Monday Development SA Consolidated Annual Report 2012
CONTENTS I. LETTER TO SHAREHOLDERS, INVESTORS AND PARTNERS... 3 II. SELECTED FINANCIAL DATA... 4 III. FINANCIAL STATEMENTS... 5 IV. MANAGEMENT REPORT ON THE OPERATIONS OF THE GROUP... 43 1. Monday Development SA Group... 43 2. Governance... 45 3. Key corporate events in 2012 and planned growth vectors... 46 4. Risks affecting the Company s business activity... 51 5. Events after the end of the reporting period... 53 V. MANAGEMENT DECLARATION ON THE ACCURACY OF THE FINANCIAL STATEMENTS... 54 VI. MANAGEMENT DECLARATION ON APPOINTMENT OF A STATUTORY AUDITOR... 54 VII. STATUTORY AUDITOR'S OPINION AND REPORT... 55 VIII. CORPORATE GOVERNANCE PRINCIPLES... 73 2
I. LETTER TO SHAREHOLDERS, INVESTORS AND PARTNERS Dear Stakeholders, Over the course of 2012 Monday Development faced continuing project delays dating back several years. Despite the fact that most of the setbacks had administrative origins and were outside the Company s control, they brought with them revenue delays and increased servicing costs for debt incurred over the past few years. Due to a restructuring carried out in 2011, including development of alternative projects and significant expansion of the land bank, Monday Development s situation considerably improved throughout 2012. Today the Company s portfolio is among the best in the Poznań market, while our growing project pipeline is set to be a key driver in generating attractive returns going forward despite delays in some of the investments. The Company s operating scale is steadily growing. In the fourth quarter we completed the construction of Kamienica Wildecka, a development comprising 38 apartments and four commercial premises, and continued work on Mieszkania na Sokoła, with 35 apartments set to be delivered in Q2 2013. The last quarter also saw the commencement of Hevelia, a residential JV with Warsaw-based Unidevelopment Sp. z o.o. and the Company s largest development to date. The investment consists of 174 apartments, nine commercial premises and over 200 parking spaces. From a financial perspective, the Company completed a key transaction, selling its stake in project Botaniczna, a residential development with usable area of 25 000m 2. As a minority shareholder, the Company s involvement was limited to supervision rather than an operating role, which is why management decided to sell the 49% stake held by Monday FIZ in Q4 2012 and use the proceeds to develop projects in a more hands-on capacity. It should be noted that Monday Development s 2012 revenue came from the redemption of Monday FIZ investment certificates and not property-related activities by project companies controlled by the Monday FIZ fund. In 2012 the Company redeemed certificates worth PLN 1 731 839, booking a profit of PLN 70 083 after covering interest on series B, C and D bonds. Monday Group s operating scale is reflected in the value of Monday FIZ which, calculated using discounted cash flows, amounted to PLN 23 422 053 at the end of 2012. Certificates in Monday FIZ are recognised in Monday Development s balance sheet as non-current investments. We will continue to implement our strategy in 2013. In addition to making headway with construction on projects launched in 2012, we aim to create new-revenue opportunities by preparing projects from our land bank. We also plan to launch new projects co-financed by external partners in exchange for equity stakes in the respective project companies. Another key objective for 2013 is development of a stable, long-term financing structure, which will entail management discussions with potential investors. The management board and I would like to thank all of our employees and partners for their efforts and hard work towards Monday Development s growth last year, and our customers and shareholders for the trust they ve shown us. Sincerely, Kurt Montgomery President of the Management Board Monday Development SA 3
II. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED FINANCIAL DATA PLN EUR 31.12.2012 31.12.2011 31.12.2012 31.12.2011 Net revenue 2 400 127 1 800 405 575 074 434 867 Profit (loss) on operating activities 212 873 372 511 51 005 89 976 Net profit (loss) 117 239 499 912 28 091 120 748 Non-current investments 23 422 953 28 124 601 5 729 405 6 367 642 Current investments 2 617 258 13 841 660 640 198 3 133 866 Current receivables 1 488 583 0 364 117 0 Total assets 27 931 048 42 594 530 6 832 114 9 643 753 Equity 17 085 980 26 045 453 4 179 341 5 896 906 Provisions for liabilities 2 225 721 4 395 469 544 426 995 170 Current liabilities 8 586 258 5 056 466 2 100 254 1 144 826 Total liabilities and equity 27 931 048 42 594 530 6 832 114 9 643 753 Net cash flows from operating activities 1 6 315 355 757 400 1 513 167 182 941 Net cash flows from investing activities -6 922 625-149 663-1 658 670-36 149 Net cash flows from financing activities -4 586-3 833-1 099-926 Number of shares 788 485 788 485 788 485 788 485 Earnings (loss) per share 0.15 0.63 0.04 0.15 Book value per share 21.67 33.03 5.30 7.48 EURPLN exchange rate used for translation of balance sheet items 4.0882 4.4168 EURPLN exchange rate used for translation of items in the statement of profit and loss and statement of cash flows 4.1736 4.1401 1 - given the specific nature of Monday Development SA operations, consisting of raising capital for special purpose vehicles through the issuance of equity or debt, negative cash flows on operating activities result from the financing of an SPV belonging to Monday FIZ, which distributes funds between specific projects. The off-setting of cash flows from operating activities with cash flows from financing activities shows that the net proceeds from equity issuance are fully allocated to project financing. 4
III. FINANCIAL STATEMENTS MONDAY DEVELOPMENT SA CONSOLIDATED FINANCIAL STATEMENTS for the period from 1 January to 31 December 2012 5
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2012 In accordance with art. 55 of the Polish Accounting Act, a group parent having its registered office or place of management in Poland drafts annual consolidated financial statements for the group, covering data for the parent and subsidiaries of all types, regardless of the location of their registered offices, presented so that the group constitutes one unit. In drafting the consolidated financial statements, accounting principles appropriate to the entity's operations were adopted and applied in a consistent manner. In measuring assets and liabilities and equity, as well as in determining the financial result, it was assumed that the group will continue as a going concern in its current form for the foreseeable future, without entering into liquidation or bankruptcy. The attached consolidated financial statements, comprising an introduction, consolidated balance sheet, consolidated statement of profit and loss, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the financial statements, were drafted in accordance with the Polish Accounting Act and are presented in this report in the following order: Introduction Consolidated balance sheet Consolidated statement of profit and loss Consolidated statement of cash flows Consolidated statement of changes in equity Notes to the financial statements Kurt Montgomery President of the Management Board Person drafting the financial statements Dorota Jankowiak Monday Management Sp. z o.o. SKA Monika Owerko Member of the Management Board Piotr Łopatka Member of the Management Board Poznań, 29 March 2013 6
I. INTRODUCTION TO THE FINANCIAL STATEMENTS 1. Information on the parent 1.1. Monday Development SA (the Company ) is the parent of a property development group. The Company was formed through a notarial deed of 13 November 2008 in connection with group reorganisation. The Company's registered office is in Poznań at ul. Piątkowska 116. On 28 June 2010 the Company floated on NewConnect, an alternative trading system managed by the Warsaw Stock Exchange. The following share series had been issued as of 31 December 2012: SHARE SERIES % SHARE IN EQUITY NOMINAL VALUE A series 6.3% 500 000 A1 series 81.1% 6 395 000 B series 12.6% 989 850 Series A shares are held by the Company as own shares and as such the Company cannot exercise the voting rights carried by them. 1.2. The Company is registered in the Register of Companies under entry number KRS 0000323647. The entry was made on 16 February 2009 by the District Court for Poznań Nowe Miasto i Wilda in Poznań, 8th Commercial Division of the National Court Register. 1.3. The Company holds the following identification numbers: REGON 301054767 NIP 7811832838 1.4. The Company's objects are: Activities of head offices Management consultancy activities 1.5. In accordance with its articles of association the duration of the Company is unlimited. 1.6. As at the date of drafting the report, the Company's Management Board comprised: Kurt Montgomery President of the Management Board Monika Owerko Member of the Management Board Piotr Łopatka Member of the Management Board 7
2. List of subsidiaries, associates and jointly controlled entities included in the consolidated financial statements No. Entity name Monday Development SA stake [share capital / voting rights] 1 Monday Sp. z o.o. ul. Piątkowska 116, 60-649 Poznań 100% / 100% 2. Monday Management Sp. z o.o. ul. Piątkowska 116, 60-649 Poznań 3. Internal Finance Sp. z o.o. ul. Piątkowska 116, 60-649 Poznań 4. Lunedi Sp. z o.o. ul. Piątkowska 116, 60-649 Poznań 5. Monday Palacza Sp. z o.o. ul. Piątkowska 116, 60-649 Poznań 100% / 100% 100% / 100% 100% / 100% 25% / 25% 3. List of subsidiaries, associates and jointly controlled entities excluded from the consolidated financial statements, together with the legal basis for exclusion Monday FIZ, ul. Grójecka 5, 02-019 Warsaw Art. 3, sec. 1, point 39 of the Polish Accounting Act the fund does not match the definition of a subsidiary. 4. Indication of the duration of the Company and other entities within the Group In accordance with its articles of association, the duration of Monday Development SA is unlimited. In accordance with the articles of association of subsidiaries, their duration is unlimited. 5. Indication of the periods presented in the consolidated financial statements The consolidated financial statements for the Monday Development SA Group present data for the period from 1 January to 31 December 2012, together with comparable data for 2011. 6. Financial statements 6.1. The financial statements were drafted in accordance with the Polish Accounting Act of 29 September 1994 (Polish Journal of Laws no. 121, item 591 as amended) on historical cost basis, with the exception of investment certificates in Monday FIZ, which are carried at fair value. 6.2. The financial statements as at 31 December 2012 were drafted with the assumption that the Company will continue to operate as a going concern in the foreseeable future and that there are no circumstances posing a threat to continuing operations. 6.3. The financial statements cover the period from 1 January to 31 December 2012 and include comparative data for the period from 1 January to 31 December 2011. 6.4. Companies within the Group hold documentation concerning the adopted accounting principles and these principles are applied in a consistent manner. 7. Significant accounting principles applied in separate financial statements 3.1. Property, plant and equipment and intangible assets Tangible assets are recognised in the accounts if their useful economic life exceeds one year and their initial cost exceeds PLN 3 500.00. 8
Finance-leased tangible assets pursuant to art. 3 sec. are classified by the Company as non-current assets. 3.2. Investments Non-current investments are measured at acquisition price less impairment losses, with the exception of closed-end fund investment certificates, which are carried at fair value. Monday FIZ is not subject to consolidation since it does not match the definition of an entity referred to in art. 3, sec. 1, point 39 of the Polish Accounting Act. Impairment losses are recognised in finance costs. If reasons are established for recognising impairment losses, the equivalent of the whole or appropriate part of a previous impairment loss increases the value of the investment and is subject to inclusion in finance income. Purchased bills of exchange are measured at adjusted purchase price estimated using the effective interest rate. 3.3. Inventory Not applicable. 3.4. Current receivables Receivables are recognised at the repayment amount less impairment losses. The value of receivables is subject to revaluation based on an individual review of specific items by the parent's management board and the management boards of subsidiaries. Impairment of receivables is recognised in other operating expenses. Written-off, overdue or unrecoverable receivables decrease previously recognised impairment losses. Written-off, overdue or unrecoverable receivables on which impairment losses have been recognised or partially recognised are included in operating expenses. 3.5. Foreign currency transactions Transactions denominated in currencies other than PLN are translated into PLN using the bid/ask rates of the bank whose services the Group uses or the average National Bank of Poland mid-rate on the day preceding the transaction execution date. As at the end of the reporting period assets and liabilities and equity expressed in currencies other than PLN are translated into PLN at the National Bank of Poland mid-rate published on the last day of the financial year. Exchange rate differences from translation are included in finance income or finance costs. 3.6. Cash and cash equivalents Cash held in bank accounts and at hand, together with current deposits held until maturity, are included at nominal value. The cash and cash equivalents item indicated in the statement of cash flows comprises cash at hand, funds held in bank accounts and bank deposits with maturity not exceeding 3 months which are not treated as deposits. 3.7. Prepayments 9
Write-down of prepayments on costs occurs in proportion to time elapsed. The date and means of settlement is justified by the nature of the costs incurred, with observance of prudential valuation principles. 3.8. Share capital Share capital is the Group's primary capital. It is included at the level specified in the articles of association and in the court register. 3.9. Provisions Provisions are recognised if the group is encumbered with an existing obligation (legal or otherwise) resulting from past events, if it is certain or highly probable that the performance of such obligation will make it necessary to pay out funds and if the amount resulting from such obligation can reliably be estimated. 3.10. Current liabilities Current liabilities are indicated at the required repayment amount. Issued bonds are valued at adjusted purchase price estimated using the effective interest rate. 3.11. Accruals Accruals are recognised at the amount of the probable liability corresponding to the reporting period, resulting in particular from: services performed for the entity by the entity's contracting parties if the value of the liability can reliably be estimated; the obligation to perform future services connected with current operations for unknown persons or entities, the value of which can be estimated despite the fact that the date on which the liability will arise is as yet unknown, including repair under guarantee relating to products sold with long-term useful lives. Write-down on accruals occurs in proportion to time elapsed. The date and means of settlement is justified by the nature of the costs calculated, with observance of prudential valuation principles. 3.12. Deferred income Deferred income is calculated with observance of prudential valuation principles and covers in particular: the equivalent of funds received or due from contracting parties for services where performance will occur in subsequent reporting periods; cash and cash equivalents received to finance the acquisition or production of tangible assets, including production-in-progress and development work, provided that this is not recognised as an increase in equity pursuant to other acts of law. Amounts classified as deferred income gradually increase other operating revenue in parallel with amortisation or depreciation of tangible assets or the cost of development work financed from these sources; the value of free-of-charge production-in-progress, tangible assets and intangible assets, including through donation. Amounts classified as deferred income gradually increase other operating revenue in parallel with amortisation or depreciation of tangible or intangible assets. 3.13. Deferred income tax 10
