The Bonds are repayable on the date which is two years from the date of issuance, but the Company may redeem the Bonds early, in whole or in part, without penalty at Less Mess Storage Inc. Form F4 Page 2 of 4

3 any time after six months from the date of issuance. The Bonds are secured by second charges in favour of the lender against the four freehold properties owned by the Acquired Companies. The 7,000,000 Euro vendor financing was divided into two equal facilities (A and B) of 3,500,000 Euros each. Facility A bears interest as follows: for three years from the closing date, the interest rate shall be the three-month Euribor rate plus 2.5%, but in no case shall it exceed 5.0%; and following three years from the closing date until the maturity date (five years after the closing date), the interest rate shall be the three-month Euribor rate plus 8.0%. Facility B bears interest as follows: for three years from the closing date, the interest rate shall be 5.0%; and following three years from the closing date until the maturity date (five years after the closing date), the interest rate shall be the three-month Euribor rate plus 8.0%. The principal on the facilities is repayable as follows: 125,000 Euros on each facility on the first and second anniversaries after closing; 400,000 Euros on each facility on the third and fourth anniversaries after closing; the remaining principal on the fifth anniversary after closing. The vendor financing is secured by first charges in favour of the vendors against the four freehold properties owned by the Acquired Companies. The Company acquired the exclusive right to purchase the Acquired Companies from Mr. Guy Pinsent pursuant to an asset purchase agreement dated January 9, 2014 (the Asset Purchase Agreement ), as am. The Company also acquired other assets that Pinsent obtained or developed with respect to the self-storage business, including certain intellectual property (i.e. the Less Mess brand and intellectual property). Pinsent was unrelated to the Company at the time the Asset Purchase Agreement was entered into, but upon successful completion of the acquired of the Acquired Companies Pinsent became the President and CEO of Less Mess. The consideration payable by the Company under the Asset Purchase Agreement was an aggregate of 2,000,000 common shares, as follows: Pinsent received 1,130,433 shares; Peter Smith (the Company s President and CEO at the time the Asset Purchase Agreement was entered into, now the Company s Chairman and Vice President, Corporate Development) received 521,739 shares; Michael Raven (the Company s Corporate Secretary) received 173,914 shares; and two arm s length parties received 86,957 shares each. Each of Mr. Smith and Mr. Raven received their shares as compensation for services provided to Pinsent during his pursuit of the acquisition of the Acquired Companies prior to the Company s involvement in the transaction. 2.4 Post-Acquisition Changes Which Effect Financial Position (i) The Company is engaged with banks to refinance the Bonds or the Bonds plus the majority of the vendor financing, with draw down from the selected bank anticipated for end-october 2014, six months after closing and the earliest time at which the Bonds can be redeemed without penalties. This will lower the cost of capital on PLN 14,700,000 of Company debt (the Bonds) by approximately 12 percentage points, saving the Company approximately $620,000 a year in interest cost. (ii) The Company has begun the process of merging the Czech Acquired Companies into a single entity, and, separately, merging the Polish Acquired Companies plus Leodegrance Sp. z o.o. into a single company. When completed, anticipated by October 2014, the Company will have two wholly owned subsidiaries, one Czech and one Polish. These mergers will benefit the Company by: (a) making the structure simpler and easier to understand for investors; (b) generating savings on accountancy, auditing and other costs associated with maintaining separate companies, estimated to be $20,000 a year; (c) in the case of the Czech companies, savings on otherwise non-recoverable VAT, estimated at $40,000 a year, by eliminating inter-company rent. 2.5 Prior Valuations None. Less Mess Storage Inc. Form F4 Page 3 of 4

4 2.6 Parties to Transaction As noted above under 2.3 Consideration, as part of the transaction the Company issued common shares to Guy Pinsent (President and CEO of the Company), Peter Smith (Chairman and Vice President, Corporate Development of the Company) and Michael Raven (Corporate Secretary of the Company). 2.7 Date of Report July 10, 2014 Item 3 Financial Statements and Other Information The following financial statements are attached: Audited combined financial statements for the Acquired Companies for the year December 31, 2012, and December 31, 2013, and for the three month periods March 31, 2013 and March 31, Unaudited pro forma consolidated statement of financial position for the period February 28, 2014 combining the condensed interim statement of financial position of DGM Minerals Corp. (newly named Less Mess Storage as of April 24, 2014) as at February 28, 2014 and the combined interim balance sheet of the Acquired Companies as at March 31, Unaudited pro forma consolidated statement of operations and comprehensive loss for the year August 31, 2013 combining the audited statement of operations and comprehensive loss of DGM Minerals Corp. for the year August 31, 2013 with the constructed unaudited combined statement of operations and comprehensive income of the Acquired Companies for the year September 30, Unaudited pro forma consolidated statement of operations and comprehensive loss for the six months February 28, 2014 combining the condensed interim statement of operations and comprehensive loss of DGM Minerals Corp. for the six months February 28, 2014 with the constructed unaudited combined interim statement of operations and comprehensive income of the Acquired Companies for the six months March 31, Amounts originating in foreign currencies may be expressed differently in various financial statements due to the fact that foreign exchange rates and other assumptions used may differ due to various guidelines that may apply for statements prepared and filed at different times and for different purposes. For example, the average foreign exchnage rates applied to certain numbers may change over the course of a reporting year, thus resulting in slightly different numbers from quarter to quarter as well as for the final year end calculation. In all cases, IAS 21 - The Effects of Changes of Foreign Exchange Rates will apply. Less Mess Storage Inc. Form F4 Page 4 of 4

