POLNORD SA CAPITAL GROUP

Transcription

1 POLNORD SA CAPITAL GROUP CONSOLIDATED QUARTERLY REPORT FOR THE FIRST QUARTER OF 2011 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS GDYNIA, 16 May 2011

2 CONTENTS I. GENERAL INFORMATION... 4 II. CAPITAL GROUP'S CHARACTERISTICS COMPOSITION OF THE CAPITAL GROUP EFFECTS OF CHANGES IN THE CAPITAL GROUP S STRUCTURE, INCLUDING MERGERS, ACQUISITIONS OR DIVESTMENTS OF MEMBERS OF THE COMPANY S GROUP, LONG-TERM INVESTMENTS, RESTRUCTURING AND DISCONTINUATION OF OPERATIONS COMPANIES COVERED BY CONSOLIDATION COMPANIES EXCLUDED FROM CONSOLIDATION PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS CHANGES IN PROVISIONS DIFFERENCES BETWEEN FINANCIAL RESULTS AND THE LAST PUBLISHED FORECAST REVENUES AND FINANCIAL RESULTS BY SEGMENTS CONDENSED SEMI-ANNUAL FINANCIAL STATEMENTS OF POLNORD SA CAPITAL GROUP CONSOLIDATED INCOME STATEMENT (IN THOUSAND PLN) CONSOLIDATED STATEMENT OF OVERALL INCOME IN THOUSAND PLN CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (BALANCE-SHEET) IN THOUSAND PLN CONSOLIDATED CASH FLOW STATEMENT IN THOUSAND PLN STATEMENT OF MOVEMENTS IN CONSOLIDATED EQUITY IN THOUSAND PLN OFF-BALANCE-SHEET ITEMS IN THOUSAND PLN FACTORS AND EVENTS, PARTICULARLY OF EXTRAORDINARY NATURE, WHICH SIGNIFICANTLY AFFECT THE FINANCIAL RESULTS EVENTS WHICH OCCURRED AFTER THE DATE OF PREPARING THE CONDENSED QUARTERLY FINANCIAL STATEMENTS AND WERE NOT DISCLOSED IN SUCH STATEMENTS BUT MAY SIGNIFICANTLY AFFECT FUTURE FINANCIAL RESULTS INFORMATION ABOUT THE DISTRIBUTED (OR DECLARED) DIVIDENDS NOTES ON SEASONAL AND CYCLICAL NATURE OF CAPITAL GROUP S OPERATIONS III. CAPITAL GROUP'S ACTIVITY SIGNIFICANT ACHIEVEMENTS OF THE CAPITAL GROUP MAIN MARKETS OF ACTIVITY DEVELOPMENT PROJECTS INCLUDED IN THE INCOME STATEMENT IV. COMPOSITION OF THE SHAREHOLDING, AUTHORITIES OF THE COMPANY SHAREHOLDERS CONTROLLING AT LEAST 5% OF THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY ORDINARY BEARER SHARES AS AT 16 MAY INFORMATION ON SHARES OR RIGHTS TO THE SHARES (OPTIONS) OF POLNORD SA HELD BY MEMBERS OF THE MANAGEMENT AND SUPERVISORY BODIES OF POLNORD SA AS AT 16 MAY V. OTHER INFORMATION LITIGATIONS PENDING BEFORE COURT, RELEVANT ARBITRATION AUTHORITIES, OR PUBLIC ADMINISTRATION AUTHORITIES28 2. INFORMATION ON ONE OR MORE TRANSACTIONS BETWEEN POLNORD SA OR ITS SUBSIDIARY AND RELATED ENTITIES, IF INDIVIDUALLY OR JOINTLY SUCH TRANSACTIONS ARE SIGNIFICANT OR HAVE BEEN EXECUTED ON TERMS OTHER THAN ARM S LENGTH LOAN OR BORROWING GUARANTEES OR SURETIES GRANTED BY POLNORD SA AND ITS SUBSIDIARIES IF TOTAL VALUE OF THE EXISTING GUARANTEES OR SURETIES EQUALS AT LEAST 10% OF THE EQUITY OF POLNORD SA

3 4. OTHER INFORMATION SIGNIFICANT TO ASSESSMENT OF THE PERSONNEL, ECONOMIC AND FINANCIAL STANDING, FINANCIAL RESULT AND CHANGES THERETO, AS WELL AS INFORMATION SIGNIFICANT TO ASSESSMENT OF THE GROUP S ABILITY TO MEET ITS OBLIGATIONS FACTORS WHICH WILL AFFECT THE FINANCIAL RESULTS OF THE CAPITAL GROUP IN THE PERSPECTIVE OF AT LEAST THE NEXT QUARTER VI. CONDENSED INDIVIDUAL SEMI-ANNUAL FINANCIAL STATEMENTS OF POLNORD SA INCOME STATEMENT OF POLNORD SA IN THOUSAND PLN STATEMENT OF OVERALL INCOME OF POLNORD SA IN THOUSAND PLN STATEMENT ON FINANCIAL SITUATION (BALANCE-SHEET) OF POLNORD SA IN THOUSAND PLN CASH FLOW STATEMENT OF POLNORD SA IN THOUSAND PLN STATEMENT OF MOVEMENTS IN EQUITY OF POLNORD SA IN THOUSAND PLN OFF-BALANCE-SHEET ITEMS OF POLNORD SA IN THOUSAND PLN