The deferred income tax provision is created in relation to all positive differences occurring as at the end of the reporting period on the tax value of assets and liabilities and equity over their carrying value as indicated in the financial statements. The deferred income tax asset is included in relation to all negative differences and unused deferred income tax assets carried forward to subsequent years and its value is the amount of taxable income likely to be generated, allowing the above differences and asset to be used. The deferred income tax asset and provision are valued with application of the tax rate anticipated to be in force during the period when the asset will be used or the provision released, adopting the tax rate (and tax regulations) in force as at the end of the reporting period as the basis. 3.14. Recognition of revenue Revenue is recognised in the amount of economic benefits likely to flow to the Group and which may reliably be estimated. Revenue is recognised at the moment when significant risk and benefits resulting from ownership of goods or products are transferred to the purchaser. Revenue covers the due or obtained amount from sale, decreased by tax on goods and services (VAT). Revenue from provision of services is recognised in proportion to the degree to which services are completed. Interest income/costs are recognised as at receipt/payment or when charged if their receipt/payment is beyond doubt. Given the specific nature of the Group's operations, interest income on bills of exchange is shown as operating revenue. 3.15. Recognition of costs Costs are recognised in the accounts on an accrual basis and in line with the matching principle. Costs incurred are linked to the period in which the goods were delivered or service rendered. Given the specific nature of the Group's operations and with regard to the matching principle, interest costs on bonds are recognised as operating expenses. 8. Description of the accounting principles in force during preparation of the consolidated financial statements 8.1. Pursuant to art. 44c of the Polish Accounting Act, the merger of Monday Sp. z o.o. and Monday Management Sp. z o.o. was reported using the pooling of interests method of accounting. Use of the pooling of interests method is justified as follows: - as at the date the companies were acquired by the parent, shareholders holding 100% of shares in Monday Sp. z o.o. and Monday Management Sp. z o.o. controlled over 60% of shares in Monday Development SA - the acquired entities operated on behalf of companies currently included in the Monday FIZ portfolio, and from an economic viewpoint the costs incurred and revenues generated by them are fully attributable and belong to the Monday Development Group. Internal Finance Sp. z o.o. and Lunedi Sp. z o.o. were formed by the parent, and for this reason reporting of the merger consists of eliminating the value of share capital in the subsidiary and the value of shares held in the parent. Subsidiaries are fully consolidated. 11
Pursuant to art. 63 of the Polish Accounting Act, associates are consolidated using the equity method. Use of the equity method of accounting is justified as follows: - the participation of a significant investor in the decision-making process concerning distribution of profit or coverage of loss, - the fact that a representative of a significant investor sits on the managing body, - the execution of significant transactions between the investor and the associate, - the investor makes significant technical information available to the associate. Equity interests in associates are initially recognised at acquisition price. As at the end of the reporting period these items were measured at acquisition price adjusted by changes to the share in the value of their net assets. 8.2. Monday FIZ is not subject to consolidation since it does not match the definition of an entity referred to in art. 3, sec. 1, point 39) of the Polish Accounting Act. Monday FIZ operates pursuant to the Act on Investment Funds, and thus cannot be recognised as a commercial company. 8.3. Adjustments and exclusions from consolidation may cover the following (if the transactions listed below occur during a given financial year): - exclusion of mutual receivables and liabilities, - exclusion of revenue and costs under mutual purchase and sale transactions, - exclusion of mutual financial transactions, - adjustment of retained earnings accumulated in Group assets, - exclusion of dividends paid out to the parent by subsidiaries, - adjustment of depreciation concerning tangible assets sold within the Group, - adjustment of subsidiaries' share capital, - the participation of minority shareholders in a subsidiary's financial result. - settlement of the Group's share of a change in the equity of companies consolidated using the equity method. 12
II. CONSOLIDATED BALANCE SHEET NOTE 31.12.2012 31.12.2011 A. NON-CURRENT ASSETS 23 803 276.67 28 550 648.94 I. Intangible assets 0.00 0.00 1. Costs of completed development work 2. Goodwill 3. Other intangible assets 4. Prepayments for intangible assets II. Goodwill of subsidiaries. associates and jointly controlled entities 0.00 0.00 1. Goodwill subsidiaries 2. Goodwill jointly controlled entities III. Property. plant and equipment 40 963.81 0.00 1. Tangible assets 40 963.81 0.00 a) land (including land usufruct rights) b) buildings, premises, civil and marine engineering structures c) technical equipment and machinery d) means of transport 1 40 963.81 e) other tangible assets 2. Production-in-progress 3. Prepayments on production-in-progress IV. Non-current receivables 0.00 0.00 1. From related parties 2. From other entities V. Non-current investments 23 422 952.86 28 124 600.94 1. Real property 2. Intangible assets 3. Non-current financial assets 23 422 952.86 28 124 600.94 a) in subsidiaries, associates and jointly controlled entities neither consolidated nor proportionally consolidated 0.00 0.00 - equity instruments - other securities - borrowings granted - other non-current financial assets b) in equity-accounted subsidiaries, associates and jointly controlled entities 0.00 149 963.23 - equity instruments 149 963.23 - other securities - borrowings granted - other non-current financial assets c) other entities 2.3.4 23 422 952.86 27 974 637.71 - equity instruments 900.00 - other securities - borrowings granted - other non-current financial assets 23 422 052.86 27 974 637.71 4. Other non-current investments VI. Non-current prepayments 7 339 360.00 426 048.00 1. Deferred income tax assets 19 339 360.00 426 048.00 13
2. Other accruals B. CURRENT ASSETS 4 127 771.02 14 043 881.46 I. Inventory 0.00 0.00 1. Materials 2. Semi-finished products and work in progress 3. Finished products 4. Goods for resale 5. Prepayments for product deliveries II. Current receivables 5 1 488 582.50 161 336.97 1. Receivables from related parties 0.00 0.00 a) for products and services, by payment period: 0.00 0.00 - up to 12 months - over 12 months b) other 2. Receivables from other entities 1 488 582.50 161 336.97 a) for products and services, by payment period: 45 590.00 29 310.70 - up to 12 months 45 590.00 29 310.70 - over 12 months b) from taxes, grants, excise duties and social security 103 992.50 94 826.27 c) other 1 339 000.00 37 200.00 d) under judicial enforcement III. Current investments 2 617 257.69 13 841 660.29 1. Current financial assets 2 617 257.69 13 841 660.29 a) subsidiaries and jointly controlled entities 0.00 0.00 - equity instruments - other securities - borrowings granted - other current financial assets b) associates 0.00 0.00 - equity instruments - other securities - borrowings granted - other current financial assets c) other entities 6 2 532 781.00 13 145 328.00 - equity instruments - other securities 2 532 781.00 13 145 328.00 - borrowings granted - other current financial assets d) cash and other cash assets 14 84 476.69 696 332.29 - cash on hand and at bank accounts 84 476.69 696 332.29 - other cash instruments - other cash assets 2. Other current investments IV. Current prepayments 8 21 930.83 40 884.20 TOTAL ASSETS 27 931 047.69 42 594 530.40 Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka Dorota Jankowiak President of the Member of the Member of the Monday Management Sp. z o.o. SKA 14
Management Board Management Board Management Board NOTE 31.12.2012 31.12.2011 A. EQUITY 17 085 980.01 26 045 453.38 I. Share capital 9 7 884 850.00 7 884 850.00 II. Mandatory contributions to share capital III. Own shares 10a -500 000.00-500 000.00 IV. Supplementary capital 10b 1 395 316.17 1 155 174.29 V. Revaluation reserve 11 8 425 583.76 17 502 295.70 VI. Other provisions VII. Exchange differences VIII. Profit / loss brought forward -237 008.49-496 778.62 IX. Net profit (loss) 117 238.57 499 912.01 X. Net profit deductions during the financial year B. NON-CONTROLLING INTERESTS C. Negative goodwill of subsidiaries. associates and jointly controlled entities 0.00 0.00 I. Negative goodwill subsidiaries II. Negative goodwill jointly controlled entities D. LIABILITIES AND PROVISIONS FOR LIABILITIES 10 845 067.68 16 549 077.02 I. Provisions for liabilities 12 2 225 721.00 4 395 469.00 1. Provision for deferred income tax 20 2 225 721.00 4 395 469.00 2. Provision for retirement pay and similar 0.00 0.00 3. Other provisions 0.00 0.00 II. Non-current liabilities 13 33 088.64 7 097 142.00 1. Towards related parties 2. Towards other entities 33 088.64 7 097 142.00 a) borrowings b) issuance of debt instruments 7 097 142.00 c) other financial liabilities 33 088.64 d) other III. Current liabilities 13a 8 586 258.04 5 056 466.02 1. Towards related parties 0.00 0.00 a) for products and services, by maturity date: 0.00 0.00 - up to 12 months - over 12 months b) advances received for product deliveries c) bills of exchange d) other 2. Towards other entities 8 586 258.04 5 056 466.02 a) borrowings b) issuance of debt instruments 8 497 438.00 984 382.00 c) other financial liabilities 4 050.36 d) for products and services, by maturity date: 84 121.68 272 084.02 - up to 12 months 84 121.68 272 084.02 - over 12 months e) advances received for product deliveries f) bills of exchange 3 800 000.00 g) due to taxes, grants, excise duties, social security and other benefits 648.00 h) due to remuneration i) other 3. Special-purpose funds 15
IV. Accruals 0.00 0.00 1. Negative goodwill 2. Other accruals 0.00 0.00 TOTAL EQUITY AND LIABILITIES 27 931 047.69 42 594 530.40 Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka Dorota Jankowiak President of the Management Board Member of the Management Board Member of the Management Board Monday Management Sp. z o.o. SKA 16
III. CONSOLIDATED STATEMENT OF PROFIT AND LOSS NOTE 01.01.2012 31.12.2012 01.01.2011 31.12.2011 A. NET REVENUE FROM SALES, including: 17a 2 400 127.00 1 800 405.00 - from related parties I. Net revenue from sale of products and services 2 400 127.00 1 800 405.00 - including: net revenue from financial non-current assets 1 728 150.00 II. Net revenue from sale of goods for resale and materials B. COST OF PRODUCTS, GOODS FOR RESALE AND MATERIALS SOLD, including: 18a 1 873 857.11 1 049 050.37 - to related parties I. Manufacturing cost of products and services sold 1 873 857.11 1 049 050.37 - including: redeemed financial non-current assets 379 627.11 0.00 II. Value of goods for resale and materials sold C. GROSS PROFIT (LOSS) ON SALES (A - B) 526 269.89 751 354.63 D. DISTRIBUTION COSTS 18b 35 830.00 30 935.75 E. ADMINISTRATIVE EXPENSES 18b 274 201.18 345 182.77 F. PROFIT (LOSS) ON SALES (C-D-E) 216 238.71 375 236.11 G. OTHER OPERATING REVENUE 15 1.16 91.82 I. Gain on disposal of non-current assets other than financial assets 0.00 II. Grants 0.00 0.00 III. Other operating revenue 1.16 91.82 H. OTHER OPERATING EXPENSES 16 3 367.16 2 816.98 I. Loss on disposal of non-current assets other than financial assets 0.00 II. Revaluation of non-financial assets III. Other operating expenses 3 367.16 2 816.98 I. PROFIT (LOSS) ON OPERATING ACTIVITIES (F+G+H) 212 872.71 372 510.95 J. FINANCE INCOME 17 2 644.98 5 175.83 I. Dividends and shares of profit, including: 0.00 - from related parties 0.00 II. Interest, including: 1 641.25 5 175.83 - from related parties III. Gain on disposal of investments 0.00 IV. Revaluation of investments 0.00 V. Other 1 003.73 K. FINANCE COSTS 18 54 826.89 4 645.00 I. Interest, including: 7 516.89 4 645.00 - towards related parties 0.00 II. Loss on disposal of investments 0.00 III. Revaluation of investments 47 310.00 IV. Other 0.00 L. GAIN (LOSS) ON SALE OF FULL OR PARTIAL INTEREST IN SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES 7 481.12 0.00 M. OPERATING PROFIT (LOSS) (I+J-K/-L) 168 171.92 373 041.78 N. GAIN (LOSS) ON EXTRAORDINARY EVENTS (N.I.-N.II.) 0.00 0.00 I. Extraordinary profit II. Extraordinary loss O. GOODWILL IMPAIRMENT 0.00 0.00 17
I. Goodwill impairment - subsidiaries II. Goodwill impairment - jointly controlled entities P. NEGATIVE GOODWILL IMPAIRMENT 0.00 0.00 I. Negative goodwill impairment - subsidiaries II. Negative goodwill impairment - jointly controlled entities Q. SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTEES -4 344.35-5 636.77 R. GROSS PROFIT (LOSS) (M+/-N-O+P+/-Q) 163 827.57 367 405.01 S. INCOME TAX 21c 46 589.00-132 507.00 T. OTHER MANDATORY PROFIT REDUCTIONS U. (Profit) loss attributable to non-controlling interests W. NET PROFIT (LOSS) (R-S-T+/-U) 117 238.57 499 912.01 Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka Dorota Jankowiak President of the Management Board Member of the Management Board Member of the Management Board Monday Management Sp. z o.o. SKA 18
IV. CONSOLIDATED STATEMENT OF CASH FLOWS NOTE 01.01.2012 31.12.2012 01.01.2011 31.12.2011 A. CASH FLOWS FROM OPERATING ACTIVITIES I. Net profit (loss) 117 238.57 499 912.01 II. Total corrections 23 6 202 461.23 263 124.70 1. (Profit) loss attributable to non-controlling interests 2. (Profit) loss on interests in equity-accounted entities 4 344.35 5 636.77 3. Depreciation 483.55 4. Goodwill impairment 5. Negative goodwill impairment 6. Interest accrued on purchased bills of exchange 1 263 505.00-1 159 092.00 7. Interest accrued on issued bonds 415 914.00 141 489.77 8. Cost of redemption of investment certificates 379 627.11 9. (Profit) loss on exchange differences 10. Interest and shares of profit (dividend) 277.84 3 833.00 11. (Profit) loss on investing activities 38 828.88 12. Change in provisions -40 643.00 187 131.00 13. Change in inventories 14. Change in receivables -1 327 245.53 417 377.03 15. Change in current liabilities -187 314.34 255 018.10 16. Change in prepayments and accruals 105 641.37-326 055.20 17. Purchase of third-party bills of exchange -270 000.00-6 005 000.00 18. Redemption of third-party bills of exchange 5 819 042.00 3 075 000.00 19. Issuance of own bills of exchange 240 000.00 20. Redemption of own bills of exchange -1 140 000.00 21. Issuance of bonds 7 567 786.23 22. Redemption of bonds -3 000 000.00 23. Other corrections III. Net cash flows from operating activities (I±II) 6 319 699.80 763 036.71 B. NET CASH FLOWS FROM INVESTING ACTIVITIES I. Inflow 152 300.00 1. Proceeds from disposal of intangible assets and property, plant and equipment 2. Proceeds from disposal of investment property and intangible assets 3. Proceeds from sale of financial assets 152 300.00 a) share of profit of equity-accounted entities 152 300.00 b) other entities - disposal of financial assets - dividends and shares of profit - repayment of long-term borrowings granted - redemption of re-paid bills of exchange - interest 4. Other investment inflows II. Outflow 7 079 269.20 155 300.00 1. Payments for intangible assets and property, plant and equipment 2. Payments for investment property and intangible assets 3. Payments for financial assets 46 410.00 155 300.00 19
a) share of profit of equity-accounted entities 154 800.00 - acquisition of financial assets 154 800.00 b) other entities 46 410.00 500.00 - acquisition of financial assets 46 410.00 500.00 - long-term borrowings granted 4. Dividends and shares of profit paid to non-controlling interests 5. Other investment outflows 7 032 859.20 - redemption of own bills of exchange - interest on own bills of exchange - other investment outflows 7 032 859.20 III. Net cash flows from investing activities (I-II) -6 926 969.20-155 300.00 C. NET CASH FLOWS FROM FINANCING ACTIVITIES I. Inflow 150 000.00 1. Net inflow on issuance of share and other equity instruments and capital contributions 2. Loans and borrowings 150 000.00 3. Issuance of debt instruments 4. Other financial inflows II. Outflow 4 586.20 153 833.00 1. Acquisition of own shares 2. Dividends and other payments to owners 3. Outflows connected with profit distribution other than payments to owners 4. Repayment of borrowings 150 000.00 5. Redemption of debt instruments 6. Due to other financial liabilities 7. Payment of finance lease liabilities 4 308.36 8. Interest 277.84 3 833.00 9. Other finance costs III. Net cash flows from financing activities (I-II) -4 586.20-3 833.00 D. TOTAL NET CASH FLOWS (A.III±B.III±C.III) -611 855.60 603 903.71 E. BALANCE SHEET CHANGES IN CASH AND CASH EQUIVALENTS, of which: -611 855.60 76 758.05 - change in cash and cash equivalents due to exchange differences F. CASH AS AT THE BEGINNING OF PERIOD 696 332.29 92 428.58 G. CASH AS AT THE END OF PERIOD (F±D), INCLUDING 84 476.69 696 332.29 Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka Dorota Jankowiak President of the Management Board Member of the Management Board Member of the Management Board Monday Management Sp. z o.o. SKA 20
V. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY NOTE 01.01.2012 31.12.2012 01.01.2011 31.12.2011 I. Equity as at the beginning of period (opening balance) 26 045 453.38 15 134 586.29 I.a. Equity as at the beginning of period (opening balance), after corrections 26 045 453.38 15 134 586.29 1. Share capital at the beginning of period 7 884 850.00 7 884 850.00 1.1. Changes in share capital 0.00 0.00 1.2. Share capital at the end of period 9 7 884 850.00 7 884 850.00 2. Mandatory contributions to share capital at the beginning of period 0.00 0.00 2.1. Changes in mandatory contributions to share capital 0.00 0.00 2.2. Mandatory contributions to share capital as at the end of period 0.00 0.00 3. Own shares at the beginning of period 500 000.00 500 000.00 3.1. Changes in own shares 0.00 0.00 a) increase 0.00 0.00 b) decrease 3.2. Own shares at the end of period 10a 500 000.00 500 000.00 4. Supplementary capital at the beginning of period 1 155 174.29 790 633.00 4.1. Changes in supplementary capital 240 141.88 364 541.29 a) increase 240 141.88 364 541.29 - retained earnings 240 141.88 364 541.29 b) decrease 0.00 0.00 4.2. Supplementary capital as at the end of period 10b 1 395 316.17 1 155 174.29 5. Revaluation reserve at the beginning of period 17 502 295.70 7 091 340.62 5.1. Changes in the revaluation reserve -9 076 711.94 10 410 955.08 a) increase 2 129 105.00 12 853 031.08 - measurement of financial assets (Monday FIZ investment certificates) 0.00 12 853 031.08 - deferred tax on measurement of financial assets (Monday FIZ investment certificates) 1 872 185.00 - deferred tax on redemption of financial assets (Monday FIZ investment certificates) 256 920.00 b) decrease 11 205 816.94 2 442 076.00 - deferred tax on measurement of financial assets (Monday FIZ investment certificates) 0.00 2 442 076.00 - measurement of financial assets (Monday FIZ investment certificates) 9 853 605.23 - redemption of financial assets (Monday FIZ investment certificates) 1 352 211.71 5.2. Revaluation reserve at the end of period 11 8 425 583.76 17 502 295.70 6. Other provisions at the beginning of period 0.00 0.00 6.1. Changes in other provisions 0.00 0.00 6.2. Other provisions at the end of period 0.00 0.00 7. Profit (loss) brought forward as at the beginning of period 3 133.39-132 237.33 7.1. Profit brought forward as at the beginning of period 499 912.01 271 748.71 7.2. Profit brought forward as at the beginning of period, after corrections 499 912.01 271 748.71 7.3. Changes in profit brought forward -527 176.41-379 754.47 a) increase (due to) 0.00 0.00 b) decrease (due to) 527 176.41 379 754.47 - profit distribution off-set with loss brought forward 287 034.53 15 213.18 - increase of supplementary capital 240 141.88 364 541.29 7.4. Profit brought forward as at the end of period 24-27 264.40-108 005.76 7.5. Loss brought forward as at the beginning of period 496 778.62 403 986.04 - effects of changes in accounting policies 7.6. Loss brought forward as at the beginning of period, after corrections 496 778.62 403 986.04 7.7. Changes in loss brought forward -287 034.53-15 213.18 21