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9 Combined Financial Statements covering City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o., Toruńska House Sp. z o.o., City Self-Storage s.r.o., For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Warsaw / Prague, 20 June 2014

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11 Combined Financial Statements For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March COMBINED BALANCE SHEET 2 COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME 3 COMBINED STATEMENT OF NET CAPITAL SURPLUS (DEFICIENCY) 4 COMBINED STATEMENT OF CASH FLOWS 5 NOTES TO THE FINANCIAL STATEMENTS 1. ORGANISATION AND OPERATIONS 6 2. CAPITAL MANAGEMENT 8 3. FINANCIAL INSTRUMENTS 8 4. SIGNIFICANT ACCOUNTING POLICIES NEW ACCOUNTING STANDARDS TRADE & OTHER RECEIVABLES TANGIBLE ASSETS TRADE & OTHER PAYABLES LONG TERM LIABILITIES PROVISIONS, ACCRUALS AND DEFERRED INCOME CAPITAL STOCK INCOME CALCULATION OF EBITDA OPERATING EXPENSES RESULT ON OTHER OPERATING ITEMS RESULT ON FINANCIAL ITEMS RELATED PARTY TRANSACTIONS SUBSEQUENT EVENTS LEASE OBLIGATIONS INCOME TAXES OPERATING SEGMENTS REMUNARATION AND BENEFITS OF MANAGEMENT EMPLOYMENT STRUCTURE 36 Page 1 of 36

12 Combined Financial Statements For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March COMBINED BALANCE SHEET City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., City-Self Storage s.r.o., As at 31 December 2012, 31 March 2013, 31 December 2013 and 31 March Current Assets Cash Trade & Other Receivables Inventory Total current assets Non-current assets Tangible assets Total non-current assets Total assets Current Liabilities Trade and Other Payables Provisions Accruals and deferred income Total current liabilities Long term liabilities Deferred tax provision Shareholders Equity Capital Stock Supplementary capital Accumulated deficit Translation difference Total Equity Page 2 of 36

13 Combined Financial Statements For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., City Self-Storage s.r.o., For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Sales revenue Operating expenses Profit on Operations Result on other operating items Result on financial items Profit Before Tax Corporate Tax Net Profit Other Comprehensive Income Basic and diluted Earnings per Share Weighted average number of Common Shares Outstanding Page 3 of 36

14 Combined Financial Statements For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March COMBINED STATEMENT OF NET CAPITAL SURPLUS (DEFICIENCY) City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., City Self-Storage s.r.o., For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Share capital Balance beginning of the period Changes Balance end of periods Supplementary capital Balance beginning of the period Changes Balance end of periods Accumulated Deficit Balance beginning of the period Transfer to Supplementary capital Net profit (loss) Balance end of period Translation difference Balance beginning of the period Changes during the period Balance end of period Net capital surplus (deficiency) Page 4 of 36

15 Combined Financial Statements For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March COMBINED STATEMENT OF CASH FLOWS City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., City Self-Storage s.r.o., For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Income on operating activities Net profit / loss Cash inflows on operating activities Unrealised foreign exchange differences Corporate Tax paid Interest Cash used / generated on operating activities Income on investing activities Purchases of fixed assets/investments Cash used / generated on investing activities Income on financing activities Loans drawn in Loans paid / settled (including interest) Increase in share capital Cash used / generated on Financing Activities Increase in cash Cash beginning of period Cash end of period Difference on translation Page 5 of 36

16 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 1. ORGANISATION AND OPERATIONS These financial statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ), as published by the International Financial Reporting Standards Board and approved by the European Commission. The entities covered by these financial statements are: Poland Czech Republic City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., City Self-Storage s.r.o., further referred to collectively as the Companies. The combined financial statements have been prepared for inclusion in a Business Acquisition Report by Less Mess Storage Inc. ("LMS"), as required by the TSX Venture Exchange, for the acquisition of the Companies by LMS, finalised on 28th April Local financial statements prepared for statutory purposes by individual companies have been approved by their respective Management at the following dates: Company Financial statements for the 12 month period City Self-Storage Sp. z o.o Krakowska House Sp. z o.o Toruńska House Sp. z o.o City Self-Storage s.r.o., The Companies did not prepare financial statements for statutory purposes for the 3 month periods 31 March 2013 or 31 March Page 6 of 36

