POLNORD SA CAPITAL GROUP CONSOLIDATED QUARTERLY REPORT FOR 2010 Q3 PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS GDYNIA, November 15, 2010
CONTENTS I. GENERAL INFORMATION... 4 II. CAPITAL GROUP'S CHARACTERISTICS... 4 1. CAPITAL GROUP'S COMPOSITION... 4 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... 7 3. THE COMPANIES COVERED BY CONSOLIDATION... 7 4. COMPANIES EXCLUDED FROM CONSOLIDATION... 8 5. RULES OF PREPARING CONSOLIDATED FINANCIAL STATEMENTS... 8 6. BALANCE OF PROVISIONS... 9 7. DIFFERENCES BETWEEN FINANCIAL RESULTS AND THE LAST PUBLISHED FORECAST... 9 8. REVENUES AND FINANCIAL RESULTS BY SEGMENTS... 10 9. CONSOLIDATED INCOME STATEMENT (IN THOUSAND PLN)... 11 10. CONSOLIDATED STATEMENT OF OVERALL INCOME IN THOUSAND PLN... 13 11. CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (BALANCE-SHEET) IN THOUSAND PLN... 13 12. CONSOLIDATED CASH FLOW STATEMENT IN THOUSAND PLN... 15 13. STATEMENT OF MOVEMENTS IN CONSOLIDATED EQUITY IN THOUSAND PLN... 17 14. OFF BALANCE SHEET ITEMS IN THOUSAND PLN... 18 15. FACTORS AND EVENTS, PARTICULARLY OF EXTRAORDINARY NATURE, WHICH SIGNIFICANTLY AFFECT THE FINANCIAL RESULTS... 18 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... 18 17. INFORMATION ABOUT THE DISTRIBUTED (OR DECLARED) DIVIDENDS... 18 18. NOTES ON SEASONAL AND CYCLICAL NATURE OF THE GROUP S OPERATIONS... 18 III. CAPITAL GROUP'S ACTIVITY... 19 1. SIGNIFICANT ACHIEVEMENTS OF THE CAPITAL GROUP... 19 2. MAIN MARKETS OF ACTIVITY... 19 3. DEVELOPMENT PROJECTS INCLUDED IN THE INCOME STATEMENT... 20 4. ISSUE, REPURCHASE, AND REPAYMENT OF NON-EQUITY AND EQUITY SECURITIES... 22 IV. COMPOSITION OF THE SHAREHOLDING, AUTHORITIES OF THE COMPANY... 24 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 2010.... 24 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... 25 V. OTHER INFORMATION... 26 1. 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... 26 2
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... 26 4. OTHER INFORMATION SIGNIFICANT TO ASSESSMENT OF THE PERSONNEL, ECONOMIC AND FINANCIAL STANDING, FINANCIAL RESULT AND CHANGES THERETO, AS WELL AS INFORMATION SIGNIFICANT TO ASSESSMENT OF THE GROUP S ABILITY TO MEET ITS LIABILITIES... 27 5. FACTORS WHICH WILL AFFECT THE FINANCIAL RESULTS OF THE GROUP IN THE PERSPECTIVE OF AT LEAST THE NEXT QUARTER... 27 VI. CONDENSED UNCONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS OF POLNORD SA... 29 1. INCOME STATEMENT OF POLNORD SA IN THOUSAND PLN... 29 2. STATEMENT OF OVERALL INCOME OF POLNORD SA IN THOUSAND PLN... 30 3. STATEMENT OF FINANCIAL SITUATION (BALANCE-SHEET) OF POLNORD SA IN THOUSAND PLN... 30 4. CASH FLOW STATEMENT OF POLNORD SA IN THOUSAND PLN... 32 5. STATEMENT OF MOVEMENTS IN EQUITY OF POLNORD SA IN THOUSAND PLN... 34 6. OFF BALANCE-SHEET ITEMS OF POLNORD SA IN THOUSAND PLN... 34 3
I. GENERAL INFORMATION POLNORD SA is the Parent Company in the POLNORD Group. Full name (company): POLNORD Spółka Akcyjna Registered Office: 81-310 Gdynia, ul. Śląska 35/37 KRS (National Court Register) number: 0000041271 NIP (tax identification number): 583-000-67-67 REGON (statistical registration number): 742457 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 2 750 000 100.00 % 2. POLNORD - ŁÓDŹ II Sp. z o.o. Łódź 50 000 100.00 % 3. POLNORD - ŁÓDŹ III Sp. z o.o. Łódź 50 000 100.00 % 4. POLNORD WARSZAWA - WILANÓW I Sp. z o.o. Warsaw 50 000 100.00 % 5. POLNORD WARSZAWA - WILANÓW II Sp. z o.o. Warsaw 50 000 100.00 % 6. POLNORD WARSZAWA - WILANÓW III Sp. z o.o. Warsaw 25 144 500 100.00 % 7. POLNORD WARSZAWA - WILANÓW IV Sp. z o.o. Warsaw 700 000 100.00 % 8. PD DEVELOPMENT Sp. z o. o. Gdańsk 50 000 100.00 % 9. OSIEDLE TĘCZOWY LAS PD DEVELOPMENT Sp. z o.o. Gdańsk 5 000 000 100.00 % S.K.A. 10. POLNORD - BALTIC CENTER Sp. z o.o. Gdańsk 50 000 100.00 % 11. POLNORD - APARTAMENTY Sp. z o.o. Gdańsk 50 000 100.00 % 12. PROKOM - PROJEKT Sp. z o.o. Warsaw 100 000 100.00 % 13. LUBLIN PROPERTY I Sp. z o.o. Lublin 50 000 100.00 % 4