4 I. GENERAL INFORMATION POLNORD SA is the Parent Company in the POLNORD Group. Full name (company): POLNORD Spółka Akcyjna Registered Office: Gdynia, ul. Śląska 35/37 KRS (National Court Register) number: NIP (tax identification number): REGON (statistical registration number): The core business of the POLNORD SA Capital Group is construction and sale of residential and commercial property. POLNORD SA delivers development projects mostly through special purpose vehicles. Unless the context requires otherwise, the terms used in the contents of these Consolidated Quarterly Financial Statements for the 2011 Q1, such as 'the Company', POLNORD SA', POLNORD, 'the Parent Company', or other terms of similar meaning and any variations thereof, refer to POLNORD SA, whereas 'the Group', 'the POLNORD Group, Capital Group or other terms of similar meaning and any variations thereof, refer to the Capital Group including POLNORD SA and entities subject to consolidation. II. CAPITAL GROUP'S CHARACTERISTICS 1. Composition of the Capital Group As at Match 31st, 2011, the Group, where POLNORD SA is the dominant entity, included the following subsidiaries, co-subsidiaries and affiliates: No. Company name % Registered Nominal value of of capital/ office shares (PLN) votes 1. POLNORD - ŁÓDŹ I Sp. z o.o. Łódź 2,750, % 2. POLNORD - ŁÓDŹ II Sp. z o.o. Łódź 50, % 3. POLNORD - ŁÓDŹ III Sp. z o.o. Łódź 50, % 4. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. Warsaw 50, % 5. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. Warsaw 50, % 6. POLNORD WARSZAWA - WILANÓW III Sp. z o.o. Warsaw 25,144, % 7. POLNORD WARSZAWA - WILANÓW IV Sp. z o.o. Warsaw 700, % 8. PD DEVELOPMENT Sp. z o. o. Gdańsk 50, % 9. OSIEDLE TĘCZOWY LAS PD DEVELOPMENT Sp. z o.o. S.K.A. Gdańsk 5,000, % 10. POLNORD - APARTAMENTY Sp. z o.o. Gdańsk 50, % 11. PROKOM - PROJEKT Sp. z o.o. Warsaw 100, % 12. POLNORD LUBLIN I Sp. z o.o. Warsaw 50, % 13. POLNORD INŻYNIERIA Sp. z o.o. Warsaw 50, % 14. POLNORD SZCZECIN I Sp. z o.o. Szczecin 50, % 4

5 15. POLNORD SOPOT II Sp. z o.o. Warsaw 50, % 16. POLNORD - INVEST Sp. z o. o. Warsaw 11,867, % 17. STROJ-DOM ZAO Saratov % (Russia) 18. POMORSKIE BIURO PROJEKTÓW GEL Sp. z o. o. Sopot 226, % 19. CENTRUM HANDLOWE WILANÓW Sp. z o.o. Warsaw 48,869, % 20. PLP DEVELOPMENT GROUP ZSA Novosibirsk 1,103, % (Russia) 21. FADESA POLNORD POLSKA Sp. z o.o. Warsaw 8,134, % 22. FPP POWSIN Sp. z o.o. * Warsaw 2,474, % 23. OSIEDLE INNOVA Sp. z o.o. * Warsaw 3,454, % 24. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. ** Warsaw 17, % 25. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. S.K.A. ** Warsaw 5,000, % 26. HYDROSSPOL Sp. z o. o. under liquidation Gdańsk 15, % * indirect subsidiary controlled through FADESA POLNORD POLSKA Sp. z o.o. ** indirect subsidiary controlled through PROKOM PROJEKT Sp. z o.o. Aside from those mentioned above, as at Polnord SA held shares/equity capitals exceeding 5% in the capital of the following companies: Dolnośląskie Surowce Skalne SA ( DSS ) - 670,375 shares entitling to 670,375 votes constituting 5.19% in the share capital and general number of votes. In result of sale of 83,000 shares of DSS on the share of Polnord SA in share capital and general number of votes of DSS fell below 5%. Robyg Wilanów II Sp. z o.o shares with total par value of PLN 7,500.00, constituting 15% in the share capital and votes. Below a scheme of the Capital Group as at is presented: 5

6 Polnord Łódź I Sp. z o.o. Polnord Lublin I Sp. z o.o. Stroj Dom ZAO (Russia) 100% of shares 100% of shares 100% of shares Polnord Łódź II Sp. z o.o. Polnord Szczecin I Sp. z o.o. Pomorskie Biuro Projektów GEL Sp. z o.o. 100% of shares 100% of shares % of shares Polnord Łódź III Sp. z o.o. Polnord Inżynieria Sp. z o.o. Centrum Handlowe Wilanów Sp. z o.o. 100% of shares 100% of shares 50% of shares Polnord Warszawa Wilanów I Sp. z o.o. PD Development Sp. z o.o. PLP Development Group ZSA (Russia) 100% of shares 100% of shares 50% of shares Polnord Warszawa Wilanów II Sp. z o.o. Osiedle Tęczowy Las PD Development Sp. z o.o. SKA Hydrosspol Sp. z o.o. under liquidation 100% of shares 100% of shares 30% of shares Polnord Warszawa Wilanów III Sp. z o.o. Polnord Apartamenty Sp. z o.o. 100% of shares 100% of shares Polnord Warszawa Wilanów IV Sp. z o.o. Polnord - Invest Sp. z o.o. 100% of shares 100% of shares Polnord Sopot II Sp. z o.o. Fadesa Polnord Polska Sp. z o.o. 100% of shares 49% of shares Prokom Projekt Sp. z o.o. FPP Powsin Sp. z o.o. 100% of shares 100% of shares Skarbiec Nieruchomości 3 Sp. z o.o. Osiedle Innova Sp. z o.o. 34% of shares 100% of shares Skarbiec Nieruchomości 3 Sp. z o.o. SKA % of shares 6