17 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Operations City Self-Storage Sp. z o.o. was established on the basis of a memorandum and articles of association prepared in the form of a notarial deed in the office of notary Martyna Gonstał in Warsaw on 4 November 2005, Repertory A no. 3814/2005. The Company is a privately owned entity that operates on the basis of the Commercial Partnerships and Companies Code. The Company s registered office is located in Warsaw in al. Krakowska 271. The Company s main activity is renting self-storage spaces to customers. Additionally the Company sells packaging materials both at its properties and by internet. Krakowska House Sp. z o.o. was established on the basis of a memorandum and articles of association prepared in the form of a notarial deed in the office of notary Martyna Gonstał in Warsaw on 10 March 2005, Repertory A no. 669/2005. The Company is a privately owned entity that operates on the basis of the Commercial Partnerships and Companies Code. The Company s registered office is located in Warsaw in al. Krakowska 271. The Company owns a self-storage and office building located in Warsaw at al. Krakowska 271. The building s gross area is 5,940.2 m2 over 5 levels (floors). Company s main activity is renting self-storage space to City Self-Storage Sp. z o.o. (4 floors of self-storage units with gross area of 4,022.4m2), as well as renting office space to small and medium-sized businesses. Toruńska House Sp. z o.o. was established on the basis of a memorandum and articles of association prepared in the form of a notarial deed in the office of notary Martyna Gonstał in Warsaw on 26 April 2006, Repertory A no. 1746/2006. The Company is a privately owned entity operates on the basis of the Commercial Partnerships and Companies Code. The Company s registered office is located in Warsaw in al. Krakowska 271. The Company owns a owns a self-storage building located in Warsaw at Toruńska Str. The total self-storage area is 4,507.5 m2. Company s main activity is renting storage area to City Self-Storage Sp. z o.o. and general building works connected with construction of residential commercial buildings. City Self-Storage, s.r.o. was established on 19 June 2000 under the business name Tormex, s.r.o. As of 2 May 2001, the Company was acquired by Continental Storage AS (future Selvaag Self-Storage AS) and as of 30 August 2002 the Company s business name has changed to City Self-Storage s.r.o. The Company is a privately owned entity which operates on the basis of the Commercial Partnerships and Companies Code. The Company s registered office is located in Prague in Argentinská 40/516. City Self-Storage, s.r.o. provides self-storage services in three locations in Prague Holešovice, Pankrác and Dejvice. Holešovice location is owned by the Company, Pankrác is leased from 3H, spol. s r.o. and Dejvice is leased from Selvaag Evropska Building, a.s. (a related party). The Company s main activity is renting self-storage spaces for both private individuals as well as small and medium-sized businesses. Additionally the Company sells packaging goods to tenants. Selvaag Evropska Building, a.s. was established on 2 October 2003 under the business name Bohemia Building, a.s. As at 18 April 2008, the Company s owner was changed as a result of the acquisition process Page 7 of 36

18 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March and the Company s name was changed to Selvaag Evropska Building, a.s. The Company is a privately owned entity which operates on the basis of the Commercial Partnerships and Companies Code. The Company s registered office is located in Prague in Argentinská 40/516. The Company owns land and a building in Prague, in the district of Vokovice. The whole property is leased to the City Self-Storage s.r.o., which is a related party. Lease agreement was concluded on 26 June 2008 for a fixed period (15 years) with an extension option. Company s basic subject main activity is renting its premises to the only lessee, City Self-Storage s.r.o. Going Concern These financial statements have been prepared on the basis that each of the Companies is a going concern, which contemplates the realisation of its assets and the settlement of its liabilities in the normal course of operations. 2. CAPITAL MANAGEMENT The Companies objective when managing capital is to safeguard the Companies ability to continue as a going concern in order to further operations. In the management of capital, the Companies include the components of equity as capital. The Companies manage the capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Companies may attempt to issue new shares or dispose of assets. In order to facilitate the management of its capital requirements, the Companies prepare annual expenditure budgets that are updated as necessary. The Boards of Directors do not establish a quantitative return on capital criteria for respective Companies management, but rather rely on the expertise of the Companies management to sustain future development of the business. The Companies have not changed their capital risk management strategy during the 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 2013 and 31 March 2014 and are not subject to externally imposed capital requirements. 3. FINANCIAL INSTRUMENTS The Company s financial assets, other than cash, and financial liabilities are classified as follows: Amounts receivable, including prepaid expenses, are classified as Trade and other receivables. They are presented as amounts due. As at 31 December 2012, 31 March 2013, 31 December 2013 and 31 March 2014 the recorded amounts approximate fair value. Accounts payable due to non-related and related parties, including trade payables and tax liabilities, are classified as Trade and other payables and are presented as amounts due. As at 31 December 2012, 31 March 2013, 31 December the recorded amounts approximate fair value. Page 8 of 36

