POLNORD SA CAPITAL GROUP

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POLNORD SA

CAPITAL GROUP

CONSOLIDATED QUARTERLY REPORT

FOR 2010 Q3

PREPARED IN ACCORDANCE

WITH THE INTERNATIONAL FINANCIAL

REPORTING STANDARDS

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2

1.LITIGATIONS PENDING BEFORE COURT, RELEVANT ARBITRATION AUTHORITIES, OR PUBLIC ADMINISTRATION AUTHORITIES26 2.INFORMATION ON ONE OR MORE TRANSACTIONS BETWEEN POLNORDSA 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

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3.LOAN OR BORROWING GUARANTEES OR SURETIES GRANTED BY POLNORDSA AND ITS SUBSIDIARIES – IF TOTAL

VALUE OF THE EXISTING GUARANTEES OR SURETIES EQUALS AT LEAST 10% OF THE EQUITY OF POLNORDSA ... 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 POLNORDSA IN THOUSAND PLN... 29

2.STATEMENT OF OVERALL INCOME OF POLNORDSA IN THOUSAND PLN ... 30

3.STATEMENT OF FINANCIAL SITUATION (BALANCE-SHEET) OF POLNORDSA IN THOUSAND PLN ... 30

4.CASH FLOW STATEMENT OF POLNORDSA IN THOUSAND PLN ... 32

5.STATEMENT OF MOVEMENTS IN EQUITY OF POLNORDSA IN THOUSAND PLN ... 34

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4 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 30th_{, 2010, the Group, where POLNORD SA is the dominant entity, included the}

following subsidiaries, co-subsidiaries and affiliates:

No. Company name Registered

office Nominal value of shares (PLN) % of capital/ 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. S.K.A.

Gdańsk 5 000 000 100.00 %

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 %

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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

(Russia)

990 100.00 %

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

(Russia)

1 103 525 50.00 %

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.

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6 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.}

Polnord Łódź III Sp. z o.o. Polnord Inżynieria _{Sp. z o.o.} Stroj Dom ZAO (Russia)

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. Development Sp. z o.o. SKA Osiedle Tęczowy Las PD

Centrum Handlowe Wilanów Sp. z o.o.

Polnord Warszawa Wilanów III Sp. z o.o.

Polnord - Baltic Center Sp. z o.o.

PLP Development Group ZSA (Russia)

Polnord Warszawa Wilanów IV Sp. z o.o.

Polnord Apartamenty Sp. z o.o.

Polnord -Kokoszki Sp. z o.o.

Polnord Sopot II Sp. z o.o. Fadesa Polnord Polska _{Sp. z o.o.} Hydrosspol Sp. z o.o. in _liquidation

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

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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 1st_{, 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

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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 31st_{, 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.

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The Group applied in the consolidated financial statements all International Financial Reporting Standards applicable for the periods starting January 1st_{, 2010, as well as standards which had}

become effective before September 30th_{, 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.

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8. Revenues and financial results by segments

For the period from 01.01.2010 to 30.09.2010 Development activity

Continued activity Discontinued activity Commercial

areas Contracting General Other Eliminations Items non-attributed Total Other Activity in total Revenues

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

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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 _{41 268} _{137 616} _{66 677} _{170 228}

Income from sales of products, goods and materials _{37 794} _{130 777} _{65 380} _{166 516}

from related parties ₄₈₁

Income from sales of services _{3 223} _{6 256} _{1 088} _{3 327}

from related parties _{2 873} _{4 532} ₂₄

Income from lease

251 583 209 385

from related parties

Costs of sales _{( 32 601)} _{( 113 786)} _{( 45 011)} _{( 132 340)}

Gross profit (loss) on sales _{8 667} _{23 830} _{21 666} _{37 888}

Revaluation of investment property _{9 517} _{34 103} _{15 208} _{54 171}

Result on sale of investment property _{( 1 533)} _{24 332}

Sales costs _{( 6 023)} _{( 16 107)} _{( 774)} _{( 2 636)}

Administrative expenses

( 12 908) ( 38 470) ( 10 856) ( 39 418)

