TIDMNAT
RNS Number : 7665P
Nanette Real Estate Group N.V.
31 March 2009
For Immediate Release 31st March 2009
NANETTE REAL ESTATE GROUP N.V
(the "GROUP") or ("Nanette") or (the "Company")
Results for the year ended 31 December 2008
Nanette, the Central and Eastern European residential property development group
(AIM:NAT), with real estate projects in Poland, Hungary, Romania, Croatia and
Ukraine is very pleased to announce its results for the year ending 31 December
2008.
Financial Highlights
Ø Revenues amount to EUR26.5m (2007: EUR33.17m)
Ø PBT amounts to EUR6.3m (2007: EUR22.6m)
Ø Earnings per share: up to 3c (2007: 12c)
Ø EUR24.5m additional fund was raised through debentures
Ø S&P's affiliates Maalot's rating of BBB/NEGATIVE
Ø Moodys' affiliates Midrug's rating Baa1
Ø The business was cash positive at the year end, excluding the debentures
Operational Highlights
Ø Expansion of land-banks in 2008:14,223units(2007:12,903units)
Ø Expansion of investment properties in 2008: 617,333 sq.m in 4 projects
(2007:348,333 sq.m in 2 projects)
Ø Unit completions in2008: 776 (2007: 593)
Ø Continued expansion in Polish and Hungarian markets, new locations in Gdansk
and Wroclaw.
Ø New JV partnership with Rothschild's fund and the US AI fund
Ø Large scale local debt funding secured for Polish projects
Ø Major reorganization of Polish JV assets with Lehman brothers Real Estate
Partners
Ø Bond raising in Israel in the amount of Euro 24.5 M
Ø Strategic entry to the Ukraine
Ø Acquisition of additional plots of land in Poland, Romania and Hungary
Oscar Kazanelson, Chief Executive Officer, commented:
"The past year has been extremely challenging for all property developers
including us, although we continued to progress in the markets we operate. This
year we have increased our land bank by almost 40%, mainly through expansion in
the Hungarian market, where our group is well known and has a solid reputation,
exploiting beneficially the funds raised in our recent bond issues.
Shaul Lotan, Chairman, commented:
"This year's results demonstrate to our investors and the market that Nanette
continues to be a strong and solid company, despite of all the market turmoil
and financial crisis. During this year we included an additional investment
group as a strategic partner - the AI group and our existing partners, Lehman
Brothers Real Estate Partners ("LBREP") and Rothschild, have extended their
commitment to the joint venture by injecting more funds and increased their
participating share with us.
Despite the challenging market conditions we have proven our capabilities to
obtain an excellent level of project finance.
2009 will not be an easy year to the financial markets and for real estate
developers in particular, however we, at Nanette, have the confidence that our
projects are secured and we can continue to progress as we planned".
Nanette's management will be discussing their financial results and can be
available for questions in a conference call on Wednesday, 12.00, UK time, via
UK access number:
0-800-404-9501, using access code: 2131#.
Enquiries:
+----------------------------------+-------------------------+
| Nanette Real Estate Group | |
+----------------------------------+-------------------------+
| Shaul Lotan, Chairman | + 31 20 778 4141 |
+----------------------------------+-------------------------+
| Eyal Keltsh | +48 606141201 |
+----------------------------------+-------------------------+
| | |
+----------------------------------+-------------------------+
| KBC Peel Hunt | +44 (020) 7418 8900 |
+----------------------------------+-------------------------+
| Capel Irwin | |
+----------------------------------+-------------------------+
| Nicholas Marren | |
+----------------------------------+-------------------------+
| | |
+----------------------------------+-------------------------+
| Global Equity IR | +44-(0)7956 206 270 |
+----------------------------------+-------------------------+
| Amira Bardichev | |
+----------------------------------+-------------------------+
Chairman's Statement
I hereby present to you this year's results. It was a challenging year for us
and for most real estate developers, however we managed to complete the year
with positive results and to secure sufficient means to allow Nanette not only
to pass this period but also to be prepared for its future opportunities. We
started the year with the completion of the reorganization process in Poland and
a few months later we managed to conclude a bond fundraisings in Israel, which
has and will enable the Group to take advantage of the growth opportunities that
exist in Central and East Europe (CEE).
The Group was admitted to AIM in June 2006 with plots secured in Warsaw, Poland
and Budapest, Hungary. These locations have given the Group a solid base and
will continue to offer good opportunities. During 2008 we expanded our
operations in Hungary, Poland, Romania and Ukraine; we entered into Ukraine by
taking a 30% stake in a project done jointly with Olimpia Euro Construction.
Our partners in the projects, LBREP, Rothschild and our new partner AI group
from the US, continue to be supportive and all the projects funding needs have
been secured in full and on a timely manner.
The Group raised bonds on the Tel Aviv stock exchange in the amount of EUR 24.5
million; we now have access to significant funds to accelerate the growth of the
Group.
2008
The year has seen a significant increase in activity with approximately 776
completions (2007: 593). The completions were divided into 412 units in Poland
and 364 units in Hungary. We pride ourselves on providing a good quality product
in prime locations - as has been the case in both Warsaw and Budapest. Warsaw,
in particular, has a strong demand for good quality housing and provides
opportunities for us to make reasonable returns. The global market has become
tougher during the year and with the economic crisis around the world and in our
local region , sales have been down throughout the markets as, people are more
careful and very selective in choosing their apartment purchase. Our well known
reputation in Hungary and Poland is a major factor in our success, although
competition in the market has also intensified over the last year. Budapest is a
more mature market, but continues to provide opportunities for us as we
represent one of the major developers in the city.
At the end of 2006 we had 16 plots in 2 countries and by the end of 2007 we had
increased that number to 27 in 5 countries. The land-bank typically consists of
sites with varying planning consents and some will be held for several while
planning is approved or amended in order to provide the Group with the best
possible development.
The profit for the year is EUR6.3m (2007: EUR22.6m). The Group ended the year with
EUR22m of net cash.
Dividend
During 2008 Nanette distributed to its shareholders EUR11m of dividends, Nanette
has a dividend policy of distribution 30% of the annual net profit, the
management and the board agreed not to distribute any dividends this year in
order to maintain sufficient reserve of cash in the company.
Board
The Board of Directors was established in its current form following the
admission to AIM. I would like to thank the Executive team together with their
colleagues for the progress that has been made in 2008. I also appreciate the
time and commitment that the Non Executive Directors have provided to the Group
in what has proven to be a busy period. Mr. Oskar Kazanelson continues to
identify exciting opportunities and I would like to thank him especially for the
growth that has been achieved.
Due to market condition our board had unanimously agreed on a 10% salary cut for
all board members and position holders in the company.
This year, our board expanded with an additional non executive board member, Mr.
David Dekel with major background in economics and marketing.
Outlook
The world's financial crisis is far from being over, we believe that the region
will perform better than other markets and will provide considerable growth
opportunity even in these harsh times, due to the continued projected economic
growth and further economic liberalisation of the new EU members and candidates.
Whilst we will continue to develop sites in the cities in which we commenced
operations - in Poland: Warsaw, Gdansk, Wroclaw; in Hungary: Budapest; in
Romania: Bucharest and Timisuara; in Croatia: Zagreb; and in Ukraine: Kiev. Our
desire and appetite for growth has been implemented in our expansion. We will
maintain our light footed approach and consider other projects in the countries
we operate in the region if the project fits our requirements and investment
parameters. In addition, we may see opportunities to sell parcels of land which
we will do so if the available returns are sufficient.
The funds available to the Group are significant and together with our partners,
in specific sites, we are confident that the region provides exciting
opportunities to progress the Group.
The results announcement for the year ended 31 December 2008 is audited. The
financial information contained in this announcement does not constitute
statutory accounts for the year ended 31 December 2008. The statutory accounts
for the year ended 31 December 2008 will be finalized on the basis of the
financial information presented by the directors in the announcement and will be
delivered to the Registrar of Companies following the company's Annual General
Meeting.
Shaul Lotan, Chairman of the Board
CONSOLIDATED BALANCE SHEETS
Euro in thousands
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | December 31, |
+----------------------------------------------------+-+-------+--+-------------------------+
| | | Note | | 2008 | | 2007 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| ASSETS | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| CURRENT ASSETS: | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Cash and cash equivalents | | 3 | | 22,056 | | 70,905 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Deposits | | 4 | | 22,657 | | 15,051 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Trade and other receivables | | 5 | | 7,351 | | 13,336 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Inventory of land and housing units | | 6 | | 24,330 | | 85,868 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | 76,394 | | 185,160 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| NON-CURRENT ASSETS: | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Land | | 6 | | 43,130 | | 16,634 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Investment property | | 7 | | 17,036 | | 18,402 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Investment in associates | | 8 | | 52,114 | | - |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Furniture and equipment, net | | | | 170 | | 162 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Other financial assets | | 10 | | 16,746 | | 35,298 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Goodwill | | 11 | | 455 | | 2,302 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Deferred tax asset | | 13c | | 357 | | 708 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | 130,008 | | 73,506 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| | | | | | | |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
| Total assets | | | | 206,402 | | 258,666 |
+----------------------------------------------------+-+-------+--+-----------+-+-----------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
Euro in thousands
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | December 31, |
+----------------------------------------------------+-+---------+--+---------------------------+
| | | Note | | 2008 | | 2007 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| LIABILITIES AND EQUITY | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| CURRENT LIABILITIES: | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Interest-bearing loans and | | 12 | | 32,929 | | 29,844 |
| borrowings | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Trade and other payables | | 14 | | 6,302 | | 22,598 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Customer advances | | 6 | | 9,484 | | 22,194 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | 48,715 | | 74,636 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| NON-CURRENT LIABILITIES: | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Interest-bearing loans and | | 12 | | 75,206 | | 91,546 |
| borrowings | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Other liabilities | | 18 | | 2,482 | | 715 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Deferred tax liability | | 13c | | 96 | | 2,874 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | 77,784 | | 95,135 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Total liabilities | | | | 126,499 | | 169,771 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| EQUITY: | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Equity attributable to equity | | | | | | |
| holders of the parent: | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Share capital | | 17 | | 3,449 | | 3,435 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Share premium | | | | 67,473 | | 67,415 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Treasury shares | | | | (527) | | - |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Other reserves | | 17 | | 486 | | (58) |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Retained earnings | | | | 8,906 | | 17,535 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | 79,787 | | 88,327 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Minority interests | | | | 116 | | 568 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Total equity | | | | 79,903 | | 88,895 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| | | | | | | |
+----------------------------------------------------+-+---------+--+------------+-+------------+
| Total liabilities and equity | | | | 206,402 | | 258,666 |
+----------------------------------------------------+-+---------+--+------------+-+------------+
The accompanying notes are an integral part of the consolidated financial
statements.