14. POLNORD INŻYNIERIA Sp. z o.o. Warsaw 50 000 100.00 % 15. POLNORD SZCZECIN I Sp. z o.o. Szczecin 50 000 100.00 % 16. POLNORD SOPOT II Sp. z o.o. Warsaw 50 000 100.00 % 17. POLNORD - INVEST Sp. z o. o. Warsaw 11 867 000 100.00 % 18. POLNORD - OSKAR Sp. z o. o. PUBLISHING HOUSE Gdańsk 50 000 100.00 % 19. STROJ-DOM ZAO Saratów 990 100.00 % (Russia) 20. POMORSKIE BIURO PROJEKTÓW GEL Sp. z o. o. Sopot 226 000 90.22 % 21. CENTRUM HANDLOWE WILANÓW Sp. z o.o. Warsaw 48 869 500 50.00 % 22. POLNORD-KOKOSZKI Sp. z o.o. Gdańsk 1 500 000 50.00 % 23. PLP DEVELOPMENT GROUP ZSA Novosibirsk 1 103 525 50.00 % (Russia) 24. FADESA POLNORD POLSKA Sp. z o.o. Warsaw 8 134 000 49.00 % 25. FPP POWSIN Sp. z o.o. * Warsaw 2 474 500 49.00 % 26. OSIEDLE INNOVA Sp. z o.o. * Warsaw 3 454 500 49.00 % 27. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. ** Warsaw 17 000 34.00 % 28. SKARBIEC NIERUCHOMOŚCI 3 Sp. z o.o. S.K.A. ** Warsaw 5 000 000 33.33 % 29. HYDROSSPOL Sp. z o.o. under liquidation Gdańsk 15 000 30.00 % * indirect subsidiary controlled through FADESA POLNORD POLSKA Sp. z o.o. ** indirect subsidiary controlled through PROKOM PROJEKT Sp. z o.o. 5
Below a scheme of the Capital Group as at 30.09.2010 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
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 02.08.2010, 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 02.08.2010 with full consolidation method (100%), after disposal of 50% of shares consolidated with the equity method 7
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, 2009. 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
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, 2010. 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: 30.09.2010 31.12.2009 USD 2.9250 2.8503 EUR 3.9870 4.1082 RUB 0.0956 0.0950 The following exchange rates were used for the income statement valuation purposes: 01.01-30.09.2010 01.01-30.09.2009 USD 3.0556 3.2243 EUR 4.0027 4.3993 RUB 0.1008 0.0989 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 7,337,000. 7. Differences between financial results and the last published forecast The forecast of results of the Capital Group for 2010 was not published. 9
8. Revenues and financial results by segments Continued activity Discontinued activity Revenues For the period from 01.01.2010 to 30.09.2010 Development activity Commercial areas General Contracting Other Eliminations Items nonattributed Total Other Activity in total Sales for external customers 131 062 10 1 531 132 603 132 603 Sales between segments 108 487 321 3 080 3 587 ( 110 462) 5 013 5 013 Revenues from segment in total 239 549 331 3 080 5 118 ( 110 462) 137 616 137 616 Result Profit (loss) on segment 6 178 22 840 ( 118) ( 270) 28 630 ( 366) 28 264 Non-attributed items ( 2 720) ( 2 720) ( 2 720) Profit (loss) on continued activity before tax and financial costs 6 178 22 840 ( 118) ( 270) ( 2 720) 25 910 ( 366) 25 544 Net financial costs ( 8 175) ( 8 175) ( 144) ( 8 319) Profit on disposal of subsidiary 42 749 42 749 42 749 Share in profit of affiliate ( 79) ( 79) ( 79) Profit (loss) before tax and minority shareholding 6 178 22 840 ( 118) ( 270) 31 775 60 405 ( 510) 59 895 Income tax ( 14 744) ( 14 744) ( 14 744) Net profit (loss) for the financial year 6 178 22 840 ( 118) ( 270) 17 031 45 661 ( 510) 45 151 The main area of activity of POLNORD Capital Group in 2010 Q3 was Poland.