a) increase 0.00 0.00 b) decrease 287 034.53 15 213.18 - off-set with profit brought forward 287 034.53 15 213.18 7.8. Loss brought forward as at the end of period 209 744.09 388 772.86 7.9. Profit (loss) brought forward as at the end of period -237 008.49-496 778.62 8. Net result 117 238.57 499 912.01 a) net profit 117 238.57 499 912.01 b) net loss c) profit reductions II. Equity at the end of period (closing balance) 17 085 980.01 26 045 453.38 III. Equity after the proposed profit distribution / coverage of loss 17 085 980.01 26 045 453.38 Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka Dorota Jankowiak President of the Management Board Member of the Management Board Member of the Management Board Monday Management Sp. z o.o. SKA 22
VI. NOTES AND ADDITIONAL INFORMATION Monday Development SA Consolidated Annual Report 1. Intangible assets arising on consolidation Not applicable. The merger was accounted for using the pooling of interests method. 2. Property, plant and equipment (note 1) Changes in financial assets subsidiaries, associates and jointly controlled entities No. Item Land Buildings Technical equipment and machinery Means of transport Other tangible assets Total 1. As at the beginning of period Increases 41 447.36 41 447.36 - acquisition 41 447.36 41 447.36 Decreases 2. As at the end of period 41 447.36 41 447.36 3. - Increases 483.55 483.55-4. 483.55 483.55 5. As at the beginning of period 6. As at the end of period 40 963.81 40 963.81 Subsidiary Monday Sp. z o.o. entered into an agreement to lease a car. As per art. 3, sec. 4 of the Polish Accounting Act, the Company recognised this transaction as acquisition of non-current assets. 3. Inventories and write-down of inventories The Group did not hold inventory as at the end of the reporting period. 4. Non-current investments - financial assets Changes in financial assets subsidiaries, associates and jointly controlled entities (note 2) Equity Bills of No. Item interests exchange Other non-current financial assets Total 1. As at the beginning of period 149 963.23 0.00 27 974 637.71 28 124 600.94 a) Increases 47 410.00 0.00 7 032 859.20 7 080 269.20 - acquisition 47 410.00 0.00 7 032 859.20 7 080 269.20 - revaluation of investment certificates 0.00 0.00 0.00 b) Decreases 196 473.23 0.00 11 585 444.05 11 781 917.28 - redemption of investment certificates 1 731 838.82 1 731 838.82 - discount paid 47 310.00 9 853 605.23 9 900 915.23 - sales 149 163.23 149 163.23 2. As at the end of period 900.00 0.00 23 422 052.86 23 422 052.86 Equity interests recognised as non-current financial assets: - subsidiary Monday Sp. z o.o.'s PLN 800 stake in the supplementary capital of partnerships limited by shares, in which it is general partner 23
- subsidiary Internal Finance Sp. z o.o.'s PLN 100 stake in the supplementary capital of a partnership limited by shares, in which it is general partner The shares in Monday Palacza Sp. z o.o. and Monday Palacza Sp. z o.o. SKA acquired by the parent in 2011 were sold at purchase price. Subsidiaries Monday Sp. z o.o. and Monday Management Sp. z o.o. acquired shares in Monday Sp. z o.o. Milczańska SKA. Due to the liquidation of Monday Sp. z o.o. Milczańska SKA, the Company made a 100% write-down. Investment certificates in Monday FIZ are recognised as non-current financial assets. Monday Development SA acquired 10 314 390 investment certificates in Monday FIZ on 3 March 2010, and 2 585 610 certificates in January 2012. Monday FIZ holds stakes in the partnerships limited by shares responsible for implementing development projects and in the company responsible for managing the Monday Group. On 3 March 2010 Monday Development SA acquired 10 314 390 investment certificates in Monday FIZ, together with 2 585 610 investment certificates in January 2012, which holds stakes in the partnerships limited by shares responsible for implementing development projects and in the company responsible for managing the Monday Group. In March 2010 the certificates were purchased for PLN 0.6173 each, i.e. for a total price of PLN 6 366 865.00. In January 2012 they were purchased at a price of PLN 2.72, i.e. for a total of PLN 7 032 859.20. In 2012 the Company redeemed 615 000 investment certificates acquired for PLN 0.6173 each, amounting to a total of PLN 379 627.11. As a result of these events, the purchase price for certificates in the Fund as at the last valuation date was PLN 13 020 097.10. The Monday Group's assets are invested in Monday FIZ in the form of special purpose vehicles in which the Fund is shareholder. Thus the main item, constituting over 83% of Group assets, is investment certificates in the Fund. The value of certificates as at 31 December 2012 was PLN 34 481 873.86, comprising Monday FIZ's following portfolio companies and other balance sheet items: Company name VALUE PLN Monday Management Sp. z o.o. SKA 6 573 000.00 Monday Sp. z o.o. Sokoła I SKA 1 910 042.00 Monday Sp. z o.o. Rataje SKA 13 734 130.00 Monday Sp. z o. o. Sokoła II SKA 837 973.00 Monday Sp. z o.o. Piątkowska SKA 847 713.00 Monday Sp. z o.o. Strzeszyn SKA 1 705 143.00 Monday Sp. z o.o. Palacza SKA 1 369 290.00 Monday Sp. z o.o. Małe Garbary SKA 765 036.00 Companies are measured using net asset value. 1 476 661.17 Cash 2 566 658.07 Receivables 4 151 721.00 Liabilities -162 893.38 Liabilities (investment certificate redemption requests at 31 December 2012) -1 292 600.00 TOTAL 34 481 873.86 The decision to redeem certificates was taken in December 2012. Due to the possibility of a payment under a redemption request, the redemption was recognised as a liability of the fund only in 2013, i.e. after annual measurement of fund assets. Similarly, this amount was recognised in the Company s balance sheet under other receivables. 24
The Company revalued investment certificates in the Monday FIZ in connection with changes to valuation assumptions for the Rataje project which were not known to the auditor before issue of the opinion on the Monday FIZ financial statements. The PLN 11 059 821 correction comprises a PLN 2883 172 reduction in the value of the project itself and the impact of adjusted Rataje project assumptions on assessment of profits after the forecast period and residual value, totalling PLN 8 176 649, which is contained in the valuation of Monday Management Sp. z o.o. SKA. Irrespective of the audit of Monday Development SA's financial statements, the value of Monday FIZ assets was audited and approved by the Fund's statutory auditor, PKF Audyt Sp. z o.o. Portfolio companies are valued using discounted cash flows (DCF). One DCF valuation approach is FCFE (free cash flow to equity). The Fund s value is calculated as the sum of discounted project cash flows and residual values, less the Group s operating costs and adjusted by balance sheet items carried at historic cost, which comprise assets and equity and liabilities not relating to projects, i.e. which are connected with Group operations or do not fulfil the conditions necessary for DCF valuation. Calculation of free cash flows and discount + project cash flows - Group operating costs = free cash flows Group operating costs are assumed at the level of the first forecast period and are revalued at +3% annually. Free cash flows are discounted at 14.5%. A half-year discount period was adopted. Calculation of the project risk discount Project risk now comprises an element of the Monday Group's DCF-FCFE model in connection with the achievement by projects of subsequent milestones towards project completion. Risk is calculated at the level of each project's stage of completion, the weightings of which are presented in the table below: STAGE DESCRIPTION STAGE WEIGHT (%) PROJECT RISK (%) 1 Land use study 15.0 85.0 2 Neighbourhood 15.0 70.0 3 Adoption of area development plan / receipt of decision on 35.0 35.0 development conditions 4 Ratification of area development plan / decision on development 20.0 15.0 conditions 5 Issue of a construction permit 10.0 5.0 6 Financing 5.0 0.0 7 Development 0.0 0.0 100% Stages and weightings are established by the management board of the SPV general partner on the basis of the Monday Group's experience in the Poznań market, taking into consideration the way in which the Group runs its business. Risk is included in project valuation as a percentage discount on project value. 25
In the 2010 valuations, risk was estimated on the basis of one factor the ratification of local area development plans or issue decisions on development conditions. A lack of these documents triggered a 50% discount on project value. The change in 2011 was introduced in order to ensure more precise reflection of value as projects advance. Calculation of residual value Since Monday Group projects are implemented through SPVs, which are liquidated at the end of the warranty period, it is impossible to directly calculate their residual value. Thus the residual value is indicated for the entire Monday Group and is reflected in the valuation of Monday Management Sp. z o.o. SKA. The methodology for establishing net profit after a specific forecast period is as follows: a) calculation of project profit (without internal finance costs) and adjustment for the risk discount, b) spread of calculated profits throughout the project lifetime, where the start is designated as the first project cash flow and the end the last project cash flow, c) calculation of average cash flows, which are the arithmetic average over two years: the valuation year and the subsequent year, with subsequent years after the calculation period of average cash flows included as the average cash flow plus adopted annual growth rate (3%), less cash flows calculated in a given year from specific forecasts per project (these cash flows result from valuations for specific companies). The cash flow for calculation of residual value is the designated net profit after the specific forecast period for 2018 and after deduction of the Monday Group's fixed costs as at 2018 year end. The profit growth rate after the specific forecast period and fixed costs has been established as 3%. The methodology for designation of net profit after the specific forecast period has been modified in relation to 2011. Changes in methodology are presented in the table below: Component 2010 methodology 2011-2012 methodology net profit profit spread period calculation of average cash flow profit after the specific forecast period net profit for the project from handover of the construction site to the general contractor until completion of works fixed two-year period calculated from 2016 with fixed growth rate net profit for the project, minus internal finance costs, adjusted by project risk discount from the first to last project cash flows period covering the valuation year and subsequent year calculated from the year after the period adopted for calculation of the average cash flow Residual value for the Monday Group is calculated using the following formula: RV = [FCFE ly x (1+pgr) / (cc - egr)] x rvdr where: 26
FCFE ly - free cash flow to equity in the last year of the cash flow forecast egr - expected FCFE growth rate after the forecast period (3%) cc - cost of capital (14.5%) rvdr - residual value discount factor [1/(1+0.145/2] x [1/(1.1450)^6] Adjustment by balance sheet items carried at historic cost This group includes assets and equity and liabilities not linked to any projects, i.e. those which are connected with Group operations or do not fulfil the necessary requirements for DCF valuation. These assets increase Fund value while equity and liabilities reduce Fund value. Conditions for commencing application of the FCFE valuation approach The condition for commencing application of project valuation using the described method is the concurrent occurrence of all of the following events: - event 1 The Group has the right to use land through: ownership / perpetual usufruct, or an irrevocable right to acquire land at any given moment (dependent exclusively on the actions or omissions of the Company), and the right to appear before government authorities on behalf of previous owners - event 2 The Group has confirmed the possibility of obtaining a permit to construct planned buildings / structures - event 3 A management board decision to use the land - event 4 The commencement of administrative proceedings for issue of a construction permit Conditions for ceasing application of the FCFE valuation approach The condition for ceasing application of project valuation using the described approach and transfer to valuation using the adjusted net asset method is the company's conclusion of a project, consisting of the completion and sale of the investment and payout of profit, also in the form of buying back own bills of exchange or paying bills of exchange issued by another Group company. Changes in impairment of financial assets other entities (note 3) Equity No. Item interests Bills of exchange Other non-current financial assets Total 1. As at the beginning of period 0.00 0.00 21 607 772.20 21 607 772.20 a) Increases 0.00 0.00 0.00 0.00 b) Decreases 0.00 0.00 11 205 816.94 11 205 816.94 Monday FIZ investment - certificate redemption 1 352 211.23 1 352 211.71 - Monday FIZ investment certificate valuation 9 853 605.23 9 853 605.23 - Mandatory redemption 0.00 2. As at the end of period 0.00 0.00 10 401 955.26 10 401 955.26 27
As at 31 December 2012, investment certificates in Monday FIZ were revalued up to the value indicated by the Fund as at the valuation date, which is the last day of each quarter. The decrease results from a decision to redeem part of the investment certificates held and decrease the value of project Rataje. From the formation of Monday FIZ to the end of 2009, quarterly valuations of the Fund's SPVs were carried out using net asset values (NAV). This method was justified with regard to its low cost and simplicity, which while the business was still privately owned was acknowledged by investors as sufficient. As the Company was preparing to list on the NewConnect market, it became necessary to identify the actual market value of projects and as a consequence, in the first quarter of 2010, the method for valuing shares in SPVs belonging to Monday FIZ was changed to the discounted cash flow approach (DCF-FCFE free cash flow to equity), which is the universal approach for valuing this type of business. 5. Non-current investments - impairment recognised in the revaluation reserve Effect of changes in impairment of financial assets on the revaluation reserve (note 4) Equity Other No. Item interests securities Other non-current financial assets Total 1. Revaluation reserve as at the beginning of period 0.00 0.00 17 502 295.70 17 502 295.70 a) Increases 0.00 0.00 2 129 105.00 2 129 105.00 - deferred tax - valuation of Monday FIZ investment certificates 1 872 185.00 1 872 185.00 deferred tax - redemption of investment certificates 256 920.00 256 920.00 b) Decreases 0.00 0.00 11 205 816.94 11 205 816.94 - redemption of investment certificates 1 352 211.71 1 352 211.71 - valuation of Monday FIZ investment certificates 9 853 605.23 9 853 605.23-2. Revaluation reserve as at the end of period 0.00 0.00 8 425 583.76 8 425 583.76 6. Inventory The Group did not report inventories as at 31 December 2012. 7. Receivables Structure of current liabilities (note 5) No. Item Receivables Receivables Receivables As at the end Current overdue by up to overdue by 31-90 overdue by over of period receivables 30 days days 90 days 1. From related parties 0.00 0.00 0.00 0.00 0.00 a) For products and services, including: 0.00 0.00 0.00 0.00 0.00 - up to 12 months 0.00 0.00 - over 12 months 0.00 0.00 b) Other 0.00 0.00 2. From other entities 1 458 582.50 1 458 582.50 9 840,00 11 070.00 12 380.00 a) For products and services 45 590.00 45 590.00 9 840,00 11 070.00 12 380.00 - up to 12 months 45 590.00 45 590.00 9 840,00 11 070.00 12 380.00 - over 12 months 0.00 0.00 b) VAT refund 103 992.50 103 992.50 c) Receivables from investment certificates redemption 1 292 600.00 1 292 600.00 d) Other 16 400.00 16 400.00 e) Under judicial enforcement 0.00 0.00 28