+--------------------+--+-------------------+--+-------------------+--+----------------------+
| March 30, 2009 | | | | | | |
+--------------------+--+-------------------+--+-------------------+--+----------------------+
| Date of approval | | Shaul Lotan | |Oscar Katzenelson | | Ran Jacobs |
| of | | | | | | |
+--------------------+--+-------------------+--+-------------------+--+----------------------+
| financial | | Chairman of the | | Director and CEO | | Director and CFO |
| statements | | Board of | | | | |
| | | Directors | | | | |
+--------------------+--+-------------------+--+-------------------+--+----------------------+
CONSOLIDATED INCOME STATEMENTS
Euro in thousands (except per share data)
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | Year ended December 31, |
+---------------------------------------+-+-------+--+----------------------------------------+
| | | Note | | 2008 | | 2007 | | 2006 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Revenues | | | | 26,529 | | 33,174 | | 31,869 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Cost of revenues | | | | 20,921 | | 25,936 | | 25,520 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Gross profit | | | | 5,608 | | 7,238 | | 6,349 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Fair value adjustment of | | 7 | | 1,969 | | 5,122 | | - |
| investment property, net | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | 7,577 | | 12,360 | | 6,349 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Marketing, general and | | 20 | | 6,351 | | 5,966 | | 3,358 |
| administrative expenses | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Operating profit | | | | 1,226 | | 6,394 | | 2,991 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Finance costs | | 21 | | (27,685) | | (16,034) | | (3,602) |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Finance income | | 21 | | 25,272 | | 23,654 | | 5,835 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Share in profit of | | 8 | | 1,180 | | - | | - |
| associates | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Other income | | 22 | | 6,330 | | 8,621 | | 4,216 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Profit before taxes on | | | | 6,323 | | 22,635 | | 9,440 |
| income | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Taxes on income | | 13 | | 701 | | 2,555 | | 1,079 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Profit for the year | | | | 5,622 | | 20,080 | | 8,361 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Attributable to: | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Equity holders of | | | | 5,529 | | 19,270 | | 7,031 |
| the parent | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Minority | | | | 93 | | 810 | | 1,330 |
| interests | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | 5,622 | | 20,080 | | 8,361 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Earnings per share | | 23 | | | | | | |
| attributable to equity | | | | | | | | |
| holders of the parent (in | | | | | | | | |
| Euro): | | | | | | | | |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
| Basic and diluted | | | | 0.03 | | 0.12 | | 0.06 |
+---------------------------------------+-+-------+--+-----------+-+-----------+--+-----------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Euro in thousands
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | Attributable to equity holders of the parent | | | | |
+------------------------------------------------+-+-------------------------------------------------------------------------------------------+-+--------------+-+-----------+
| | | Share | | Share | | Treasury | | Other | | Retained | | | | Minority | | Total |
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | capital | | premium | | shares | | reserves | | earnings | | Total | | interests | | equity |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Balance at January 1, 2006 | | 2,400 | | 8,422 | | - | | 2,498 | | (1,194) | | 12,126 | | 841 | | 12,967 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Currency translation | | - | | - | | - | | (1,246) | | - | | (1,246) | | 73 | | (1,173) |
| differences | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Profit for the year | | - | | - | | - | | - | | 7,031 | | 7,031 | | 1,330 | | 8,361 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Total recognized profit | | - | | - | | - | | (1,246) | | 7,031 | | 5,785 | | 1,403 | | 7,188 |
| for 2006 | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Share-based compensation | | | | 275 | | - | | - | | - | | 275 | | - | | 275 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Transfer of revaluation | | - | | - | | - | | (493) | | 493 | | - | | - | | - |
| reserve upon disposal of | | | | | | | | | | | | | | | | |
| inventory | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Issue of share capital | | 260 | | 11,827 | | - | | - | | - | | 12,087 | | - | | 12,087 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Dividend to minority | | - | | - | | - | | - | | - | | - | | (12) | | (12) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Disposal of subsidiary | | - | | - | | - | | - | | - | | - | | 32 | | 32 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Acquisition of subsidiary | | - | | - | | - | | - | | - | | - | | 4 | | 4 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Acquisition of minority | | - | | - | | - | | - | | - | | - | | (368) | | (368) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | 260 | | 12,102 | | - | | (493) | | 493 | | 12,362 | | (344) | | 12,018 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Balance at December 31, 2006 | | 2,660 | | 20,524 | | - | | 759 | | 6,330 | | 30,273 | | 1,900 | | 32,173 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Currency translation | | - | | - | | - | | (4,735) | | - | | (4,735) | | 183 | | (4,552) |
| differences | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Reclassification upon sale | | - | | - | | - | | (110) | | - | | (110) | | - | | (110) |
| of shares of subsidiaries | | | | | | | | | | | | | | | | |
| *) | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Profit for the year | | - | | - | | - | | - | | 19,270 | | 19,270 | | 810 | | 20,080 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Total recognized profit | | - | | - | | - | | (4,845) | | 19,270 | | 14,425 | | 993 | | 15,418 |
| for 2007 | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Share-based compensation | | - | | 47 | | - | | - | | - | | 47 | | - | | 47 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Transfer of revaluation | | - | | - | | - | | (160) | | 160 | | - | | - | | - |
| reserve upon disposal of | | | | | | | | | | | | | | | | |
| inventory | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Issue of share capital, | | 775 | | 46,844 | | | | - | | - | | 47,619 | | - | | 47,619 |
| net | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Dividend paid | | - | | - | | - | | - | | (4,037) | | (4,037) | | - | | (4,037) |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Dividend to minority | | - | | - | | - | | - | | - | | - | | (576) | | (576) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Sale of shares of | | - | | - | | - | | - | | - | | - | | (161) | | (161) |
| subsidiaries | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Acquisition of minority | | - | | - | | - | | - | | - | | - | | (1,588) | | (1,588) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Reclassification according | | - | | - | | - | | 4,188 | | (4,188) | | - | | - | | - |
| to statutory requirements | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | 775 | | 46,891 | | - | | 4,028 | | (8,065) | | 43,629 | | (2,325) | | 41,304 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Balance at December 31, 2007 | | 3,435 | | 67,415 | | - | | (58) | | 17,535 | | 88,327 | | 568 | | 88,895 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Currency translation | | - | | - | | - | | (2,211) | | - | | (2,211) | | 29 | | (2,182) |
| differences | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Reclassification upon sale | | - | | - | | - | | (408) | | - | | (408) | | - | | (408) |
| of shares of subsidiaries | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Profit for the year | | - | | - | | - | | - | | 5,529 | | 5,529 | | 93 | | 5,622 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Total recognized profit | | - | | - | | - | | (2,619) | | 5,529 | | 2,910 | | 122 | | 3,032 |
| for 2008 | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Exercise of options | | 14 | | 58 | | - | | - | | - | | 72 | | - | | 72 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Treasury shares | | - | | - | | (527) | | - | | - | | (527) | | - | | (527) |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Dividend paid | | - | | - | | - | | - | | (10,995) | | (10,995) | | - | | (10,995) |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Dividend to minority | | - | | - | | - | | - | | - | | - | | (159) | | (159) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Acquisition of minority | | - | | - | | - | | - | | - | | - | | (415) | | (415) |
| interest | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Reclassification according | | - | | - | | - | | 3,163 | | (3,163) | | - | | - | | - |
| to statutory requirements | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | 14 | | 58 | | (527) | | 3,163 | | (14,158) | | (11,450) | | (574) | | (12,024) |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| | | | | | | | | | | | | | | | | |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
| Balance at December 31, 2008 | | 3,449 | | 67,473 | | (527) | | 486 | | 8,906 | | 79,787 | | 116 | | 79,903 |
+------------------------------------------------+-+------------+-+------------+-+-------------+-+-------------+-+-------------+-+-------------+-+--------------+-+-----------+
*) Reclassified.
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENTS
Euro in thousands
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | Year ended December 31, |
+-----------------------------------------------------------+-+--------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Cash flows from operating activities: | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Profit for the year | | 5,622 | | 20,080 | | 8,361 |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Adjustments for: | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Non-cash: | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Depreciation | | 40 | | 87 | | 44 |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Finance costs | | 27,685 | | 16,034 | | 3,602 |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Finance income | | (25,272) | | (23,654) | | (5,835) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Share-based | | - | | 47 | | 275 |
| compensation | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Taxes on income | | 701 | | 2,555 | | 1,079 |
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Other non-cash | | 370 | | - | | - |
| expenses | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Gain on | | (6,527) | | (8,314) | | (4,183) |
| sale of | | | | | | |
| interest | | | | | | |
| in joint | | | | | | |
| ventures | | | | | | |
| and | | | | | | |
| subsidiaries | | | | | | |
| (Note 22) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Share in profit | | (1,180) | | - | | - |
| of associates | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Fair value adjustment of | | (1,969) | | (5,122) | | - |
| investment property | | | | | | |
| (Note 7) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | (6,152) | | (18,367) | | (5,018) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Working capital adjustments: | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Increase in trade and | | (1,114) | | (8,670) | | (3,009) |
| other receivables | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Increase in inventory of | | (29,310) | | (43,733) | | (20,768) |
| land and housing units | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Increase (decrease) in | | (4,014) | | 9,504 | | 12,934 |
| trade and other payables | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Increase (decrease) in | | 2,462 | | 12,012 | | (183) |
| customer advances | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | (31,976) | | (30,887) | | (11,026) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Interest paid | | (9,294) | | (4,607) | | (2,121) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Interest received | | 8,973 | | 9,686 | | 242 |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Income tax paid | | (958) | | (2,500) | | (725) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | (1,279) | | 2,579 | | (2,604) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Net cash used in operating activities | | (33,785) | | (26,595) | | (10,287) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Cash flows from investing activities: | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Acquisition of subsidiaries, net of | | (29,855) | | (1,277) | | (1,091) |
| cash acquired (a) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Proceeds from disposal of interest in | | - | | (72) | | 2,739 |
| subsidiary, net (b) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Proceeds from sale of interest in | | - | | - | | 11 |
| subsidiary to minority shareholders | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Proceeds (reduction in cash) upon sale | | - | | 8,564 | | (1) |
| of interest in jointly controlled | | | | | | |
| entity | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Deconsolidation of proportionately | | (4,624) | | - | | - |
| consolidated company (c) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Acquisition of additional interest in | | - | | (825) | | (2,072) |
| proportionately consolidated company | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Company proportionately consolidated | | - | | - | | (2,654) |
| for the first time (formerly an | | | | | | |
| associate) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Initially proportionately consolidated | | 24,152 | | - | | - |
| company (formerly a subsidiary) (d) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Acquisition of minority interest in | | - | | (5,497) | | (2,306) |
| subsidiaries | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Exercise of option granted to minority | | (582) | | - | | - |
| (Note 7(2)) | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Loans granted, net | | (5,862) | | (2,609) | | (2,627) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Restricted bank deposits, net | | (12,735) | | 9,788 | | (13,492) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Purchase of land held as investment | | - | | (5,744) | | (12,474) |
| property | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Purchases of furniture and equipment | | (74) | | (131) | | (62) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
| Net cash used in investing activities | | (29,580) | | 2,197 | | (34,029) |
+-----------------------------------------------------------+-+----------+--+----------+--+----------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENTS
Euro in thousands
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | Year ended December 31, |
+-----------------------------------------------+-+-----------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Cash flows from financing activities: | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Short-term loans, net | | 2,995 | | 7,076 | | (726) |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Issue of share capital, net of | | - | | 47,619 | | 12,087 |
| issue costs | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Dividends paid to minority | | - | | (457) | | - |
| interest | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Issue of debentures, net of | | 24,402 | | 38,376 | | 9,809 |
| issue costs (Note 12d.3) | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Repayments of debentures | | (18,025) | | (5,552) | | - |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Receipt of long-term loans | | 32,363 | | 51,600 | | 33,216 |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Repayments of long-term loans | | (14,584) | | (42,186) | | (12,072) |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Dividend paid (Note 16) | | (10,995) | | (4,037) | | - |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Exercise of options | | 72 | | - | | - |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Purchase of treasury shares | | (527) | | - | | - |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Net cash provided by financing | | 15,701 | | 92,439 | | 42,314 |
| activities | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Effect of exchange rate changes on | | (1,185) | | (2,647) | | 11 |
| cash and cash equivalents | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Increase (decrease) in cash and cash | | (48,849) | | 65,394 | | (1,991) |
| equivalents | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Cash and cash equivalents at | | 70,905 | | 5,511 | | 7,502 |
| beginning of year | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
| Cash and cash equivalents at end of | | 22,056 | | 70,905 | | 5,511 |
| year | | | | | | |
+-----------------------------------------------+-+-----------+--+-----------+--+-----------+
Supplementary information on investing and financing activities not involving
cash flows:
1. As of December 31, 2008, subsidiaries had current liabilities of EUR 83, in
respect of a dividend, which had been declared but had not yet been paid to the
minority interests (2007 - EUR 119, 2006 - EUR 12).