19 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Accrued liabilities and deferred income are presented under separate headings. As at 31 December 2012, 31 March 2013, 31 December the recorded amounts approximate fair value. Loans granted by Parent Companies, including accrued interest, are classified as Long term liabilities. Amounts of principal amounts of loans granted are increased by amounts of accrued, and unpaid interest. As at 31 December 2012, 31 March 2013, 31 December the recorded amounts approximate fair value. The carrying values of cash and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. Credit Risk Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations. The Companies limit exposure to credit risk by maintaining its cash with major financial institutions. Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Companies approach to managing liquidity risk is to provide reasonable assurance that they will have sufficient funds to meet liabilities when due. The Companies manage their liquidity risk by forecasting cash flows required for operations and anticipated investing and financing activities. As at each balance sheet date, the Companies held cash available to apply against short-term business requirements and current liabilities. All of the Company s financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. Market Risk Market risks consist of interest rate risk, foreign currency risk and other price risk. Market risk to which the Company is exposed is as follows: Interest rate risk consists of two components: (i) To the extent that payments made or received on the Companies monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Companies are exposed to interest rate cash flow risk. (ii) To the extent that changes in prevailing market rates differ from the interest rate in the Companies monetary assets and liabilities, the Companies are exposed to interest rate price risk. Page 9 of 36

20 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March The Companies are exposed to interest rate risk: Krakowska House Sp. z o.o., Toruńska House Sp. z o.o. and have significant interest bearing loans payable, with interest based on a variable inter-bank rate (3m LIBOR) increased by a margin of 1.25%. City Self-Storage s.r.o loan is bearing interest at a fixed rate, and not subject to interest rate risk. City Self-Storage Sp. z o.o. loan has been converted to capital and its balance as at 31 March 2014 is nil, it is thus not considered for interest risk any more. 3M LIBOR increased from 0,0120% to 0,0230% between 31 Dec 2012 and 31 December In the event that the 3M LIBOR increased again by a similar level, i.e. to 0,0350%, this would impact the overall interest rate by 1%. Such increase would result in increase of interest payable by up to CAD 2T on an annual basis. All parent company loans were replaced with new vendor loans on the acquisition of the Companies by LMS on 28 th April 2014 with fixed or capped interest rates. Foreign currency risk was related to long term parent company loans to Torunska House Sp. z o.o. and Krakowska House Sp. z o.o.. These two companies were exposed to financial risk related to the fluctuation of foreign exchange rates. A significant change in the rate of the Polish zloty against the Euro could have had an effect on the Companies results on operations, financial position or cash flow. The Companies had not hedged their exposure to exchange rate fluctuations. The Companies' net exposure to foreign currency risk was as follows: Loan balance (combined) EUR PLN Based on the above and assuming all other variables remained constant, a 7% weakening or strengthening of the Polish zloty against the Euro would have resulted in the following net changes to the combined statement of operations and comprehensive income: Estimated effect (CAD) As of 28 th April 2012, the vendor loans which replaced the parent company loans are all denominated in Euros and the Companies have not hedged their exposure to exchange rate fluctuations. The Companies maintain their accounting records in local currency being Polish zloty and Czech crown, while the financial statements for the consolidation purposes require translation of the local financial statements into Canadian dollars. Significant fluctuations on Polish zloty or Czech crown to Canadian dollar might have a material effect on the Companies other comprehensive income. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Companies are not exposed to other price risk. Page 10 of 36

21 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 4. SIGNIFICANT ACCOUNTING POLICIES Foreign Currency Translation The functional currencies of the Companies are presented in the below table: Country Company Code Currency name Poland City Self-Storage Sp. z o.o., Krakowska House Sp. z o.o. Toruńska House Sp. z o.o., PLN PLN PLN Polish zloty Polish zloty Polish zloty Czech Republic City Self-Storage s.r.o., CZK CZK Czech crown Czech crown These financial statements were prepared in CAD (Canadian dollars), to conform to the presentation used by LMS. Assets and liabilities were translated into CAD at exchange rates (PLN to CAD and CZK to CAD) applicable at relevant balance sheet dates. Capital stock figures were translated into CAD at historic rates applicable at the dates when share capital was raised or supplemented. Reserves and retained earnings figures were translated into CAD at average rates applicable for the period when the reserves and retained earnings were recognised. Income statement figures were translated into CAD at average rates applicable for the period when the income and cost were recognised. Transactions entered into by the Companies and denominated in foreign currencies are converted into PLN and CZK according to the rate of exchange as at the transaction date. As at the balance sheet day assets and liabilities denominated in foreign currencies are converted into PLN and CZK according to the bank average rate of exchange being in effect on that day. Differences in exchange rates are respectively included in revenues of financial costs with the exception of rates of exchange differences resulting from valuation of fixed assets under construction from the day of their purchase to balance sheet day or by the day of acceptance for using the fixed asset, which increase the value of fixed assets under construction or value of fixed assets. Use of Estimates The preparation of these combined financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the combined financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the combined financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and may affect both the period of revision and future periods. Page 11 of 36