9. Consolidated income statement (in thousand PLN) 01.07.2010-01.01.2010-01.07.2009-01.01.2009-30.09.2010 30.09.2010 30.09.2009 30.09.2009 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 41 268 137 616 66 677 170 228 37 794 130 777 65 380 166 516 481 3 223 6 256 1 088 3 327 2 873 4 532 24 251 583 209 385 Costs of sales ( 32 601) ( 113 786) ( 45 011) ( 132 340) 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 8 667 23 830 21 666 37 888 9 517 34 103 15 208 54 171 ( 1 533) 24 332 ( 6 023) ( 16 107) ( 774) ( 2 636) ( 12 908) ( 38 470) ( 10 856) ( 39 418) 1 123 2 664 271 13 438 ( 2 528) ( 4 442) ( 901) ( 13 748) ( 3 685) 25 910 24 614 49 695 ( 5 699) 15 356 814 7 008 ( 9 170) ( 23 531) ( 4 002) ( 14 769) 42 749 42 749 278 333 ( 79) ( 79) 24 116 60 405 21 704 42 267 ( 4 400) ( 14 744) ( 4 382) ( 9 548) 19 716 45 661 17 322 32 719 ( 207) ( 510) ( 199) ( 487) 19 509 45 151 17 123 32 232 Attributable to: Shareholders of the dominant entity Minority shareholders 19 509 45 151 17 123 32 232 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) 76 553 21 665 77 604 23 188 22 185 266 18 872 034 25 002 042 18 977 555 3.45 1.15 3.50 1.23 3.06 1.14 3.10 1.22 11
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 2008-2009 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
10. Consolidated statement of overall income in thousand PLN 01.07.2010-01.01.2010-01.07.2009-01.01.2009-30.09.2010 30.09.2010 30.09.2009 30.09.2009 Net profit/(loss) for the financial year 19 509 45 151 17 123 32 232 Other overall income ( 733) ( 584) 2 892 2 906 FX differences on recalculation ( 733) ( 590) 103 82 Effective part of profits and losses due to instruments hedging cash flows 3 819 3 410 Other 6 ( 305) 62 Income tax on other overall income components ( 725) ( 648) Overall income for the period 18 776 44 567 20 015 35 138 11. Consolidated Statement of Financial Condition (Balance-sheet) in thousand PLN As at 30.09.2010 As at 31.12.2009 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 667 969 478 016 19 018 16 794 335 220 264 319 859 270 69 608 41 682 29 036 29 402 26 295 31 860 1 000 139 983 139 983 337 319 1 407 405 1 544 220 1 214 529 1 300 613 49 885 47 002 69 901 105 759 18 586 15 861 283 479 16 434 15 394 37 787 59 112 245 2 075 374 2 022 481 13
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 1 152 976 1 126 670 44 437 44 357 956 030 955 281 ( 569) 21 89 608 56 402 63 470 70 609 1 152 976 1 126 670 571 426 449 069 516 656 403 877 257 266 790 453 53 723 44 473 350 972 446 742 67 094 30 192 100 406 149 326 14 840 88 007 149 865 1 230 1 620 369 603 21 11 550 7 494 4 490 41 284 48 794 45 067 35 462 922 398 895 811 2 075 374 2 022 481 14
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 60 405 42 267 ( 510) ( 487) ( 110 848) ( 113 132) 79 1 619 1 611 6 020 ( 1 334) ( 101 239) ( 473) ( 10 315) 5 563 ( 293) 57 961 ( 7 402) ( 175 464) 3 633 ( 312) 8 043 9 780 ( 8 971) 1 158 ( 2 022) ( 11 622) ( 50 953) ( 71 352) 204 054 11 047 204 054 11 047 438 222 77 840 39 679 1 412 750 4 502 814 80 055 790 8 599 ( 99 541) ( 3 594) ( 2 000) ( 267) ( 41 187) ( 6 921) ( 59) ( 47 082) ( 1 241) ( 2 292) ( 2 086) 104 513 7 453 290 898 502 670 849 77 660 92 949 214 585 197 100 210 000 425 ( 365 804) ( 358 344) ( 605) ( 849) ( 275 406) ( 161 586) ( 19 085) ( 20) ( 6) 15
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 ( 30 631) ( 20 795) ( 40 000) ( 175 000) ( 57) ( 108) ( 74 906) 144 326 ( 21 346) 80 427 21 2 59 112 31 158 37 787 111 587 70 18 273 16