2. Acquisition of minority interest in subsidiary through investment in
equity of the subsidiary (dilution of minority interest).
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENTS
Euro in thousands
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | Year ended December 31, |
+--------+----------------------------------------------+-+--------------------------------------+
| | | | 2008 | | 2007 | | 2006 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| (a) | Acquisition of subsidiaries, net of cash | | | | | | |
| | acquired | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Assets and liabilities at date of | | | | | | |
| | acquisition: | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Working capital (excluding | | 3,713 | | (1,277) | | (1,080) |
| | cash and cash equivalents) | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Land | | - | | - | | (1,202) |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment property | | (33,568) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term liabilities | | - | | - | | 161 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term receivables | | - | | - | | 1,034 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Minority interests | | - | | - | | (4) |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | (29,855) | | (1,277) | | (1,091) |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| (b) | Proceeds from disposal of interest in | | | | | | |
| | subsidiary | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Assets and liabilities at date of | | | | | | |
| | sale: | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Working capital (excluding | | - | | 14,102 | | 12,601 |
| | cash and cash equivalents) | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment | | - | | - | | 6,503 |
| | properties | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term receivables | | - | | (15,030) | | (11,014) |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Fixed assets | | - | | - | | 5 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Goodwill | | - | | 121 | | 70 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term liabilities | | - | | (657) | | (9,501) |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Minority interest | | - | | (161) | | 32 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment in associate | | - | | - | | 947 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Currency translation | | - | | 110 | | - |
| | adjustment | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Gain on disposal | | - | | 1,443 | | 3,096 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | - | | (72) | | 2,739 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| (c) | Deconsolidation of proportionately | | | | | | |
| | consolidated company | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Assets and liabilities at | | | | | | |
| | date of deconsolidation | | | | | | |
| | (see Note 8e): | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Working capital (excluding | | 49,336 | | - | | - |
| | cash and cash equivalents) | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Furniture and equipment | | 26 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment property | | 10,515 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Goodwill | | 1,085 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Deferred taxes | | (1,900) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term receivables | | (11,848) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term liabilities | | (39,205) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment in associate | | (12,633) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | (4,624) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED CASH FLOWS STATEMENTS
Euro in thousands
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | Year ended December 31, |
+--------+----------------------------------------------+-+--------------------------------------+
| | | | 2008 | | 2007 | | 2006 |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| (d) | Initially proportionately | | | | | | |
| | consolidated company (former | | | | | | |
| | subsidiary) | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Assets and liabilities at date of | | | | | | |
| | sale: | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Working capital (excluding | | (2,227) | | - | | - |
| | cash and cash equivalents) | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Investment properties | | 26,812 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term receivables | | (6,113) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Long-term liabilities | | 5,026 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Deferred taxes | | (207) | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Currency translation | | (407) | | - | | - |
| | adjustment | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | Gain on disposal | | 1,268 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | | |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
| | | | 24,152 | | - | | - |
+--------+----------------------------------------------+-+----------+--+----------+--+----------+
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE 1:- GENERAL
a. Corporation information:
The consolidated financial statements of Nanette Real Estate Group N.V. ("the
Company") for the year ended December 31, 2008, were authorized for issue in
accordance with a resolution of the directors on March 30, 2009.
The Company is a limited liability company incorporated and domiciled in the
Netherlands. The address of its registered office is Rapenburgerstraat 204, 1011
Mn Amsterdam, the Netherlands. The Company's shares are publicly traded on the
AIM in London. In addition, the Company has debentures outstanding which are
registered for trading on the Tel-Aviv Stock Exchange.
The Company and its investee companies ("the Group") are engaged in the
development, construction and sale of real estate housing projects in Hungary,
Poland, Romania, Croatia and Ukraine (see Note 25, for information on the
Group's operating segments).
Regarding the reorganization of the Company's operations in Poland in April
2008, see Note 8e.
b. Impact of financial market crisis:
The ongoing crisis in the financial markets and the related worldwide recession
could have an impact on property markets and property prices although its
effects have not been uniform across all markets. As the global recession takes
hold, its impacts on the various European and Global property markets will vary
depending on many factors. These will include the size of the underlying
markets, the extent of excessive capital growth in the past, diversification of
tenant mix, general shape of the overall economy, reliance on the credit markets
and investor mentality. These global factors contribute to instability and
inactivity in real estate markets and could possibly have future negative
consequences for the value of real estate assets and the results of the Company
due to: declines in selling prices of residential units; write downs of
inventories of land and housing units; potential increases of real estate yields
and therefore decreases in value of investment properties; impairment of
investments in associated companies and other assets.
The Company works in partnership with Lehman Brothers Real Estate Partners,
("LBREP") a series of distinct and segregated private equity funds, funded by
multiple partners and not part of the Chapter 11 proceedings affecting Lehman
Brothers. As of the date the financial statements were approved, all LBREP's
funding obligations to the joint projects have been met.
The Company believes that its current resources and the funds to be generated
from its operations will be sufficient to repay its obligations as they come due
in the coming year.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation:
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS(, on the historical cost
basis, except for investment properties and derivative financial instruments
that have been measured at fair value. The consolidated financial statements are
presented in Euro and values are rounded to the nearest thousand (EUR000), except
when otherwise indicated.
b. Basis of consolidation:
1. The consolidated financial statements comprise the financial statements of
the Company and its subsidiaries as at December 31 each year. The financial
statements of subsidiaries, jointly controlled entities and associates are
prepared for the same reporting year as the parent company, using consistent
accounting policies.
2. Subsidiaries are entities over which the Group has control. Subsidiaries
are fully consolidated from the date on which the Group obtains control (see
also l. below) and they continue to be consolidated until the date that control
ceases.
All intercompany balances and transactions between Group companies included in
the consolidated financial statements have been eliminated.
3. Minority interests represent the portion of profit or loss and net assets
that is not held by the Group and are presented separately in the consolidated
income statement and within equity in the consolidated balance sheet, separately
form parent shareholders' equity. Sales to minority interests result in a gain
or loss that is recognized in the income statement. Acquisition of minority
shares at a cost which exceeds the carrying amount of the acquired net assets
results in goodwill.
4. The Group's interests in jointly controlled entities are accounted for by
proportionate consolidation. The Group combines its share of the joint ventures'
individual income and expenses, assets and liabilities and cash flows on a
line-by-line basis with similar items in the Group's financial statements.
c. Changes in accounting policy and disclosures:
The accounting policies adopted are consistent with those of the previous
financial year except as follows:
The Group has adopted the following new IFRIC interpretation as of January 1,
2008:
IFRIC 11/IFRS2 - Group and Treasury Share Transactions
The Group has adopted IFRIC Interpretation 11 insofar as it applies to
consolidated financial statements. This interpretation requires arrangements
whereby an employee is granted rights to an entity's equity instruments to be
accounted for as an equity-settled scheme, even if the entity buys the
instruments from another party, or the shareholders provide the equity
instruments needed. The Group amended its accounting policy accordingly.
Adoption of this interpretation did not have any effect on the financial
performance or position of the Group.
d. Significant estimates and assumptions:
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
Investment properties
Investment properties are presented at fair value as at the balance sheet date.
Any changes in the fair value are included in the income statement. Fair value
is determined by independent real estate valuation experts in accordance with
recognised valuation techniques. The fair values are determined based on recent
real estate transactions with similar characteristics and location to those of
the Company's assets. See additional information in Note 7.
Certain market conditions prevalent at the valuation date, such as reduced
liquidity available to purchasers, coupled with an increase in the cost of
financing, a scarcity of comparable transactions in certain countries, and an
overall lack of market place activity, significantly increases subjectivity of
the valuation process.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the value in use of the cash generating units to
which the goodwill is allocated. Estimating the value in use requires the Group
to make key assumptions in respect of the expected future cash flows from the
cash-generating unit and an appropriate discount rate in order to calculate the
present values of those cash flows. See additional information in Note 11.
Fair value of financial instruments
Where the fair value of financial assets and financial liabilities recorded in
the balance sheet cannot be derived from active markets, they are determined
using valuation techniques including the discounted cash flows model. The inputs
to these models are taken from observable markets where possible, but where this
is not feasible, a degree of judgment is required in establishing fair values.
The judgments include considerations of inputs such as liquidity risk, credit
risk and volatility. Changes in assumptions about these factors could affect the
reported fair value of financial instruments.
e. Functional currency:
Items included in the financial statements of each of the Group entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). Until December 31, 2007, the
functional currency of the Company was the U.S. dollar. At the end of 2007, the
Company re-evaluated the factors used in determining its functional currency,
including the currency in which the Company's revenues and its costs are
denominated and settled. Based on this revaluation, the Company concluded that
the Euro better reflects the primary economic environment in which the Company
is now operating, and therefore, the Euro is the Company's functional currency
commencing in 2008. In accordance with IAS 21, The Effects of Change in Foreign
Exchange Rates, the change in functional currency from the U.S. dollar to the
Euro was accounted for prospectively.
