POLNORD SA CAPITAL GROUP

Transcription

1 POLNORD SA CAPITAL GROUP CONSOLIDATED QUARTERLY REPORT FOR 2010 Q3 PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS GDYNIA, November 15, 2010

2 CONTENTS I. GENERAL INFORMATION... 4 II. CAPITAL GROUP'S CHARACTERISTICS CAPITAL GROUP'S COMPOSITION EFFECTS OF CHANGES IN THE GROUP S STRUCTURE, INCLUDING MERGERS, ACQUISITIONS OR DIVESTMENTS OF MEMBERS OF THE COMPANY S GROUP, LONG-TERM INVESTMENTS, RESTRUCTURING AND DISCONTINUATION OF OPERATIONS THE COMPANIES COVERED BY CONSOLIDATION COMPANIES EXCLUDED FROM CONSOLIDATION RULES OF PREPARING CONSOLIDATED FINANCIAL STATEMENTS BALANCE OF PROVISIONS DIFFERENCES BETWEEN FINANCIAL RESULTS AND THE LAST PUBLISHED FORECAST REVENUES AND FINANCIAL RESULTS BY SEGMENTS CONSOLIDATED INCOME STATEMENT (IN THOUSAND PLN) CONSOLIDATED STATEMENT OF OVERALL INCOME IN THOUSAND PLN CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (BALANCE-SHEET) IN THOUSAND PLN CONSOLIDATED CASH FLOW STATEMENT IN THOUSAND PLN STATEMENT OF MOVEMENTS IN CONSOLIDATED EQUITY IN THOUSAND PLN OFF BALANCE SHEET ITEMS IN THOUSAND PLN FACTORS AND EVENTS, PARTICULARLY OF EXTRAORDINARY NATURE, WHICH SIGNIFICANTLY AFFECT THE FINANCIAL RESULTS EVENTS WHICH OCCURRED AFTER THE DATE OF PREPARING THE CONDENSED QUARTERLY FINANCIAL STATEMENTS AND WERE NOT DISCLOSED IN SUCH STATEMENTS BUT MAY SIGNIFICANTLY AFFECT FUTURE FINANCIAL RESULTS INFORMATION ABOUT THE DISTRIBUTED (OR DECLARED) DIVIDENDS NOTES ON SEASONAL AND CYCLICAL NATURE OF THE GROUP S OPERATIONS III. CAPITAL GROUP'S ACTIVITY SIGNIFICANT ACHIEVEMENTS OF THE CAPITAL GROUP MAIN MARKETS OF ACTIVITY DEVELOPMENT PROJECTS INCLUDED IN THE INCOME STATEMENT ISSUE, REPURCHASE, AND REPAYMENT OF NON-EQUITY AND EQUITY SECURITIES IV. COMPOSITION OF THE SHAREHOLDING, AUTHORITIES OF THE COMPANY SHAREHOLDERS CONTROLLING AT LEAST 5% OF THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY ORDINARY BEARER SHARES AS AT 15 NOVEMBER INFORMATION ON SHARES OR RIGHTS TO THE SHARES (OPTIONS) OF POLNORD SA HELD BY MEMBERS OF THE MANAGEMENT AND SUPERVISORY BODIES OF POLNORD SA AS AT 15 NOVEMBER V. OTHER INFORMATION LITIGATIONS PENDING BEFORE COURT, RELEVANT ARBITRATION AUTHORITIES, OR PUBLIC ADMINISTRATION AUTHORITIES26 2. INFORMATION ON ONE OR MORE TRANSACTIONS BETWEEN POLNORD SA OR ITS SUBSIDIARY AND RELATED ENTITIES, IF INDIVIDUALLY OR JOINTLY SUCH TRANSACTIONS ARE SIGNIFICANT OR HAVE BEEN EXECUTED ON TERMS OTHER THAN ARM S LENGTH

3 3. LOAN OR BORROWING GUARANTEES OR SURETIES GRANTED BY POLNORD SA AND ITS SUBSIDIARIES IF TOTAL VALUE OF THE EXISTING GUARANTEES OR SURETIES EQUALS AT LEAST 10% OF THE EQUITY OF POLNORD SA OTHER INFORMATION SIGNIFICANT TO ASSESSMENT OF THE PERSONNEL, ECONOMIC AND FINANCIAL STANDING, FINANCIAL RESULT AND CHANGES THERETO, AS WELL AS INFORMATION SIGNIFICANT TO ASSESSMENT OF THE GROUP S ABILITY TO MEET ITS LIABILITIES FACTORS WHICH WILL AFFECT THE FINANCIAL RESULTS OF THE GROUP IN THE PERSPECTIVE OF AT LEAST THE NEXT QUARTER VI. CONDENSED UNCONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS OF POLNORD SA INCOME STATEMENT OF POLNORD SA IN THOUSAND PLN STATEMENT OF OVERALL INCOME OF POLNORD SA IN THOUSAND PLN STATEMENT OF FINANCIAL SITUATION (BALANCE-SHEET) OF POLNORD SA IN THOUSAND PLN CASH FLOW STATEMENT OF POLNORD SA IN THOUSAND PLN STATEMENT OF MOVEMENTS IN EQUITY OF POLNORD SA IN THOUSAND PLN OFF BALANCE-SHEET ITEMS OF POLNORD SA IN THOUSAND PLN