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 2009 36 230 858 360 236 28 933 67 873 991 632 991 632 ( 498) ( 6 286) ( 50 802) ( 57 586) ( 57 586) 36 230 858 360 ( 262) 22 647 17 071 934 046 934 046 8 106 98 834 106 940 106 940 ( 2 073) ( 2 073) ( 2 073) 10 092 ( 10 092) 2 780 2 780 2 780 82 2 824 32 232 35 138 35 138 44 336 955 121 ( 180) 38 343 39 211 1 076 831 1 076 831 21 203 224 224 ( 43) ( 43) ( 43) ( 2) 2 8 960 8 960 8 960 ( 6) ( 6) ( 6) 201 9 101 31 402 40 704 40 704 44 357 955 281 21 56 402 70 609 1 126 670 1 126 670 As at 01.01.2010 Issue of shares Cost of share issue Profit / loss carryforward Dividend Overall income in total As at 30.09.2010 44 357 955 281 21 56 402 70 609 1 126 670 1 126 670 80 769 849 849 ( 20) ( 20) ( 20) 33 200 ( 33 200) ( 19 090) ( 19 090) ( 19 090) ( 590) 6 45 151 44 567 44 567 44 437 956 030 ( 569) 89 608 63 470 1 152 976 1 152 976 17
14. Off balance sheet items in thousand PLN Contingent liabilities Item 30.09.2010 31.12.2009 Liabilities due to bank guarantees granted mainly as a collateral for performance of commercial agreements 1 045 13 168 Other contingent liabilities 342 352 Contingent liabilities in total 1 387 13 520 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, 2009. 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 1,432,000. 15. 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 12.07.2010, 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 26.07.2010. The dividend was paid up in 09.08.2010. 18. 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
III. CAPITAL GROUP'S ACTIVITY 1. Significant achievements of the Capital Group In 2010 Q3 (02.08.2010), in relation with the fulfilment of conditions determined in agreements concluded on 24.05.2010 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 02.08.2010. Moreover, on: 14.09.2010 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 2010. 20.09.2010, 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: 29.10.2010, 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. 05.11.2010, 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
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 31.12.2009 2010 Q1-Q3 31.12.2009 2010 Q1 Q3 Premises sold to be commissioned** (amount) 1. Wilanowska V (Gdańsk, Rogalińska) 6 069 120 Polnord 50% Q4 2008 - Q1 2010 62 28 2 929 1 364 5 2. Srebrzysta Podkowa (build. 1 i 2) (Gdańsk - Kowale) 2 675 56 Polnord Apartamenty 100% Q4 2008 42 10 1 893 561 1 3. Kamienica pod Wrzosem (Gdańsk, Wita Stwosza) 2 692 38 Polnord Apartamenty 100% Q2 2009 25 6 1 741 372 3 4. Apartamenty Albatros (Gdynia, Wiejska) 3 631 60 Polnord Apartamenty 100% Q1 2010 0 41 0 2 254 7 5. Osiedle Tęczowy Las (Stage I) (Olsztyn, Tęczowy Las) 10 639 185 Osiedle Tęczowy Las 100% Q3 2008 143 32 8 183 1 904 6 6. City Park (Stage I) (Łódź, Żeligowskiego) 4 306 60 Polnord Łódź II 100% Q4 2009 0 53 0 3 417 3 7. Kryształ Wilanowa (Warszawa Wilanów, Klimczaka) 9 103 95 Polnord W-wa Wilanów I 100% Q3 2009 40 20 2 793 2 012 3 8. Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) 33 518 439 Skarbiec Nieruchomości 3 33% Q4 2008 330 26 23 783 1 950 15 9. Ostoja Wilanów (Stage II) (Warszawa Wilanów, Klimczaka) 20 541 225 Fadesa Polnord 49% Q4 2008/ Q1 2009 176 32 15 570 3 243 3 10. Ostoja Wilanów (Stage III) (Warszawa Wilanów, Klimczaka) 19 606 231 Fadesa Polnord 49% Q1 2009 46 24 3 579 1 938 25 11. Ostoja Wilanów (Stage IV) (Warszawa Wilanów, Klimczaka) 22 337 228 Fadesa Polnord 49% Q2-Q3 2009 78 77 7 000 7 629 15 12. Ostoja Wilanów (Stage V) * (Warszawa Wilanów, Klimczaka) 17 986 191 Fadesa Polnord 49% Q1 2010 0 54 0 4 164 22 153 353 1 932 942 403 67 472 30 808 108 * 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