Foreign currency transactions are translated into the functional currency using
exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the income statement.
f. Presentation currency:
The consolidated financial statements are presented in Euro.
The results and financial position of all the Group entities (none of which has
the currency of a hyperinflationary economy) that have a different functional
currency from the presentation currency are translated into the presentation
currency as follows:
a) Assets and liabilities for each balance sheet presented are translated at
the closing rate at that balance sheet date;
b) Income and expenses for each income statement are translated at weighted
average exchange rates; and
c) All resulting exchange differences are recognized as a separate component
of equity.
When an entity is disposed of, such exchange differences are recognized in the
income statement as part of the gain or loss on sale.
g. Cash and cash equivalents:
Cash equivalents include cash in hand and deposits with banks and other
short-term highly liquid investments with original maturities of three months or
less.
h. Furniture and equipment:
Furniture and equipment are stated at cost, less accumulated depreciation and
accumulated impairment losses. These assets are depreciated by the straight-line
method over their estimated useful life (mainly three years).
i.Investment in associates:
The Group's investment in associates is accounted for using the equity method of
accounting. An associate is an entity in which the Group has significant
influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the
balance sheet at cost plus post acquisition changes in the Group's share of net
assets of the associate. Goodwill relating to the associate is included in the
carrying amount of the investment and is not amortized. The statement of income
reflects the share of the results of operations of the associate. Where there
has been a change recognized directly in the equity of the associate, the Group
recognizes its share of any changes and discloses this, when applicable, in the
statement of changes in equity. Profits and losses resulting from transactions
between the Group and the associate are eliminated to the extent of the interest
in the associate.
The financial statements of the associate are prepared for the same reporting
period as the parent company. Where necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
j. Impairment of associates:
After application of the equity method, the Group determines whether it is
necessary to recognize an additional impairment loss of the Group's investment
in its associates. The Group determines at each balance sheet date whether there
is any objective evidence that the investment in an associate is impaired. If
this is the case, the Group calculates the amount of impairment as being the
difference between the recoverable amount of the associate and the carrying
amount of the investment and recognizes the amount in the statement of income.
k. Impairment of non-financial assets:
The Group assesses at each reporting date whether events or changes in
circumstances indicate that an asset may be impaired. An impairment loss is
recognized if the amount by which an asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and its value in use. In assessing value in use, the
estimated future cash flows are discounted using a pre-tax discount rate that
reflects current market assessments specific to the asset. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
l. Business combinations and goodwill:
Business combinations are accounted for using the purchase method.
The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date
irrespective of the extent of any minority interest.
When the Group acquires a business, embedded derivatives separated from the host
contract by the acquiree are not reassessed on acquisition unless the business
combination results in a change in the terms of the contract that significantly
modifies the cash flows that would otherwise be required under the contract.
In a business combination achieved in stages, the increase in the fair value of
the identifiable net assets relating to the interest held prior to the business
combination is recognized as an asset revaluation surplus in equity.
Goodwill is initially measured at cost being the excess of the cost of the
business combination over the Group's share in the net fair value of the
acquiree's identifiable assets, liabilities and contingent liabilities.
Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
The Group assesses whether there are any indicators that goodwill is impaired at
each reporting date. Goodwill is tested for impairment, annually and when
circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of the
cash-generating units, to which the goodwill relates. Where the recoverable
amount of the cash-generating units is less than their carrying amount an
impairment loss is recognized. Impairment losses relating to goodwill cannot be
reversed in future periods. The Group performs its annual impairment test of
goodwill in the last quarter of the year.
m. Inventories:
Inventories of housing units under construction are stated at the lower of cost
and net realizable value. The cost of inventories includes the cost of the land,
construction costs and capitalized borrowing costs.
The Company measures its operating cycle based on the average construction time
of the construction projects. The operating cycle for purposes of classification
of inventories is two to three years.
n. Investment properties:
Investment properties are measured initially at cost, including transaction
costs. The carrying amount includes the cost of replacing part of an existing
investment property at the time that cost is incurred if the recognition
criteria are met; and excludes the costs of day to day servicing of an
investment property. Subsequent to initial recognition, investment properties
are stated at fair value, which reflects market conditions at the balance sheet
date. Gains or losses arising from changes in the fair values of investment
properties are included in the income statement in the year in which they
arise.
Investment properties are derecognized when either they have been
disposed of or when the investment property is permanently withdrawn from use
and no future economic benefit is expected from its disposal. Any gains or
losses on the retirement or disposal of an investment property are recognized in
the income statement in the year of retirement or disposal.
o. Derecognition of financial assets and liabilities:
Financial assets
A financial asset is derecognised when:
* the rights to receive cash flows from the asset have expired;
* the Group retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third
party under a pass through arrangement; and
* the Group has transferred its rights to receive cash flows from the asset and
either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
Where the Group has transferred its rights to receive cash flows from the asset
and has neither transferred nor retained substantially all the risks and rewards
of the asset, but retains control, the asset is recognised to the extent of the
Group's continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee over the transferred asset is measured at the lower of
the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
Where continuing involvement takes the form of a written and/or purchased option
on the transferred asset, the extent of the Group's continuing involvement is
the amount of the transferred asset that the Group may repurchase, except that
in the case of a written put option on an asset measured at fair value, the
extent of the Group's continuing involvement is limited to the lower of the fair
value of the transferred asset and the option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is recognised in the
income statement.
p. Interest-bearing loans and borrowings:
All loans and borrowings are initially recognized at the fair value of the
consideration received less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses
are recognized in the income statement when the liabilities are derecognized as
well as through the amortization process.
q. Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of these assets, until such time as the assets are
substantially ready for their intended use or sale.
Borrowing costs include exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to interest
costs.
r. Loans and receivables:
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
Loans and receivables are recognized initially at fair value and subsequently
measured at amortized cost less any allowance for impairment. An allowance for
impairment is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of loans
and receivables.
s. Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net amount
reported in the consolidated balance sheet if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an
intention to settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
t. Fair value of financial instruments:
The fair value of financial instruments that are actively traded in organized
financial markets is determined by reference to quoted market bid prices at the
close of business on the balance sheet date. For financial instruments where
there is no active market, fair value is determined using valuation techniques.
Such techniques may include using recent arm's length market transactions;
reference to the current fair value of another instrument that is substantially
the same; discounted cash flow analysis or other valuation models.
u. Amortized cost of financial instruments:
Amortized cost is computed using the effective interest method less any
allowance for impairment and principal repayment or reduction. The calculation
takes into account any premium or discount on acquisition and includes
transaction costs and fees that are an integral part of the effective interest
rate.
v. Impairment of financial assets:
The Group assesses at each balance sheet date whether there is any objective
evidence that a financial asset or a group of financial assets is impaired. A
financial asset or a group of financial assets is deemed to be impaired if, and
only if, there is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset (an incurred
'loss event') and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that the
debtors or a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that
they will enter bankruptcy or other financial reorganization and where
observable data indicate that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that
correlate with defaults.
w. Income tax:
Current income tax
Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date.
Deferred income tax
Deferred income tax is provided using the liability method on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. However, if the deferred
income tax arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the
transaction affects neither the accounting nor taxable profit, it is not
accounted for.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realized, or the deferred
income tax liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that
future taxable profit will be available against which carryforward losses and
deductible temporary differences can be utilized.
Deferred income tax liabilities are not recognized for taxable temporary
differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset only if they relate
to the same taxable entity and that entity has a legally enforceable right to
offset those assets against the liabilities.
x. Revenue recognition:
1.Sale of housing units:
Revenue from sales of housing units is recognized when the significant risks and
rewards of ownership have been passed to the buyer, it is probable that the
economic benefits associated with the transaction will flow to the Group and
provided that the Group has no further substantial obligations under the
contract.
The significant risks and rewards are considered to be transferred to the buyer
when the housing units have been constructed, accepted by the customer and the
consideration was paid by the buyer. Until such time, any unsold or uncompleted
residential units are accounted for under inventories.
2. Interest income:
Interest income is recognized as interest accrues using the effective interest
method.
y. Treasury shares:
Own equity instruments which are reacquired (treasury shares) are recognised at
cost and are presented in the balance sheet as a deduction from shareholders'
equity. No gain or loss is recognized in the income statement on the sales,
issuance, or cancellation of treasury shares.
Consideration received is presented in the financial statements as a change in
shareholders' equity.
Shares of the parent company purchased by subsidiaries are accounted for as
treasury shares.
z. Share-based payment transactions:
The Company applies the provisions of IFRS 2, Share-Based Payment. IFRS 2
requires an expense to be recognized where the Group buys goods or services in
exchange for shares or rights over shares ("equity-settled transactions"), or in
exchange for other assets equivalent in value to a given number of shares of
rights over shares ("cash-settled transactions"). The main impact of IFRS 2 on
the Group is the expensing of employees' and directors' share options
(equity-settled transactions).
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date on which they are granted. The fair value is
determined by using the Black-Scholes option-pricing model taking into account
the terms and conditions upon which the instruments were granted. The fair
values of Ordinary shares for the purpose of calculating the fair values of
options and warrants were determined by management based on a number of factors,
including external valuations.
The cost of equity-settled transactions is recognized, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award ("the vesting date"). The
cumulative expense recognized for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has
expired and the Company's best estimate of the number of equity instruments that
will ultimately vest.
aa. Derivative financial instruments:
The Group uses derivative financial instruments such as interest rate swaps.
Such derivative financial instruments are initially recognized at fair value on
the date on which a derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as assets when the fair value
is positive and as liabilities when the fair value is negative. Any gains or
losses arising from changes in fair value on derivatives are taken directly to
profit or loss.
The fair value of interest rate swap contracts is
determined by reference to market values for similar instruments.
The
Group considers whether a contract contains an embedded derivative when the
entity first becomes a party to it. The embedded derivatives are separated from
the host contract, which is not measured at fair value through profit or loss,
when the analysis shows that the economic characteristics and risks of embedded
derivatives are not closely related to those of the host contract. Embedded
derivatives are recognized at fair value when any change in fair value is taken
directly to profit or loss.
bb. Standards issued but not yet effective:
IFRS 3R Business Combinations and IAS 27R Consolidated and Separate Financial
Statements
The revised standards were issued in January 2008 and become effective for
financial years beginning on or after July 1, 2009. IFRS 3R introduces a number
of changes in the accounting for business combinations occurring after this date
that will impact the amount of goodwill recognized, the reported results in the
period that an acquisition occurs, and future reported results. IAS 27R requires
that a change in the ownership interest of a subsidiary (without loss of
control) is accounted for as an equity transaction. Therefore, such transactions
will no longer give rise to goodwill, nor will it give rise to a gain or loss.