7 2. Effects of changes in the Capital Group s structure, including mergers, acquisitions or divestments of members of the Company s group, long-term investments, restructuring and discontinuation of operations In 2011 Q1, the following changes in equity relations between POLNORD SA and other entities were recorded: - on , Polnord SA disposed of 100% of shares in the share capital of Polnord Baltic Center Sp. z o.o. - on , Polnord SA disposed of 100% of shares in the share capital of POLNORD - WYDAWNICTWO OSKAR Sp. z o. o. 3. Companies covered by consolidation Apart from POLNORD SA, the following companies were included in the consolidation for the period from January 1st, 2011 to March 31st, 2011: a) full consolidation: POLNORD - ŁÓDŹ I Sp. z o.o. POLNORD - ŁÓDŹ II Sp. z o.o. POLNORD - ŁÓDŹ III Sp. z o.o. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. POLNORD WARSZAWA - WILANÓW III Sp. z o.o. POLNORD WARSZAWA - WILANÓW IV Sp. z o.o. PD Development Sp. z o.o. Osiedle Tęczowy Las PD DEVELOPMENT Sp. z o.o. SKA POLNORD - APARTAMENTY Sp. z o.o. PROKOM - Projekt Sp. z o.o. POLNORD Lublin I Sp. z o.o. POLNORD Inżynieria Sp. z o.o. POLNORD Szczecin I Sp. z o.o. POLNORD Sopot II Sp. z o.o. POLNORD - INVEST Sp. z o.o. POLNORD WYDAWNICTWO OSKAR Sp. z o.o. (for the period from to disposal date) Pomorskie Biuro Projektów GEL Sp. z o.o. Stroj-Dom ZAO. b) proportional method: PLP Development Group Z.S.A. Fadesa Polnord Polska Sp. z o.o. FPP Powsin Sp. z o. o. Osiedle Innova Sp. z o. o. Skarbiec Nieruchomości 3 Sp. z o. o. Skarbiec Nieruchomości 3 Sp. z o. o. SKA c) equity method: Centrum Handlowe Wilanów Sp. z o.o. 7

8 4. Companies excluded from consolidation In the consolidated financial statements, HYDROSSPOL Sp. z o.o. in liquidation, a company that had discontinued, was not included. Financial data of this company are insignificant from the perspective of the consolidated financial statements. 5. Preparation of the consolidated financial statements These consolidated financial statements have been prepared in accordance with the historical cost principle, except for investment real estates and derivative financial instruments which are reported at their fair value. The financial statements do not include any items which would be measured using any other method under any principles adopted by the Group. Certain information and disclosures, which in accordance with the International Financial Reporting Standards approved by the European Union ("EU") are usually presented along with the annual consolidated financial statements, were either condensed or excluded in accordance with IAS 34 "Semi-annual financial reporting" (IAS 34). These semi-annual condensed consolidated financial statements do not cover all the information and disclosures required in the case of annual consolidated financial statements and should be read jointly with the consolidated financial statements of the Group drafted in accordance with IFRS for the financial year ended on December 31st, The consolidated financial statements are presented in thousands of Polish zloty, unless specified otherwise. The consolidated financial statements have been prepared based on an assumption that the Group s companies will continue as a going concern. As at the date of approval of the financial statements, there are no circumstances indicating any threat to continuity of operations of the Group s companies. Statement of compliance The consolidated financial statements have been prepared in accordance with the respective International Financial Reporting Standards (IFRS) adopted by the EU. The IFRS comprise of standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC). The financial statements of most subsidiaries were drafted in accordance with accounting principles (policy) stemming from the International Financial Reporting Standards and the relevant interpretations published in the form of regulations of the European Commission, and within the scope not covered by these Standards pursuant to the Accounting Act and relevant secondary legislation issued on the basis of the Act. Financial statements of remaining subsidiaries were drafted in line with regulations stemming from the Accountancy Act, while relevant adjustments and reshaping in accordance with IAS/IFRS principles were accounted for in the consolidated financial statements for the purposes of consolidation of the Capital Group. The Group applied in the consolidated financial statements all International Financial Reporting Standards applicable for the periods starting January 1st, 2011, as well as standards which had become effective before March 31st, The Group has analysed the new standards and interpretations as well as any changes to the already existing standards and interpretations. 8

9 The changes in standards and interpretations, except for the necessary new disclosures, do not affect the financial results presented in theses statements. Measurement currency and presentation currency Items disclosed in the financial statements of the Group s companies are shown in the currency of the main economic environment in which the given company operates (functional currency). The functional currency and presentation currency of the Parent Company is Polish zloty (PLN). The reporting currency of the Group s financial statements is Polish zloty (PLN). Some of the Group s companies use a functional currency other than Polish zloty (PLN). Financial statements of such companies, prepared in their functional currencies, are included in these consolidated financial statements following their translation to PLN in accordance with IAS 21. The following exchange rates were used for the balance sheet valuation purposes: USD EUR RUB The following exchange rates were used for the income statement valuation purposes: USD EUR RUB Changes in the applicable accounting principles In 2011, the Group continues to apply the accounting principles described in the last annual financial statements. 6. Changes in provisions The amount of provisions disclosed in the consolidated financial statements as at 31 March 2011 was by PLN 14,600,000 higher than at 31 December 2010, while the income tax provision increased by PLN 7,871,000. The amount of provisions disclosed in the individual financial statements at 31 March 2011 was by PLN 12,313,000 higher than at 31 December 2010, while the income tax provision increased by PLN 7,111, Differences between financial results and the last published forecast The forecast of results of the Capital Group for 2011 was not published. 9

10 8. Revenues and financial results by segments For the period from to or as at Development activity (residential) Commercial projects General contracting Continued operations Other Eliminations Undistributed positions Discontinued operations In total Other Total activity Revenues Sales in favour of external clients Intersegment sales ( 2 224) Segment income, in total (2 224) Result Segment profit (loss) (198) (437) Undistributed positions Profit (loss) on activities continued before taxation and financial costs (198) (437) Net financial expenses (1 759) (1 759) 9 (1 750) Profit on subsidiary sale Share in the associate s profit Gross profit / loss before tax and minority shareholdings (198) (437) Income tax (4 994) (4 994) (4 994) Net profit (loss) for the financial year (198) (437) The main area of activity of POLNORD Capital Group in 2011 Q1 was Poland.