Total 1 458 582.50 1 458 582.50 9 840.00 11 070.00 12 380.00 There were no impairment losses on receivables. 8. Current investments - financial assets Changes in financial assets other entities (note 6) No. Item Equity interests Bills of exchange Other non-current financial assets Total 1. As at the beginning of period 0.00 13 145 328.00 0.00 13 145 328.00 a) Increases 0.00 670 977.00 0.00 670 977.00 - acquisition 0.00 270 000.00 0.00 270 000.00 - accrued discount 0.00 400 977.00 0.00 400 977.00 b) Decreases 0.00 11 283 524.00 0.00 11 283 524.00 - redemption 9 619 042.00 9 619 042.00 - discount paid 1 664 482.00 1 664 482.00 2. As at the end of period 0.00 2 532 781.00 0.00 2 532 781.00 The decrease in current financial assets results from investment of funds in non-current financial assets and debt servicing due to the issue of series B, C and D bonds. The discount on series B and C bonds is paid half-yearly, while the discount on series D bonds is paid on a quarterly basis. The bill of exchange acquired in 2011 from Monday Palacza Sp. z o.o. SKA, which was not paid in 2012, was cancelled. 9. Prepayments and accruals Non-current prepayments (assets) (note 7) No. Item As at the beginning of period Increases Decreases As at the end of period 1 Deferred tax assets 426 048.00 85 965.00 172 653.00 339 360.00 2 Other prepayments 0.00 Total 426 048.00 85 965.00 172 653.00 339 360.00 The change in prepayments results from a decrease in deferred Income tax assets by negative differences, mainly referring to the Parent s unallocated loss for 2011. The increase results from temporary negative differences on interest on bonds accrued but not paid out, settled by the Parent using adjusted purchase price and on the value of finance lease liabilities of subsidiary Monday Sp. z o.o. Current prepayments (assets) (note 8) No. Item As at the beginning of period Increases Decreases As at the end of period 1 Other prepayments 40 884.20 21 930.83 40 884.20 21 930.83 - insurance 22 500.00 21 930.83 22 500.00 21 930.83 - fees for bond register maintenance 18 330.00 0.00 18 330.00 0.00 - safe box fees 54.20 54.20 Total 40 884.20 21 930.83 40 884.20 21 930.83 29
10. Share capital Share capital (note 8) No. Item Number of shares Share capital as at % in share capital as Nominal amount held the end of period at the end of period 1. Series A shares 50 000 10.00 500 000.00 6.34% 2. Series A1 shares 639 500 10.00 6 395 000.00 81.10% 3. Series B shares 98 985 10.00 989 850.00 12.55% Total 788 485.00 7 884 850.00 100% In connection with internal group reorganisation, on 3 March 2010 the parent acquired own shares from Monday FIZ in order to redeem them. Own shares (note 9a) No. Item Number of Own shares as at the % in share capital as at Nominal amount shares held end of period the end of period 1. Series A shares 50 000 10.00 500 000.00 6.34% Total 50 000.00 500 000.00 6% Supplementary capital (note 9b) No. Item Value 1. Series B shares [share premium] 910 662 2. Series B shares [issuance costs] -120 029 3. Distribution of 2010 profit 364 541 4. Distribution of 2011 profit 240 142 Total 1 395 316.17 11. Other reserves (note 11) No. Item Current period Prior period 1. As at the beginning of period 17 502 295.00 7 091 340.62 a) Increases, including: 2 129 105.00 12 853 031.08 - valuation of Monday FIZ 0.00 12 853 031.08 - deferred tax - valuation of investment certificates 1 872 185.00 - deferred tax - redemption of investment certificates 256 920.00 b) Decreases, including: 11 205 816.94 2 442 076.00 - deferred tax arising on valuation 0.00 2 442 076.00 - valuation of Monday FIZ investment certificates 9 853 605.23 - redemption of investment certificates 1 352 211.71 2. As at the end of period 8 425 583.76 17 502 295.00 In connection with the quarterly valuations of the parent's investment certificates in Monday FIZ, valuation causing an increase in financial assets value was recognised in the revaluation reserve. This additional redemption of investment certificates translated into a decrease in the revaluation reserve by the amount in excess of acquisition price. 30
12. Change in provisions (note 12) Item As at the beginning of period Increases Use As at the end of period 1. Deferred income tax provision 4 395 469.00 270 386.00 2 440 134.00 2 225 721.00 2. Provision for retirement benefits and similar 0.00 0.00 0.00 0.00 3. Other provisions 0.00 0.00 0.00 0.00 Total provisions for liabilities 4 395 469.00 270 386.00 2 440 134.00 2 225 721.00 The following events contributed to the increase in the deferred income tax provision: redemption of investment certificates in the Monday FIZ - PLN 1 008 651 part to be settled in 2013 - and the necessity to create a PLN 191 644 provision, payment of new bills of exchange by the parent and the generation of PLN 70 959.00 in temporary negative differences, increase in tangible asset value at subsidiary Monday Sp. z o.o. financed through operating leases, which as per the Polish Accounting Act (art. 3, sec. 4) are classified as finance leases, resulting in a PLN 7 783.00 temporary positive difference. The following events contributed to the decrease in the deferred income tax provision: bills of exchange bought back by issuers and the discount received, for which a PLN 311 039 provision was created, redeemed investment certificates in the Monday FIZ in the part for which a PLN 256 920 provision was created, PLN 9 852 605.23 decrease in the value of Monday FIZ investment certificates and the necessity to create a PLN 1 872 185 provision from the revaluation reserve. (note 13) No. 13. Structure of non-current liabilities Item As at the end of period Current liabilities Liabilities overdue by up to 30 days Liabilities overdue by 31-90 days Liabilities overdue by over 90 days 1. Towards related parties 0.00 0.00 0.00 0.00 0.00 2. Towards other entities 33 088.64 33 088.64 0.00 0.00 0.00 a) borrowings 0.00 b) from issuance of debt instruments 0.00 0.00 c) other financial liabilities 33 088.64 33 088.64 d) other Total 33 088.64 33 088.64 0.00 0.00 0.00 Subsidiary Monday Sp. z o.o. entered into a leasing agreement until October 2019. Instalments from 2014 to 2019 constitute a non-current liability. 14. Structure of current liabilities Structure of current liabilities (excluding special-purpose funds) (note 13a) No. Item Current liabilities Liabilities overdue by up to 30 days Liabilities overdue by 31-90 days Liabilities overdue by over 90 days As at the end of period 1. Towards related parties 0.00 0.00 0.00 0.00 0.00 a) for products and services 0.00 0.00 0.00 0.00 0.00 b) bill of exchange liabilities 0.00 0.00 2. Towards other entities 8 586 258.04 8 586 258.04 0.00 0.00 0.00 a) borrowings 0.00 0.00 b) from issuance of debt 8 497 438.00 8 497 438.00 31
instruments c) other financial liabilities 4 050.36 4 050.36 d) for products and services 84 121.68 84 121.68 0.00 0.00 0.00 -up to 12 months 84 121.68 84 121.68 -over 12 months 0.00 0.00 e) advances received for deliveries 0.00 0.00 f) bill of exchange liabilities 0.00 0.00 g) due to taxes, excise duty, social insurance 648.00 648.00 h) due to remuneration 0.00 0.00 i) other 0.00 0.00 Total 8 586 258.04 8 586 258.04 0.00 0.00 0.00 The liability for issue of debt securities is the value of discounted interest on series B, C and D bonds, the maturity of which does not exceed one year from the end of the reporting period. In February 2011 the parent issued series B and C bonds at a total nominal value of PLN 6 000 000, and in December issued series D bonds valued at PLN 2 300 000. Series B and C bonds reach maturity in February 2013, whereas series D bonds mature in June 2013. Interest is paid on series B and C bonds twice per year, whereas payment is made quarterly in the case of series D bonds. Debt instrument liabilities are measured at adjusted purchase price, which means that liability elements included in the accounts have been decreased by bond issuance costs and interest paid, together with being adjusted by the accumulated amount of discounted variance between nominal value and value at maturity, which is calculated using the effective interest rate. 15. Impact of subsidiary acquisition reporting using pooling of interests and equity accounting Pursuant to art. 44c of the Polish Accounting Act, in 2010 the parent reported the acquisition of 100% stakes in Monday Sp. z o.o. and Monday Management Sp. z o.o. using the pooling of interests method of accounting. Use of the pooling of interests method is justified as follows: - as at the date the companies were acquired by the parent, shareholders holding 100% of shares in Monday Sp. z o.o. and Monday Management Sp. z o.o. controlled over 60% of shares in Monday Development SA - the acquired entities operated on behalf of companies currently included in the Monday FIZ portfolio, and from an economic viewpoint the costs incurred and revenues generated by them are fully attributed to and reflected in the financial statements of the Monday Development Group. Internal Finance Sp. z o.o. and Lunedi Sp. z o.o. were formed by the parent, and for this reason reporting of the merger consists of fully reducing the subsidiary s share capital and its shares held by the parent. Subsidiaries are fully consolidated. Pursuant to 63 of the Polish Accounting Act, the parent valued its shares in associates Monday Palacza Sp. z o.o. and Monday Palacza Sp. z o.o. SKA using the equity method of accounting. In 2012 the parent disposed of all its shares in Monday Palacza Sp. z o.o. SKA and 50% of its shares in Monday Palacza Sp. z o.o. This transaction is recognised in row L of the statement of profit and loss gain (loss) on sale of full or partial interest in subsidiaries, associates and jointly controlled entities. The remaining interest is valued at purchase price adjusted by a proportional change in net asset value. Use of the equity method of accounting is justified as follows: - representatives of the investor sit on the management board of the company in which the investment is made, - the investor takes part in developing the associate's operational strategy, - there are significant transactions executed between the investor and the associate. 32
Investments in subsidiaries, jointly controlled entities and associates are initially indicated at purchase price. As at the end of the reporting period these items were valued at purchase price adjusted by changes to the share in net asset values. 16. Use of Group assets as collateral A registered pledge was established on investment certificates in Monday FIZ as collateral for the issue of bonds. The pledge was established on three certificate series: - 1 970 000 series B certificates as collateral for series D bonds - 738 048 series C certificates as collateral for series B bonds - 791 952 series D certificates as collateral for series B bonds The parent granted a bill of exchange guarantee for "W Zaciszu Stawów nr 7" Sp. z o.o. in connection with collateral for series C bonds. Sureties issued by the parent up to the end of the reporting period for Monday FIZ portfolio companies are as follows: SURETY ISSUED FOR IN CONNECTION WITH AMOUNT Monday Sp. z o.o. Chwiałkowskiego SKA land acquisition for the project 3 700 000 Internal Finance Sp. z o.o. SKA issuance of bills of exchange for acquisition of land for the 2 480 658 SOKOŁA I project Internal Finance Sp. z o.o. SKA agreement concerning the issuance of bills of exchange for 574 383 own contribution to projects Monday Management Sp. z o.o. SKA agreement concerning the issuance of a bill of exchange for operating activities 508 726 17. Average employment The Group has no employees. Executive salaries On 27 June 2011 the general meeting passed a resolution to pay members of the supervisory board on a quarterly basis. PLN 25 000 gross was paid out in 2012. In 2012 the Company's management board did not receive remuneration for their work. 18. Fees paid to the statutory auditor or entities authorised to audit the financial statements Description Current period Prior period Mandatory audit of the annual 1 financial statements 2 Other assurance services 16 000 18 000 3 Tax advisory services 4 Other services 1 700 Total 16 000 19 700 The above fees are due to the statutory auditor issuing an opinion on the separate and consolidated financial statements. 19. Transactions with management board and supervisory board members The Group did not grant loans or similar to management board members at Group companies. 33
The Group did not grant loans or similar to supervisory board members at Group companies. As at 31 December 2012 the Group had no liabilities towards management board members at Group companies. 20. Exclusions for the purposes of the statement of cash flows Structure of cash and cash equivalents in the statement of cash flows (note 14) No. Item As at the end of As at the beginning of period period 1. Cash on hand and in bank accounts 84 476.69 695 332.29 2. Other cash instruments 3. Other cash assets Total 84 476.69 695 332.29 A detailed breakdown of specific items in the statement of cash flows can be found in note 23. With regard to the role of parent Monday Development SA as a company raising capital for projects implemented by Monday FIZ and providing access to this in the form of debt, bill of exchange interest and interest on the parent's bonds are recognised in operating activities. The cost of redeeming investment certificates also constitutes an item under operating activities. Changes in current investments (bills of exchange), bill-of-exchange and bond liabilities constitute operating activities. No foreign exchange valuations occurred. A detailed breakdown of specific items in the statement of cash flows can be found in note 23. 21. Structure of revenue from sales To a large extent Group revenues are generated by the parent and can be broken down as follows: - 5% from the performance of agreements for use of the "MONDAY" and "MONDAY Development" brand and image, signed with the company managing Group projects, - 89% from financing activities. subsidiaries generated interest income from SPVs for which they are general partner, constituting 7% of total revenue. Structure of revenue from sales (note 17a) No. Item Current period Prior period 1. Interest 551 977.00 1 560 405.00 - attributable to the general partner 151 000.00 319 589.00 - on bills of exchange 400 977.00 1 240 816.00 2. Sale of other services 120 000.00 240 000.00 - Revenue from sales 120 000.00 240 000.00 3. Revaluation of investments 0.00 0.00 4. Other 1 728 150.00 0.00 - Redemption of investments certificates 1 728 150.00 Total revenue 2 400 127.00 1 800 405.00 Cost of sales structure (note 18a) No. Item Current period Prior period 1. Interest 1 494 230.00 1 027 364.37 - required by law - on borrowings 0.00 - on bills of exchange 1 494 230.00 32 326.00 - on bonds 0.00 995 038.37 - on borrowings 0.00 0.00 2. Loss on disposal of investments 0.00 - Revenue from sales - Value of investments sold 3. Revaluation of investments 0.00 0.00 4. Other 379 627.11 21 686.00 - Value of investment certificates redeemed 379 627.11 34
- Written-off equity interests in non-existent entities 0.00 - Issuance of bonds 21 686.00 Total costs 1 873 857.11 1 049 050.37 22. Structure of expenses by nature (note 18b) No. Item Current period Prior period 1. Depreciation 483.55 0.00 2. Use of materials and energy 0.00 0.00 3. Third-party services 184 638.66 298 713.82 4. Taxes and fees 63 615.00 37 207.00 5. Remuneration 25 000.00 12 500.00 6. Social security and other benefits 32 500.00 0.00 7. Other costs by nature 3 793.97 27 697.70 Total costs 310 031.18 376 118.52 Third-party services comprise PLN 40 000 for legal and financial consultancy, PLN 20 000 for administrative support, PLN 9 000 for marketing services, PLN 41 000 for NewConnect fees, PLN 25 000 for bond servicing and PLN 42 000 for services connected with the approval and publication of the financial statements. The cost of taxes and fees mainly constitutes non-deducted VAT, which the parent settles under sales structure in accordance with art. 90 of the VAT Act. Insurance costs concern insurance for management and supervisory board members. 23. Structure of other operating revenue (note 15) No. Item Current period Prior period 1. Gain on disposal of non-financial assets 0.00 0.00 2. Grants 0.00 0.00 3. Other operating revenue 1.16 91.82 - cost re-invoicing 0.00 90.00 - other 1.16 1.82 Total other operating revenue 1.16 91.82 Structure of other operating expenses (note 16) No. Item Current period Prior period 1. Loss on disposal of non-financial assets 0.00 0.00 2. Impairment of non-financial assets 0.00 0.00 3. Other operating expenses 3 367.16 2 816.98 - other 3 367.16 2 816.98 Total other operating expenses 3 367.16 2 816.98 24. Structure of finance income (note 17) No. Item Current period Prior period 1. Dividends and shares of profit 0.00 0.00 2. Interest 1 641.25 3 175.83 - interest on deposits 1 641.25 3 175.83 3. Gain on disposal of investments 0.00 0.00 - revenue from sales 152 300.00 - value of investments sold 152 300.00 4. Revaluation of investments 0.00 0.00 5. Other 1 003.73 2 000.00 - other income 1 003.73 - contributions from Monday FIZ 0.00 2 000.00 Total finance income 2 644.98 5 175.83 35