Furthermore, the amended standard changes the accounting for losses incurred by
the subsidiary as well as the loss of control of a subsidiary. Other
consequential amendments were made to IAS 7 Statement of Cash Flows, IAS 12
Income Taxes, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 2
Investment in Associates and IAS 31 Interests in Joint Ventures. The changes by
IFRS 3R and IAS 27R will affect future acquisitions or loss of control and
transactions with minority interests. The standards may be early applied.
However, the Group does not intend to take advantage of this possibility.
IAS 1 Revised Presentation of Financial Statements
The revised Standard was issued in September 2007 and becomes effective for
financial years beginning on or after January 1, 2009. The Standard separates
owner and non-owner changes in equity. The statement of changes in equity will
include only details of transactions with owners, with non-owner changes in
equity presented as a single line. In addition, the Standard introduces the
statement of comprehensive income: it presents all items of recognized income
and expense, either in one single statement, or in two linked statements. The
Group is still evaluating whether it will have one or two statements.
IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
statements - Puttable Financial Instruments and Obligations Arising on
liquidation
These amendments to IAS 32 and IAS 1 were issued in February 2008 and become
effective for financial years beginning on or after January 1, 2009. The
revisions provide limited scope exception for puttable instruments to be
classified as equity if they fulfill a number of specified features. The
amendment to the standards will have no impact on the financial position or
performance of the Group, as the Group has not issued such instruments.
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged
Items
These amendments to IAS 39 were issued in August 2008 and become effective for
financial years beginning on or after July 1, 2009. The amendment addresses the
designation of a one-sided risk in a hedged item, and the designation of
inflation as a hedged risk or portion in particular situations. It clarifies
that an entity is permitted to designate a portion of the fair value changes or
cash flow variability of a financial instrument as hedged item. The Group has
concluded that the amendment will have no impact on the financial position or
performance of the Group, as the Group has not entered into any such hedges.
Improvements to IFRSs
The Group has not yet adopted the following amendments and anticipates that
these changes will have no material effect on the financial statements.
1. IFRS 7 Financial Instruments: Disclosures:
Removal of the reference to "total interest income" as a component of finance
costs.
2. IAS 8 Accounting Policies, Change in Accounting Estimates and Errors:
Clarification that only implementation guidance that is an integral part of an
IFRS is mandatory when selecting accounting policies.
3. IAS 10 Events after the Reporting Period:
Clarification that dividends declared after the end of the reporting period are
not obligations.
4. IAS 16 Property, Plant and Equipment:
Items of property, plant and equipment held for rental that are routinely sold
in the ordinary course of business after rental, are transferred to inventory
when rental ceases and they are held for sale.
5. IAS 18 Revenues:
Replacement of the term "direct costs" with "transaction costs" as defined in
IAS 39.
6. IAS 19 Employee Benefits:
Revised the definition of "past service costs" return on plan assets" and
"short-term" and "other long-term" employee benefits. Amendments to plans that
result in a reduction in benefits related to future services are accounted for
as curtailment. Deleted the reference to the recognition of contingent
liabilities to ensure consistency with IAS 37.
7. IAS 20 Accounting for Government Grants and Disclosures of Government
Assistance:
Loans granted in the future with no or low interest rates will not be exempt
from the requirement to impute interest. The difference between the amount
received and the discounted amount is accounted for as government grant. Also,
revised various terms used to be consistent with other IFRS.
8. IAS 27 Consolidated and Separate Financial Statements:
When a parent entity accounts for a subsidiary at fair value in accordance with
IAS 39 in its separate financial statements, this treatment continues when the
subsidiary is subsequently classified as held for sale.
9. IAS 29 Financial Reporting in Hyperinflationary Economies:
Revised the reference to the exception to measure assets and liabilities at
historical cost, such that it notes property, plant and equipment as being an
example, rather than implying that it is a definitive list. Also, revised
various terms used to be consistent with other IFRS.
10. IAS 34 Interim Reporting:
Earnings per share are disclosed in interim financial reports if an entity is
within the scope of IAS 33.
11. IAS 39 Financial Instruments: Recognition and Measurement:
Changes in circumstances relating to derivatives are not reclassifications and
therefore may be either removed from, or included in, the "fair value through
profit or loss" classification after initial recognition. Removed the reference
in IAS 39 to a "segment" when determining whether an instrument qualifies as a
hedge. Requires the use of the revised effective interest rate when remeasuring
a debt instrument on the cessation of fair value hedge accounting.
12. IAS 40 Investment Property:
Revision of the scope such that property under construction or development for
future use as an investment property is classified as investment property. If
fair value can not be reliably determined, the investment under construction
will be measured at cost until such time as fair value can be determined or
construction is complete. Also, revised the conditions for a voluntary change in
accounting policy to be consistent with IAS 8 and clarified that the carrying
amount of investment property held under lease is the valuation obtained
increased by any recognized liability.
IFRIC 15 Agreement for the Construction of Real Estate
IFRIC 15 was issued in July 2008 and becomes effective for financial years
beginning on or after January 1, 2009. The interpretation is to be applied
retrospectively. It clarifies when and how revenue and related expenses from the
sale of a real estate unit should be recognized if an agreement between a
developer and a buyer is reached before the construction of the real estate is
completed. Furthermore, the interpretation provides guidance on how to determine
whether an agreement is within the scope of IAS 11 or IAS 18. The Group has
concluded that the interpretation will have no impact on the consolidated
financial statements as the Group already applies the guidance.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 16 was issued in July 2008 and becomes effective for financial years
beginning on or after October 1, 2008. The interpretation is to be applied
prospectively. IFRIC 16 provides guidance on the accounting for a hedge of a net
investment. As such it provides guidance on identifying the foreign currency
risks that qualify for hedge of a net investment, where within the Group the
hedging instruments can be held in the hedge of a net investment and how an
entity should determine the amount of foreign currency gain or loss, relating to
both the net investment and the hedging instrument, to be recycled on disposal
of the net investment. The Group is currently assessing which accounting policy
to adopt for the recycling on disposal of the net investment.
NOTE 3:-CASH AND CASH EQUIVALENTS
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | December 31, |
+-------------------------------------+--+-----------+--+--------------------------+
| | | | | 2008 | | 2007 |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | | | |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| Cash at banks and | | | | 6,825 | | 37,650 |
| in-hand | | | | | | |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| Short-term deposits | | | | 15,231 | | 33,255 |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | | | |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | 22,056 | | 70,905 |
+-------------------------------------+--+-----------+--+-----------+--+-----------+
The short-term deposits may be classified by currency, linkage terms and
interest rates, as follows:
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | Weighted | | |
| | | average | | |
| | | effective | | |
| | | interest | | |
+------------------------------------+--+-------------+--+--------------------------+
| | | December | | December 31, |
| | | 31, | | |
+------------------------------------+--+-------------+--+--------------------------+
| | | 2008 | | 2008 | | 2007 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | % | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| U.S. dollars | | - | | - | | 1,482 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| Euro | | 3.79 | | 6,502 | | 10,429 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| Polish Zloty | | 6.84 | | 8,317 | | 21,344 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| Ron | | 12.00 | | 412 | | - |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | 15,231 | | 33,255 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
NOTE 4:- DEPOSITS
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | Weighted | | |
| | | average | | |
| | | effective | | |
| | | interest | | |
+------------------------------------+--+-------------+--+--------------------------+
| | | December | | December 31, |
| | | 31, | | |
+------------------------------------+--+-------------+--+--------------------------+
| | | 2008 | | 2008 | | 2007 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | % | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| In Euro (1) | | 1.6 | | 1,605 | | 441 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| In Hungarian Forint (2) | | 10.61 | | 21,052 | | 9,985 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| In Polish Zloty | | | | - | | 4,625 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-------------+--+-----------+--+-----------+
| | | | | 22,657 | | 15,051 |
+------------------------------------+--+-------------+--+-----------+--+-----------+
(1) The deposit is pledged to secure a cross currency swap (see Note 19(2)).
Interest in respect of these deposits for the year ended December 31, 2008 is
1.6%.
(2) The deposits are pledged to secure credit facilities granted to the Group
and construction cost financing of the Group. Interest in respect of these
deposits for the year ended December 31, 2008 is based on BUBOR per month with a
margin of 0.5%-0.65%. The rate of the BUBOR as of December 31, 2008 is 10%.
NOTE 5:- TRADE AND OTHER RECEIVABLES
+------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | December 31, |
+------------------------------------+--+-----------+--+--------------------------+
| | | | | 2008 | | 2007 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Trade receivables | | | | 276 | | 1,537 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Prepaid expenses | | | | 368 | | 745 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Related parties (Note | | | | 898 | | - |
| 24b) | | | | | | |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Government authorities | | | | 5,356 | | 8,337 |
| (principally VAT) | | | | | | |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Payment on account of | | | | - | | 1,750 |
| purchase of land | | | | | | |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Advances to suppliers | | | | 354 | | 818 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| Other | | | | 99 | | 149 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | | | |
+------------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | 7,351 | | 13,336 |
+------------------------------------+--+-----------+--+-----------+--+-----------+
NOTE 6:- INVENTORY OF LAND AND HOUSING UNITS
+-------------------------------+--+-----------+--+-----------+--+-----------+
| | | | | December 31, |
+-------------------------------+--+-----------+--+--------------------------+
| | | | | 2008 | | 2007 |
+-------------------------------+--+-----------+--+-----------+--+-----------+
a. Composition:
+--------------------------------+--+-----------+--+-----------+--+------------+
| | | | | | | |
+--------------------------------+--+-----------+--+-----------+--+------------+
| Land and | | | | 64,628 | | 97,756 |
| construction costs | | | | | | |
+--------------------------------+--+-----------+--+-----------+--+------------+
| Capitalized | | | | 2,832 | | 4,746 |
| borrowing costs | | | | | | |
+--------------------------------+--+-----------+--+-----------+--+------------+
| | | | | | | |
+--------------------------------+--+-----------+--+-----------+--+------------+
| | | | | 67,460 | | 102,502 |
+--------------------------------+--+-----------+--+-----------+--+------------+
b. Presentation:
+-------------------------------+--+-----------+--+-----------+--+------------+
| | | | | | | |
+-------------------------------+--+-----------+--+-----------+--+------------+
| Current | | | | 24,330 | | 85,868 |
+-------------------------------+--+-----------+--+-----------+--+------------+
| Non-current (*) | | | | 43,130 | | 16,634 |
+-------------------------------+--+-----------+--+-----------+--+------------+
| | | | | | | |
+-------------------------------+--+-----------+--+-----------+--+------------+
| | | | | 67,460 | | 102,502 |
+-------------------------------+--+-----------+--+-----------+--+------------+
(*) Land on which construction is not intended to begin before the end of the
Company's current operating cycle.