22 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Significant assumptions about the future and other sources of estimation uncertainty that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: Critical Accounting Estimates Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and include, but are not limited to, the following: i. Estimated useful lives of tangible assets - the estimated useful lives of tangible assets, which is included in the combined statements of financial position, will impact the amount and timing of the related amortization included in profit or loss. ii. Recovery of deferred tax assets - The Company estimates the expected manner and timing of the realization or settlement of the carrying value of its assets and liabilities and applies the tax rates that are enacted or substantively enacted on the estimated dates of realization or settlement. Critical Accounting Judgments Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the combined financial statements include, but are not limited to the functional currency. The Companies applied judgment in determining their functional currency. The Polish zloty and Czech crown are the functional currencies because they are the currencies in which funds are sourced and their dependence on the parent company for financial support. Financial assets The Companies classify their financial assets in the following categories: held-to-maturity, fair value through profit or loss ( FVTPL ), loans and receivables, and available-for-sale ( AFS ). The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at recognition. Fair value through profit or loss Financial assets are classified as FVTPL when the financial asset is held-for-trading or it is designated as FVTPL. A financial asset is classified as FVTPL when it has been acquired principally for the purpose of selling in the near future, it is a part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short-term profit-taking or if it is a derivative that is not designated and effective as a hedging instrument. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Cash is included in this category of financial assets. Page 12 of 36

23 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially recognized at the transaction value and subsequently carried at amortized cost, less impairment losses. The impairment loss on receivables is based on a review of all outstanding amounts at year-end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate method. Held-to-maturity Held-to-maturity financial assets are recognized on a trade-date basis and are initially measured at fair value using the effective interest rate method. The Company has no assets classified as held-to-maturity. Available-for-sale AFS financial assets are non-derivatives that are either designated as AFS or not classified in any of the other financial assets categories. Changes in the fair value of AFS financial assets, other than impairment losses, are recognized as other comprehensive income and classified as a component of equity. Financial liabilities The Company classifies its financial liabilities in the following category: Borrowings and other financial liabilities Borrowings and other financial liabilities are non-derivatives and are recognized initially at fair value, net of transaction costs incurred, and are subsequently stated at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in the income statement over the period to maturity using the effective interest method. Borrowings and other financial liabilities are classified as current or non-current based on their maturity date. Financial liabilities include accounts payable and accrued liabilities. Fair value hierarchy Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows: Level 1: Level 2: Level 3: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Inputs for assets or liabilities that are not based on observable market data. Page 13 of 36

24 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Tangible assets Tangible assets are recorded at cost, and sub-divided into component parts where applicable based on their estimated useful lives. Depreciation is provided at annual rates considered sufficient to amortise the cost of the assets over their estimated useful lives, and are as follows: 1.5%-10% for buildings and constructions, 10%-30% for machinery and equipment, 20% for means of transport, 10%-30% for other fixed assets. Land is not depreciated. Income Taxes As a result of the carrying value of the prior year s tax losses, accrued and unpaid interest on related Company loans received, as well as foreign exchange losses, the Companies would be entitled to recognising deferred tax assets. Valuation allowances amounting to the full value of deferred tax assets were recognised for all accounting periods. Deferred tax liabilities are disclosed following the balance sheet liability method of accounting for income taxes. Under this method, future income tax liabilities are recorded based on temporary differences between the carrying amount of balance sheet items and their corresponding tax bases. Future income tax assets and liabilities would be measured using enacted or substantively enacted tax rates and laws expected to apply when the future tax liabilities or assets are to be either settled or realized. Revenue recognition Revenue is recognised at fair value amounting to payments actually received or remaining due and represent amounts receivable for services rendered and goods delivered within business operations, after deductions related to rebates, VAT and other sales related taxes. Revenue on services is recognised in the period when the service was rendered. Revenue on sales of goods is recognised at the moment of goods delivery and transfer of rights. Revenue on interest is recognised cumulatively, based on principal amount due, in line with effective interest rate method. Operating segments The Companies operating segments are strategic business units that offer unique products and services, and are reported with a manner consistent with the internal reporting provided to key management personnel. The accounting policies of the segments are the same as those described in the significant accounting policies. Page 14 of 36