25. Structure of finance costs Monday Development SA Consolidated Annual Report (note 18) No. Item Current period Prior period 1. Interest 7 516.89 4 645.00 - on bills of exchange 0.00 0.00 - on overdue contributions 7 239.05 812.00 - on borrowings 0.00 3 833.00 - on leasing 277.84 0.00 2. Loss on disposal of investments 0.00 0.00 3. Revaluation of investments 47 310.00 0.00 4. Other 0.00 0.00 Total finance costs 54 826.89 4 645.00 26. Gain (loss) on extraordinary events No extraordinary events took place. 27. Share of the net profit or loss of equity-accounted subsidiaries, associates and jointly controlled entities In the financial statements for 2011, the share in the net profit (loss) of equity-accounted subsidiaries, associates and jointly controlled entities was recognised in the statement of profit and loss section dealing with settlement of income tax and other profit reductions. In the current financial statements this incorrect inclusion was re-classified in accordance with Appendix no. 3 to the Ordinance of the Minister of Finance of 8 August 2008 on the specific principles for consolidated group financial statements drafted by entities other than banks and insurance companies. Presentation in the statement of profit and loss within the financial statements for the period 1 January 2011 to 31 December 2011 Item Current period Prior period N Gross profit (loss) (L+-M) 373 041.78 313 731.71 O Income tax -132 507.00 41 983.00 P Other mandatory profit reductions R Share of the net profit of equity-accounted entities -5 636.77 S Net profit (loss) (N-O-P) 499 912.01 271 748.71 Presentation in the statement of profit and loss within the financial statements for the period 1 January 2012 to 31 December 2012 Item Current period Prior period Q Share of the net profits of equity-accounted entities -4 344.35-5 636.77 R Gross profit (loss) (L+-M) 163 827.57 367 405.01 S Income tax 46 589.00-132 507.00 T Other mandatory profit reductions U Profit (loss) attributable to non-controlling interests W Profit (loss) 117 238.57 499 912.01 (note 19) 28. Deferred income tax assets No. Item Value 1. Deferred income tax assets as at the beginning of period, including 426 048.00 a) recognised as profit or loss 426 048.00 b) recognised as equity c) recognised as goodwill, negative goodwill 2. Increases, including 85 965.00 a) recognised as profit or loss 85 965.00 - interest charged on bonds 78 909.00 - interest charged on leasing 7 056.00 b) recognised as equity 0.00 c) recognised as goodwill, negative goodwill 0.00 3. Decreases 172 653.00 36
a) recognised as profit or loss 172 653.00 - settlement of loss brought forward 142 217.00 - bond issuance costs 30 436.00 b) recognised as equity 0.00 c) recognised as goodwill, negative goodwill 0.00 4. Deferred income tax assets as at the end of period, including 339 360.00 a) recognised as profit or loss 339 360.00 b) recognised as equity 0.00 c) recognised as goodwill, negative goodwill 0.00 29. Deferred income tax provision (note 20) No. Item Value 1. Deferred income tax provision as at the beginning of period, including 4 395 469.00 a) recognised as profit or loss 289 992.00 b) recognised as equity 4 105 477.00 c) recognised as goodwill, negative goodwill 2. Increases, including 270 386.00 a) recognised as profit or loss 270 386.00 - car leases 7 783.00 - measurement of investment certificates redemption 191 644.00 - interest accrued on promissory note discount 70 959.00 b) recognised as equity 0.00 - valuation of investment certificates 0.00 c) recognised as goodwill, negative goodwill 3. Decreases 2 440 134.00 a) recognised as profit or loss 311 029.00 - Exchange differences as at the end of the reporting period - interest accrued on promissory note discount 311 029.00 - change in tax value of non-current assets b) recognised as equity 2 129 105.00 - valuation of investment certificates redeemed 256 920.00 - valuation of investment certificates 1 872 185.00 c) recognised as goodwill, negative goodwill 0.00 4. Deferred income tax provision as at the end of period, including 2 225 721.00 a) recognised as profit or loss 249 349.00 b) recognised as equity 1 976 3722.00 c) recognised as goodwill, negative goodwill 0.00 30. Variance between the balance sheet result and tax result Settlement of key items differentiating the tax base from the gross financial result of the parent using income tax (note 21a) No. Item Current period Prior period 1. Gross profit 96 984.30 125 096.28 2. Correction of costs 583 652.00-402 419.00 a Non-deductible expenses 743 852.00 147 901.77 - interest charged on bonds 415 914.00 119 810.77 - equity issuance costs 0.00 21 679.00 - accruals - notary public costs 918.00 - depreciation cost of redeemed investment certificates as per the - Accounting Act 283 948.73 - liability cover premiums management board and supervisory board members 32 500.00 - tax on civil law transactions 0.00 3 000.00 - tax interest 7 239.00 812.00 - other (membership fees) 3 332.27 2 600.00 b Increases in tax-deductible expenses 160 200.00 550 320.77 - issuance costs increasing equity 160 200.00 550 320.77 3. Correction of revenue 29 095.00 984 911.00 a Non-taxable revenue 1 292 600.00 984 911.00 37
- interest charged on bills of exchange 0.00 984 911.00 cost of redeemed investment certificates as per the - Accounting Act 1 292 600.00 - release of other provisions - other b Increases in taxable revenue 1 263 505.00 0.00 - promissory note discount received 1 263 505.00 - other 4. Revenue for tax purposes 651 541.00-1 262 233.72 tax deductions 649 275.15 0.00 - loss brought forward 649 275.15 0.00 5. Tax base 2 266.00 0.00 6. Current income tax 431.00 0.00 7. Income tax - 2010 corporate income tax correction 0.00-17 332.00 8. Deferred income tax 26 470.00-97 674.00 9. Income tax recognised in profit or loss 26 901.00-115 006.00 Settlement of key items differentiating the tax base from the gross financial results of subsidiaries using income tax (note 21b) Monday Sp. z o.o. No. Item Current period Prior period 1. Gross profit 60 880.03 269 533.33 2. Correction of costs 38 318.19-174 181.00 a Non-deductible expenses 44 943.55-174 181.00 interest charged on bills of - exchange -174 181.00 - depreciation 483.55 - revaluation 44 460.00 b Increases in tax-deductible expenses 6 625.36 0.00 - lease payments made 4 308.36 - Insurance premiums paid 2 317.00 3. correction of revenue 0.00 4. Revenue for tax purposes 99 198.22 95 352.33 Income deductions 99 198.22 - loss brought forward 99 198.22 5. Tax base 0.00 0.00 6. Current income tax 0.00 0.00 7. Deferred income tax 19 575.00-17 501.00 8. Income tax recognised in profit or loss 19 575.00-17 501.00 Monday Management Sp. z o.o. No. Item Current period Prior period 1. Gross profit 1 840.32-13 103.43 2. Correction of costs 0.00 0.00 a Non-deductible expenses 0.00 0.00 3. correction of revenue 0.00 4. Revenue for tax purposes 1 840.32-13 103.43 Income deductions 0.00 5. Tax base 0.00 0.00 6. Current income tax 0.00 0.00 7. Deferred income tax 0.00 8. Income tax recognised in profit or loss 0.00 0.00 Internal Finance Sp. z o.o. No. Item Current period Prior period 1. Gross profit 4 899.68-8 524.20 2. Correction of costs 0.00 0.00 a Non-deductible expenses 0.00 0.00 3. correction of revenue 0.00 0.00 4. Revenue for tax purposes 4 899.68-8 524.20 Income deductions 4 303.00 0.00 - loss brought forward 4 303.00 38
5. Tax base 597.00 0.00 6. Current income tax 113.00 0.00 7. Deferred income tax 0.00 8. Income tax recognised in profit or loss 113.00 0.00 Lunedi Sp. z o.o. No. Item Current period Prior period 1. Gross profit -232.89 0.00 2. Correction of costs 0.00 0.00 a Non-deductible expenses 0.00 0.00 - interest incurred on bills of exchange 0.00 - other expenses 0.00 3. correction of revenue 0.00 0.00 4. Revenue for tax purposes -232.89 0.00 Income deductions 0.00 0.00 5. Tax base 0.00 0.00 6. Current income tax 0.00 0.00 7. Deferred income tax 0.00 8. Income tax recognised in profit or loss 0.00 0.00 (note 21c) No. Item Current period Prior period 1. Profit (loss) on sale of subsidiaries, associates and jointly controlled entities 7 481.12 0.00 2. Profit on operating activities 168 171.92 373 041.78 Gain on the share of profit in equity-accounted 3. entities -4 344.35-5 636.77 4. Gross profit 163 827.57 367 405.01 5. Correction of costs 621 970.19-576 600.00 6. Correction of revenue 29 095.00 984 911.00 7. Income for tax purposes 753 565.99 73 724.90 Income deductions 752 776.37 - loss brought forward 752 776.37 8. Tax base 2 863.00 0.00 9. Current income tax 544.00 0.00 10. Income tax CIT correction for 2010 0.00-17 332.00 11. Deferred income tax 46 045.00-115 175.00 Income tax recognised in the statement of profit 12. and loss 46 589.00-132 507.00 31. Notes to the statement of cash flows (note 23) No. Item Current period Prior period 1. Depreciation 483.55 0.00 depreciation of tangible assets 483.55 0.00 2. Interest charged on acquired bills of exchange 1 263 505.00-1 159 092.00 valuation of third-party bills of exchange - Monday Development 1 263 505.00-984 911.00 valuation of own bills of exchange - Monday Sp. z o.o. 0.00-174 181.00 3. Interest accrued on issued bonds 415 914.00 141 489.77 bond valuation 415 914.00 141 489.77 4. Profit (loss) on exchange differences 0.00 0.00 5. Interest and shares of profit (dividend) 277.84 3 833.00 interest received on borrowings granted 0.00 3 833.00 interest paid on finance leases 277.84 6. Profit (loss) on investing activities 38 828.88 0.00 gain (loss) on disposal of shares by Monday Development -7 481.12 revaluation of Monday Sp. z o.o. shares 43 460.00 39
revaluation of Management Sp. z o.o. SKA shares 2 850.00 7. Change in provisions -40 643.00 187 131.00 balance sheet change in provisions -2 169 748.00 2 629 207.00 provision settled through profit or loss (Monday FIZ investment certificate redemption) 256 920.00 provision settled through revaluation reserve (Monday FIZ investment certificates) 1 872 185.00-2 442 076.00 8. Change in inventories 0.00 0.00 9. Change in receivables -1327 245.53 417 377.03 balance sheet change in current receivables -1327 245.53 417 377.03 balance sheet change in receivables from investing activities 0.00 1.00 10. Change in current liabilities -187 314.34 255 018.10 balance sheet change in current liabilities 3 529 792.02 592 971.10 correction concerning Monday Development SA's bill-of-exchange liability 3 800 000.00-3 800 000.00 correction concerning a change in liabilities from bonds -7 513 056.00 2 387 866.00 correction concerning a change in liabilities from leasing -4 050.36 balance sheet change concerning Monday Sp. z o.o. bills of exchange 1 074 181.00 11. Change in prepayments and accruals 105 641.37-326 055.20 balance sheet change in non-current prepayments (assets) 86 688.00-302 306.00 balance sheet change in current prepayments (assets) 18 953.37-23 749.20 12. Acquisition of third-party bills of exchange -270 000.00-6 005 000.00 balance sheet change in non-current investments -6 358 172.92-12 741 155.31 correction concerning valuation of investment certificates 8 239 074.97 12 853 031.08 correction concerning redeemed investment certificates -1 731 838.82 change in share purchases -149 063.23 149 663.23 balance sheet change in current investments, excluding cash and cash equivalents 10 612 547.00-7 976 450.00 exclusion of a non-exercised bill of exchange -3 800 000.00 3 800 000.00 valuation of third-party bills of exchange - Monday Development SA -1 263 505.00 984 911.00 valuation of third-party bills of exchange - Monday Sp. z o.o. 0.00 0.00 redeemed third-party bills of exchange - Monday Development SA -5 819 042.00-3 075 000.00 13. Redemption of third-party bills of exchange 5 819 042.00-3 075 000.00 redemption of third-party bills of exchange - Monday Development SA 5 819 042.00-3 075 000.00 14. Issuance of own bills of exchange 0.00 240 000.00 issuance of own bills of exchange - Monday Development SA 0.00 30 000.00 issuance of own bills of exchange - Monday Sp. z o.o. 0.00 210 000.00 15. Redemption of own bills of exchange 0.00-1 140 000.00 redemption of own bills of exchange - Monday Development SA 0.00-30 000.00 redemption of own bills of exchange - Monday Sp. z o.o. 0.00-1 110 000.00 16. Issuance of bonds 0.00 7 567 786.23 balance sheet change in liabilities due to issuance of bonds 0.00 4 709 276.00 bond valuation 0.00-119 810.77 redemption of bonds 0.00 3 000 000.00 unsettled bond issuance costs 0.00-21 679.00 17. Redemption of bonds 0.00-3 000 000.00 18. Other corrections 0.00 0.00 19. Net proceeds from issuance of shares and other equity instruments and 0.00 0.00 capital contributions 20. Acquisition of own shares 0.00 0.00 40
32. Notes to the statement of changes in equity Monday Development SA Consolidated Annual Report All items are justified in resolutions of the general meeting and the revaluation reserve results from investment certificates in Monday FIZ held and valued by the Company. The Company opted to leave non-distributed consolidated profit or loss in the consolidated financial statements with consideration to resolutions adopted for separate financial statements. A detailed breakdown of item 7.4, "Profit brought forward as at the end of period", can be found in note 24. Profit brought forward as at the end of period (note 24) No. Item Current period 1. Consolidated net profit for 2011 499 912.01 2. Settlement of the parent's 2011 financial result 240 141.88 - increase in supplementary capital 240 141.88 3. Settlement of the related parties 2011 financial result 287 034.53 - coverage of Monday Sp. z o.o. s 2007 loss with 2011 profit 54 562.97 - coverage of Monday Sp. z o.o. s 2008 loss with 2011 profit 232 471.56 4. Profit brought forward as at the end of period (1-2-3) -27 264.40-2011 net loss of Management Sp. z o.o. SKA -13 103.43-2011 net loss of Internal Finance Sp. z o.o. SKA -8 524.20 - loss on share of profit (loss) of equity-accounted entities -5 636.77 33. Events after the end of the reporting period The following economically significant events took place after the end of the reporting period: the parent made early payment of interest on series B and C bonds the parent rolled over series C bonds (issue of series E bonds) the parent extended the buy-back of series B bonds from 11 February 2013 to 6 February 2014 the parent issued series F bonds, valued at PLN 1 million. The proceeds were allocated to buyback of series B bonds shares in two limited partnerships, for which Monday Development is limited partner, were paid for by the parent Lunedi Sp. z o.o. became the general partner in the limited partnership Lunedi Sp. z o.o. Sp.k. 41
34. Monday Development SA Group structure Monday Development SA Consolidated Annual Report MONDAY DEVELOPMENT S.A. Monday Sp. z o.o. Monday Development S.A. 100.00% Monday Management Sp. z o.o. Monday Development S.A. 100.00% Internal Finance Sp. z o.o. Monday Development S.A. 100.00% Lunedi Sp. z o.o. Monday Development S.A. 100.00% The Parent has one associate. MONDAY DEVELOPMENT SA Monday Palacza Sp. z o.o. Stake held by Monday Development SA 25.00% 35. Joint ventures not subject to consolidation During the financial year ended 31 December 2012 no joint ventures were formed such as would have not been subject to consolidation. Poznań, 29 March 2013 Kurt Montgomery President of the Management Board Person drafting the financial statements Dorota Jankowiak Monday Management Sp. z o.o. SKA Monika Owerko Member of the Management Board Piotr Łopatka Member of the Management Board 42
IV. MANAGEMENT REPORT ON THE OPERATIONS OF THE GROUP 1. Monday Development SA Group Monday Development's operations consist of managing a property development group. The Parent was formed on 13 November 2008 as a result of restructuring the Monday Group. The Group's operations began in 2003 when its first company was formed PKM Inwest Sp. z o.o. (currently Monday Sp. z o.o.). As new projects commenced new SPVs were formed, which in 2007 were transferred as contributionsin-kind to a closed-end investment fund (currently Monday FIZ). In order to float on the NewConnect market, in the first quarter of 2010 a group parent was designated and named Monday Development SA and in March 2010 this company became the recipient of all investment certificates, i.e. the entire fund and the Group s business. As a result the Company became the parent to general partner companies and together they constitute a group in the meaning of the Polish Accounting Act. The portfolio companies whose shares are held by Monday FIZ are recognised in the Company's financial statements as other financial assets. For the requirements of these statements, the term Monday Group has been used in a wider meaning than the statutory definition and is used to describe entities comprising Monday Development SA, the general partners and Monday FIZ portfolio companies. The financial statements cover events which took place within project companies belonging to Monday FIZ, which the Company does not consolidate. Monday Development SA directly or indirectly holds equity interests in the following companies: Company name Equity interest Monday Sp. z o.o. 100.0% Monday Management Sp. z o.o. 100.0% Internal Finance Sp. z o.o. 100.0% Monday Palacza Sp. z o.o. 25.0% Lunedi Sp. z o.o. 100.0% Monday Sp. z o.o. Milczańska SKA 100.0% Monday Sp. z o.o. Sokoła I SKA 50.0% Monday Sp. z o.o. Rataje SKA 100.0% Monday Sp. z o.o. Piątkowska SKA 70.0% Monday Sp. z o.o. Strzeszyn SKA 80.0% Monday Sp. z o.o. Małe Garbary SKA 100.0% Monday Sp. z o.o. Sokoła II SKA 100.0% Monday Sp. z o.o. Chwiałkowskiego SKA 100.0% Monday Sp. z o.o. Kampus Technologiczny SKA 100.0% Monday Sp. z o.o. Mała Botaniczna SKA 100.0% Monday Palacza Sp. z o.o. SKA 25.0% Monday Sp. z o.o. Dwunastka SKA 100.0% MD Inwestycje Sp. z o.o. Monday Małe Garbary Sp. k. 100.0% Monday Management Sp. z o.o. SKA 100.0% Internal Finance Sp. z o.o. SKA 100.0% 43
stake held by the Monday Group Monday Development SA Consolidated Annual Report MONDAY DEVELOPMENT SA MONDAY FIZ Monday Sp. z o.o. Monday Sp. z o.o. SOKOŁA I SKA general partner in special purpose vehicles stake held by the Monday Group 50.00% Stake held by Monday Development SA 100.00% Other 50.00% Monday Palacza Sp. z o.o. Monday Sp. z o.o. RATAJE SKA general partner in a special purpose vehicle stake held by the Monday Group 100.00% Stake held by Monday Development SA 25.00% Other 0.00% Monday Management Sp. z o.o. Monday Sp. z o.o. PIĄTKOWSKA SKA general partner in a management entity stake held by the Monday Group 70.00% Stake held by Monday Development SA 100.00% Other 30.00% Internal Finance Sp. z o.o. Monday Sp. z o.o. STRZESZYN SKA general partner in a financing entity stake held by the Monday Group 80.00% Stake held by Monday Development SA 100.00% Other 20.00% Lunedi Sp. z o.o. Monday Sp. z o.o. MAŁE GARBARY SKA general partner in a development entity stake held by the Monday Group 100.00% Stake held by Monday Development SA 100.00% Other 0.00% Monday Sp. z o.o. SOKOŁA II SKA stake held by the Monday Group 100.00% Other 0.00% Monday Palacza Sp. z o.o. SKA Monday Sp. z o.o. CHWIAŁKOWSKIEGO SKA joint venture with UNIDEVELOPMENT Sp. z o.o. stake held by the Monday Group 100.00% stake held by the Monday Group 25.00% Other 0.00% Monday Management Sp. z o.o. SKA Monday Sp. z o.o. KAMPUS TECHNOLOGICZNY SKA project administration company stake held by the Monday Group 100.00% stake held by the Monday Group 100.00% Other 0.00% Internal Finance Sp. z o.o. SKA Monday Sp. z o.o. MAŁA BOTANICZNA SKA project finance company stake held by the Monday Group 100.00% stake held by the Monday Group 100.00% Other 0.00% Monday Sp. z o.o. DWUNASTKA SKA stake held by the Monday Group 100.00% Other 0.00% 44