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 01.10.2010, 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 31.12.2009 2010 Q1-Q3 Offer as at 01.10.2010 COMMISSIONED PROJECTS 1. Wilanowska V (Gdańsk, Rogalińska) 6 069 120 Polnord 50% Q4 2008 - Q1 2010 71 24 25 2. Srebrzysta Podkowa (bud. 1 i 2) (Gdańsk - Kowale) 2 675 56 Polnord Apartamenty 100% Q4 2008 49 4 3 3. Kamienica pod Wrzosem (Gdańsk, Wita Stwosza) 2 692 38 Polnord Apartamenty 100% Q2 2009 27 7 4 4. Apartamenty Albatros (Gdynia, Wiejska) 3 631 60 Polnord Apartamenty 100% Q1 2010 37 11 12 5. Osiedle Tęczowy Las (Stage I) (Olsztyn, Tęczowy Las) 10 639 185 Osiedle Tęczowy Las 100% Q3 2008 161 20 4 6. City Park (Stage I) (Łódź, Żeligowskiego) 4 306 60 Polnord Łódź II 100% Q4 2009 41 15 4 7. Kryształ Wilanowa (Warszawa Wilanów, Klimczaka) 9 103 95 Polnord W-wa Wilanów I 100% Q3 2009 48 15 32 8. Królewskie Przedmieście (Warszawa Wilanów, Al. Rzeczypospolitej) 34 017 443 Skarbiec Nieruchomości 3 33% Q4 2008 352 19 72 9. Ostoja Wilanów (Stage II) (Warszawa Wilanów, Klimczaka) 20 541 225 Fadesa Polnord 49% Q4 2008/Q1 2009 201 10 14 10. Ostoja Wilanów (Stage III) (Warszawa Wilanów, Klimczaka) 19 606 231 Fadesa Polnord 49% Q1 2009 63 32 136 11. Ostoja Wilanów (Stage IV) (Warszawa Wilanów, Klimczaka) 22 337 228 Fadesa Polnord 49% Q2-Q3 2009 127 43 58 12. Ostoja Wilanów (Stage V) * (Warszawa Wilanów, Klimczaka) 17 738 191 Fadesa Polnord 49% Q1 2010 85-9 115 153 353 1 932 1 262 191 479 1. 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 31.03.2010 1 322 28 Polnord Apartamenty 100% 9 617 162 Polnord Sopot II 100% 5 800 87 Polnord Łódź II 100% 17 964 272 Fadesa Polnord 49% 10 496 155 Polnord W-wa Wilanów I 100% 12 277 222 Polnord Szczecin I 100% 7 274 137 Polnord Kokoszki 50% Q4 2010 (planned) 0 8 20 Q2 2011 (planned) 0 15 147 Q1 2011 (planned) 0 22 65 Q3 2011 (planned) 21 112 139 Q3 2011 (planned) 0 45 110 Q4 2011 (planned) 0 41 181 Q2/Q4 2011 (planned) 0 0 137 21
8. Ostoja Myśliwska (Gdańsk, Myśliwska) 9. Osiedle Tęczowy Las (Stage II) (Olsztyn, Tęczowy Las) 10. Osiedle Innova (Stage I) (Wrocław, Jesionowa) 13 770 229 6 751 139 15 156 236 100 427 1 667 Polnord Apartamenty 100% Osiedle Tęczowy Las 100% 253 781 3 599 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/Q2 2012 (planned) 0 18 211 Q4 2011 (planned) 0 18 121 Fadesa Polnord 49% Q12013 (planned) 0 24 212 21 303 1 343 1 283 494 1 822 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 2010. 4. 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 30.09.2010, the indebtedness due to all hitherto issued bonds was as follows: Type Limit (mpln) Debt as at 30.09.2010 mpln Repayment Schedule Issue date 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2013 14.10.2009 Bearer bonds 10.0 10.0 10.0 12.03.2010 Bearer bonds 25.0 25.0 25.0 26.03.2010 Bearer bonds 10.0 10.0 10.0 28.04.2010 Bearer bonds 5.0 5.0 5.0 18.06.2010 Bearer bonds 40.0 40.0 40.0 22.01.2010 Bearer bonds 75.0 75.0 75.0 21.05.2010 Bearer bonds 42.1 42.1 42.1 Bonds convertible into 06.11.2009 shares 110.0 110.0 110.0 20.11.2009 Bonds convertible into shares 10.5 10.5 10.5 327.6 0.0 0.0 10.0 0.0 0.0 25.0 10.0 0.0 125.5 157.1 327.6 The debt of the Group as at 30.09.2010 due to all the issued bonds totalled PLN 327.6 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 120.5 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
convertible bonds, shall be accordingly lower or may not occur at all. The amount totalling mpln 157.1 Polnord SA is obliged to return to the bondholders in 2013. Debt due to loans The debt due to loans of companies from the Group as at 30.09.2010 along with the repayment schedule is as follows: Indebtedness as at 30.09.2010 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 25.0 15.8 15.8 Polnord SA BRE Bank SA revolving 19.0 0.0 Polnord SA DZ Bank Polska SA overdraft facility 57.0 5.4 5.4 Polnord SA BRE Bank SA investment (land) 12.3 12.3 6.1 6.1 Polnord Apartamenty Sp. z o.o. (Srebrzysta Podkowa) Polnord Apartamenty Sp. z o.o. (Ostoja Myśliwska) Nordea Bank Polska SA execution 2.8 2.8 2.8 Bank Millenium SA execution 23.7 0.0 Polnord Łódź II Sp. z o.o. Nordea Bank Polska SA execution 10.0 5.4 1.4 2.0 2.0 investment (land) 25.0 25.0 9.0 4.0 4.0 4.0 4,0 Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK investment (land) 43.1 43.1 8.6 34,5 Polnord Warszawa Wilanów I Sp. z o.o. Bank Zachodni WBK SA execution 43.0 0.0 Polnord Warszawa Wilanów III Sp. z o.o. BOŚ Bank execution 42.5 29.4 29,4 VAT 3.8 3.8 3.8 Polnord Warszawa Wilanów IV Sp. z o.o. PKO BP SA execution 129.1 0.0 VAT 3.6 0.0 Polnord Invest Sp. z o.o. BPH Bank Hipoteczny investment 3.9 3.9 0.1 0.1 0.1 0.1 0,1 0,1 0,1 0,1 0,1 2,9 Polnord Sopot II Sp. z o.o. investment (land) 44.8 44.8 44,8 PKO BP SA execution 23.5 10.6 10.6 23