4 I. GENERAL INFORMATION POLNORD SA is the Parent Company in the POLNORD Group. Full name (company): POLNORD Spółka Akcyjna Registered Office: Gdynia, ul. Śląska 35/37 KRS (National Court Register) number: NIP (tax identification number): REGON (statistical registration number): Polish Classification of Activities (PKD) (2007): 4110 Z development and sale of real estates The core business of the POLNORD Capital Group is construction and sale of residential and commercial property. POLNORD SA delivers development projects either independently or through special purpose vehicles. Unless the context requires otherwise, the terms used in the contents of these Consolidated Quarterly Financial Statements for the 2010 Q3, such as 'the Company', 'POLNORD', 'the Parent Company', or other terms of similar meaning and any variations thereof, refer to POLNORD SA, whereas 'the Group', 'the POLNORD Group', or other terms of similar meaning and any variations thereof, refer to the Group including POLNORD SA and entities subject to consolidation. II. CAPITAL GROUP'S CHARACTERISTICS 1. Capital Group's composition As at September 30 th, 2010, the Group, where POLNORD SA is the dominant entity, included the following subsidiaries, co-subsidiaries and affiliates: No. Company name % Registered Nominal value of of capital/ office shares (PLN) votes 1. POLNORD - ŁÓDŹ I Sp. z o.o. Łódź % 2. POLNORD - ŁÓDŹ II Sp. z o.o. Łódź % 3. POLNORD - ŁÓDŹ III Sp. z o.o. Łódź % 4. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. Warsaw % 5. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. Warsaw % 6. POLNORD WARSZAWA - WILANÓW III Sp. z o.o. Warsaw % 7. POLNORD WARSZAWA - WILANÓW IV Sp. z o.o. Warsaw % 8. PD DEVELOPMENT Sp. z o. o. Gdańsk % 9. OSIEDLE TĘCZOWY LAS PD DEVELOPMENT Sp. z o.o. Gdańsk % S.K.A. 10. POLNORD - BALTIC CENTER Sp. z o.o. Gdańsk % 11. POLNORD - APARTAMENTY Sp. z o.o. Gdańsk % 12. PROKOM - PROJEKT Sp. z o.o. Warsaw % 13. LUBLIN PROPERTY I Sp. z o.o. Lublin % 4

5 14. POLNORD INŻYNIERIA Sp. z o.o. Warsaw % 15. POLNORD SZCZECIN I Sp. z o.o. Szczecin % 16. POLNORD SOPOT II Sp. z o.o. Warsaw % 17. POLNORD - INVEST Sp. z o. o. Warsaw % 18. POLNORD - OSKAR Sp. z o. o. PUBLISHING HOUSE Gdańsk % 19. STROJ-DOM ZAO Saratów % (Russia) 20. POMORSKIE BIURO PROJEKTÓW GEL Sp. z o. o. Sopot % 21. CENTRUM HANDLOWE WILANÓW Sp. z o.o. Warsaw % 22. POLNORD-KOKOSZKI Sp. z o.o. Gdańsk % 23. PLP DEVELOPMENT GROUP ZSA Novosibirsk % (Russia) 24. FADESA POLNORD POLSKA Sp. z o.o. Warsaw % 25. FPP POWSIN Sp. z o.o. * Warsaw % 26. OSIEDLE INNOVA Sp. z o.o. * Warsaw % 27. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. ** Warsaw % 28. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. S.K.A. ** Warsaw % 29. HYDROSSPOL Sp. z o.o. under liquidation Gdańsk % * indirect subsidiary controlled through FADESA POLNORD POLSKA Sp. z o.o. ** indirect subsidiary controlled through PROKOM PROJEKT Sp. z o.o. 5

6 Below a scheme of the Capital Group as at is presented: Polnord Łódź I Sp. z o.o. Lublin Property I Sp. z o.o. Polnord - Invest Sp. z o.o. 100% of shares 100% of shares 100% of shares Polnord Łódź II Sp. z o.o. Polnord Szczecin I Sp. z o.o. Polnord - Wydawnictwo Oskar Sp. z o.o. 100% of shares 100% of shares 100% of shares Polnord Łódź III Sp. z o.o. Polnord Inżynieria Sp. z o.o. Stroj Dom ZAO (Russia) 100% of shares 100% of shares 100% of shares Polnord Warszawa Wilanów I Sp. z o.o. PD Development Sp. z o.o. Pomorskie Biuro Projektów GEL Sp. z o.o. 100% of shares 100% of shares 90.22% of shares Polnord Warszawa Wilanów II Sp. z o.o. Osiedle Tęczowy Las PD Development Sp. z o.o. SKA Centrum Handlowe Wilanów Sp. z o.o. 100% of shares 100% of shares 50% of shares Polnord Warszawa Wilanów III Sp. z o.o. Polnord - Baltic Center Sp. z o.o. PLP Development Group ZSA (Russia) 100% of shares 100% of shares 50% of shares Polnord Warszawa Wilanów IV Sp. z o.o. Polnord Apartamenty Sp. z o.o. Polnord -Kokoszki Sp. z o.o. 100% of shares 100% of shares 50% of shares Polnord Sopot II Sp. z o.o. Fadesa Polnord Polska Sp. z o.o. Hydrosspol Sp. z o.o. in liquidation 100% of shares 49% of shares 30% of shares Prokom Projekt Sp. z o.o. FPP Powsin Sp. z o.o. 100% of shares 100% of shares Skarbiec Nieruchomośći 3 Sp. z o.o. Osiedle Innova Sp. z o.o. 34% of shares 100% of shares Skarbiec Nieruchomośći 3 Sp. z o.o. SKA 33.33% of shares 6