11 9. Condensed semi-annual financial statements of Polnord SA Capital Group 9.1. Consolidated income statement (in thousand PLN) Item Revenues on sales From products, goods and materials sales from related entities Revenues from services sales from related entities Lease income from related entities 7 Prime cost of sales (15 724) (35 399) Gross profit (loss) on sale Revaluation of investment property Result on sales of investment property Costs of sale (3 670) ( 3 367) General administration costs ( ) ( ) Other operating income Other operating costs ( 6 939) ( 1 616) Gross operating profit (loss) Financial revenues Financial costs ( 6 513) ( 6 873) Profit on subsidiary sale Share in the associate s profit 11 Gross profit (loss) Income tax (4 994) (4 405) Net profit (loss) on continued business activities Discontinued operations Gross profit (loss) for financial year on discontinued business activities 9 ( 29) Net profit (loss) for the financial year Attributable to: Dominant Entity s Shareholders Minority Shareholders Profit per share - Basic For the period from to For the period from to Net profit (loss) for the period Net profit (loss) on continued business activities for the period Weighted average of ordinary shares (amount) for the period Net profit (loss) per one ordinary share (PLN) Net profit (loss) on continued activity per one ordinary share (PLN)

12 Profit per share - diluted For the period from to For the period from to Net profit (loss) for the period Net profit (loss) on continued business activities for the period Interest on bonds convertible into shares Net profit (loss) for the period applied to calculate diluted earnings per share Net profit (loss) on continued operations for the period applied to calculate diluted earnings per share Dilution effect: Share options Convertible bonds Weighted average of diluted number of ordinary shares (amount) for the period Net diluted earnings (loss) per one ordinary share (PLN) Net diluted earnings (loss) from continued activity per ordinary share (PLN) Annualised profit per share - basic For the period from to For the period from to Net profit (loss) for the period Net profit (loss) on continued business activities for the period Weighted average number of ordinary shares (amount) for the period Net profit (loss) per one ordinary share (PLN) Net profit (loss) on continued activity per one ordinary share (PLN)

13 Annualised profit per share - diluted For the period from to For the period from to Net profit (loss) for the period Net profit (loss) on continued business activities for the period Interest on bonds convertible into shares Net profit (loss) for the period applied to calculate diluted earnings per share Net profit (loss) on continued operations for the period applied to calculate diluted earnings per share Dilution effect: Share options Convertible bonds Weighted average of diluted number of ordinary shares (amount) for the period Net diluted earnings (loss) per one ordinary share (PLN) Net diluted earnings (loss) on continued activity per ordinary share (PLN) Comment on results In 2011 Q1, the Polnord Group worked out net profit in the amount of PLN 15,729 thousand and achieved revenues from sales at the level of PLN 21,456 thousand. In 2010 Q1, these values amounted to, accordingly, PLN 15,269 thousand and PLN 42,542 thousand. The gross profit from sales amounting to PLN 5,732 thousand was generated mainly on 56 developed flats delivered to the Customers under nine residential development projects located in Warsaw, Tricity, Łódź and Olsztyn. Gross profitability from sales in the analysed period amounted to 26.7%, whereas in the corresponding period in the preceding year this value was 16.8%. In Q1 the Company had any reasons to believe in positive result of ongoing proceedings related to determination of compensation due to the expiration of the right of perpetual usufruct of nine plots of land with total area of 159,478 sq. m., separated for public roads from the land property no. 2/32, located in Warsaw, Wilanów District (more detailed information with respect thereto is included in section V.1). Due to the circumstances presented above the Company started to recognize gains and losses from indemnification in the income statement. Revenues from indemnification were entered under the category Other operating revenues in the amount of PLN 34,766,000. Book value of the assets related to non-recognized revenues has been indicated under the item Other operating expenses in the amount of PLN 5,305,000. The transactions of sale of 100% of shares in the companies Baltic Center Sp. z o.o. and Polnord Wydawnictwo Oskar Sp. z o.o. also had an impact on the results of Q1. Under the said transactions the Group recorded profits in the amount of PLN 4,037,000 that was indicated under the item Profit on subsidiary sale. 13

14 While analysing the general sales and administration costs one should remember that they were charged with the costs of conducted reorganisation including one-off costs related to employment reduction in the amount of app. PLN 2 million. Effect of conducted optimisation actions will be fully reflected in the financial statements as of second half of Presently, the Polnord Group conducts works aimed at launching the development of a Shopping Gallery in Wilanów, another office building within the Wilanów Office Park as well as residential projects in new, attractive locations and further stages of projects under implementation that enjoy substantial interest of Customers. Above actions and pending reorganisation process will have a positive impact on the scale and profitability of the activity conducted in further reporting periods Consolidated statement of overall income in thousand PLN Item Net profit (loss) for the financial year Other total revenues: (103) ( 150) FX differences from recalculation (103) ( 150) Total revenues for the period Consolidated statement of financial condition (balance-sheet) in thousand PLN ASSETS Item Fixed assets Tangible fixed assets Investment property Intangible assets Investments in associates measured using the equity method Financial assets Deferred tax assets Long-term accounts receivable Goodwill Other fixed assets Current assets Inventories Trade and other receivables Other short-term financial assets Receivables due to VAT and other taxes Receivables due to income tax Prepayments and accruals Cash and cash equivalents TOTAL ASSETS