c. The movement during the year:
+------------------------------------------+--+-------------+--+-------------+
| | | December 31, |
+------------------------------------------+--+------------------------------+
| | | 2008 | | 2007 |
+------------------------------------------+--+-------------+--+-------------+
| | | | | |
+------------------------------------------+--+-------------+--+-------------+
| Opening balance at January 1, | | 102,502 | | 76,573 |
+------------------------------------------+--+-------------+--+-------------+
| Additional costs incurred during the | | 52,765 | | 70,734 |
| year | | | | |
+------------------------------------------+--+-------------+--+-------------+
| Disposal of subsidiaries | | (63,067) | | (27,330) |
| (Note 8e) | | | | |
+------------------------------------------+--+-------------+--+-------------+
| Acquisition of subsidiaries | | - | | 5,533 |
+------------------------------------------+--+-------------+--+-------------+
| Transfer to the income | | (20,921) | | (25,936) |
| statement upon disposal | | | | |
+------------------------------------------+--+-------------+--+-------------+
| Currency translation | | (3,819) | | 2,928 |
| differences | | | | |
+------------------------------------------+--+-------------+--+-------------+
| | | | | |
+------------------------------------------+--+-------------+--+-------------+
| Closing balance at December | | 67,460 | | 102,502 |
| 31, | | | | |
+------------------------------------------+--+-------------+--+-------------+
d. The main projects included in the inventories are as follows:
+---------+--+-------------------+--+----------+--+----------------------------+
|Country | | Project | | Costs | | Details |
+---------+--+-------------------+--+----------+--+----------------------------+
| | | | | | | |
+---------+--+-------------------+--+----------+--+----------------------------+
| Hungry | | Paty Plot | | 17,308 | | Residential project in |
| | | | | | | Budapest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Hungary | | Real prop | | 4,083 | | Residential project in |
| | | | | | | Budapest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Hungary | | Foodex | | 3,183 | | Residential project in |
| | | | | | | Budapest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Hungary | | Thokoly | | 8,158 | | Residential project in |
| | | | | | | Budapest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Romania | | Nanette City Gate | | 4,236 | | Residential project in |
| | | | | | | Timisoara |
+---------+--+-------------------+--+----------+--+----------------------------+
| Romania | | Nanette Bucharest | | 4,110 | | Residential project in |
| | | | | | | Bucharest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Romania | | Savinesti | | 4,416 | | Residential project in |
| | | | | | | Bucharest |
+---------+--+-------------------+--+----------+--+----------------------------+
| Romania | | Nanette Heights | | 1,284 | | Residential project in |
| | | | | | | Timisoara |
+---------+--+-------------------+--+----------+--+----------------------------+
| Poland | | Gilianki | | 4,246 | | Residential project in |
| | | | | | | Warsaw |
+---------+--+-------------------+--+----------+--+----------------------------+
| Croatia | | Nanette Borovje | | 13,365 | | Residential project in |
| | | | | | | Zagreb |
+---------+--+-------------------+--+----------+--+----------------------------+
As of December 31, 2008, advances from customers amounted to EUR 9,484 (2007 - EUR
22,194). The advances are presented as short-term, since they will be utilized
during the Company's operating cycle.
e. As for pledges, see Note 15b.
NOTE 7:- INVESTMENT PROPERTY
+------------------------------------------------+--+-------------+--+------------+
| | | December 31, |
+------------------------------------------------+--+-----------------------------+
| | | 2008 | | 2007 |
+------------------------------------------------+--+-------------+--+------------+
| | | | | |
+------------------------------------------------+--+-------------+--+------------+
| Opening balance at January 1, | | 18,402 | | 6,749 |
+------------------------------------------------+--+-------------+--+------------+
| Additions: | | | | |
+------------------------------------------------+--+-------------+--+------------+
| Land and other costs (2) | | 33,568 | | 5,744 |
+------------------------------------------------+--+-------------+--+------------+
| Decrease in the Group's share in | | (26,812) | | - |
| proportionately consolidated entity | | | | |
| (2) | | | | |
+------------------------------------------------+--+-------------+--+------------+
| Fair value adjustment | | 1,969 | | 5,122 |
+------------------------------------------------+--+-------------+--+------------+
| Currency translation differences | | 424 | | 787 |
+------------------------------------------------+--+-------------+--+------------+
| Deconsolidation of proportionately | | (10,515) | | - |
| consolidated company (Note 8e) | | | | |
+------------------------------------------------+--+-------------+--+------------+
| | | | | |
+------------------------------------------------+--+-------------+--+------------+
| Closing balance at December 31, | | 17,036 | | 18,402 |
+------------------------------------------------+--+-------------+--+------------+
(1) The balance as of December 31, 2008 is comprised of two properties
(primarily vacant land) located in Budapest, Hungary. Investment properties are
stated at fair value, which has been determined based on valuations preformed by
King Sturge Ltd., an independent external valuator who has expertise in valuing
these types of properties.
In determining the fair value of the investment properties, the valuator relied
on comparable arm's length market transactions for similar properties.
(2) In April 2008, the Company acquired 90% of the issued and outstanding
share capital, including loans, of Taltoring, for a consideration of
approximately EUR 30,000. Taltoring is a Hungarian company, which owns a 153,000
sq.m. plot of land in Budapest, Hungary. The Company also signed an agreement
with the municipality, the owner of the remaining 10% interest in Taltoring,
according to which the municipality has an option (put) to sell to the Company
its entire interest in Taltoring upon the approval of a new zoning plan for the
plot, for a consideration of approximately EUR 2,200. The agreement also provides
the Company with a (call) option to buy the municipality's interest at the same
price. The put option may be exercised at any time during a three-year period
beginning upon the completion of the first stage of the change in zoning. The
call option may be exercised at any time during the period ending in April 2011.
The Company recorded a liability for the full amount of the consideration of EUR
2,200.
In June 2008, the Company signed an agreement to sell to AI Property Holdings LP
(Hungary) 50% of its interest (90%) in Taltoring (including the put/call options
discussed above) for a consideration of EUR 16,950, of which EUR 12,000 is for
outstanding loans and the balance is for the shares. The sale was subject to a
right of first refusal by the municipality. In July 2008, the municipality
notified the Company that it did not intend to exercise its right of first
refusal.
Following this transaction, the Company assigned its share (45%) in the issued
and outstanding share capital of Taltoring and shareholders loans (including its
share in the call option) to a wholly-owned subsidiary, EDR Construction Brasov
B.V. ("EDR").
During the second quarter of 2008, following the above transaction, the Company
signed an agreement to sell to Rothschild Group Unit E&R Real Estate 45% of its
interest in EDR for EUR 7,500, of which EUR 7,160 is for outstanding loans and the
balance is for the shares.
In the third quarter of 2008, the above sales were completed and in the fourth
quarter the option discussed above was exercised by the Municipality, the
Company presently owns, indirectly through a jointly-controlled company, 27.5%
of Taltoring. As a result of the sales, the Company recorded a gain of EUR 1,200.
NOTE 8:- INVESTMENT IN ASSOCIATES
a. Composition:
+------------------------------------------+--+------------+--+------------+
| | | December 31, |
+------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+------------------------------------------+--+------------+--+------------+
| | | | | |
+------------------------------------------+--+------------+--+------------+
| Investment in associates | | 11,101 | | - |
+------------------------------------------+--+------------+--+------------+
| Loans to associates (f) | | 41,013 | | - |
+------------------------------------------+--+------------+--+------------+
| | | | | |
+------------------------------------------+--+------------+--+------------+
| | | 52,114 | | - |
+------------------------------------------+--+------------+--+------------+
b. Share in the associates' balance sheets:
+-------------------------------------------+--+------------+--+------------+
| | | December 31, |
+-------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| Current assets | | 67,281 | | - |
+-------------------------------------------+--+------------+--+------------+
| Non-current assets | | 38,568 | | - |
+-------------------------------------------+--+------------+--+------------+
| Current liabilities | | (18,774) | | - |
+-------------------------------------------+--+------------+--+------------+
| Non-current liabilities | | (75,974) | | - |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| Net assets | | 11,101 | | - |
+-------------------------------------------+--+------------+--+------------+
c. Share in the associates' revenues and profits:
+-------------------------------------------+--+------------+--+------------+
| | | Year ended |
| | | December 31, |
+-------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| Revenues | | 20,512 | | - |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| Profit | | 1,180 | | - |
+-------------------------------------------+--+------------+--+------------+
d. During the first quarter of 2008, the Company acquired through a
wholly-owned subsidiary 15% (of which 11% was acquired from a related party) of
the issued and outstanding share capital of Osnova-C LLC ("Osnova-C"), for a
nominal consideration of EUR 1. Osnova-C is a Ukrainian company that is the owner
of a plot of land in Kiev, Ukraine. The Company also granted loans to Osnova-C
in the total amount of $ 6,000 thousand (approximately EUR 4,000), at an annual
interest rate of LIBOR with a margin of 5%. The repayment dates of the loans
have not yet been determined. The investment in the Company is accounted for
under the equity method.
Subsequent to the balance sheet date, the Company acquired an additional 15% of
Osnova-C (see Note 26b).
e. In October 2007, the Company signed a memorandum of understandings with
Lehman Brothers Real Estate Partners L.P. ("Lehman") to reorganize the holdings
of the jointly-controlled Polish companies of the Company and of Lehman. The
Company accounted for its investment in these Polish companies under the
proportionate consolidation method. This reorganization was subject to court
approval in Poland.
In April 2008, the court approved the reorganization plan. Accordingly, the
Company and Lehman each contributed their interests in all jointly-controlled
Polish companies to a holding company (Robyg S.A.) established for this purpose.
In consideration of the contribution, the Company and Lehman received an equal
number of shares of Robyg S.A., thus retaining (indirectly) the joint ownership
of the Polish companies. In addition, the collaboration agreement between the
Company and Lehman was amended such that the Company and Lehman do not have
joint control of Robyg S.A. Accordingly, commencing from the second quarter of
2008, the Company includes the accounts of Robyg S.A. under the equity method
and, consequently, the Polish companies are no longer proportionately
consolidated.
f. Terms and conditions of loans to associates:
+-------------------------------------------+--+------------+--+------------+
| | | Weighted | | December |
| | | average | | 31, 2008 |
| | | interest | | |
| | | rate | | |
+-------------------------------------------+--+------------+--+------------+
| | | % | | |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| In Euros (1) | | 4.99 - | | 5,398 |
| | | 5.93 | | |
+-------------------------------------------+--+------------+--+------------+
| In U.S. dollars (2) | | 6.25 | | 5,395 |
+-------------------------------------------+--+------------+--+------------+
| In Polish Zloty (3) | | 7.22 - | | 30,220 |
| | | 8.86 | | |
+-------------------------------------------+--+------------+--+------------+
| | | | | |
+-------------------------------------------+--+------------+--+------------+
| | | | | 41,013 |
+-------------------------------------------+--+------------+--+------------+
(1) Interest in respect of these loans for the year ended December 31,
2008, is based on EURIBOR with a margin of 3% - 4%. The rate of EURIBOR as of
December 31, 2008 is 2.89%.