7 2. Effects of changes in the Group s structure, including mergers, acquisitions or divestments of members of the Company s group, long-term investments, restructuring and discontinuation of operations In 2010 Q3, i.e. on , Polnord SA disposed in favour of Globe Trade Centre SA 50% of shares in share capital of Centrum Handlowe Wilanów Sp. z o.o. 3. The companies covered by consolidation Apart from POLNORD SA, the following companies were included in the consolidation for the period from January 1 st, 2010 to September 30 th, 2010: a) full consolidation: POLNORD - ŁÓDŹ I Sp. z o.o. POLNORD - ŁÓDŹ II Sp. z o.o. POLNORD - ŁÓDŹ III Sp. z o.o. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. POLNORD WARSZAWA - WILANÓW III Sp. z o.o. POLNORD WARSZAWA - WILANÓW IV Sp. z o.o. PD Development Sp. z o.o. Osiedle Tęczowy Las PD DEVELOPMENT Sp. z o.o. SKA POLNORD - BALTIC CENTER Sp. z o.o. POLNORD - APARTAMENTY Sp. z o.o. PROKOM - Projekt Sp. z o.o. Lublin Property I Sp. z o.o. POLNORD Inżynieria Sp. z o.o. POLNORD Szczecin I Sp. z o.o. POLNORD Sopot II Sp. z o.o. POLNORD - INVEST Sp. z o.o. POLNORD - Wydawnictwo Oskar Sp. z o.o. Pomorskie Biuro Projektów GEL Sp. z o.o. Stroj-Dom ZAO. b) proportional method: Polnord-Kokoszki Sp. z o.o. PLP Development Group Z.S.A. Fadesa Polnord Polska Sp. z o.o. FPP Powsin Sp. z o. o. Osiedle Innova Sp. z o. o. Skarbiec Nieruchomości 3 Sp. z o. o. Skarbiec Nieruchomości 3 Sp. z o. o. SKA c) equity method: Centrum Handlowe Wilanów Sp. z o.o. * * consolidated until day of disposal of shares, that is. until with full consolidation method (100%), after disposal of 50% of shares consolidated with the equity method 7

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

9 The Group applied in the consolidated financial statements all International Financial Reporting Standards applicable for the periods starting January 1 st, 2010, as well as standards which had become effective before September 30 th, The Group has analysed the new standards and interpretations as well as any changes to the already existing standards and interpretations. The changes in standards and interpretations, except for the necessary new disclosures, do not affect the financial results presented in the consolidated financial statements. Measurement currency and presentation currency Items disclosed in the financial statements of the Group s companies are shown in the currency of the main economic environment in which the given company operates (functional currency). The functional currency and presentation currency of the Parent Company is Polish zloty (PLN). The reporting currency of the Group s financial statements is Polish zloty (PLN). Some of the Group s companies use a functional currency other than Polish zloty (PLN). Financial statements of such companies, prepared in their functional currencies, are included in these consolidated financial statements following their translation to PLN in accordance with IAS 21. The following exchange rates were used for the balance sheet valuation purposes: USD EUR RUB The following exchange rates were used for the income statement valuation purposes: USD EUR RUB Changes in the accounting policies In 2010, the Group continues to apply the accounting principles described in the last annual financial statements. 6. Balance of provisions The amount of provisions disclosed in the consolidated financial statements as at 30 December 2009 was by PLN 18,846,000 higher than at 31 December 2009, while the income tax provision increased by PLN 9,250,000. The amount of provisions disclosed in the unconsolidated financial statements at 30 September 2010 was by PLN 14,600,000 higher than at 31 December 2009, while the income tax provision increased by PLN 7,337, Differences between financial results and the last published forecast The forecast of results of the Capital Group for 2010 was not published. 9

10 8. Revenues and financial results by segments Continued activity Discontinued activity Revenues For the period from to Development activity Commercial areas General Contracting Other Eliminations Items nonattributed Total Other Activity in total Sales for external customers Sales between segments ( ) Revenues from segment in total ( ) Result Profit (loss) on segment ( 118) ( 270) ( 366) Non-attributed items ( 2 720) ( 2 720) ( 2 720) Profit (loss) on continued activity before tax and financial costs ( 118) ( 270) ( 2 720) ( 366) Net financial costs ( 8 175) ( 8 175) ( 144) ( 8 319) Profit on disposal of subsidiary Share in profit of affiliate ( 79) ( 79) ( 79) Profit (loss) before tax and minority shareholding ( 118) ( 270) ( 510) Income tax ( ) ( ) ( ) Net profit (loss) for the financial year ( 118) ( 270) ( 510) The main area of activity of POLNORD Capital Group in 2010 Q3 was Poland.