25 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March All operating segments operating results for which discrete financial information is available are reviewed regularly by key management personnel to make decisions about resources to be allocated to the segment and to assess performance. Segment results that are reported to key management personnel include items directly attributable to a segment as well as those items that can be allocated on a reasonable basis. Other Comprehensive Income (loss) Other comprehensive income (loss) represents changes in the net capital surplus (deficiency) during a period resulting from differences on translation of local currency financial statements into Canadian dollars. These differences do not impact the combined net result. 5. NEW ACCOUNTING STANDARDS Standards and interpretations applied in 2013 for the first time The following changes to existing standards published by the International Financial Reporting Standards Board and approved by the European Commission (EC) are applied starting from 2013: IFRS 13 Fair Value measurement, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to IFRS 1 First time adoption significant hyperinflation and deleting fixed deadlines for first time adoption, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to IFRS 1 First time adoption governmental loans, approved by the EC on 4 March 2013 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to IFRS 7 Financial instruments - disclosures Setting off financial assets and liabilities, approved by the EC on 13 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to IAS 1 Financial statements presentation presentation of elements of comprehensive income, approved by the EC on 5 June 2012 (and to be applied for annual accounting periods starting on or after 1 July 2012), Changes IAS 12 Deferred tax realisation of assets value, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to IAS 19 Employee benefits Amendments to accounting for benefits after term of employment approved by the EC on 5 June 2012 (and to be applied for annual accounting periods starting on or after 1 January 2013), Changes to various standards IFRS amendments (2012) changes in the procedures for annual amendments to IFRS, published on 17 May 2012 (IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34) aimed at resolving differences and discrepancies in wording, approved by the EC on 27 March 2013 (and to be applied for annual accounting periods starting on or after 1 January 2013), Page 15 of 36

26 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Above mentioned standards, interpretations and changes to standards did not have any significant impact of the applied accounting policies of the Companies. Standards and interpretations already published and approved by the EC, but not yet in force The Companies did not apply the following standards, changes to standards or interpretations, that were already published and approved by the EC, but not yet in force: IFRS 10 Consolidated financial statements, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014), IFRS 11 Joint arrangements, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014), IFRS 12 Disclosure of interest in other entities, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014), IAS 27 (updated in 2011) Separate financial statements, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014), IAS 28 (updated 2011) Investments in associates, approved by the EC on 11 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014), Changes to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint arrangements and IFRS 12 Disclosure of interest in other entities explanations and guidance for temporary periods, approved by the EC on 4 April 2013 (and to be applied for annual accounting periods starting on or after 1 January 2014), Changes to IAS 32 Financial Instruments - presentations setting off financial assets and liabilities, approved by the EC on 13 December 2012 (and to be applied for annual accounting periods starting on or after 1 January 2014). 6. TRADE & OTHER RECEIVABLES Details of titles presented under trade and other receivables: Trade receivables Doubtful debts provision Tax receivables Other receivables Prepaid expenses Advances provided Total Page 16 of 36

27 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Movements in doubtful debts provisions: Doubtful debts provision Opening balance Creation Utilisation Resolution Translation difference Closing balance Trade receivables ageing: Current Overdue up to 30 days Overdue up to 60 days Overdue up to 90 days Overdue up to 180 days Overdue up to 360 days Overdue over 360 days Total Page 17 of 36

28 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 7. TANGIBLE ASSETS Movements in the 12 month period 31 December 2012 Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software Total Acquisition cost Opening Balance Additions Revaluation Disposals Translation difference Closing Balance Depreciation Opening Balance Depreciation in the period Disposals Additions Translation difference Closing Balance Impairment losses at beginning of period Impairment losses at end of period Net Book Value Net Book Value Page 18 of 36

29 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Movements in the 3 month period 31 March 2013 Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software Total Acquisition cost Opening Balance Additions Revaluation Disposals Translation difference Closing Balance Depreciation Opening Balance Depreciation in the period Disposals Additions Translation difference Closing Balance Impairment losses at beginning of period Impairment losses at end of period Net Book Value 31 March Net Book Value Page 19 of 36

30 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Movements in the 12 month period 31 December 2013 Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software Total Acquisition cost Opening Balance Additions Revaluation Disposals Translation difference Closing Balance Depreciation Opening Balance Depreciation in the period Disposals Additions Translation difference Closing Balance Impairment losses at beginning of period Impairment losses at end of period Net Book Value Net Book Value Page 20 of 36

31 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Movements in the 3 month period 31 March 2014 Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software Total Acquisition cost Opening Balance Additions Revaluation Disposals Translation difference Closing Balance Depreciation Opening Balance Depreciation in the period Disposals Additions Translation difference Closing Balance Impairment losses at beginning of period Additions Translation difference Impairment losses at end of period Net Book Value 31 March Net Book Value Page 21 of 36