(2) Interest in respect of these loans for the year ended December 31,
2008, is based on LIBOR with a margin of 3% - 5%. The rate of LIBOR as of
December 31, 2008 is 1.42%.
(3) Interest in respect of these loans for the year ended December 31,
2008, is based on WIBOR with a margin of 1.5% - 3%. The rate of WIBOR as of
December 31, 2008 is 5.88%.
The repayment dates of these loans have not yet been determined.
NOTE 9:- INTEREST IN PROPORTIONATELY CONSOLIDATED ENTITIES
The Group's share in the assets, liabilities, income and expenses of the
proportionately consolidated entities (see Appendix) at December 31, 2008 and
2007 and for the years then ended, which are included in the consolidated
financial statements are as follows.
+-------------------------------------------------+-+-------------+--+-------------+
| | | December 31, |
+-------------------------------------------------+-+------------------------------+
| | | 2008 | | 2007 |
+-------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| Balance sheets: | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| Current assets | | 30,142 | | 64,669 |
+-------------------------------------------------+-+-------------+--+-------------+
| Non-current assets | | 19,585 | | 25,965 |
+-------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| | | 49,727 | | 90,634 |
+-------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| Current liabilities | | (19,809) | | (33,678) |
+-------------------------------------------------+-+-------------+--+-------------+
| Non-current liabilities | | (14,890) | | (27,811) |
+-------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| | | (34,699) | | (61,489) |
+-------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+-------------------------------------------------+-+-------------+--+-------------+
| | | 15,028 | | 29,145 |
+-------------------------------------------------+-+-------------+--+-------------+
+------------------------------------+--+------------+--+------------+--+------------+
| | | Year ended December 31, |
+------------------------------------+--+--------------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+------------------------------------+--+------------+--+------------+--+------------+
| | | | | | | |
+------------------------------------+--+------------+--+------------+--+------------+
| Income statements: | | | | | | |
+------------------------------------+--+------------+--+------------+--+------------+
| Revenues | | 12,832 | | 7,570 | | 8,216 |
+------------------------------------+--+------------+--+------------+--+------------+
| Cost of revenues | | (9,601) | | (5,634) | | (6,002) |
+------------------------------------+--+------------+--+------------+--+------------+
| Fair value adjustment | | 1,969 | | 5,122 | | - |
| of investment property | | | | | | |
+------------------------------------+--+------------+--+------------+--+------------+
| Marketing, general and | | (779) | | (763) | | (288) |
| administrative expenses | | | | | | |
+------------------------------------+--+------------+--+------------+--+------------+
| Finance costs | | (5,649) | | (2,645) | | (634) |
+------------------------------------+--+------------+--+------------+--+------------+
| Finance income | | 3,416 | | 1,063 | | 753 |
+------------------------------------+--+------------+--+------------+--+------------+
| Other expenses | | (194) | | - | | - |
+------------------------------------+--+------------+--+------------+--+------------+
| Taxes on income | | 659 | | 2,376 | | 607 |
+------------------------------------+--+------------+--+------------+--+------------+
| | | | | | | |
+------------------------------------+--+------------+--+------------+--+------------+
| Net profit | | 1,335 | | 2,337 | | 1,438 |
+------------------------------------+--+------------+--+------------+--+------------+
NOTE 10:- OTHER FINANCIAL ASSETS (NON-CURRENT)
+---------------------------------------------+--+-------------+--+-------------+
| | | December 31, |
+---------------------------------------------+--+------------------------------+
| | | 2008 | | 2007 |
+---------------------------------------------+--+-------------+--+-------------+
| | | | | |
+---------------------------------------------+--+-------------+--+-------------+
| Loans to related parties (1) | | 16,615 | | 35,298 |
+---------------------------------------------+--+-------------+--+-------------+
| Cross currency swap (2) | | 131 | | - |
+---------------------------------------------+--+-------------+--+-------------+
| | | | | |
+---------------------------------------------+--+-------------+--+-------------+
| | | 16,746 | | 35,298 |
+---------------------------------------------+--+-------------+--+-------------+
(1) For terms and conditions relating to loans to related parties, see Note
24.
(2) See Note 19a.2.
NOTE 11:- GOODWILL
a. Cost:
+-----------------------------------------------------+--+-------------+
| | | Total |
+-----------------------------------------------------+--+-------------+
| | | |
+-----------------------------------------------------+--+-------------+
| At January 1, 2007 | | 1,141 |
+-----------------------------------------------------+--+-------------+
| Acquisition of minority interests (Note | | 1,268 |
| 24a) | | |
+-----------------------------------------------------+--+-------------+
| Disposal of interest in subsidiary | | (121) |
+-----------------------------------------------------+--+-------------+
| Currency translation differences | | 14 |
+-----------------------------------------------------+--+-------------+
| | | |
+-----------------------------------------------------+--+-------------+
| At December 31, 2007 | | 2,302 |
+-----------------------------------------------------+--+-------------+
| | | |
+-----------------------------------------------------+--+-------------+
| Disposal of business activities of | | (783) |
| subsidiaries | | |
+-----------------------------------------------------+--+-------------+
| Deconsolidation of proportionately | | (1,085) |
| consolidated company (ROBYG Development) | | |
+-----------------------------------------------------+--+-------------+
| Currency translation differences | | 21 |
+-----------------------------------------------------+--+-------------+
| | | |
+-----------------------------------------------------+--+-------------+
| At December 31, 2008 | | 455 |
+-----------------------------------------------------+--+-------------+
b. Impairment testing of goodwill:
Goodwill acquired through the acquisition of minority interest has been
allocated to individual cash-generating units, for impairment testing:
Carrying amount of goodwill allocated to each of the cash-generating units:
+------------------------------------------+--+------------+--+------------+
| | | Carrying amount of |
| | | goodwill |
+------------------------------------------+--+----------------------------+
| | | 2008 | | 2007 |
+------------------------------------------+--+------------+--+------------+
| | | | | |
+------------------------------------------+--+------------+--+------------+
| ROBYG Development Sp.Z.o.o. | | - | | 1,089 |
+------------------------------------------+--+------------+--+------------+
| ROBYG Park Sp.Z.o.o. | | - | | 130 |
+------------------------------------------+--+------------+--+------------+
| Immo Prop. Kft. | | - | | 223 |
+------------------------------------------+--+------------+--+------------+
| Thokoly Udvar Kft. | | 289 | | 279 |
+------------------------------------------+--+------------+--+------------+
| Foodex 2003 Kft. | | - | | 406 |
+------------------------------------------+--+------------+--+------------+
| Real Prop House Kft. | | 166 | | 175 |
+------------------------------------------+--+------------+--+------------+
| | | | | |
+------------------------------------------+--+------------+--+------------+
| | | 455 | | 2,302 |
+------------------------------------------+--+------------+--+------------+
The recoverable amount of the cash-generating units has been determined based on
a value in use calculation using cash flow projections from budgets approved by
senior management. The budgets are based on past experience and cover periods of
up to four years and does not include any growth after the budget period. The
pre-tax discount rate applied to cash flow projections is 15%.
NOTE 12:- INTEREST-BEARING LOANS AND BORROWINGS
a. Current:
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | December 31, |
+-----------------------------------+-+--------+-+-----------------------------+
| | | Note | | 2008 | | 2007 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Short-term loans: | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Related | | 24 | | 5,517 | | 3,849 |
| parties (in | | | | | | |
| Euro) | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Bank (in | | | | 4,239 | | 1,612 |
| Euro) | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | 9,756 | | 5,461 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Current maturities of | | | | | | |
| long-term loans from: | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Banks | | | | 21,750 | | 9,322 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Global Europe | | | | - | | 2,223 |
| Investment | | | | | | |
| ("the Fund") | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Related | | 24 | | - | | 7,128 |
| parties | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Debentures | | d | | 1,423 | | 5,431 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| Others | | | | - | | 279 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | 23,173 | | 24,383 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | | | |
+-----------------------------------+-+--------+-+-------------+-+-------------+
| | | | | 32,929 | | 29,844 |
+-----------------------------------+-+--------+-+-------------+-+-------------+
b. Non-current:
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | December 31, |
+-----------------------------------+-+--------+-+---------------------------+
| | | Note | | 2008 | | 2007 |
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| Banks | | | | 34,323 | | 50,321 |
+-----------------------------------+-+--------+-+------------+-+------------+
| Global Europe | | | | - | | 2,223 |
| Investment ("the | | | | | | |
| Fund") | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| Related parties | | 24 | | - | | 10,603 |
+-----------------------------------+-+--------+-+------------+-+------------+
| Shareholders in | | | | 7,280 | | - |
| proportionately | | | | | | |
| consolidated entities | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| Others | | | | - | | 775 |
+-----------------------------------+-+--------+-+------------+-+------------+
| Debentures | | d | | 56,776 | | 52,007 |
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | 98,379 | | 115,929 |
+-----------------------------------+-+--------+-+------------+-+------------+
| Less - current | | | | 23,173 | | 24,383 |
| maturities | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | | | |
+-----------------------------------+-+--------+-+------------+-+------------+
| | | | | 75,206 | | 91,546 |
+-----------------------------------+-+--------+-+------------+-+------------+
c. Repayment dates subsequent to the balance sheet date:
+---------------------------------------------+--+-----------+
| | | |
+---------------------------------------------+--+-----------+
| 2009 First year - current maturities | | 23,173 |
+---------------------------------------------+--+-----------+
| 2010 Second year | | 13,792 |
+---------------------------------------------+--+-----------+
| 2011 Third year | | 11,301 |
+---------------------------------------------+--+-----------+
| 2012 Fourth year | | 13,668 |
+---------------------------------------------+--+-----------+
| 2013 Fifth year | | 13,668 |
+---------------------------------------------+--+-----------+
| 2014 Sixth year and thereafter | | 22,777 |
+---------------------------------------------+--+-----------+
| | | |
+---------------------------------------------+--+-----------+
| | | 98,379 |
+---------------------------------------------+--+-----------+
d. Additional details:
1. On August 15, 2006, the Company issued to institutional investors
debentures (series A) with a par value in NIS equivalent in amount to $
12,478,997 (EUR 9,846 on the date of issue). This issue is an extension of series
A which the Company issued in July 2005 and is under the same conditions as the
original issue. The debentures were issued at a discount of EUR 98.
2. In June 2007, the Company issued to institutional investors debentures
(series B) with a par value in NIS of approximately NIS 214 million (EUR 38,000).
Directly attributable transaction costs amounted to EUR 290. The debentures bear
interest at an annual rate of 5.5% and are linked (principal and interest) to
the Israeli Consumer Price Index. In June 2008, the Company registered those
debentures for trading on the Tel-Aviv Stock Exchange. The annual interest rate
decreased by 0.65% to 4.85% on the date of registration.
The interest on the debentures is payable every six months, commencing in
December 2007, and the principal will be paid in four equal annual installments
commencing in June 2012.