Other operating revenues

1 123 2 664 271 13 438

Other operating costs

( 2 528) ( 4 442) ( 901) ( 13 748)

Gross profit (loss) on operating activity _{( 3 685)} _{25 910} _{24 614} _{49 695}

Financial income _{( 5 699)} _{15 356} ₈₁₄ _{7 008}

Financial costs _{( 9 170)} _{( 23 531)} _{( 4 002)} _{( 14 769)}

Profit on disposal of a subsidiary _{42 749} _{42 749} ₂₇₈ ₃₃₃

Share in profit of affiliate _{( 79)} _{( 79)}

Gross profit (loss) _{24 116} _{60 405} _{21 704} _{42 267}

Income tax _{( 4 400)} _{( 14 744)} _{( 4 382)} _{( 9 548)}

Net profit (loss) on continued operations _{19 716} _{45 661} _{17 322} _{32 719} Discontinued operations

Gross profit (loss) for the financial year from discontinued activity _{( 207)} _{( 510)} _{( 199)} _{( 487)} Net profit (loss) on discontinued operations

Net profit /(loss) for the financial year

19 509 45 151 17 123 32 232

Attributable to:

Shareholders of the dominant entity

19 509 45 151 17 123 32 232

Minority shareholders

Annualised ratios Net profit (loss) (annualised)

76 553 21 665

Net profit (loss) on continued operations (annualised) _{77 604} _{23 188}

Weighed average amount of ordinary shares (items) _{22 185 266} _{18 872 034}

Weighed diluted average amount of ordinary shares (items) _{25 002 042} _{18 977 555}

Net profit (loss) per one ordinary share (PLN) _3.45 _1.15

Net profit (loss) on continued operations per one ordinary share (PLN) _3.50 _1.23

Diluted net profit (loss) per one ordinary share (PLN)

3.06 1.14

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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 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.

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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

667 969 478 016

Property, plant and equipment _{19 018} _{16 794}

Investment property _{335 220} _{264 319}

Intangible assets

859 270

Investments in affil. valuated with equity method _{69 608}

Financial assets _{41 682} _{29 036}

Deferred tax assets _{29 402} _{26 295}

Long-term receivables _{31 860} _{1 000}

Goodwill _{139 983} _{139 983}

Other fixed assets

337 319

Current assets

1 407 405 1 544 220

Inventories _{1 214 529} _{1 300 613}

Trade and other receivables _{49 885} _{47 002}

Other current financial assets

69 901 105 759

Amounts receivable due to VAT, other taxes, customs duties, insurance and other _{18 586} _{15 861}

Income tax receivables ₂₈₃ ₄₇₉

Prepaid expenses and accrued income _{16 434} _{15 394}

Cash and cash equivalents

37 787 59 112 Available-for-sale assets 245 TOTAL ASSETS 2 075 374 2 022 481

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14

LIABILITIES

Equity (attributable to shareholders of the dominant company) _{1 152 976} _{1 126 670}

Share capital _{44 437} _{44 357}

Share premium _{956 030} _{955 281}

Foreign exchange differences on translation of a foreign entity _{( 569)} ₂₁

Other reserves _{89 608} _{56 402}

Accumulated profit or loss _{63 470} _{70 609}

Minority interests Total equity

1 152 976 1 126 670

Long-term liabilities

571 426 449 069

Interest-bearing bank credits and borrowings _{516 656} _{403 877}

Provisions ₂₅₇ ₂₆₆

Other liabilities

790 453

Deferred tax liability

53 723 44 473

Current liabilities

350 972 446 742

Trade and other liabilities _{67 094} _{30 192}

Current long-term portion of bank credits and borrowings _{100 406} _{149 326}

Short-term revolving credits _{14 840}

Other short-term credits and borrowings _{88 007} _{149 865}

Liabilities due to VAT, other taxes, customs duties, insurance and other _{1 230} _{1 620}

Income tax liabilities ₃₆₉ ₆₀₃

Other financial liabilities ₂₁ _{11 550}

Accrued expenses and deferred income _{7 494} _{4 490}

Received advance payments _{41 284} _{48 794}

Provisions

45 067 35 462

Total amounts payable

922 398 895 811

TOTAL LIABILITIES

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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 _{60 405} _{42 267} Gross profit /(loss) on discontinued activity _{( 510)} _{( 487)}