2. Governance MANAGEMENT BOARD Throughout 2012 the management board comprised: Kurt Montgomery President of the Management Board Monika Owerko Member of the Management Board Piotr Łopatka Member of the Management Board No changes to the board were made up to the date of drafting these financial statements. SUPERVISORY BOARD From 1 January to 18 October 2012 the supervisory board comprised: Arkadiusz Kurkiewicz Piotr Kasprowicz Krzysztof Szyszka Mariola Więckowska Piotr Różański On 18 October 2012 Krzysztof Szyszka resigned from his position as member and secretary of the supervisory board. On 9 November 2012 the supervisory board appointed Filip Kasprowicz as member of the supervisory board. Pursuant to 18 sec. 3 of the Company s articles of association, a supervisory board member added ad hoc is subject to approval by the next general meeting. From 9 November to 31 December 2012 the supervisory board comprised: Arkadiusz Kurkiewicz Piotr Kasprowicz Filip Kasprowicz Mariola Więckowska Piotr Różański No subsequent changes to the board were made up to the date of drafting these financial statements. 45
3. Key corporate events in 2012 and planned growth vectors 3.1 PROJECT PROGRESS IN 2012 PIĄTKOWSKA PROJECT PROJECT COMMERCIALISATION Piątkowska 116, an 1 800m2 office building with premises intended for sale, was delivered in 2010. In 2012 the Company continued to commercialise the building, which resulted in the signing of sale agreements for a subsequent 13% of office space. The building had been 95% sold at the end of 2012. A single 83m2 office remaining to be sold is covered by a booking agreement. Revenue from the investment is estimated at approx. PLN 14 million. The estimate was decreased by PLN 0.3 million based on changes in Company expectations taking into consideration the situation in the commercial property market. Monday FIZ, the fund managing the investment through an SPV, holds a 70% stake in the project. CHWIAŁKOWSKIEGO PROJECT (KAMIENICA WILDECKA) COMPLETION OF CONSTRUCTION The Chwiałkowskiego project provides for the construction of a 1 900m2 six-storey apartment building with garage and commercial premises. The investment is located in the north of Poznań s Wilda district, immediately neighbouring the city centre. The location provides ease of access to popular attractions such as the Stary Browar, multiplex cinema and old town market square, in addition to well-developed transport and service infrastructure. Construction began in Q3 2011 and was completed in Q4 2012. As at the end of the year, 41% of usable space had been covered by sale agreements, while by the date the report was drafted the figure had risen to 63%. Total revenue from the investment is estimated at PLN 11.9 million. Monday FIZ, the fund managing the investment through an SPV, holds a 100% stake in the project. SOKOŁA I PROJECT ON-GOING CONSTRUCTION This project covers the construction of a modern residential building with underground car park and service premises at ul. Sokoła 21 and 23 in Poznań. The investment is located in the district of Sołacz not far from Sołacki park and close to recreational areas surrounding Lake Rusałka. The development provides for construction of a four-storey building and the repair and renovation of an existing residential building. Construction commenced at the end of 2011 and completion, initially planned for Q1 2012, has been delayed. As per current assumptions this should take place at the end of Q2 2013. Up to the date on which this report was drafted, over 50% of the building s office space had been covered by preliminary sale agreements. Planned revenue from the investment is estimated at PLN 15.3 million. Monday FIZ, the fund managing the investment through an SPV, holds a 50% stake in the project. HEVELIA PROJECT COMMENCEMENT OF CONSTRUCTION Marketed as Hevelia, this project covers the construction of an approx. 10 000m2 residential complex in Poznań s Grunwald district. It will comprise six four-storey buildings with 174 apartments, a garage and commercial premises. The investment is located on 12 500m2 of land at the junction of Heweliusza and Palacza streets. This quiet residential area stands out through its proximity to a municipal park and its contemporary 46
architecture. The project is being implemented jointly with Warsaw-based Unidevelopment Sp. z o.o., a member of the Unibep Group. Investment preparations were carried out in 2012. At the end of Q1 2012 an architectural design was completed and a construction permit application was filed. After receipt of the permit and selection of the general contractor in Q1 2012, the Company commenced construction. Completion is planned for Q4 2013. Total planned revenue from the investment is estimated at PLN 66.2 million. Monday FIZ, the fund managing the investment through an SPV, holds a 25% stake in the project. SOKOŁA II PROJECT INVESTMENT PREPARATION This project covers the construction of a second residential building with garage and commercial premises at ul. Sokoła in Poznań. The investment is located a short distance from the Sokoła I project. With regard to their proximity and similar architecture, both investments share common features. The building s usable area is approx. 3 300m2. In developing the design, the Company planned for construction to commence within H1 2013. As expected, the decision on development conditions was issued in Q4 2012. As a result of prolonged proceedings at the local government appeals committee, this decision had not become legally binding by the date of drafting the report. Based on current information, the Company estimates that the decision on development conditions will become legally binding in Q2 2013, which will enable the commencement of work on an architectural concept. Commencement of construction is planned for Q2 2014. Revenue from the investment is estimated at approx. PLN 20 million. Monday FIZ, the fund managing the investment through an SPV, holds a 100% stake in the project. The Company intends to invite a financial investor to join the project on similar terms to those applied in its other projects. RATAJE PROJECT INVESTMENT PREPARATION This project provides for the construction of a residential and commercial complex in the Rataje district with total usable area of 21 500m2. The construction site borders greenbelt areas along the Cybina river and attractive leisure areas around Lake Malta. Shopping centres M1 and Galeria Malta, featuring numerous retail and service outlets, are located nearby. The scope of the project has changed in relation to previous assumptions which were described under point 7.4 of the quarterly report for Q4 2012. The change results from the planned sale of the project s land for a convenience store, which led to a decrease in the surface area planned for residential and commercial development. Sale of the land for the convenience store enables the SPV to obtain attractive financing for construction of the rest of the complex. The current plan envisages project implementation in four stages. Project revenue is estimated at approx. PLN 135 million. Monday FIZ is expected to ultimately hold 50% of shares in the project. STRZESZYN PROJECT SERVICE INFRASTRUCTURE AND ACQUISITION OF CONSTRUCTION PERMITS The Strzeszyn project covers the development of 21.7 hectares of land. Surrounded by lakes and forests, the property is located in one of Poznań s most attractive neighbourhoods. The project includes connection of utilities, the acquisition of a construction permit and commercialisation of the land. Work connected with providing service infrastructure was carried out in 2012, including preparation of the water network, sewage system and hardening of the access road. The Company also anticipated the issue of a final construction permit for the land, enabling project commercialisation. 47
The permit was issued and became legally binding in Q1 2013. Commercialisation is currently underway. Planned revenue from the investment is estimated at approx. PLN 5 million. Monday FIZ, the fund managing the investment through an SPV, holds a 80% stake in the project. MAŁE GARBARY PROJECT INVESTMENT PREPARATION This project covers the construction of an office building of approx. 1 000m2 in area on a 340m2 plot in the very centre of Poznań. The planned building will be similar in standard and function to the completed Piątkowska 116 project. In Q3 2012, the Company obtained a decision on development conditions for the plot in line with investment assumptions and began to develop the building s architectural concept, which was completed in Q1 2013. Work on developing technical infrastructure solutions is currently on-going. Commencement of construction is planned for Q3 2013. Revenue from the investment is estimated at PLN 7.8 million. Monday FIZ, the fund managing the investment through an SPV, holds a 70% stake in the project. BOTANICZNA PROJECT EXIT FROM THE INVESTMENT Project Botaniczna comprised the construction and commercialisation of an investment at ul. Botaniczna in Poznań. Since the entry of Nickel Projects Sp. z o.o. to the project in 2010, the Company s role has been limited to oversight. In Q4 2012 a decision was taken to sell the 41% shares held by Monday FIZ to the other shareholder and use proceeds for projects which the Company directly manages. The shares were sold in December 2012. 3.1 PLANS FOR 2013 The Group will continue implementing its strategy in 2013, focussing on advancing investments commenced in 2012 and preparation of further projects in its land bank. The Group also plans to launch new projects co-financed by external partners in exchange for equity stakes in the respective project companies. Negotiations with potential partners and property acquisitions are on-going. Completion of the Sokoła I investment is planned for the end of Q2 2013, which will see the handover of 35 apartments and two commercial premises. The last quarter of 2013 will also see the delivery of Hevelia, a residential development consisting of 174 apartments, nine commercial premises and over 200 parking spaces. The commencement of another office project, Małe Garbary with useable area of 1 100m2, is planned for Q3 2013. Negotiations with potential buyers are on-going. After a long waiting period the Company managed to obtain the final construction permit for land in Strzeszyn, which enables the land to be commercialised. The Group will also prepare for implementation of the Rataje project, the next large project from its land bank, which will involve the construction of over 21 500m2 of offices and apartments. Sale of land for a convenience store and reorganisation of the project enabled a significant improvement in its competitiveness. Risk management will continue to play a strategic role in 2013 as the Company aims to select cofinancing partners with complementary capabilities for larger developments and projects in new areas. 48
3.2 COMPANY FINANCIAL STANDING, ASSETS HELD IN 2012 AND FORECAST FOR 2013 FINANCIAL PERFORMANCE The PLN 2 400 000 in revenue from sales comprises revenue from performance of agreements for use of the MONDAY and MONDAY DEVELOPMENT brand and image, executed with the company managing Group projects (5%), from finance activities consisting of paid access to capital for SPVs (18%) and revenue from the redemption of investment certificates (77%). Monday Development SA s finance acquisition costs were PLN 1 494 000, while in turn the cost of redeemed investment certificates was PLN 379 000. Among costs by nature, the principle items are third-party services, including financial and legal consultancy (PLN 70 000), administrative support (PLN 30 000), NewConnect fees (PLN 41 000) and marketing costs (PLN 9 000). Gross profit for 2012 was PLN 168 000. ASSET STRUCTURE The main assets listed are non-current investments, amounting to a total of PLN 23 794 000, of which PLN 23 422 000 are investment certificates in Monday FIZ. The Fund holds shares in SPVs within the Group. It also owns firms created to assist the SPVs. Portfolio companies are valued using discounted cash flows (DCF). One DCF valuation approach is FCFE (free cash flow to equity). The Fund s value is calculated as the sum of discounted project cash flows and residual values, less Group operating costs and adjusted by balance sheet items carried at historic cost, which comprise assets and equity and liabilities not relating to projects, i.e. which are connected with Group operations or do not fulfil the conditions necessary for DCF valuation. The value of Monday FIZ assets has been audited and approved by the Fund s statutory auditor, PKF Audyt Sp. z o.o. Current investments are mainly funds provided to Internal Finance Sp. z o.o. SKA, which finances Monday Group projects through acquiring bills of exchange issued by the portfolio companies. LIABILITY STRUCTURE Equity comprises more than 60% of equity and liabilities, mainly made up of PLN 7 885 000 in share capital and the PLN 8 425 000 revaluation reserve arising from valuation of Monday FIZ investment certificates. Available-for-sale own shares are listed as PLN -500 000 (negative figure). Current liabilities are liabilities connected with series B, C and D bonds calculated according to adjusted purchase price and the effective interest rate and maturing by the end of December 2012. USE OF GROUP ASSETS AS COLLATERAL 49
The Parent established a registered pledge on investment certificates in Monday FIZ as collateral for the issue of bonds and as at the end of the reporting period was valued at PLN 9 484 000. The pledge was established on three series of certificates: - series B 1 970 000 - series C 738 048 - series D 791 952 OFF-BALANCE SHEET ITEMS Monday Development SA grants guarantees and sureties to Monday FIZ portfolio companies. Of the sureties granted in previous period, PLN 3 584 000 expired during the financial year. In the meantime PLN 2 609 000 in new sureties was issued, of which PLN 1 083 000 was still valid as at the end of the reporting period. FORECAST FOR 2013 The Group requires additional equity to realise its plans for the near future. As per previous statements made by the parent s management, if market conditions are favourable it intends to issue new equity or seek other long-term sources of finance. 50
4. Risks affecting the Company s business activity 4.1 RISK CONNECTED WITH CONDITIONS IN THE REAL ESTATE MARKET Conditions in the real estate market are closely linked to the overall condition of the economy. The Group s operations are determined by the situation in the Polish real estate market, affected by factors including the level of demand for residential units and office and retail space, as well as the availability of funds for the Group s customers. A drop in demand for real estate and worsening of conditions in the overall investment climate in Poland may contribute to a drop in market rates for lease and sale of real estate (sale of entire buildings to investors or sale of individual units), and as a result could lead to weaker financial results and a deterioration of the Group s financial standing, impacting its development prospects. 4.2 COMPETITION RISK The real estate market in which the Group operates is highly competitive and the situation in Poznań, where all of the Group s projects are located, is no different. However, from the viewpoint of population and economic potential, Poznań has high capacity to absorb new businesses and is one of the most attractive markets for the Group s operations. The Group may encounter competition when seeking land available for development, which could lead to a rise in land prices and a drop in ROI. Increasing competition may also lead to excess supply of land and intense rivalry over pricing, forcing down sale and lease prices. These factors could lead to weaker financial results and deterioration in the Group s financial standing and prospects for expansion. 4.3 ADMINISTRATIVE RISK Some land presenting potential for investment projects financed and managed by the Group is not covered by local area development plans. This risk category relates to the possibility that legally binding and final decisions on development conditions and construction permits may not be granted or that delays may arise in issuing the applicable administrative decisions, which in Poland is a common occurrence due primarily to the large number of complaints and difficulties in complying with time limits imposed by the country s Code of Administrative Procedure. The Group cannot guarantee that SPVs will be granted the specific permits required with respect to on-going or new property development projects or that current or future permits will not have their validity compromised. If such permits are not obtained or their validity is compromised, this could have an adverse effect on the Group s capacity to conduct or complete current or future property development projects. 4.4 RISK CONNECTED WITH A LACK OF ACCESS TO FINANCE The Group s investments are financed mainly through bank loans. Any potential delays in project schedules could postpone the next release of loan tranches, leading to a delay in closing the entire investment and a reduced rate of return on investment. Also, reduced availability of bank financing for newly commenced investments could complicate the question of entering into business arrangements with other investors with regard to specific ventures. This scenario may have a negative effect on a given investment s ROI, lead to weaker financial performance and result in deterioration in the Group s financial standing and prospects for expansion. The Group reduces the risk connected with lack of access to finance by diversifying sources of financing (equity issuance, debt issuance, bank financing) and by signing letters of intent and preliminary agreements with external investors. 51