11 9. Consolidated income statement (in thousand PLN) Income from sales Income from sales of products, goods and materials from related parties Income from sales of services from related parties Income from lease from related parties Costs of sales ( ) ( ) ( ) ( ) Gross profit (loss) on sales Revaluation of investment property Result on sale of investment property Sales costs Administrative expenses Other operating revenues Other operating costs Gross profit (loss) on operating activity Financial income Financial costs Profit on disposal of a subsidiary Share in profit of affiliate Gross profit (loss) Income tax Net profit (loss) on continued operations Discontinued operations Gross profit (loss) for the financial year from discontinued activity Net profit (loss) on discontinued operations Net profit /(loss) for the financial year ( 1 533) ( 6 023) ( ) ( 774) ( 2 636) ( ) ( ) ( ) ( ) ( 2 528) ( 4 442) ( 901) ( ) ( 3 685) ( 5 699) ( 9 170) ( ) ( 4 002) ( ) ( 79) ( 79) ( 4 400) ( ) ( 4 382) ( 9 548) ( 207) ( 510) ( 199) ( 487) Attributable to: Shareholders of the dominant entity Minority shareholders Annualised ratios Net profit (loss) (annualised) Net profit (loss) on continued operations (annualised) Weighed average amount of ordinary shares (items) Weighed diluted average amount of ordinary shares (items) Net profit (loss) per one ordinary share (PLN) Net profit (loss) on continued operations per one ordinary share (PLN) Diluted net profit (loss) per one ordinary share (PLN) Diluted net profit (loss) on continued activity per one ordinary share (PLN)

12 Comment on results In three quarters of 2010, the Polnord Group gained net profit in the amount of PLN 45,151 thousand and generated revenues from sales at the level of PLN 137,616 thousand. In 2010 Q3, the figures were PLN 19,509 thousand, PLN 41,268 thousand, respectively. The gross profit from sales (PLN 23,830 thousand within three quarters and PLN 8,667 in the third quarter) was generated mainly on developed flats delivered to the Customers under nine residential development projects localised in Warsaw, Tricity, Łódź and Olsztyn. From January to September 2010, the Polnord Group delivered 403 premises (of which 114 premises in Q3). Residential premises delivered to the Clients are first of all flats developed in with margins lower than in the case of projects currently underway. The projects that are currently developed by the Polnord Group shall be commissioned in 2011 which should translate positively into the level of gross profit on sales in the next year. A significant influence on the result of 2010 Q3 has the transaction of sales to GTC SA of 50% of shares in Centrum Handlowe Wilanów Sp. z o.o. (a company incorporated for the purposes of development, within the Miasteczko Wilanów, one of the biggest Shopping Centres in Warsaw - the transaction is described in more detail in item III.1.) In connection with the above transaction, the Polnord Group recorded a profit in the amount of PLN 42,749 thousand. The result constitutes the difference between the amount of remuneration for disposed shares and recognised fair value of non-sold 50% of shares, and eliminated assets and liabilities of Centrum Handlowe Wilanów Sp. z o.o. company (IAS 27). Thus, the result presented in the Consolidated Statements is constituted by the profit generated on sale of 50% of shares and the profit on valuation to the fair value of non-sold remaining 50%. The profit gained on the above transaction was presented, in accordance with applicable regulations in the Income Statement, below the operating activity result under the item "Profit on disposal of subsidiary". The transaction however, being an element of development activity pursued by the Group, should be taken into account in analysis of results generated on core activity of the Polnord Group. The negative result in financial activity in 2010 Q3 was mainly caused by negative exchange rate differences on receivables and borrowings related with the activity conducted on the territory of Russian Federation, which was connected with material depreciation of rouble when compared to zloty. Presently, the Polnord Group conducts works aimed at launching the development of a Shopping Gallery in Wilanów, two office buildings within the Wilanów Office Park as well as residential projects in new, attractive locations. Actions undertaken shall translate positively into the range and profitability of the activity conducted in further reporting periods. 12

13 10. Consolidated statement of overall income in thousand PLN Net profit/(loss) for the financial year Other overall income ( 733) ( 584) FX differences on recalculation ( 733) ( 590) Effective part of profits and losses due to instruments hedging cash flows Other 6 ( 305) 62 Income tax on other overall income components ( 725) ( 648) Overall income for the period Consolidated Statement of Financial Condition (Balance-sheet) in thousand PLN As at As at ASSETS Fixed assets Property, plant and equipment Investment property Intangible assets Investments in affil. valuated with equity method Financial assets Deferred tax assets Long-term receivables Goodwill Other fixed assets Current assets Inventories Trade and other receivables Other current financial assets Amounts receivable due to VAT, other taxes, customs duties, insurance and other Income tax receivables Prepaid expenses and accrued income Cash and cash equivalents Available-for-sale assets TOTAL ASSETS

14 LIABILITIES Equity (attributable to shareholders of the dominant company) Share capital Share premium Foreign exchange differences on translation of a foreign entity Other reserves Accumulated profit or loss Minority interests Total equity Long-term liabilities Interest-bearing bank credits and borrowings Provisions Other liabilities Deferred tax liability Current liabilities Trade and other liabilities Current long-term portion of bank credits and borrowings Short-term revolving credits Other short-term credits and borrowings Liabilities due to VAT, other taxes, customs duties, insurance and other Income tax liabilities Other financial liabilities Accrued expenses and deferred income Received advance payments Provisions Total amounts payable TOTAL LIABILITIES ( 569)