15 Item LIABILITIES Equity (Attributable to Dominant Entity s Shareholders) Stated capital Premium on shares Equity ( 1) ( 1) FX differences from recalculating foreign units ( 551) ( 448) Other reserves Retained profit/uncovered loss Total equity Long-term liabilities Interest bearing bank loans and borrowings Provisions Other liabilities Provisions for deferred income tax Short-term liabilities Trade and other liabilities Current part of interest-bearing loans Other short-term loans and borrowings Liabilities due to VAT and other taxes Liabilities due to income tax Other financial liabilities 40 Prepayments and accruals Received advance payments Provisions Total liabilities TOTAL EQUITY AND LIABILITIES

16 9.4. Consolidated cash flow statement in thousand PLN Item Cash flows from operating activity Gross profit (loss) on continued activities Gross profit (loss) on discontinued activities 9 ( 29) Corrections: ( ) ( ) Share in result of associates measured using the equity method ( 11) Depreciation Interests and dividends, net (Profit)/loss on investments ( 4 082) ( ) Receivables (increase)/decrease ( ) Inventories (increase)/decrease ( ) ( ) Liabilities increase/(decrease) except for credits and loans Changes in prepayments and accruals Changes in provisions Paid income tax ( 128) ( 619) Other ( 1 547) ( 366) Net cash flows from operating activity ( 4 258) Cash flows from investment activity Inflows Sale of tangible fixed assets and intangible assets Sale of investment real property Sale of financial assets Interest received Payment of borrowings granted Expenditure ( 3 876) ( ) Purchase of tangible fixed assets and intangible assets ( 570) ( 340) Purchase of investment property ( 3 280) ( 5 968) Purchase of financial assets ( 18) Borrowings granted ( ) Other ( 26) 27 Net cash flows from investment activity Cash flows from financial activity Inflows Inflows from share issuance Inflows from credits/loans taken Inflows from bonds issuance Expenditure ( ) ( ) Amounts payable under finance leasing ( 288) ( 136) Payment of credits/loans ( ) ( ) Interest paid ( ) ( 9 144) Redemption of bonds ( ) Other ( 620) Net cash flows from investment activity ( ) Net cash balance and equivalents increase Net currency translation profit/loss 4 8 Cash at beginning of period Cash at end of period Restricted cash

17 9.5. Statement of movements in consolidated equity in thousand PLN Item Stated capital Surplus from shares sales above their nominal value Equity Attributable to Dominant Entity s Shareholders FX differences from foreign unit recalculation Other reserves Retained profit/ Uncovered (loss) As at 01 January Shares issue Shares issue cost ( 2) ( 2) ( 2) Total revenues ( 150) As at 31 March ( 129) Shares issue Shares issue cost ( 18) ( 18) ( 18) Equity ( 1) ( 1) ( 1) Result transfer ( ) Dividends ( ) ( ) ( ) Total revenues ( 319) As at 31 December ( 1) ( 448) In Minority shareholdings Equity in total As at 1 January ( 1) ( 448) Shares issue Shares issue cost ( 26) ( 26) ( 26) Total revenues (103) As at 31 March ( 1) ( 551)

18 10. Off-balance-sheet items in thousand PLN Item Contingent liabilities Other contingent liabilities Total contingent liabilities Changes in contingent liabilities or contingent assets As at December 31st, 2010, contingent liabilities of the Capital Group amounted to PLN 339,000. As at the liabilities amounted to PLN 788,000. As at , sureties and guarantees granted to the Capital Group totalled PLN 11,839,000. Compared to 31 December 2010, this amount decreased by PLN 1,181, Factors and events, particularly of extraordinary nature, which significantly affect the financial results In 2011 Q1 POLNORD Capital Group started to include in the financial statements indemnities due to the Company for plots of land assigned for public roads in Warsaw, in the Wilanów District. 12. Events which occurred after the date of preparing the condensed quarterly financial statements and were not disclosed in such statements but may significantly affect future financial results After the following important events occurred: on Polnord issued 220 c series bonds in a non-document form and convertible into no more than 1,409,172 Company s shares of Q series of total nominal value and issue price PLN 55,000, Date for redemption of C series Bonds falls on More detailed information is presented in the Current Report no. 16/2011 of On r. Polnord received from the bond holders of C Series Bonds, issued on , statements on conversion of all C Series Bonds, i.e. 220 bonds convertible into Company s Q series shares, into 1,409,171 Company s Q series shares ( Conversion ). Issue of 1,409,171 Q series shares in result of the Conversion shall occur upon the recording of Q series shares on the securities accounts of bond holders which shall follow the registration of Q series shares covered under the Conversion on the deposit maintained by the National Depository for Securities. More detailed information is presented in the Current Report no. 17/2011 of Information about the distributed (or declared) dividends In the presented period, POLNORD SA neither declared nor distributed any dividend. 14. Notes on seasonal and cyclical nature of Capital Group s operations Considering the fact that the real estate development projects are measured based on the completed contract method under the IAS 18, the amount of income from sales of apartments depends on dates of completing the housing development projects and handing over the 18