4.5 RISK CONNECTED WITH THE FAILURE TO RAISE ADDITIONAL CAPITAL It cannot be ruled out that the Group s estimates regarding the level of additional capital needed to carry out new projects will emerge as imprecise, and that currently secured funds will not be sufficient. It is also uncertain whether the Group will raise enough capital, at a satisfactory cost and within the appropriate period of time (this is due to the fact that the cost of capital is a vital determinant in the decision to commence, continue or terminate a given investment). In the event that additional capital cannot be raised, there is a risk that on-going projects might not generate the expected profit or in extreme cases may fail due to a lack of funding. This could lead to advance payments being forfeited or contractual penalties being imposed. In order to mitigate this risk, the Group intends to optimise the use of available sources of financing and to try to adapt the acceptable level of risk to current market conditions. The Group s principle financial instruments are trade receivables and liabilities, bonds and acquired bills of exchange. The maximum credit risk which the entity is exposed to in connection with holding financial instruments is equal to the carrying value of a given item. The management board believes that there are no circumstances indicating a loss of financial liquidity based on rolling over bonds (see events after the end of the reporting period). The Group has no overdue receivables/non-performing financial assets. The Group is mainly exposed to interest rate risk due to the fact that it is financed through external debt capital. 4.6 INTEREST RATE RISK Any potential increase in interest rates could lead to higher costs of financing, and as a result to weaker financial results for the Group and reduced return on investments. As at the date of drafting the financial statements, the Group held a financial liability in connection with the issue of series B, C and D bonds and bill-of-exchange liabilities at a fixed interest rate. Given the management board s view that (taking into account interest rate fluctuations over the last two years and available forecasts) there will be no major adjustments to interest rates in the future and that potential adjustments will not have a significant effect on financial results, the Group does not employ safeguards against the risk of interest rate changes with regard to other liabilities subject to variable interest. A rise in interest rates could also lead to reduced demand on the part of the Group s customers for bank loans, including mortgages, which are the main source of financing for residential property purchases. Negative tendencies in this respect may lead to weaker financial results and deterioration in financial standing for the Group, but this risk is the same as for other real estate market players. 4.7 CURRENCY RISK There is no risk related to currency exchange rates since the Group does not incur costs or generate revenue in foreign currencies. 4.8 RISK CONNECTED WITH THE PROPERTY DEVELOPMENT ACT The Property Development Act (Act on Protection of Rights for Buyers of Residential Property) came into force in April 2012. This act means that more of a property developer s own funds will have to be designated to acquisition of funding. Depositing customers payments in an escrow account could lead to higher finance costs since property developers will be forced to take out a higher investment loan to accommodate these amounts.. The escrow accounts to which clients make payments in accordance with the act may be open - the bank frees accumulated funds to cover construction costs, or closed - funds are freed on transfer of ownership to the client. The Company s experience shows that banks are unwilling to use open trust accounts, making it necessary to incur an increased amount of credit. This in turn means that the Company is forced to invest more of its own funds, 52
which may also have a significant limiting impact on the number of projects which the Company is able to implement. 5. Events after the end of the reporting period BONDS In 2013 the Company, with the consent of bondholders, changed the conditions for issue of series B bonds so that their redemption date was rescheduled to 6 February 2014. The interest for this extended period is 12.59% per annum, and interest is paid on a quarterly basis. The Company bought back some of this bond series for PLN 1 million, issuing series F bonds to do so. At the same time the Company issued 3 000 000 series E bonds to roll over series C bonds. Interest is 12.82% per annum, and interest payments will be made quarterly with the redemption date established as 5 March 2014. A pledge on certificates in the Monday FIZ constitutes collateral for series B and E bonds. A surety issued by another property development company provides collateral for series F bonds. RELEASE OF COLLATERAL In connection with the sale of shares in Nickel Botaniczna Sp. z o.o. SKA and fulfilment of the terms and conditions imposed on the Company through the investment agreement, the Nickel group returned an in blanco bill of exchange issued in 2011. This provided collateral for the return of funds paid by the Nickel group in the event of its withdrawal from the joint venture on the terms and conditions specified in the agreement. PAYMENT FOR SHARES IN SUBSIDIARIES Payment was made after the end of the reporting period for shares in two limited partnerships in which Monday Development SA is limited partner, with a 100% stake in each. Kurt Montgomery Monika Owerko Piotr Łopatka President of the Management Member of the Management Member of the Management Board Board Board 53
V. MANAGEMENT DECLARATION ON THE ACCURACY OF THE FINANCIAL STATEMENTS The management board of Monday Development SA declares that, to the best of its knowledge, the annual financial statements for 2012 and comparative data were drafted in accordance with the legal regulations binding on the Company and correctly, reliably and clearly reflect the Company's assets, financial standing and results, and that the management report on Company operations contains a correct depiction of its situation, including a description of primary threats and risks. Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka President of the Management Member of the Management Member of the Management Board Board Board VI. MANAGEMENT DECLARATION ON APPOINTMENT OF A STATUTORY AUDITOR The management board of Monday Development SA declares that the entity authorised to audit the financial statements, carrying out an audit of the annual consolidated financial statements, was selected in accordance with legal regulations, and that this entity and the statutory auditors carrying out the audit of these financial statements fulfil the conditions necessary to express an impartial and independent opinion on the audit in accordance with the applicable provisions of Polish law. Poznań, 29 March 2013 Kurt Montgomery Monika Owerko Piotr Łopatka President of the Management Member of the Management Member of the Management Board Board Board 54
VII. STATUTORY AUDITOR'S OPINION AND REPORT OPINION AND REPORT OF AN INDEPENDENT STATUTORY AUDITOR concerning the consolidated financial statements of the MONDAY DEVELOPMENT SA Group in Poznań for the period from 1 January to 31 December 2012 The opinion consists of 2 pages (from page 55 to page 57) The report contains 15 pages (from page 58 to page 72) Independent statutory auditor s opinion and report supporting the opinion on audit of the consolidated financial statements for the financial year ended 31 December 2012 55
INDEPENDENT STATUTORY AUDITOR'S OPINION To the General Meeting of Monday Development SA We have audited the enclosed financial statements of the Monday Development SA Group, having its registered office in Poznań at ul. Piątkowska 116 (the "Group"), which comprise an introduction to the consolidated financial statements, consolidated balance sheet drafted as at 31 December 2012, consolidated statement of profit and loss, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year ended 31 December 2012, together with notes to the financial statements. Management board and supervisory board responsibility The parent's management board is responsible for the preparation and reliable presentation of these consolidated financial statements and for drafting the report on the Company's operations in accordance with the Polish Accounting Act of 29 September 1994 (Polish Journal of Laws of 2009, no. 152, item 1223 as amended) (the "Polish Accounting Act"), together with secondary legislation issued on its basis and other applicable regulations. The parent's management board is also responsible for internal control, which is acknowledged as essential so that the consolidated financial statements are free of irregularities arising as a result of intentional acts or errors. In accordance with the Polish Accounting Act, the parent's management board and members of its supervisory board are required to ensure that the consolidated financial statements and report on Group operations fulfil the requirements provided for in the Act. Statutory auditor's responsibility Based on the audit, our responsibility is to express an opinion on the consolidated financial statements. We carried out the audit of the consolidated financial statements in accordance with section 7 of the Polish Accounting Act, the national financial audit standards issued by the National Chamber of Statutory Auditors in Poland. These regulations require us to act ethically and to plan and carry out the audit in such manner as to obtain rational certainty that the consolidated financial statements are free from significant irregularities. Audit consists of procedures aimed at obtaining evidence concerning the amounts and information disclosed in the consolidated financial statements. The choice of audit procedures is left to our judgment, including assessment of the risk that a significant irregularity has occurred in the consolidated financial statements as a result of intentional acts or errors. Through assessing this risk we take into consideration internal control connected with the preparation and reliable presentation of the financial statements in order to plan audit procedures which are applicable to the circumstances, however we do not express an opinion on the effectiveness of internal control activities within the Company. The audit also included assessing the suitability of the adopted accounting policy, the legitimacy of estimates made by the management board and assessing the general presentation of the consolidated financial statements. 56
We believe that the evidence obtained gives us a sufficient and appropriate basis to express an opinion on the audit. Opinion We believe that the enclosed consolidated financial statements of the Monday Development SA Group reliably and clearly present the Company's financial situation and assets as at 31 December 2012, that in all significant aspects its financial result and cash flows for the financial year then ended were drafted in accordance with the accounting regulations in force in the Republic of Poland as specified in the Polish Accounting Act and secondary legislation issued on its basis, and that they are compliant with the provisions of law binding on the Group such as impact the content of financial statements. Supplementary notes to the opinion Without expressing reservations as to the correctness and reliability of the audited financial statements, we point out that: Other non-current financial assets comprises investment certificates in Monday FIZ, which holds shares in partnerships limited by shares responsible for real estate development projects and in a company managing the Monday Group. Investment certificates are carried at fair value by reference to Monday FIZ s net asset value. In turn, given a lack of reliable active market value for portfolio companies, Monday FIZ measures these using discounted cash flows. The valuation approach applied to portfolio companies, based on discounted cash flows, is described in note 4 to the financial statements; however we would like to point out that the expected cash flows were estimated using forecasts concerning future events, which may eventually differ from the adopted assumptions. Valuation assumptions for Monday Sp. z o.o. Rataje SKA were subject to change in March 2013, comprising sale of part of the land for a convenience store and change to the principles for cooperation with the investor financing the project. The Company recognised the result of changes to the above assumptions in the financial statements for 2012, which led to a PLN 2 883 000 decrease in project valuation. the Company has accepted that, pursuant to art. 3, sec. 1, point 39) of the Polish Accounting Act, Monday FIZ does not meet the definition of a subsidiary, and thus is not included in consolidation, Other matters Furthermore, pursuant to the requirements of the Polish Accounting Act, we state that the report on Group operations is complete in the meaning of art. 49, sec. 2 of the above Act and Exhibit 3, "Current and Periodic Information in the Alternative Trading System on the NewConnect Market", to the regulations for the alternative trading system organised by the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A. WSE) and that the information presented in the report, such as is sourced from the consolidated financial statements, is compliant with them. Marek Wojciechowski 57
Statutory auditor no. 10 984 lead statutory auditor conducting the audit on behalf of PKF Audyt Sp. z o.o. entity authorised to audit financial statements no. 548 ul. Orzycka 6/1B 02-695 Warsaw Regional Branch in Poznań Poznań, 26 April 2013 REPORT ON AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS OF THE MONDAY DEVELOPMENT SA Group in Poznań for the period from 1 January to 31 December 2012 The report contains 15 pages (from page 58 to page 72) REPORT ON AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS for the financial year ended 31 December 2012 58
CONTENTS 1. General part of the report... 60 1.1. Group identification details... 60 1.1.1. Name of the Group... 60 1.1.2. Registered office of the parent... 60 1.1.3. Registration of the parent in the National Court Register... 60 1.1.4. Management of the parent... 60 1.2. Information on Group companies... 60 1.2.1. Consolidated companies... 60 1.2.2. Non-consolidated entities... 60 1.3. Details of the statutory auditor and entity authorised to audit the financial statements... 61 1.3.1 Details of the lead statutory auditor:... 61 1.3.2 Details of the entity authorised to audit the financial statements... 61 1.4. Information on the consolidated financial statements for the preceding financial year... 61 1.5. Scope of the audit and responsibility... 62 1.6. Information on audits of the financial statements of entities subject to consolidation... 63 1.6.1 Parent... 63 1.6.2 Other entities subject to consolidation... 63 2. Analytical part of the report... 65 2.1. Consolidated balance sheet... 65 2.2. Consolidated statement of profit and loss... 66 2.3. Selected financial ratios... 67 2.4. Interpretation of data... 68 2.4.1 BALANCE SHEET... 68 2.4.2 STATEMENT OF PROFIT AND LOSS... 69 2.4.3 RATIOS... 69 3. Detailed part of the report... 71 3.1. Accounting principles... 71 3.2. Basis for drawing up the consolidated financial statements... 71 3.3. Consolidation method... 71 3.4. Goodwill or negative goodwill arising on consolidation, and calculation methodology... 71 3.5. Equity consolidation and non-controlling interests... 71 3.6. Exclusions from consolidation... 71 3.7. Introduction, additional information and ntes to the consolidation financial statements... 72 3.8. Management report on Group operations... 72 3.9. Information on the independent statutory auditor s report... 72 59
1. General part of the report 1.1. Group identification details 1.1.1. Name of the Group MONDAY DEVELOPMENT SA GROUP Monday Development SA Consolidated Annual Report 1.1.2. Registered office of the parent ul. Piątkowska 116; 60-649 Poznań 1.1.3. Registration of the parent in the National Court Register Registration court: District Court in Poznań - Nowe Miasto i Wilda, 8th Commercial Division of the National Court Register Date: 16 February 2009 Register number: KRS 0000323647 REGON: 301054767 NIP: 7811832838 1.1.4. Management of the parent The management board fulfils management functions at the parent. In 2011 the Company's management board comprised: - Kurt Montgomery President of the Management Board - Monika Owerko Member of the Management Board - Piotr Łopatka Member of the Management Board No changes were made to the composition of the parent's management board in 2012. 1.2. Information on Group companies 1.2.1. Consolidated companies As at 31 December 2012, the following Group companies were consolidated: Entity name Parent's stake in the share capital Parent's share in voting rights PARENT: MONDAY DEVELOPMENT SA Group - - SUBSIDIARIES: MONDAY SP. Z O.O. 100% 100% MONDAY MANAGEMENT SP. Z O.O. 100% 100% INTERNAL FINANCE SP. Z O.O. 100% 100% Lunedi Sp. z o.o. 100% 100% ASSOCIATES: MONDAY PALACZA SP. Z O.O. 25% 25% 1.2.2. Non-consolidated entities The Company has accepted that, pursuant to art. 3, sec. 1, point 39) of the Polish Accounting Act, Monday FIZ does not meet the definition of a subsidiary, and thus is not included in consolidation. 60