15 12. Consolidated cash flow statement in thousand PLN For the period For the period from 01 January 2010 from 01 January 2009 to 30 September 2010 to 30 September 2009 Cash flows from operating activity Gross profit /(loss) on continued activity Gross profit /(loss) on discontinued activity Adjusted by: Share in result of affiliates valuated with the equity method Amortisation Interest and dividends, net (Profit)/loss on investment activity (Increase)/decrease in receivables (Increase)/ decrease in inventories Increase/ (decrease) in liabilities, except for credits and borrowings Change in prepayments and accruals Change in provisions Income tax paid Other Net cash from operating activities Cash flows from investment activity Inflows Disposal of property, plant and equipment and intangible assets Disposal of investment property Disposal of financial assets Dividend received Interest received Repayment of granted borrowings Other Outflows Acquisition of property, plant and equipment and intangible assets Acquisition of investment property Acquisition of financial assets Acquisition of subsidiary after deduction of undertaken funds Borrowings granted Other Net cash from investment activity Cash flows from financial activity Inflows Inflows from issue of shares Inflows from credits/borrowings raised Inflows from issue of bonds Other Outflows Repayment of liabilities under finance lease Repayment of credits/borrowings Dividend paid to dominant entity shareholders Dividend paid to minority shareholders ( 510) ( 487) ( ) ( ) ( 1 334) ( ) ( 473) ( ) ( 293) ( 7 402) ( ) ( 312) ( 8 971) ( 2 022) ( ) ( ) ( ) ( ) ( 3 594) ( 2 000) ( 267) ( ) ( 6 921) ( 59) ( ) ( 1 241) ( 2 292) ( 2 086) ( ) ( ) ( 605) ( 849) ( ) ( ) ( ) ( 20) ( 6) 15

16 Interest paid Redemption of bonds Other Net cash from financial activity Net increase in cash and cash equivalents Net foreign exchange differences Cash as at the period beginning Cash as at the period end, including: Restricted cash ( ) ( ) ( ) ( ) ( 57) ( 108) ( ) ( )

17 13. Statement of movements in consolidated equity in thousand PLN Attributable to shareholders of the dominant company Share capital Share premium Exchange differences from translation of a foreign entity Other reserves Accumulated profit /(loss) Total Minority interests Total equity As at 01 January 2009 Change of accounting policies As at 01 January 2009 (restated) Issue of shares Shares issue costs Profit / loss carryforward Management Options Scheme Overall income in total As at 30 September 2009 Issue of shares Cost of share issue Profit / loss carryforward Bonds convertible to Q shares Dividends Overall income in total As at 31 December ( 498) ( 6 286) ( ) ( ) ( ) ( 262) ( 2 073) ( 2 073) ( 2 073) ( ) ( 180) ( 43) ( 43) ( 43) ( 2) ( 6) ( 6) ( 6) As at Issue of shares Cost of share issue Profit / loss carryforward Dividend Overall income in total As at ( 20) ( 20) ( 20) ( ) ( ) ( ) ( ) ( 590) ( 569)

18 14. Off balance sheet items in thousand PLN Contingent liabilities Item Liabilities due to bank guarantees granted mainly as a collateral for performance of commercial agreements Other contingent liabilities Contingent liabilities in total Changes in contingent liabilities or contingent assets As at September 30 th, 2010, conditional liabilities of the Group amounted to PLN 1,387,000, compared to PLN 13,520,000 as at December 31 st, As at 30 September 2010, guarantees granted to the Capital Group amounted PLN 17,365,000, and in comparison to 31 December 2009 they increased by PLN 1,432, Factors and events, particularly of extraordinary nature, which significantly affect the financial results In 2010 Q3, there were no factors or events of extraordinary character which could influence presented financial results within the POLNORD Capital Group. 16. Events which occurred after the date of preparing the condensed quarterly financial statements and were not disclosed in such statements but may significantly affect future financial results After the balance-sheet date no such events occurred. 17. Information about the distributed (or declared) dividends The General Shareholders Meeting of the Company, by means of the resolution 9/2010 of , decided to earmark for dividend the amount of PLN 19,089,722.72, which accounts for 0.86 grosz per one share. The number of shares covered with the dividend totalled 22,197,352. The record date was determined for The dividend was paid up in Notes on seasonal and cyclical nature of the Group s operations Considering the fact that the real estate development projects are measured based on the completed contract method under the IAS 18, the amount of revenues from sales of apartments depends on dates of completing the housing development projects and handing over the apartments to buyers. Following the change of the accounting policy in 2009 for measurement of real estate development contracts, the Group no longer applies the percentage of completion method (IAS 11), and therefore, the financial statements as of 2009 do not reflect the progress of construction works and advance sales of premises. 18

19 III. CAPITAL GROUP'S ACTIVITY 1. Significant achievements of the Capital Group In 2010 Q3 ( ), in relation with the fulfilment of conditions determined in agreements concluded on between Polnord and Globe Trade Centre SA ("GTC"), Polnord and GTC concluded an agreement based on which GTC purchased 50% of Polnord's shares in share capital of the Centrum Handlowe Wilanów Sp. z o.o. company, in which Polnord held 100% of shares ("CH Wilanów"). CH Wilanów is the owner of a real estate property with the area of 7.3 hectare, located in the Wilanów district in Warsaw, where the parties plan to construct one of the most modern shopping centres in Europe. The date of commencement of construction works depends on the Office of the Capital City of Warsaw that is to issue all necessary administrative decisions. More detailed information is presented in the Current Report no. 34/2010 of Moreover, on: Polnord Warszawa Wilanów III Sp. z o.o. was granted a construction permit for development of B3 office building within the project called "Wilanów Office Park" in Warsaw. The development shall be launched still in , Polnord SA signed a letter of intent with the city of Szczecin on possible cooperation within the development of Łasztownia island in Szczecin. After the balance sheet date, that is on: , a local spatial development plan of Wyspa Spichrzów in Gdańsk was prepared, which will enable Polnord to establish a special purpose vehicle together with the city of Gdańsk , Polnord SA signed with the city of Opole the letter of intent on cooperation within the development of a Opole's subzone of a Special Economic Zone. The cooperation is to lead to construction of an office centre. 2. Main markets of activity The main area of activity of POLNORD Capital Group in 2010 Q1-Q3 was Poland. The Capital Group's activity on the domestic market was conducted in Warsaw, Olsztyn, Wrocław, Łódź, Szczecin and Tricity, while the export activity covered Russian market via PLP Development Group ZSA. company. 19