Adjusted by: _{( 110 848)} _{( 113 132)}

Share in result of affiliates valuated with the equity method

79

Amortisation

1 619 1 611

Interest and dividends, net _{6 020} _{( 1 334)}

(Profit)/loss on investment activity _{( 101 239)} _{( 473)}

(Increase)/decrease in receivables _{( 10 315)} _{5 563}

(Increase)/ decrease in inventories _{( 293)} _{57 961}

Increase/ (decrease) in liabilities, except for credits and borrowings _{( 7 402)} _{( 175 464)}

Change in prepayments and accruals _{3 633} _{( 312)}

Change in provisions _{8 043} _{9 780}

Income tax paid

( 8 971) 1 158

Other

( 2 022) ( 11 622)

Net cash from operating activities

( 50 953) ( 71 352)

204 054 11 047

Cash flows from investment activity Inflows

204 054 11 047

Disposal of property, plant and equipment and intangible assets ₄₃₈ ₂₂₂

Disposal of investment property _{77 840}

Disposal of financial assets _{39 679} _{1 412}

Dividend received ₇₅₀

Interest received _{4 502} ₈₁₄

Repayment of granted borrowings _{80 055}

Other ₇₉₀ _{8 599}

Outflows

( 99 541) ( 3 594)

Acquisition of property, plant and equipment and intangible assets _{( 2 000)} _{( 267)}

Acquisition of investment property _{( 41 187)}

Acquisition of financial assets _{( 6 921)}

Acquisition of subsidiary after deduction of undertaken funds _{( 59)}

Borrowings granted _{( 47 082)} _{( 1 241)}

Other

( 2 292) ( 2 086)

Net cash from investment activity

104 513 7 453

Cash flows from financial activity

Inflows _{290 898} _{502 670}

Inflows from issue of shares

849 77 660

Inflows from credits/borrowings raised _{92 949} _{214 585}

Inflows from issue of bonds _{197 100} _{210 000}

Other ₄₂₅

Outflows _{( 365 804)} _{( 358 344)}

Repayment of liabilities under finance lease _{( 605)} _{( 849)}

Repayment of credits/borrowings _{( 275 406)} _{( 161 586)}

Dividend paid to dominant entity shareholders _{( 19 085)} Dividend paid to minority shareholders

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16 Interest paid _{( 30 631)} _{( 20 795)} Redemption of bonds ( 40 000) ( 175 000) Other ( 57) ( 108)

Net cash from financial activity

( 74 906) 144 326

Net increase in cash and cash equivalents _{( 21 346)} _{80 427}

Net foreign exchange differences ₂₁ ₂

Cash as at the period beginning

59 112 31 158

Cash as at the period end, including:

37 787 111 587

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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 interests Minority Total equity

As at 01 January 2009 _{36 230} _{858 360} ₂₃₆ _{28 933} _{67 873} _{991 632} _{991 632}

Change of accounting policies _{( 498)} _{( 6 286)} _{( 50 802)} _{( 57 586)} _{( 57 586)}

As at 01 January 2009 (restated) _{36 230} _{858 360} _{( 262)} _{22 647} _{17 071} _{934 046} _{934 046}

Issue of shares _{8 106} _{98 834} _{106 940} _{106 940}

Shares issue costs _{( 2 073)} _{( 2 073)} _{( 2 073)}

Profit / loss carryforward _{10 092} _{( 10 092)}

Management Options Scheme _{2 780} _{2 780} _{2 780}

Overall income in total

82 2 824 32 232 35 138 35 138

As at 30 September 2009

44 336 955 121 ( 180) 38 343 39 211 1 076 831 1 076 831

Issue of shares ₂₁ ₂₀₃ ₂₂₄ ₂₂₄

Cost of share issue _{( 43)} _{( 43)} _{( 43)}

Profit / loss carryforward _{( 2)} ₂

Bonds convertible to Q shares _{8 960} _{8 960} _{8 960}

Dividends _{( 6)} _{( 6)} _{( 6)}

Overall income in total ₂₀₁ _{9 101} _{31 402} _{40 704} _{40 704}

As at 31 December 2009 44 357 955 281 21 56 402 70 609 1 126 670 1 126 670 As at 01.01.2010 44 357 955 281 21 56 402 70 609 1 126 670 1 126 670 Issue of shares 80 769 849 849