32 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Presentation of tangible assets by country of their location (geographical segments): As at As at As at As at Poland (Net Book Value) Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software Czech Republic (Net Book Value) Freehold land Building and construction Plant and machinery Vehicles Other tangible fixed assets Construction in progress Software TOTAL (Net Book Value) TRADE & OTHER PAYABLES Details of titles presented under trade and other payables: Trade Payables Uninvoiced costs Tax payables Other payables including: short term loans Salary payables Total Page 22 of 36

33 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Trade payables ageing: Current Overdue up to 30 days Overdue up to 60 days Overdue up to 90 days Overdue up to 180 days Overdue up to 360 days Overdue over 360 days Total LONG TERM LIABILITIES Long term liabilities comprise of loans received from Parent Companies. Terms under which the loans have been granted are presented below. Company / Loan balance as at 31 March 2014 Lender Loan repayment date Interest rate City Self-Storage Sp. z o.o. Selvaag Self-Storage AS Loan transferred to capital Balance : CAD 0 Krakowska House Sp. z o.o. Balance : CAD 2,724,106 Toruńska House Sp. z o.o. Balance : CAD 2,409,450 City Self-Storage s.r.o. Balance : CAD 3,975,645 Selvaag Eiendom AS Selvaag Eiendom AS Selvaag Self-Storage AS Loan is repayable by 31 December 2015 or within ten days of receipt of a written demand from the Lender Loan is repayable by 31 December 2015 or within ten days of receipt of a written demand from the Lender Loan is repayable when the borrower is generating positive cash flows, or payable on demand LIBOR % margin, unpaid interest is capitalised LIBOR % margin, unpaid interest is capitalised 2.07% p.a. Page 23 of 36

34 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Company / Loan balance as at 31 March 2014 Lender Loan repayment date Interest rate Selvaag Evropska Building a.s. Balance : CAD 2,903,523 Selvaag Eiendom AS 31 December 2015 at the latest 3-month LIBOR published by Selvaag Gruppen plus 1.25% margin Movements in long term loans: Opening balance - loans: Loan issue Interest accrued Interest paid Loan repaid Balance valuation Exchange difference - paid interests Exchange difference - paid principal amount WHT on interest paid Translation difference Closing balance - loans: Detailed titles within long term liabilities: Long term loans Long term liabilities owed to other entities Total Page 24 of 36

35 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 10. PROVISIONS, ACCRUALS AND DEFERRED INCOME Detailed titles within provisions and accruals: Unused holidays provison Audit provision Other provisons Deferred income Total CAPITAL STOCK Shareholding structure as at 31 March 2014 for each of the companies covered in the Financial Statements is presented in the table below: Company City Self-Storage Sp. z o.o. Krakowska House Sp. z o.o. Toruńska House Sp. z o.o. City Self-Storage s.r.o. Selvaag Evropska Building a.s. Total Number of shares Total Value of Share Capital 107,035 shares PLN 5,351,750 (CAD 1,917,228.55) 10,000 Shares PLN 5,000,000 (CAD 1,908,654.81) 7,200 shares PLN 3,600,000 (CAD 1,251,358) 143,000 shares CZK 143,000,000 (CAD 7,722,139.56) 200 shares CZK 2,000,000 (CAD 98,789.82) Shareholders Selvaag Self- Storage AS Selvaag Eiendom AS Selvaag Eiendom AS Selvaag Self- Storage AS Selvaag Self- Storage AS Number and value of shares held 107,035 (PLN 5,351,750) 10,000 (PLN 5,000,000) 7,200 (PLN 3,600,000) % held 100% 100% 100% CZK 143,000, % 200 shares CZK 2,000, % During the period covered with these financial statements, the changes in Equity related to: i. Increase in share capital in City Self-Storage Sp. z o.o. from PLN 3,701,750 to PLN 5,351,750 taken by the shareholder Selvaag Self-Storage AS. Increase in share capital took place on 11 February 2014, by transfer of the long term loan amounting to PLN 8,244,422; PLN 1,650,000 was transferred to share capital, and the balance was transferred to reserve capital; ii. Selvaag Eiendom AS purchased shares of Krakowska House Sp. z o.o. and Toruńska House Sp. z o.o. held by Karl Olaf Moriggi; as of 31 March 2014 Selvaag Eiendom AS being the only shareholder of Krakowska House Sp. z o.o. and Toruńska House Sp. z o.o. Page 25 of 36

36 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March iii. iv. Increase in supplementary capital financed with net profits earned by individual companies: In 2013, Krakowska House Sp. z o.o. and Toruńska House Sp. z o.o. transferred CAD 494,948 and CAD 512,130 respectively Transfer of net profit / loss to accumulated deficit. 12. INCOME Detailed titles of income: Sales Revenue: Self Storage room income Other income - rent & ancillary Rent from CSS eliminated on consolidation Recharges from CSS eliminated on consolidation Office net rental income Office recharges Net antenna income Antenna recharges Split of income by markets (countries): Polish market City Self Storage Sp. z o.o Krakowska House Sp. z o.o Toruńska House Sp. z o.o Czech market City Self Storage s.r.o TOTAL Page 26 of 36