20 3. Development projects included in the income statement Below development projects are presented along with the number of commissioned premises which were accounted for in the financial result of the Group for 2010 Q1-Q3: Commissioned premises accounted for in the financial result Name and location of the project Usable area (sq. m.) Number of premises (amount) Developing company Polnord's share (%) Commissioning term (amount) (sq. m.) until until Q1-Q Q1 Q3 Premises sold to be commissioned** (amount) 1. Wilanowska V (Gdańsk, Rogalińska) Polnord 50% Q Q Srebrzysta Podkowa (build. 1 i 2) (Gdańsk - Kowale) Polnord Apartamenty 100% Q Kamienica pod Wrzosem (Gdańsk, Wita Stwosza) Polnord Apartamenty 100% Q Apartamenty Albatros (Gdynia, Wiejska) Polnord Apartamenty 100% Q Osiedle Tęczowy Las (Stage I) (Olsztyn, Tęczowy Las) Osiedle Tęczowy Las 100% Q City Park (Stage I) (Łódź, Żeligowskiego) Polnord Łódź II 100% Q Kryształ Wilanowa (Warszawa Wilanów, Klimczaka) Polnord W-wa Wilanów I 100% Q Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) Skarbiec Nieruchomości 3 33% Q Ostoja Wilanów (Stage II) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q4 2008/ Q Ostoja Wilanów (Stage III) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q Ostoja Wilanów (Stage IV) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q2-Q Ostoja Wilanów (Stage V) * (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q * whole stage V amounts to 297 premises (28,250 sq. m. of usable area) - planned accomplishment term: 2013 Q4 ** premises with regard to which preliminary sales agreements were concluded 20

21 The table below presents the information on the number of residential premises sold by the Polnord Group in Poland within individual projects as well as offers of the Group as at , in split into commissioned projects and projects in development. Net premises sold (with annulation taken into account) Item Name and location of the project Usable area Number of premises Developing company Polnord's share Commissioning term (amount) (sq. m.) (amount) (%) until Q1-Q3 Offer as at COMMISSIONED PROJECTS 1. Wilanowska V (Gdańsk, Rogalińska) Polnord 50% Q Q Srebrzysta Podkowa (bud. 1 i 2) (Gdańsk - Kowale) Polnord Apartamenty 100% Q Kamienica pod Wrzosem (Gdańsk, Wita Stwosza) Polnord Apartamenty 100% Q Apartamenty Albatros (Gdynia, Wiejska) Polnord Apartamenty 100% Q Osiedle Tęczowy Las (Stage I) (Olsztyn, Tęczowy Las) Osiedle Tęczowy Las 100% Q City Park (Stage I) (Łódź, Żeligowskiego) Polnord Łódź II 100% Q Kryształ Wilanowa (Warszawa Wilanów, Klimczaka) Polnord W-wa Wilanów I 100% Q Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) Skarbiec Nieruchomości 3 33% Q Ostoja Wilanów (Stage II) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q4 2008/Q Ostoja Wilanów (Stage III) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q Ostoja Wilanów (Stage IV) (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q2-Q Ostoja Wilanów (Stage V) * (Warszawa Wilanów, Klimczaka) Fadesa Polnord 49% Q Srebrzysta Podkowa (build. 3) (Gdańsk - Kowale) 2. Sopocka Rezydencja (Sopot, Łokietka) 3. City Park (Stage II) (Łódź, Żeligowskiego) 4. Ostoja Wilanów (Stage VI) " (Warszawa Wilanów, Klimczaka) 5. Dobry Dom (Warszawa Wilanów, Kazachska) 6. Ku Słońcu (Stage I) (Szczecin, Ku Słońcu) 7. Os. Jabłoniowa (build. no.1 i 2) (Gdańsk, Jabłoniowa) PROJECTS UNDER CONSTRUCTION AS AT Polnord Apartamenty 100% Polnord Sopot II 100% Polnord Łódź II 100% Fadesa Polnord 49% Polnord W-wa Wilanów I 100% Polnord Szczecin I 100% Polnord Kokoszki 50% Q (planned) Q (planned) Q (planned) Q (planned) Q (planned) Q (planned) Q2/Q (planned)