Polnord Szczecin I Sp. z o.o. PKO BP SA execution 92.0 0.0 Polnord Szczecin I Sp. z o.o. PKO BP SA investment (land) 25.6 24.6 24,6 FADESA POLNORD POLSKA Sp. z o.o. PEKAO SA execution 365.7 127.3 49.3 59.4 18,6 investment (land) 77.5 67.5 12,5 55,0 VAT 35.0 0.0 FPP Powsin Sp. z o.o. execution 1 40.8 0.0 PEKAO SA execution 2 51.3 0.0 investment (land) 35.0 35.0 35,0 VAT 21.1 0.0 Indebtedness not weighed with Polnord's share: 456.7 30.4 60.9 22.0 81.5 28,7 47,6 0,1 44,9 34,6 105,9 30.4 193.1 127.2 105.9 Indebtedness weighed with Polnord's share: 339.5 30.4 35.8 22.0 51.2 28,7 23,4 0,1 44,9 34,6 68,4 30.4 137.6 103.0 68.4 The gross credit debt of the Group as at 30.09.2010 run at the level of mpln 339.5, while along with the debt stemming from the issued bonds it totalled mpln 667.1. The net debt (after including funds on accounts in the amount of mpln 37.8) totalled mpln 629.3. 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 2012 - mpln 127.2. mpln 105.9 shall be returned to the creditors after 2012. 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 2010. According to the information held by the Company, the following shareholders held as at 15.11.2010 shares authorising to at least 5% of votes at the General Shareholders Meeting: 24
Item Shareholder Number of shares/votes (amount) Par share value % of capital/votes 1 PROKOM Investments SA in Gdynia 7 477 959 14 955 918 33.66% Osiedle Wilanowskie Sp. z o.o. in Gdynia (a subsidiary of Prokom Investments 2 SA) 2 582 949 5 165 898 11.63% 3 Templeton Asset Management Ltd. in Singapore* 3 091 382 6 182 764 13.91% 4 Other shareholders in total 9 066 096 18 132 192 40.80% In total 22 218 386 44 436 772 100.00% 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 15.11.2010, 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) 2 447 1 523 Marek Modecki - Member of the Supervisory Board 1 700 According to the information possessed by the Company, remaining persons managing and supervising POLNORD SA did not hold shares of the Company as at 15.11.2010. 25
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 147 237 21.24 31.12.2012 Piotr Wesołowski - Deputy President of the Management Board 21 034 21.24 31.12.2012 In the period until the day of approval of the Condensed Consolidated Financial Statements for 2010 H1 until 15.11.2010 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 15.07.2010, 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 11.06.2010. The surety (repayment) was granted up to the amount of PLN 137,958, valid until 30 December 2013. 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 23.07.2010, 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
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 2013. 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 129.1 10.03.2010 31.03.2025 129 100 1 Polnord Warszawa -Wilanów IV Sp. z o.o. credit at PKO BP SA in the amount of mpln 3.6 10.03.2010 30.09.2012 3 600 "The said loans shall not be utilised, whereof the Company informed in more detail in the Current Report No. 10/2010 on 30.03.2010. 4. Other information significant to assessment of the personnel, economic and financial standing, financial result and changes thereto, as well as information significant to assessment of the Group s ability to meet its 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.5. 5. 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