19 apartments to buyers. Following the change of the accounting policy in 2009 for measurement of real estate development contracts, the Group no longer applies the percentage of completion method (IAS 11), and therefore, the financial statements as of 2009 do not reflect the progress of construction works and advance sales of premises. III. CAPITAL GROUP'S ACTIVITY 1. Significant achievements of the Capital Group In 2011 Q1 the activities of the Capital Group focused mainly on two areas: 1) Optimisation of Group s operations to significantly increase effectiveness of conducted activities and maximisation of Polnord Group s potential. 2) Preparatory works leading to launching of new development projects. In reference to: 1) Objectives of conducted optimisation process include: a) Sales intensification: to this end, inter alia, Sales Division has been substantially reinforced in terms of sales; sales and marketing function were centralised; verification of architectonic assumptions was started to adjust the residential offer to the current expectations of customers. b) Increased profitability of conducted projects: to this end, inter alia: specific development projects were verified in terms of potential savings and simultaneous maintenance of high quality level of the products; the process of enhancement and unification of project management procedures was started. c) Significant reduction of general administration and sales costs: to this end, inter alia, new organizational structure was introduced which required employment reduction; some contracts with service providers were terminated as well; d) Implementation of projects that ensure adequate level of rate of return: to this end, inter alia, projects planned to be implemented were verified and the decision to sell minor projects in terms of flats number and PUM was taken. In reference to: 2) In relation to achievement of satisfactory sales results, in order to supplement and expand held residential offer, the Group conducted intense works preparing for commencement of further project stages in Olsztyn (project: Osiedle Tęczory Las); in Szczecin (project Ku Słońcu); in Wilanów (project Dobry Dom ); in Łódź (project City Park ); in Wrocław (project Osiedle Innova ) and new project in the segment of popular construction located in Gdańska. In the area of commercial projects the activities leading to implementation of Shopping Centre in Wilanów and another office building under Wilanów Office Park have been continued. In 2011 Q1 the companies belonging to the Group signed the following credit agreements: The credit agreement of concluded between PKO BP SA with the registered office in Warsaw as the lender and Polnord Warszawa-Wilanów III Sp. z o.o. as borrower. The subject of the agreement is granting an investment credit to Polnord Warszawa-Wilanów III Sp. z o.o., earmarked for: 19

20 -repayment of the implementation credit taken out by the company at Bank Ochrony Środowiska SA on (this loan was paid-up in full on ) and -financing the financial expenditures on construction of an office building (B1) within the project titled "Wilanów Office Park in the Wilanów district in Warsaw. The investment loan in the amount of PLN 66,100,000 was granted up to The interest on the investment credit amounts to WIBOR 3M increased by bank margin. The credit agreements of concluded between PKO BP SA with the registered office in Warsaw as lender and Polnord Warszawa-Wilanów IV Sp. z o.o. as borrower. The subject of the agreements is granting an investment credit and a VAT working capital credit to the company Polnord Warszawa-Wilanów IV Sp. z o.o., earmarked for financing costs connected with execution of the B2 office building within the "Wilanów Office Park" project, designated for lease. The investment credit in the amount of PLN 37,066, was granted up to , while the VAT working capital credit in the amount of PLN 1,800, was granted up to Interest on the investment credit amounts to WIBOR 3M increased by the bank s margin, and interest on the VAT working capital credit equals WIBOR 1M increased by the bank s margin. The credit agreements of concluded between PKO BP SA with the registered office in Warsaw as lender and Osiedle Innova Sp. z o.o. as borrower. Subject matter of the agreements encompasses granting to Osiedle Innova Sp. z o.o. company of construction credit and VAT working capital credit earmarked for financing of seven stages of a development project called "Osiedle Innova" in Wrocław, within which 527 residential premises and 4 business premises will be built, with total usable area of 28 thousand sq.m. 141 residential premises are currently under construction (stage I and II). The whole project called "Osiedle Innova" in Wrocław will be executed in eight stages, comprising 952 residential premises and 24 business premises with total usable area of 63 thousand sq.m. The construction credit in the amount of PLN 95,830,000 was granted up to , while the VAT credit in the amount of PLN 5,000,000 was granted up to Interest on the construction credit and VAT credit amounts to WIBOR 1M increased by bank margin. Moreover in 2011 Q1: - special purpose vehicle Polnord Warszawa-Wilanów III Sp. z o.o. obtained occupancy permit for and commissioned to the lessee the office building (B1) constructed under Wilanów Office Park project on the real property with the area of 21,955 sq.m. located at Przyczółkowa St. in Warsaw. The executed facility is an A class office building with usable area of 7,277 sq.m. and 161 parking places. - stage 2. of City Park project in Łódź, implemented by the special purpose vehicle Polnord Łódź II Sp. z o.o. was commissioned to use; under this project 87 flats were built of total usable area of 5,800 sq.m. - postponed by Polnord SA and the City of Gdańsk was the date for conclusion of the agreement whose effect shall be establishment of a company for implementation of joint project for development of Wyspa Spichrzów. This date was deferred to The agreement conclusion was postponed due to the requirement to perform additional examinations related to 20