22 8. Ostoja Myśliwska (Gdańsk, Myśliwska) 9. Osiedle Tęczowy Las (Stage II) (Olsztyn, Tęczowy Las) 10. Osiedle Innova (Stage I) (Wrocław, Jesionowa) Polnord Apartamenty 100% Osiedle Tęczowy Las 100% IN TOTAL *The whole Stage V comprises 297 residential premises (28,250 m. u. a.) planned accomplishment in 2013 Q4. **The whole Stage VI comprises 398 residential premises (30,815 m. u. a.) planned accomplishment in 2013 Q4. Q3 2011/Q (planned) Q (planned) Fadesa Polnord 49% Q12013 (planned) The Polnord Group executes also a office park project called "Wilanów Office Park. Within the investment, under the concluded preliminary lease agreement, works are conducted with an aim of developing the office building to be leased to Pol Aqua SA. The planned commissioning term is December Issue, repurchase, and repayment of non-equity and equity securities Share issues In 2010 Q3 the Company issued, within the registered conditional share capital, 21,034 H shares as a result of exercising the rights under 21,034 subscription warrants issued within the Management Options Scheme by authorised persons. Bond issues In the third quarter the Company did not issue any bonds. As at , the indebtedness due to all hitherto issued bonds was as follows: Type Limit (mpln) Debt as at mpln Repayment Schedule Issue date 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bearer bonds Bonds convertible into shares Bonds convertible into shares The debt of the Group as at due to all the issued bonds totalled PLN million. In 2011 the redemption term for bonds totalling mpln 10 falls. In 2012, the bonds of total value of mpln 160.5, of which mpln constitute the value of bonds convertible into shares, should be redeemed. The above amount (mpln 120.5) constitutes the par value of bonds issued by the Company and convertible to shares, which should be redeemed within such time limits, provided that no bonds are converted into Q shares. If the holders will exercise the right to convert a part or all the convertible bonds held, the said amount to be repaid that constitutes the par value of the 22

23 convertible bonds, shall be accordingly lower or may not occur at all. The amount totalling mpln Polnord SA is obliged to return to the bondholders in Debt due to loans The debt due to loans of companies from the Group as at along with the repayment schedule is as follows: Indebtedness as at without interest (not weighed Borrower Bank Type Limit (mpln) with shares) 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 after 2012 Polnord SA BRE Bank SA overdraft facility Polnord SA BRE Bank SA revolving Polnord SA DZ Bank Polska SA overdraft facility Polnord SA BRE Bank SA investment (land) Polnord Apartamenty Sp. z o.o. (Srebrzysta Podkowa) Polnord Apartamenty Sp. z o.o. (Ostoja Myśliwska) Nordea Bank Polska SA execution Bank Millenium SA execution Polnord Łódź II Sp. z o.o. Nordea Bank Polska SA execution investment (land) ,0 Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK investment (land) ,5 Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK SA execution Polnord Warszawa Wilanów III Sp. z o.o. BOŚ Bank execution ,4 VAT Polnord Warszawa Wilanów IV Sp. z o.o. PKO BP SA execution VAT Polnord Invest Sp. z o.o. BPH Bank Hipoteczny investment ,1 0,1 0,1 0,1 0,1 2,9 Polnord Sopot II Sp. z o.o. investment (land) ,8 PKO BP SA execution

24 Polnord Szczecin I Sp. z o.o. PKO BP SA execution Polnord Szczecin I Sp. z o.o. PKO BP SA investment (land) ,6 FADESA POLNORD POLSKA Sp. z o.o. PEKAO SA execution ,6 investment (land) ,5 55,0 VAT FPP Powsin Sp. z o.o. execution PEKAO SA execution investment (land) ,0 VAT Indebtedness not weighed with Polnord's share: ,7 47,6 0,1 44,9 34,6 105, Indebtedness weighed with Polnord's share: ,7 23,4 0,1 44,9 34,6 68, The gross credit debt of the Group as at run at the level of mpln 339.5, while along with the debt stemming from the issued bonds it totalled mpln The net debt (after including funds on accounts in the amount of mpln 37.8) totalled mpln Polnord SA finances its ongoing activity inter alia with overdraft facilities and a revolving credit, that are renewed each year by the Company. The credits incurred by companies of the Group for the purposes of realisation of development projects are repaid from inflows from sales of residential and service premises. In accordance with the presented table, companies of the Group have to repay in 2010 the amount totalling mpln 30.4, of which until the day of preparation of these Statements, the Group already repaid mpln 9.2 (including mpln 8.6 of a loan incurred for purchase of land by Polnord Warszawa Wilanów I Sp. z o.o.) In 2011, Polnord along with the companies should return to banks mpln 193.1, while in mpln mpln shall be returned to the creditors after IV. COMPOSITION OF THE SHAREHOLDING, AUTHORITIES OF THE COMPANY 1. Shareholders controlling at least 5% of the total number of votes at the General Meeting of Shareholders of the Company ordinary bearer shares as at 15 November According to the information held by the Company, the following shareholders held as at shares authorising to at least 5% of votes at the General Shareholders Meeting: 24