1.3. Details of the statutory auditor and entity authorised to audit the financial statements 1.3.1 Details of the lead statutory auditor: First and last name: Marek Wojciechowski Registration no.: 10 984 1.3.2 Details of the entity authorised to audit the financial statements Company: PKF Audyt Sp. z o.o. Registered office: Warsaw Address: ul. Orzycka 6, lok. 1B, 02-695 Warsaw Register number: KRS 0000019875 Registration court: District Court for the City of Warsaw, 12th Commercial Division of the National Court Register Share capital: 80.000 zł NIP number: 725-10-13-699 PKF Audyt Sp. z o.o. is entered into the list of entities authorised to audit financial statements, no. 548. The audit of the consolidated financial statements was conducted in accordance with the agreement of 6 September 2012, entered into pursuant to supervisory board resolution no. 1/20100915 of 15 September 2010 concerning appointment of an entity authorised to audit the financial statements. The audit of the consolidated financial statements was carried out at the registered office of the parent between 27 February and 26 April 2013 (non-continuous). The lead statutory auditor and PKF Audyt Sp. z o.o. fulfil the requirement to be independent of Group companies in the meaning of art. 56, sections 3 and 4 of the Act of 7 May 2009 on Statutory Auditors and their Self-Regulation, Entities Authorised to Audit Financial Statements and on Public Oversight (Polish Journal of Laws no. 77, item 649). 1.4. Information on the consolidated financial statements for the preceding financial year The consolidated financial statements for the period ended 31 December 2011 were audited by PKF Audyt Sp. z o.o. and a statutory auditor's opinion was issued without reservations but with the following supplementary explanation: the item "Other non-current financial assets comprises investment certificates in Monday FIZ, which holds shares in partnerships limited by shares responsible for real estate development projects and in a company managing the Monday Group. Investment certificates are carried at fair value by reference to Monday FIZ s net asset value. In turn, given a lack of reliable active market value for portfolio companies, Monday FIZ measures these using discounted cash flows. The valuation approach applied to portfolio companies, based on discounted cash flows, is described in note 4 to the financial statements; however we would like to point out that the expected cash flows were estimated using forecasts concerning future events, which may potentially differ from the adopted assumptions. the Company has accepted that, pursuant to art. 3, sec. 1, point 39) of the Polish Accounting Act, Monday FIZ does not meet the definition of a subsidiary, and thus is not included in consolidation, 61
the auditor auditing Monday FIZ noted the following significant issues which impact on the Monday Development Group's consolidated financial statements: In 2011 the investment valuation approach was updated compared to the principles applied at the end of the previous year. The changes concerned the following elements: a) discount period cash flows are now discounted at half-year, b) accounting for project risk in the valuation approach is dependent on the stage of development, c) valuation of project residual values included in the value of Monday Management Sp. z o.o. SKA, d) valuation concept for Monday Sp. z o.o. Rataje SKA. Accounting for project risk in the valuation approach resulted in the change of the value of shares in the following companies: Monday Sp. z o.o. Sokoła II SKA, Monday Sp. z o.o. Strzeszyn SKA, Monday Sp. z o.o. Rataje SKA at a total amount of PLN 1 333 000 (increase in unrealised profit on investment valuation). The inclusion of project risk in valuation of portfolio companies depending on the stage of development along with a change in the valuation approach of residual value accounted for in Monday Management Sp. z o.o. SKA resulted in a decrease in its valuation by PLN 950 000. In 2011 the valuation concept for Monday Sp. z o.o. Rataje SKA was changed. At the end of 2010 the valuation approach treated the company as one project. In valuation as at 31 December 2010 it was assumed that profit will be distributed on a one-off basis following project completion. However in 2011 three project stages were outlined, which are settled separately. The change in the valuation approach applied to the company s shares in 2011 along with the adoption of a local area development plan for the land covered by Monday Sp. z o.o. Rataje SKA s development project resulted in a PLN 6 416 000 increase in the company s value. The consolidated financial statements were approved through resolution no. 5 on 26 June 2012 by the ordinary General Meeting. The consolidated financial statements were filed at the registration court on 3 July 2012 and announced in official gazette Monitor Polski B, no. 2714 of 30 October 2012. 1.5. Scope of the audit and responsibility This report has been prepared for the General Meeting of Monday Development SA, having its registered office in Poznań at ul. Piątkowska 116 and concerns consolidated financial statements comprising an introduction to the consolidated financial statements, consolidated balance sheet drafted as at 31 December 2012, consolidated statement of profit and loss, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year ended 31 December 2012, together with notes to the financial statements. We carried out the audit of the consolidated financial statements in accordance with section 7 of the Polish Accounting Act and the national financial audit standards issued by the National Chamber of Statutory Auditors in Poland. The parent's management board is responsible for the preparation and reliable presentation of the consolidated financial statements and management report on the Company's operations in accordance with the accounting principles specified in the Polish Accounting Act, secondary legislation issued on its basis and other applicable regulations. Based on the audit, our task was to express an opinion and prepare a supplementary report concerning these consolidated financial statements. On the date of issuing this report, the parent's management board issued a declaration on the accuracy and clarity of the consolidated financial statements submitted for audit and on the nonexistence of events significantly impacting the data indicated in the consolidated financial statements for the audited year. 62
During the audit of the financial statements, the parent's management board submitted all declarations, explanations and information requested by us and made available all documents and information necessary for issue of the opinion and preparation of the report. Our work was not limited in any way. The extent and means of carrying out the audit result from our working documentation, which is archived at the registered office of PKF Audyt Sp. z o.o. 1.6. Information on audits of the financial statements of entities subject to consolidation 1.6.1 Parent The financial statements of the parent for the financial year ended 31 December 2011 were audited by PKF Audyt Sp. z o.o., entity authorised to audit financial statements no. 548, and an opinion was issued without reservations but with the following explanatory note: "Without expressing reservations as to the correctness and reliability of the audited financial statements, we point out that Other non-current financial assets comprises investment certificates in Monday FIZ, which holds shares in partnerships limited by shares responsible for real estate development projects and in a company managing the Monday Group. Investment certificates are carried at fair value by reference to Monday FIZ s net asset value. In turn, given a lack of reliable active market value for portfolio companies, Monday FIZ measures these using discounted cash flows. The valuation approach applied to portfolio companies, based on discounted cash flows, is described in note 4 to the financial statements; however we would like to point out that the expected cash flows were estimated using forecasts concerning future events, which may eventually differ from the adopted assumptions. The valuation methodology for Monday Sp. z o.o. Rataje SKA was changed in 2012. At the end of 2011 the development was divided into three stages which are settled separately. 2012 also saw the adoption of a strategy to sell a part of the land and develop a two-phase project. The change in valuation methodology resulted in a PLN 2 883 000 decrease in the company s value. 1.6.2 Other entities subject to consolidation Entity name Authorised auditor Balance sheet date Consolidation method Monday Sp. z o.o. unaudited 31.12.2012 full method Monday Management Sp. z o.o. unaudited 31.12.2012 full method Internal Finance Sp. z o.o. unaudited 31.12.2012 full method Lunedi Sp. z o.o. unaudited 31.12.2012 full method Monday Palacza Sp. z o.o. unaudited 31.12.2012 equity method MONDAY DEVELOPMENT SA: - the parent of Monday Sp. z o.o., Monday Management Sp. z o.o., Internal Finance Sp. z o.o. and Lunedi Sp. z o.o., holding 100% of equity and 100% of voting rights, - a significant investor in Monday Palacza Sp. z o.o. (25% equity interest and 25% of voting rights) On 29 February 2012, through notarial deed register no. A 5074/2012, Monday Development SA established the company Polski Najem Sp. z o.o., with share capital of PLN 10 000. Through a notarial 63
deed, register no. A 23000/2012 of 10 December 2012, the company s name was changed to LUNEDI Sp. z o.o. The company was registered on 2 April 2012. In 2012 the parent disposed of all its shares in Monday Palacza Sp. z o.o. SKA and 50% of its shares in Monday Palacza Sp. z o.o. This transaction is included in row L of the statement of profit and loss gain (loss) on sale of full or partial interest in subsidiaries, associates and jointly controlled entities. The remaining interest is valued at purchase price adjusted by a proportional change in net asset value. 64
2. Analytical part of the report 2.1. Consolidated balance sheet Monday Development SA Consolidated Annual Report ASSETS 31-12-2012 % of balance 31-12-2011 % of balance PLN thousands sheet PLN thousands sheet Non-current assets Intangible assets - 0.0% - 0.0% Property. plant and equipment 41.0 0.1% - 0.0% Non-current receivables - 0.0% - 0.0% Non-current investments 23 423.0 83.9% 28 124.6 66.0% Non-current prepayments 339.4 1.2% 426.0 1.0% 23 803.3 85.2% 28 550.6 67.0% Current assets Inventory - 0.0% - 0.0% Current receivables 1 488.6 5.3% 161.3 0.4% Short-term investments 2 617.3 9.4% 13 841.7 32.5% Current accruals and prepayments 21.9 0.1% 40.9 0.1% 4 127.8 14.8% 14 043.9 33.0% TOTAL ASSETS 27 931.0 100% 42 594.5 100% EQUITY AND LIABILITIES 31-12-2012 % of balance 31-12-2011 % of balance PLN thousands sheet PLN thousands sheet Equity Share capital 7 884.9 28.2% 7 884.9 18.5% Mandatory contributions to share capital - 0.0% - 0.0% Own shares (500.0) -1.8% (500.0) -1.2% Supplementary capital 1 395.3 5.0% 1 155.2 2.7% Revaluation reserve 8 425.6 30.2% 17 502.3 41.1% Other provisions - 0.0% - 0.0% Profit / loss brought forward (237.0) -0.8% (496.8) -1.2% Net profit (loss) 117.2 0.4% 499.9 1.2% Net profit deductions during the financial year - 0.0% - 0.0% 17 086.0 61.2% 26 045.5 61.1% Liabilities and provisions for liabilities Provisions for liabilities 2 225.7 8.0% 4 395.5 10.3% Non-current liabilities 33.1 0.1% 7 097.1 16.7% Current liabilities 8 586.3 30.7% 5 056.5 11.9% Prepayments and accruals - 0.0% - 0.0% 10 845.1 38.8% 16 549.1 38.9% TOTAL EQUITY AND LIABILITIES 27 931.0 100.0% 42 594.5 100.0% 65
2.2. Consolidated statement of profit and loss 2012 % of revenue PLN thousands from sales 2011 % of revenue PLN thousands from sales Net revenue from sales and equivalents Revenue from sale of products and services 2 400.1 99.6% 1 800.4 99.7% Revenue from sale of goods for resale and - 0.0% - 0.0% materials 2 400.1 99.6% 1 800.4 99.7% Cost of products. goods for resale and materials sold Cost of manufacture of products and services sold (1 873.9) 83.6% (1 049.1) 73.2% Value of goods for resale and materials sold - 0.0% - 0.0% (1 873.9) 83.6% (1 049.1) 73.2% Gross profit / loss on sales 526.3 448.9% 751.4 150.3% Distribution costs (35.8) 1.6% (30.9) 2.2% Administrative expenses (274.2) 12.2% (345.2) 24.1% Other operating revenue Gain on disposal of non-financial assets - 0.0% - 0.0% Grants - 0.0% - 0.0% Other operating revenue 0.0 0.0% 0.1 0.0% 0.0 0.0% 0.1 0.0% Other operating expenses Loss on disposal of non-financial assets - 0.0% - 0.0% Revaluation of non-financial assets - 0.0% - 0.0% Other operating expenses (3.4) 0.2% (2.8) 0.2% (3.4) 0.2% (2.8) 0.2% Profit (loss) from operating activities 212.9 182% 372.5 75% Finance income Dividends and shares of profit - 0.0% - 0.0% Interest 1.6 0.1% 5.2 0.3% Gain on disposal of investments - 0.0% - 0.0% Revaluation of investments - 0.0% - 0.0% Other 1.0 0.0% - 0.0% 2.6 0.1% 5.2 0.3% Finance costs Interest (7.5) 0.3% (4.6) 0.3% Loss on disposal of investments - 0.0% - 0.0% Revaluation of investments -47.31 0.02 0.00 0.00 Other - 0.0% - 0.0% (54.8) 2.4% (4.6) 0.3% Operating profit (loss) 160.7 137.1% 373.0 74.6% GAIN (LOSS) ON SALE OF FULL OR PARTIAL INTEREST IN SUBSIDIARIES. ASSOCIATES AND JOINTLY CONTROLLED ENTITIES 7.5 0.3% - 0.0% Gross profit (loss) 168.2 143.4% 373.0 74.6% Income tax (46.6) -39.7% 132.5 26.5% Other mandatory profit/loss deductions - 0.0% - 0.0% Share of profit (loss) of entities accounted for using the equity method (4.3) -3.7% (5.6) 0.0 66
Net profit (loss) 117.2 100.0% 499.9 100.0% The structure of the statement of profit and loss was established as follows: - share of revenue items in total revenue, - share of cost items in total costs, - share of specific operational results in the net result. 2.3. Selected financial ratios 01.01.2012-31.12.2012 01.01.2011-31.12.2011 01.01.2010-31.12.2010 1. Profit margin gross profit on sales x 100% net revenue 2. Return on equity net result x 100% average equity 3. Receivables turnover average receivables from products and services x 365 days net revenue 4. Debt ratio liabilities and provisions for liabilities x 100% total assets 5. Liquidity ratio current assets current liabilities 21.9% 41.7% 55.2% 0.5% 2.4% 3.6% 6 days 56 days 86 days 38.8% 38.9% 29.2% 0.5 2.8 1.3 67
2.4. Interpretation of data 2.4.1 BALANCE SHEET Data in PLN thousands A decrease in the balance sheet value to PLN 27 930 000 (from PLN 42 594 500 in 2011) can be seen over the last year. The audited group s non-current assets constitute 85% of total assets, and throughout 2012 their value decreased by 17%. As at 31 December 2012, as in previous periods, non-current assets comprised mainly non-current investments, constituting 84% of all assets. Under non-current investments, the balance of which as at the end of the reporting period was PLN 23 423 000, the Group mainly indicates investment certificates in the Monday FIZ, which holds shares in partnerships limited by shares responsible for the implementation of property development projects, as well as in the Monday Group management company. Detailed information concerning the valuation of certificates can be found in note 4 to the consolidated financial statements. In turn the Group s current assets as at 31 December 2012 are primarily PLN 2 533 000 in securities (bills of exchange issued by SPVs to the parent). The drop in this item s value results from: the cancellation of a bill of exchange acquired in 2011 from Monday Palacza Sp. z o.o. SKA (not exercised), investment of funds in non-current financial assets (in 2012 the parent acquired certificates for a total of PLN 7 033 000), debt servicing as a result of issuing series B, C and D bonds. As regards sources of finance, 61% of the balance sheet value constitutes equity, within which a PLN 8 426 revaluation reserve. The revaluation reserve dropped by 52% in relation to the previous period due to the parent s valuation of investment certificates in the Monday FIZ. Under current liabilities the Group mainly shows series B, C and D bonds issued in 2011 by the parent with a nominal value of PLN 8 300 000 (the deadline for payment of liabilities connected with the bonds is in 2013). During the audited period the proportion between equity and liabilities was subject to practically no change. The level of equity continues to significantly exceed the level of liabilities and provisions for liabilities. 68
2.4.2 STATEMENT OF PROFIT AND LOSS Monday Development SA Consolidated Annual Report The Group s revenue and costs in 2012 mainly comprised the revenue generated and costs incurred by the Parent (94% share in revenue and 98% share in operating expenses). Data in PLN thousands A 33% growth in net revenue in 2012 was accompanied by a significant increase in operating expenses (up 79%). Given the higher growth rate of costs over revenue, the Group s 2012 gross profit on sales was PLN 526 000 (down 30% from PLN 751 400 in 2011). In addition, the Group saw a considerable decrease in administrative costs during the reporting period (by 21% or PLN 71 000). To summarise, the Group generated a gross profit of PLN 168 000, a 55% decrease in comparison with PLN 373 000 in 2011. After taking into consideration changes in deferred income tax assets and provisions, together with the negligible non-controlling interest shareholding, the Group generated PLN 117 000 in net profit, down 77%, or PLN 383 000, from 2011. 2.4.3 RATIOS Sales margin reached approx. 22% in 2012, down nearly 20% on 2011. The decrease in this ratio is a result of much faster growth in operating expenses over the corresponding revenue from sales. Return on equity (ROE) was 0.5% in 2012, indicating that each zloty invested by the Group yielded approx. PLN 0.005 in profit throughout the audited period. Trade and other receivables turnover was reduced to 50 days, with an average of six days. During the audited period the debt ratio remained at the 39% level recorded for the previous year, confirming the established finance structure. 69