21 future investment on Wyspa Spichrzów. These examinations are mostly associated with the possibility of foundation of two-storey garage hall, included in the concept for development of this area, prepared by MAT office that won the competition for project of development of Wyspa Spichrzów. 2. Main markets of activity The main area of activity of POLNORD Capital Group in 2011 Q1 was Poland. The Capital Group's activity on the domestic market was conducted primarily in Warsaw, Olsztyn and Tricity. Only the company PLP Development Group ZSA generated income abroad, i.e. in Novosibirsk. This income was generated from sales and lease of office space. 3. Development projects included in the income statement Below development projects are presented along with the number of commissioned premises which were accounted for in the financial result of the Group for 2011 Q1 (data not weighted with the involvement of Polnord in the project): Usable Premises Company Share of No. Project name and location area number implementing Polnord (sq.m.) the project (%) Date of commissioning to use Wilanowska V 2008 Q4 - Q Polnord 50% (Gdańsk, ul. Rogalińska) 2010 Srebrzysta Podkowa (build. 1 and 2) Polnord % 2008 Q4 (Gdańsk - Kowale) Apartamenty Commissioned premises that were not included in the financial result (no.) (sq.m.) to Q1 to Q Premises sold, to be commissioned (no.)* 10 0 Srebrzysta Podkowa (build. 3) Polnord % 2010 Q4 9 (Gdańsk - Kowale) Apartamenty Kamienica pod Wrzosem Polnord (Gdańsk, ul. Wita Stwosza) Apartamenty 100% Q Apartamenty Albatros Polnord (Gdynia, ul. Wiejska) Apartamenty 6 Osiedle Tęczowy T Las (Stage I) (Olsztyn, ul. Tęczowy Las) City Park (Stage I) Polnord Łódź II 100% 2009 Q4 (Łódź, ul. Żeligowskiego) Kryształ Wilanowa Polnord W-wa % 2009 Q (Warszawa Wilanów, ul. Klimczaka) Wilanów I 9 Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) Osiedle Tęczowy Las Skarbiec Nieruchomości 3 100% 2010 Q1 100% 2008 Q % 2008 Q Ostoja Wilanów w (Etap II) 2008 Q4/ Q Fadesa Polnord 49% (Warszawa Wilanów, ul. Klimczaka) Ostoja Wilanów w (Etap III) Fadesa Polnord 49% 2009 Q1 (Warszawa Wilanów, ul. Klimczaka) Ostoja Wilanów w (Etap IV) 12 (Warszawa Wilanów, ul. Klimczaka) Fadesa Polnord 49% Q-3Q Ostoja Wilanów w (Etap IV) Fadesa Polnord 49% 2010 Q1 (Warszawa Wilanów, ul. Klimczaka) * Premises for which preliminary sales contracts were concluded Absence of projects commissioned to use influenced relatively low number of commissioned premises in 2011 Q1. In the following quarters, along with the completion of projects that are currently under construction, the number of commissioned premises shall increase which will have positive impact of Polnord Group s financial results. 21

22 The table below presents the information on the number of residential premises sold by the Polnord Group in Poland within individual projects as well as offers of the Group as at , split into commissioned projects and projects in development (data not weighted with Polnord involvement in a project). Premises sold (net - after No. Project name and location including cancellation) Usable Premises Company Share of Date for commissioning (no.) area number implementing Polnord to use (sq.m.) the project (%) to offer as at 2011 Q PROJECTS COMMISSIONED TO USE Wilanowska V Polnord 50% 2008 Q Q1 (Gdańsk, ul. Rogalińska) Srebrzysta Podkowa (build. 1 and 2) Polnord % 2008 Q4 (Gdańsk - Kowale) Apartamenty Srebrzysta Podkowa (build. 3) 3 (Gdańsk - Kowale) Polnord Apartamenty 100% 2010 Q Apartamenty Albatros (Gdynia, ul. Wiejska) Polnord Apartamenty 100% 2010 Q Osiedle Tęczowy T Las (Stage I) (Olsztyn, ul. Tęczowy Las) Osiedle Tęczowy Las 100% 2008 Q City Park (Stage I) (Łódź, ul. Żeligowskiego) Polnord Łódź II 100% 2009 Q City Park (Stage II) (Łódź, ul. Żeligowskiego) Polnord Łódź II 100% 2011 Q Kryształ Wilanowa (Warszawa Wilanów, ul. Klimczaka) Polnord W-wa Wilanów I 100% 2009 Q Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) Skarbiec Nieruchomości 3 33% 2008 Q Ostoja Wilanów w (Stage II) (Warszawa Wilanów, ul. Klimczaka) Fadesa Polnord 49% 2008 Q4/2009 Q Ostoja Wilanów w (Stage III) Fadesa Polnord 49% 2009 Q1 (Warszawa Wilanów, ul. Klimczaka) Ostoja Wilanów w (Stage IV) 12 (Warszawa Wilanów, ul. Klimczaka) Fadesa Polnord 49% 2009 Q2-Q Ostoja Wilanów w (Stage IV) Fadesa Polnord 49% (Warszawa Wilanów, ul. Klimczaka) 2010 Q PROJECTS UNDER IMPLEMENTATION 1 Sopocka Rezydencja (Sopot, ul. Łokietka) Polnord Sopot II 100% 2011 Q4 (planned) 2 Ostoja Wilanów w (Stage IV)** Fadesa Polnord 49% 2011 Q3 (planned) (Warszawa Wilanów, ul. Klimczaka) Dobry Dom (Warszawa Wilanów, ul. Kazachska) 4 Ku Słońcu S (Stage I) (Szczecin, ul. Ku Słońcu) Polnord W-wa Wilanów I 100% 2011 Q3 (planned) Polnord Szczecin I 100% 2011 Q4 (planned) Ostoja Myśliwska (Gdańsk, ul. Myśliwska) Polnord Apartamenty 100% 2011 Q3/2012 Q2 (planned) Osiedle Tęczowy T Las (Stage II) I I) (Olsztyn, ul. Tęczowy Las) 7 Osiedle Innova (Stage I) (Wrocław, ul. Jesionowa) Osiedle Tęczowy Las 100% 2011 Q4/2012 Q3 (planned) Osiedle Innova 49% 2012 Q1 (planned) Osiedle Innova (Stage II) (Wrocław, ul. Jesionowa) Osiedle Innova 49% 2012 Q2/Q3 (planned) Ku Słońcu S (Stage II)* (Szczecin, ul. Ku Słońcu) Polnord Szczecin I 100% 2012 Q3 (planned) TOTAL * project to be commenced in May