25 Item Shareholder Number of shares/votes (amount) Par share value % of capital/votes 1 PROKOM Investments SA in Gdynia % Osiedle Wilanowskie Sp. z o.o. in Gdynia (a subsidiary of Prokom Investments 2 SA) % 3 Templeton Asset Management Ltd. in Singapore* % 4 Other shareholders in total % In total % From among shares owned by customers and funds managed by Templeton Asset Management Ltd., more than 5% in the share capital and general number of votes in the Company is owned by FTIF Templeton Eastern Europe Fund. In 2010 Q3, in result of an issue, within the registered conditional share capital, of 21,034 H shares of the Company, the share of the above shareholders in the general number of votes changed slightly. As at , the number of all shares issued by the Company amounts to 22,218,386 of which 14,022 bearer H shares were not hitherto covered by the update of the share capital register entry in line with the art. 452 of the CCC. 2. Information on shares or rights to the shares (options) of POLNORD SA held by members of the management and supervisory bodies of POLNORD SA as at 15 November 2009 The current composition of the Management Board of POLNORD SA is as follows: Wojciech Ciurzyński - President of the Management Board Andrzej Podgórski - Deputy President of the Management Board Piotr Wesołowski - Deputy President of the Management Board Michał Świerczyński - Deputy President of the Management Board The current composition of the Supervisory Board is as follows: Ryszard Krauze, Tomasz Buzuk, Maciej Grelowski, Bartosz Jałowiecki, Marek Modecki, Barbara Ratnicka-Kiczka, Wiesław Walendziak, Rafał Juszczak, Andre Spark. As at 15 November 2010, the following members of the Company s Management Board and Supervisory Board held the shares of POLNORD SA: Type of occupation Wojciech Ciurzyński - President of the Management Board Andrzej Podgórski - Deputy President of the Management Board, Number of held shares (amount) Marek Modecki - Member of the Supervisory Board According to the information possessed by the Company, remaining persons managing and supervising POLNORD SA did not hold shares of the Company as at

26 Within the Management Options Scheme realised at the Company, the Management members are the holders of subscription warrants convertible to H shares of POLNORD SA: Type of occupation Number of held H share issue price Term of execution of rights warrants (conversion price) (PLN) of warrants (amount) Wojciech Ciurzyński President of the Management Board Piotr Wesołowski - Deputy President of the Management Board In the period until the day of approval of the Condensed Consolidated Financial Statements for 2010 H1 until the balance of shares and subscription warrants held by the above mentioned persons did not change. V. OTHER INFORMATION 1. Litigations pending before court, relevant arbitration authorities, or public administration authorities In the third quarter of 2010, there were no litigation proceedings conducted before court, the relevant arbitration authorities or public administration authorities, in relation to liabilities or receivables of POLNORD SA or its subsidiaries, with the total value representing minimum 10% of POLNORD SA's equity. 2. Information on one or more transactions between POLNORD SA or its subsidiary and related entities, if individually or jointly such transactions are significant or have been executed on terms other than arm s length Not applicable. 3. Loan or borrowing guarantees or sureties granted by POLNORD SA and its subsidiaries if total value of the existing guarantees or sureties equals at least 10% of the equity of POLNORD SA In 2010 Q3, POLNORD SA granted a surety the amount of which exceeded 10% of the share capital of the Company, to the following entity: - on , Polnord SA guaranteed repayment of the loan of Polnord Szczecin I Sp. z o.o., its full subsidiary ("Special Purpose Vehicle"), which the Special Purpose Vehicle raised with the bank PKO BP SA ( Bank ) under the loan agreement signed on The surety (repayment) was granted up to the amount of PLN 137,958, valid until 30 December The Bank granted to the Special Purpose Vehicle a loan in the amount of PLN 91,972 thousand, earmarked for partial financing of the 1 st and 2 nd stage of development project entitled "Ku Słońcu in Szczecin. Moreover, on , Fadesa Polnord Polska Sp. z o.o., a co-subsidiary in whom Polnord holds 49% of shares ( Fadesa ), granted a surety to FPP Powsin Sp. z o.o. (a 100% subsidiary of Fadesa). The subject of surety are credit liabilities stemming from the credit agreement concluded with 26

27 Bank Polska Kasa Opieki SA in the total amount of PLN 148,279.8 thousand. The surety (repayment) was granted up to the amount of PLN 192,763.8 thousand, valid until 30 December The amount of surety exceeded 10% of the Company's equity. Aside of the above, as at September 30 th, 2009, POLNORD SA had granted certain guarantees to one entity, where the total value of the guarantees exceeded 10% of the Company s equity. Validity term Item Company Subject of surety From To amount in kpln credit at PKO BP SA in the amount of mpln Polnord Warszawa -Wilanów IV Sp. z o.o. credit at PKO BP SA in the amount of mpln "The said loans shall not be utilised, whereof the Company informed in more detail in the Current Report No. 10/2010 on Other information significant to assessment of the personnel, economic and financial standing, financial result and changes thereto, as well as information significant to assessment of the Group s ability to meet its liabilities The information important in terms of assessment of the staff, material, financial situation and the financial result and changes there of is provided for in section III and V Factors which will affect the financial results of the Group in the perspective of at least the next quarter Further operations and results of the Group will be affected by occurrence of the events discussed in section III as well as the situation on real estate market. The key factors which may affect the Group s financial standing include: - economic condition of residential market, - availability of external sources of financing for development companies, - availability of mortgage credits for natural persons, - apartments prices level, - timely, on-schedule execution of development projects and timely commissioning, - amendments in legal regulations of possible influence onto the demand on the market of products offered by the Company. In 2010, the Company and the Capital Group have the following priorities: - efficient and cost effective launch of the execution of new development projects, - achievement of the planned sales level (800 flats), - adjusting the Group's offer to the effective demand by offering less spacious flats (with the area up to 75 sq. m.), meeting the requirements of the "Family at their own" government programme. - maximise use of its own bank of land - ensuring the continuity and best possible development projects financing conditions on the market. The strategy of the Company and POLNORD Capital Group provides for further dynamic growth of the development activity. The Company, through its special purpose vehicles, has already launched on the substantial part of the owned land, of new development projects, both 27