Cost of share issue

( 20) ( 20) ( 20)

Profit / loss carryforward

33 200 ( 33 200)

Dividend

( 19 090) ( 19 090) ( 19 090)

Overall income in total

( 590) 6 45 151 44 567 44 567

As at 30.09.2010

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18 14. Off balance sheet items in thousand PLN

Item 30.09.2010 31.12.2009 Contingent liabilities

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 30th_{, 2010, conditional liabilities of the Group amounted to PLN 1,387,000,}

compared to PLN 13,520,000 as at December 31st_{, 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.

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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.

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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

Premises sold to be commissioned**

(amount) 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

31.12.2009 2010 Q1-Q3 31.12.2009 until 2010 Q1 – Q3

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

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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

PROJECTS UNDER CONSTRUCTION AS AT 31.03.2010 1. Srebrzysta Podkowa (build. 3)

(Gdańsk - Kowale)

1 322 28

Polnord Apartamenty 100% (planned) Q4 2010 0 8 20

2. Sopocka Rezydencja

(Sopot, Łokietka) 9 617 162 Polnord Sopot II 100% (planned) Q2 2011 0 15 147

3. City Park (Stage II)

(Łódź, Żeligowskiego) 5 800 87 Polnord Łódź II 100% (planned) Q1 2011 0 22 65

4. Ostoja Wilanów (Stage VI) " (Warszawa Wilanów, Klimczaka)

17 964 272

Fadesa Polnord 49% (planned) Q3 2011 21 112 139

5. Dobry Dom

(Warszawa Wilanów, Kazachska)

10 496 155

Polnord W-wa Wilanów I 100% (planned) Q3 2011 0 45 110

6. Ku Słońcu (Stage I) (Szczecin, Ku Słońcu)

12 277 222

Polnord Szczecin I 100% (planned) Q4 2011 0 41 181

7. Os. Jabłoniowa (build. no.1 i 2) 7 274 137

Q2/Q4 2011

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22

8. Ostoja Myśliwska

(Gdańsk, Myśliwska) 13 770 229 Polnord Apartamenty 100% Q3 2011/Q2 2012 (planned) 0 18 211

9. Osiedle Tęczowy Las (Stage II)

(Olsztyn, Tęczowy Las) 6 751 139 Osiedle Tęczowy Las 100% (planned) Q4 2011 0 18 121

10. Osiedle Innova (Stage I)

(Wrocław, Jesionowa) 15 156 236 Fadesa Polnord 49% Q12013 (planned) 0 24 212

100 427 1 667

21 303 1 343

IN TOTAL 253 781 3 599 1 283 494 1 822

*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.

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 (mPLN) Limit 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

06.11.2009 Bonds convertible into 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

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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:

Borrower Bank Type Limit (mPLN)

Indebtedness as at 30.09.2010 without interest

(not weighed

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) Nordea Bank Polska SA execution 2.8 2.8 2.8 Polnord Apartamenty Sp. z o.o. (Ostoja

Myśliwska) 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. PKO BP SA investment (land) 44.8 44.8 44,8 execution 23.5 10.6 10.6

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24 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

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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%

2

Osiedle Wilanowskie Sp. z o.o. in Gdynia (a subsidiary of Prokom Investments

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 Number of held shares (amount)

Wojciech Ciurzyński - President of the Management Board

2 447

Andrzej Podgórski - Deputy President of the Management Board,

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.

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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 warrants (amount)

H share issue price (conversion price) (PLN)

Term of execution of rights of warrants

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 1st_{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

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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 30th_{, 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

1 Polnord Warszawa -Wilanów IV Sp. z o.o. credit at PKO BP SA in the amount of mPLN 129.1 10.03.2010 31.03.2025 129 100 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

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28 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.