37 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 13. CALCULATION OF EBITDA Adjusted EBITDA is a non-ifrs financial measure, which is defined as earnings before financial expenses, income taxes, depreciation and amortization ("EBITDA"). Management believes that EBITDA is an important indicator of the issuer's ability to generate liquidity through operating cash flow to fund future working capital needs, service outstanding debt, and fund future capital expenditures. EBITDA is also used by investors and analysts as a metric for valuing an issuer. EBITDA provides additional useful information to investors and analysts but the measure does not have any standardized meaning under IFRS. EBITDA should therefore not be considered in isolation or used as a substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate EBITDA differently. EBITDA calculated based on combined financial results of the Companies Profit on Operations: Sales Operating expenses Add back Depreciation EBITDA Page 27 of 36

38 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March EBITDA as per financial statements reconciliation to EBITDA presented in Management Accounts related to five Companies Key adjustments are: i. Applying constant exchange rates of PLN and CZK to CAD [PLN/CAD = 2.82; CZK/CAD = 18.64; same exchange rate applied for all accounting periods] ii. Adjusting for related party costs and income iii. Adjusting for non-recoverable VAT effect (*after merging and City Self- Storage s.r.o., and elimination of related party costs) EBITDA based on constant CAD foreign exchange rates, prior to adjustments add back customer late payment penalties add back insurance income deduct doubtful debts write-offs add back effect of reversal of doubtful debts provisions add back parent / related companies costs deduct non-recoverable VAT adjusted for and City Self- Storage s.r.o. merger and related party eliminations deduct intercompany revenue KH office rental income adjustment Repair and maintenance cost adjustment (CAD) Adjusted Pro-Forma EBITDA Page 28 of 36

39 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 14. OPERATING EXPENSES Details of operating expenses: Operating Expenses Cost of goods sold Depreciation Materials Energy Rent Services Salaries Social benefits Taxes (real estate, property etc) Other Total Services include cost of repairs and maintenance, professional services (accounting, legal, tax and audit), management and consulting services, postage, security cleaning and other. Key cost items within services are presented below: Services Costs of Repairs and maintenance Operating costs (properties) Consulting services Management charges Marketing services Accounting services Legal, tax advisory IT services Post, Internet and transport services Cleaning Other services TOTAL Services Rent (Pankrác Buiding) TOTAL Rent and Services Page 29 of 36

40 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March 15. RESULT ON OTHER OPERATING ITEMS Details of results on other operating items: Other Operating Income Reversal of doubtful debts provision Change in provisions Profit on disposal of non-financial fixed assets Tax refunds Insurance income Customer late payment penalties Other Other Operating Expenses Cost of doubtful debts provision Doubtful debts writ offs Change in provisions Insurance of fixed assets Non deductible VAT Other Result on other operating itmes RESULT ON FINANCIAL ITEMS Details of results on financial items: Financial income Interest Realised foreign exchange gains Unrealised foreign exchange gains Other Page 30 of 36

41 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March Financial expenses Interest on intercompany loans Realised foreign exchange losses Unrealised foreign exchange losses Bank Charges Other Result on financial items The table below presents income and profits (disclosed as negative figures), expenses and losses per classes of financial instruments. The Companies financial instruments are limited to accounts receivable and parent companies loans Accounts receivable Interest income/expenses Impairment charges Exchange gains/losses Financial Liabilities Parent Company Loans Interest income/expenses Impairment charges Exchange gains/losses TOTAL (Profit) / Loss RELATED PARTY TRANSACTIONS Related party transactions include services of rent of storage and office space from Toruńska House Sp. z o.o. and Krakowska House Sp. z o.o. to City Self-Storage Sp. z o.o., as well as services of rent of storage and office space from to City Self-Storage s.r.o. All these transactions, as well as resulting accounts payable and receivables balances as at each period end have been eliminated for consolidation purposes. Loans granted by Parent Companies (as described in detail in Section 8 of the Notes) or related interest cost have not been eliminated from the Consolidated financial statements. Parent Companies are not subject to consolidation within these financial statements, and have not been included. Page 31 of 36

42 For 12 month periods 31 December 2012, 31 December 2013 and 3 month periods 31 March The consolidated financial statements include transactions with directors and/or officers of the Companies. No share-based compensation expenses were incurred. Key management personnel were not paid any post-employment benefits, termination benefits or other long-term benefits during the respective periods. Other related party transactions relate to services (management and consulting) provided to Companies by their shareholders. Details of such transactions in each accounting period are presented below: Consulting services provided by (CAD): Selvaag Karl Moriggi TOTAL Illustration of related party transactions Page 32 of 36