residential and commercial. Thanks to the launching of further development projects within 2 nearest years a leap increase of the offer is planned, that would enable significant growth in revenues from and profit on the operating activity. The aim of increase of the number of realised projects is to take an advantage of the improvement of situation on the Polish residential real estate market by Polnord Group starting in 2011. The aim of POLNORD Capital Group is to execute new development projects mainly on the basis of the owned bank of land comprising very attractive locations. Thanks to that, the increase in revenues from operating activity in the years to come shall be accompanied by high positive operating flows from core activity, which will enable the Company to service the present debt, while at the same time keeping the investment potential in restoration of the bank of land. The Company also conducts business activity in Russia, where it realises development projects via 2 special purpose vehicles. Until the economic conditions on the local marked is stabilised, the Group limited its activity on the Russian market. 28
VI. CONDENSED UNCONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS OF POLNORD SA 1. Income statement of POLNORD SA in thousand PLN 01.07.2010-01.01.2010-01.07.2009-01.01.2009-30.09.2010 30.09.2010 30.09.2009 30.09.2009 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 3 290 91 690 30 223 230 350 271 85 171 29 489 227 060 7 847 25 094 188 771 2 878 6 088 536 2 705 2 860 6 068 501 2 438 141 431 198 585 117 355 147 467 Prime costs of sales ( 4 184) ( 35 765) ( 28 411) ( 208 761) Gross profit (loss) on sales Revaluation of investment property Costs of sales Administrative expenses Other operating income Other operating costs Gross profit (loss) on operating activity Financial income Financial costs Profit on disposal of subsidiary Gross profit (loss) Income tax Net profit (loss) on continued operations Net profit (loss) on discontinued operations Income tax on profit on discontinued operations Net profit /(loss) for the financial year ( 894) 55 925 1 812 21 589 9 308 20 309 21 870 ( 4 469) ( 12 048) ( 553) ( 1 784) ( 8 042) ( 24 123) ( 5 705) ( 23 863) 819 930 ( 289) 1 168 ( 2 247) ( 2 765) ( 240) ( 2 675) ( 5 525) 38 228 ( 4 975) 16 305 3 099 25 282 4 615 15 933 ( 11 644) ( 24 666) ( 3 626) ( 9 150) 20 219 20 219 6 149 59 063 ( 3 986) 23 088 ( 1 244) ( 12 084) 679 ( 5 776) 4 905 46 979 ( 3 307) 17 312 ( 207) ( 510) ( 199) ( 487) 4 698 46 469 ( 3 506) 16 825 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) 87 483 10 679 88 534 12 202 22 185 266 18 872 034 25 002 042 18 977 555 3.94 0.57 3.99 0.65 3.50 0.56 3.54 0.64 29
2. Statement of overall income of POLNORD SA in thousand PLN 01.07.2010-01.01.2010-01.07.2009-01.01.2009-30.09.2010 30.09.2010 30.09.2009 30.09.2009 Net profit/(loss) for the financial year 4 698 46 469 ( 3 506) 16 825 Other overall income 6 ( 305) 62 FX differences on recalculation 6 ( 305) 62 Overall income for the period 4 698 46 475 ( 3 811) 16 887 3. Statement of financial situation (balance-sheet) of POLNORD SA in thousand PLN As at 30.09.2010 As at 31.12.2009 ASSETS Fixed assets Property, plant and equipment Investment property Intangible assets Investments in subsidiaries, co-subsidiaries and affiliates Financial assets Deferred tax assets Long-term receivables 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 TOTAL ASSETS 661 677 526 764 6 015 3 245 218 951 174 680 746 173 251 119 200 716 43 360 29 035 11 972 9 005 129 270 109 684 244 226 955 772 889 437 480 123 495 159 62 020 55 889 397 902 323 476 7 370 5 730 236 21 6 595 5 971 1 526 3 191 1 617 449 1 416 201 LIABILITIES Equity (attributable to shareholders of the dominant company) Share capital Share premium Other reserves Accumulated profit or loss Total equity 1 143 424 1 115 210 44 437 44 357 954 083 953 334 98 435 72 009 46 469 45 510 1 143 424 1 115 210 30