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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 _{3 290} _{91 690} _{30 223} _{230 350}

Income from sales of products, goods and materials ₂₇₁ _{85 171} _{29 489} _{227 060}

from related parties _{7 847} _{25 094} _{188 771}

Income from sales of services _{2 878} _{6 088} ₅₃₆ _{2 705}

from related parties _{2 860} _{6 068} ₅₀₁ _{2 438}

Income from lease ₁₄₁ ₄₃₁ ₁₉₈ ₅₈₅

from related parties ₁₁₇ ₃₅₅ ₁₄₇ ₄₆₇

Prime costs of sales

( 4 184) ( 35 765) ( 28 411) ( 208 761)

Gross profit (loss) on sales

( 894) 55 925 1 812 21 589

Revaluation of investment property _{9 308} _{20 309} _{21 870}

Costs of sales _{( 4 469)} _{( 12 048)} _{( 553)} _{( 1 784)}

Administrative expenses _{( 8 042)} _{( 24 123)} _{( 5 705)} _{( 23 863)}

Other operating income ₈₁₉ ₉₃₀ _{( 289)} _{1 168}

Other operating costs _{( 2 247)} _{( 2 765)} _{( 240)} _{( 2 675)}

Gross profit (loss) on operating activity

( 5 525) 38 228 ( 4 975) 16 305

Financial income _{3 099} _{25 282} _{4 615} _{15 933}

Financial costs _{( 11 644)} _{( 24 666)} _{( 3 626)} _{( 9 150)}

Profit on disposal of subsidiary _{20 219} _{20 219}

Gross profit (loss)

6 149 59 063 ( 3 986) 23 088

Income tax

( 1 244) ( 12 084) 679 ( 5 776)

Net profit (loss) on continued operations

4 905 46 979 ( 3 307) 17 312

Net profit (loss) on discontinued operations

( 207) ( 510) ( 199) ( 487)

Income tax on profit on discontinued operations

Net profit /(loss) for the financial year

4 698 46 469 ( 3 506) 16 825

Annualised ratios

Net profit (loss) (annualised) _{87 483} _{10 679}

Net profit (loss) on continued operations (annualised) _{88 534} _{12 202} Weighed average amount of ordinary shares (items) _{22 185 266} _{18 872 034} Weighed diluted average amount of ordinary shares

(items)

25 002 042 18 977 555

Net profit (loss) per one ordinary share (PLN) _3.94 _0.57

Net profit (loss) on continued operations per one ordinary share (PLN)

3.99 0.65

Diluted net profit (loss) per one ordinary share (PLN) _3.50 _0.56 Diluted net profit (loss) on continued activity per one

ordinary share (PLN)

(30)

30 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

661 677 526 764

Property, plant and equipment _{6 015} _{3 245}

Investment property _{218 951} _{174 680}

Intangible assets ₇₄₆ ₁₇₃

Investments in subsidiaries, co-subsidiaries and affiliates

251 119 200 716

Financial assets _{43 360} _{29 035}

Deferred tax assets _{11 972} _{9 005}

Long-term receivables _{129 270} _{109 684}

Other fixed assets

244 226

Current assets

955 772 889 437

Inventories _{480 123} _{495 159}

Trade and other receivables _{62 020} _{55 889}

Other current financial assets _{397 902} _{323 476}

Amounts receivable due to VAT, other taxes, customs duties, insurance and other _{7 370} _{5 730}

Income tax receivables ₂₃₆ ₂₁

Prepaid expenses and accrued income _{6 595} _{5 971}

Cash and cash equivalents

1 526 3 191 TOTAL ASSETS 1 617 449 1 416 201 LIABILITIES

Equity (attributable to shareholders of the dominant company) _{1 143 424} _{1 115 210}

POLNORD SA CAPITAL GROUP

POLNORD SA

CAPITAL GROUP

CONSOLIDATED QUARTERLY REPORT

FOR 2010 Q3

PREPARED IN ACCORDANCE

WITH THE INTERNATIONAL FINANCIAL

REPORTING STANDARDS

CONTENTS