23 The Polnord Group executes also an office park project called "Wilanów Office Park. Within the investment, works are conducted with an aim of developing the office building (B3) for lease. 4. Issue, redemption and repayment of non-equity and equity securities Share issues In 2011 Q1 the Company issued, within the registered conditional share capital, 28,045 H series shares as a result of exercising the rights under 28,045 subscription warrants issued within the Management Options Scheme by authorised persons. Following the balance-sheet date the Company issued 147,237 H series shares as a result of exercising the rights under 147,237 subscription warrants issued within the Management Options Scheme by authorised persons. Company earned PLN 3,723,000 from the above listed issues of H series shares. Bond issues In 2011 Q1, i.e. on , Polnord issued ordinary bonds of total par value of PLN 10,000, whose redemption term falls on All the bonds subject to the issuance organised by BRE Bank SA were taken up and paid in whole by the investors. As at , the indebtedness due to all hitherto issued bonds was as follows: Debt as at Capital repayment schedule Issue date Type in mpln 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q Bonds convertible into shares Bonds convertible into shares Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds The debt of the Group as at due to all the issued bonds totalled PLN million. In 2011 the redemption term for bonds totalling PLN 10 million falls. In 2012, the bonds of total value of mpln 190.1, of which mpln constitute the value of bonds convertible into shares, 23

24 should be redeemed. The above amount (mpln 120.5) constitutes the par value of bonds issued by the Company and convertible to shares, which should be redeemed within such time limits, provided that no bonds are converted into Q shares. If the holders will exercise the right to convert a part or all the convertible bonds held, the said amount to be repaid that constitutes the par value of the convertible bonds, shall be accordingly lower or may not occur at all. The amount totalling mpln Polnord SA is obliged to return to the bondholders in Following the balance-sheet date the Company issued C series bonds convertible into Q shares of total par value of PLN 55,000,000.00, described in more detailed manner in section II.12. Debt due to loans The debt due to loans of companies from the Group as at along with the repayment schedule is as follows: 24

25 Borrower Bank Type Limit (in mpln) Debt as at without interests (in mpln) Capital repayment schedule (for current debt 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 after 2012 Polnord SA BRE Bank SA overdraft Polnord SA BRE Bank SA revolving Polnord SA DZ Bank Polska SA overdraft Polnord Apartamenty Sp. z o.o. Bank Millennium SA implementation Polnord Łódź II Sp. z o.o. Nordea Bank Polska SA implementation investment (land) Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK SA investment (land) Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK SA implementation VAT Polnord Warszawa Wilanów III Sp. z o.o. PKO BP SA refinanced Polnord Warszawa Wilanów IV Sp. z o.o. PKO BP SA implementation VAT Polnord Warszawa Wilanów IV Sp. z o.o. PKO BP SA implementation VAT Polnord Invest Sp. z o.o. BPH Bank Hipoteczny investment (land) Polnord Sopot II o.o. PKO BP SA investment (land) implementation Polnord Szczecin I Sp. z o.o. PKO BP SA implementation Polnord Szczecin I Sp. z o.o. PKO BP SA investment (land) FADESA POLNORD POLSKA Sp. z o.o. PEKAO SA implementation investment (land) VAT OSIEDLE INNOVA Sp. z o.o. PEKAO SA implementation VAT FPP Powsin Sp. z o.o PEKAO SA implementation implementation investment (land) VAT Debt not weighted with Polnord share: Debt weighted with Polnord share:

26 The gross credit debt of the Group as at run at the level of mpln 381.2, while along with the debt stemming from the issued bonds it totalled mpln The net debt (after including funds on accounts in the amount of mpln 77.2) totalled mpln Polnord SA finances its ongoing activity inter alia with overdraft facilities and a revolving credit, that are renewed each year by the Company. Talks are held currently by the Company with Banks in respect of extending the period of Company's current financing for another year. The credits incurred by companies of the Group for the purposes of implementation of development projects are repaid from inflows from sales of residential and business premises. IV. COMPOSITION OF THE SHAREHOLDING, AUTHORITIES OF THE COMPANY 1. Shareholders controlling at least 5% of the total number of votes at the General Meeting of Shareholders of the Company ordinary bearer shares as at 16 May 2011 According to the information held by the Company, the following shareholders held as at shares authorising to at least 5% of votes at the General Shareholders Meeting: Number of shares/ Nominal % No. Shareholder votes (amount) shares of capital/ value votes PROKOM Investments SA in Gdynia Osiedle Wilanowskie Sp. z o.o. in Gdynia (a subsidiary of Prokom Investments SA) Templeton Asset Management Ltd. in Singapore* % % % 4. Other shareholders in total % IN TOTAL % *) means customers and funds managed by Templeton Asset Management Ltd. with the registered office in Singapore From among shares owned by customers and funds managed by Templeton Asset Management Ltd., more than 5% in the share capital and general number of votes in the Company is owned by FTIF Templeton Eastern Europe Fund. In the period from the date of approval of Consolidated financial statements for 2010 to , in result of an issue, within the registered conditional share capital, of 147,237 H shares of the Company, the share of the above shareholders in the general number of votes changed slightly. As at , the number of all shares issued by the Company amounts to 22,393,668 of which 147,237 bearer H shares were not hitherto covered by the update of the share capital register entry in line with the art. 452 of the CCC. 26