Long-term liabilities Interest-bearing bank credits and borrowings Provisions Other liabilities Deferred tax liability Current liabilities Trade and other liabilities Current 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 Accrued expenses and deferred income Received advance payments Provisions Total amounts payable TOTAL LIABILITIES 350 228 140 262 317 231 114 256 257 257 18 364 32 722 25 385 123 797 160 729 35 316 12 585 12 765 18 893 14 840 35 660 79 093 425 653 360 342 2 688 5 003 36 583 29 320 474 025 300 991 1 617 449 1 416 201 31
4. Cash flow statement of POLNORD SA 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: 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 59 063 23 088 ( 510) ( 487) ( 38 983) ( 62 689) 584 604 ( 2 134) ( 4 861) ( 40 546) ( 474) ( 9 373) ( 31 915) 15 036 125 310 ( 1 298) ( 150 967) 793 6 750 8 352 8 283 ( 7 713) 742 ( 2 684) ( 16 161) 19 570 ( 40 088) Cash flows from investment activity Inflows Disposal of property, plant and equipment and intangible assets 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 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 Outflows Repayment of liabilities under finance lease Repayment of credits/borrowings Dividend paid Interest paid Redemption of bonds 262 271 16 167 69 151 39 679 1 412 931 104 7 562 797 200 090 13 940 13 703 ( 380 827) ( 32 625) ( 1 514) ( 87) ( 6 920) ( 98 784) ( 270 344) ( 29 980) ( 3 265) ( 2 558) ( 118 556) ( 16 458) 231 889 327 150 849 77 660 33 940 39 490 197 100 210 000 ( 134 568) ( 214 682) ( 363) ( 346) ( 59 462) ( 31 970) ( 19 086) ( 15 657) ( 7 366) ( 40 000) ( 175 000) 32
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 97 321 112 468 ( 1 665) 55 922 3 191 2 878 1 526 58 800 48 84 33
5. Statement of movements in equity of POLNORD SA in thousand PLN Share capital Share premium Other reserves Accumulated profit /(loss) Total As at 01 January 2009 36 230 856 413 60 358 ( 12 927) 940 074 Change of accounting policies 598 598 As at 01 January 2009 (restated) 36 230 856 413 60 358 ( 12 329) 940 672 Issue of shares 8 106 98 834 106 940 Cost of share issue ( 2 073) ( 2 073) Management Options Scheme 2 780 2 780 Overall income in total 62 16 825 16 887 As at 30 September 2009 44 336 953 174 63 200 4 496 1 065 206 Issue of shares 21 203 224 Cost of share issue ( 43) ( 43) Bonds convertible to Q shares 8 960 8 960 Overall income in total ( 151) 41 014 40 863 As at 31 December 2009 44 357 953 334 72 009 45 510 1 115 210 As at 01.01.2010 44 357 953 334 72 009 45 510 1 115 210 Issue of shares 80 769 849 Cost of share issue ( 20) ( 20) Preceding period result carryforward 26 420 ( 26 420) Dividends ( 19 090) ( 19 090) Overall income in total 6 46 469 46 475 As at 31.03.2010 44 437 954 083 98 435 46 469 1 143 424 6. Off balance-sheet items of POLNORD SA in thousand PLN Item 31.0392010 31.12.2009 Contingent liabilities Credit repayment guarantee Other contingent liabilities Contingent liabilities in total 592 928 414 980 342 352 593 270 415 332 Changes in contingent liabilities or contingent assets As at 30 September 2009, conditional liabilities arising from guarantees granted by POLNORD SA to subsidiaries totalled PLN 593,270, compared to PLN 415.332,000 as at 31 December 2009. The increase in liabilities took place mainly in result of guarantees granted in 2010 Q1-Q3 by the Company to subsidiaries in the amount of PLN 395,098 thousand as well as guarantees in the amount of PLN 100 thousand, given the simultaneous lapse of contingent liabilities due to sureties granted in the total amount of PLN 217,150 thousand. As at 30.09.2010, the Company disposed of the sureties received in the amount of PLN 7,000 thousand, a decrease when compared to 31.12.2009 by kpln 690. 34