During 2008, the debentures were rated by Maalot, an Israeli rating agency which
is affiliated with Standard and Poor's, at a local rating of BBB/NEGATIVE. An
Israeli affiliate of Moody's, Midrug Ltd., rated the debentures as at A2. See
also Note 26.
3. In June 2008, the Company issued on the Tel-Aviv Stock Exchange debentures
(series C), with a par value of approximately NIS 130 million (EUR 25,095).
Directly attributable transaction costs amounted to approximately EUR 693. The
debentures bear interest at an annual rate of 8% and are linked (principal and
interest) to the Israeli Consumer Price Index. The debentures mature in four
equal annual installments commencing in June 2011 and ending in June 2014. The
interest on the debentures is payable every nine months.
During 2008, the debentures were rated by Midrug Ltd., an Israeli rating agency
which is affiliated with Moody's, at a local rating of at A2.
4. During the fourth quarter of 2008, the Company purchased debentures
(series B and C) on the Tel-Aviv Stock Exchange, at a par value of NIS 62,500
thousand (EUR 11,500), for a total consideration of NIS 22,000 thousand (EUR 4,000).
The excess of the carrying amount of the debentures acquired over the
consideration paid in the amount of EUR 7,937 was recorded as a gain in finance
income.
5. The Company has made various undertakings to the trustee of the debentures
("the trustee"), including a commitment to comply with the following covenants:
a) In the event of the delisting of the debentures, in accordance with the
Stock Exchange's capital maintenance rules, the holders of the debentures shall
be entitled to early redemption at the par value of the debentures with the
addition of linkage differences and interest on the principal.
b) In the event of a dividend distribution, the Company shall be obligated to
make a purchase offer for the redemption of the outstanding debentures (series
A), up to an amount equal to the amount of the dividend distribution, such that
the value of the remaining outstanding debentures at such date shall not be less
than NIS 3,2000 thousand (EUR 588).
Following the dividend distribution on Augsut 18, 2008 (see Note 16), purchase
offers were made and the Company received acceptance notices through October 6,
2008, for the carrying amount of NIS 47,600 thousand (EUR 9,530).
c) The trustee shall be entitled to call for the immediate redemption of all
the unpaid balance of the debentures in the event that the Company's equity
falls below EUR 4,800, according to the most recent audited or reviewed financial
statements of the Company, unless the Company and/or the shareholders supplement
or exceed said amount within 60 days of the trustee's notification of his
intention to call for the immediate redemption of the debentures.
6. The long-term borrowings, excluding debentures, may be classified by
currency of repayment, linkage terms and interest rates, as follows:
+--------------------------+--+--------------+--+-----------+--+-----------+
| | | Weighted | | |
| | | average | | |
| | | effective | | |
| | | interest | | |
+--------------------------+--+--------------+--+--------------------------+
| | | December | | December 31, |
| | | 31, | | |
+--------------------------+--+--------------+--+--------------------------+
| | | 2008 | | 2008 | | 2007 |
+--------------------------+--+--------------+--+-----------+--+-----------+
| | | % | | | | |
+--------------------------+--+--------------+--+-----------+--+-----------+
| | | | | | | |
+--------------------------+--+--------------+--+-----------+--+-----------+
| Hungarian | | 8.08 | | 29,006 | | 21,714 |
| Forint (1) | | | | | | |
+--------------------------+--+--------------+--+-----------+--+-----------+
| Euro (2) | | 5.14 | | 11,450 | | 11,311 |
+--------------------------+--+--------------+--+-----------+--+-----------+
| Polish Zloty | | 7.38 | | 1,147 | | 28,674 |
| (3) | | | | | | |
+--------------------------+--+--------------+--+-----------+--+-----------+
| U.S. dollars | | | | - | | 2,223 |
+--------------------------+--+--------------+--+-----------+--+-----------+
| | | | | | | |
+--------------------------+--+--------------+--+-----------+--+-----------+
| | | | | 41,603 | | 63,922 |
+--------------------------+--+--------------+--+-----------+--+-----------+
(1) Interest in respect of these loans is based on BUBOR with a margin of 3%
or linked to the 3-month average yields of the government bonds with a margin of
1.5-1.65% (2007 - fixed at 1.6% or linked to the 3-months average yield of the
government bonds with a margin of 1.5% - 1.65%). The rate of the BUBOR as of
December 31, 2008 is 10% (2007 - 7.5%).
(2) Interest in respect of these loans is based on EURIBOR with a margin of
2.2%-2.5% (2007 - EURIBOR with a margin of 1.5% - 3.5%). The rate of the EURIBOR
as of December 31, 2008 is 2.89% (2007 - 4.29%).
(3) Interest in respect of these loans is based on WIBOR with a margin of
1.5%. The rate of the WIBOR as of December 31, 2008 is 5.88% (2007 - 5.1%).
7. As for collateral, see Note 15b.
NOTE 13:- TAXES ON INCOME
a. Tax rates applicable to income:
The Company and its subsidiary in the Netherlands are assessed for tax purposes
under Dutch tax laws and are liable to corporate income tax at the rate of 25.5%
(2007 - 25.5%, 2006 - 29.6%).
Subsidiaries that are incorporated outside the Netherlands are assessed for tax
purposes under the tax laws in their countries of residence. The principal tax
rates applicable to subsidiaries outside the Netherlands are as follows:
Poland - corporate income tax rate of 19% (2007 and 2006 - 19%).
Hungary - corporate income tax rate of 16% (2007 and 2006 - 16%). In 2006, the
law in Hungary was changed such that from September 1, 2006, companies are
subject to a special tax at the rate of 4% of the profit for financial reporting
purposes, adjusted for dividends received and contributions made. Commencing in
2007, capital gains can be income tax exempt provided that certain criteria are
fulfilled.
Romania - corporate income tax rate of 16%.
b. Losses for tax purposes carried forward to future years:
Carryforward tax losses, for which no deferred tax asset has not been
recognized, amounted to EUR 7,555 at December 31, 2008 (2007 - EUR 9,861).
Deferred income tax assets are recognized for carryforward tax losses to the
extent that the realization of the related tax benefit through future taxable
profits is probable. The Group did not recognize deferred income tax assets of EUR
1.814 (2007 - EUR 2,515) in respect of losses and other temporary differences that
can be carried forward against future taxable income.
c. Deferred income tax:
1. Composition:
+-----------------------------+--+----------+-+-----------+-+------------+
| | | | | December 31, |
+-----------------------------+--+----------+-+--------------------------+
| | | | | 2008 | | 2007 |
+-----------------------------+--+----------+-+-----------+-+------------+
| | | | | | | |
+-----------------------------+--+----------+-+-----------+-+------------+
| Deferred tax | | | | (96) | | (2,874) |
| liability | | | | | | |
+-----------------------------+--+----------+-+-----------+-+------------+
| Deferred tax assets | | | | 357 | | 708 |
+-----------------------------+--+----------+-+-----------+-+------------+
| | | | | | | |
+-----------------------------+--+----------+-+-----------+-+------------+
| | | | | 261 | | (2,166) |
+-----------------------------+--+----------+-+-----------+-+------------+
2. The movement in deferred tax assets and (liabilities) during the year is
as follows:
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | Inventory | | Foreign | |Investment | | Tax | | Other | | Total |
| | | of land | | exchange | | property | | losses | | | | |
| | | and | |differences | | | | | | | | |
| | | housing | | on loans | | | | | | | | |
| | | units | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Balance | | (137) | | (99) | | - | | 200 | | 129 | | 93 |
| at | | | | | | | | | | | | |
| January | | | | | | | | | | | | |
| 1, 2006 | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Credited | | (789) | | (219) | | - | | 81 | | (29) | | (956) |
| (charged) | | | | | | | | | | | | |
| to the | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
| statement | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Disposal | | - | | 103 | | - | | (64) | | (73) | | (34) |
| of | | | | | | | | | | | | |
| subsidiaries | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Increase | | (1,289) | | (9) | | - | | - | | (193) | | (1,491) |
| to | | | | | | | | | | | | |
| jointly | | | | | | | | | | | | |
| controlled | | | | | | | | | | | | |
| entity | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Acquisition | | (116) | | - | | - | | - | | - | | (116) |
| of | | | | | | | | | | | | |
| subsidiary | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Exchange | | 38 | | 28 | | - | | (56) | | (35) | | (25) |
| differences | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Balance | | (2,293) | | (196) | | - | | 161 | | (201) | | (2,529) |
| at | | | | | | | | | | | | |
| December | | | | | | | | | | | | |
| 31, 2006 | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Credited | | 1,257 | | (22) | | (934) | | 335 | | (13) | | 623 |
| (charged) | | | | | | | | | | | | |
| to the | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
| statement | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Disposal | | - | | 76 | | - | | (42) | | 2 | | 36 |
| of | | | | | | | | | | | | |
| subsidiaries | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Acquisition | | (195) | | - | | - | | 4 | | - | | (191) |
| of | | | | | | | | | | | | |
| additional | | | | | | | | | | | | |
| interest in | | | | | | | | | | | | |
| jointly | | | | | | | | | | | | |
| controlled | | | | | | | | | | | | |
| entity | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Exchange | | (34) | | (51) | | (42) | | 10 | | 12 | | (105) |
| differences | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Balance | | (1,265) | | (193) | | (976) | | 468 | | (200) | | (2,166) |
| at | | | | | | | | | | | | |
| December | | | | | | | | | | | | |
| 31, 2007 | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Credited | | 328 | | 25 | | (315) | | 467 | | 114 | | 619 |
| (charged) | | | | | | | | | | | | |
| to the | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
| statement | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Deconsolidation | | 794 | | 147 | | 1,221 | | (227) | | 172 | | 2,107 |
| of | | | | | | | | | | | | |
| proportionately | | | | | | | | | | | | |
| consolidated | | | | | | | | | | | | |
| company | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Exchange | | 76 | | 5 | | (243) | | (144) | | 7 | | (299) |
| differences | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
| Balance | | (67) | | (16) | | (313) | | 564 | | 93 | | 261 |
| at | | | | | | | | | | | | |
| December | | | | | | | | | | | | |
| 31, 2008 | | | | | | | | | | | | |
+----------------------------+-+------------+-+-------------+-+------------+-+----------+-+----------+-+------------+
d. Taxes on income included in the income statements:
+----------------------------------+--+----------+--+----------+--+----------+
| | | Year ended December 31, |
+----------------------------------+--+--------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+----------------------------------+--+----------+--+----------+--+----------+
| | | | | | | |
+----------------------------------+--+----------+--+----------+--+----------+
| Current | | 1,320 | | 3,178 | | 123 |
+----------------------------------+--+----------+--+----------+--+----------+
| Deferred | | (619) | | (623) | | 956 |
+----------------------------------+--+----------+--+----------+--+----------+
| | | | | | | |
+----------------------------------+--+----------+--+----------+--+----------+
| | | 701 | | 2,555 | | 1,079 |
+----------------------------------+--+----------+--+----------+--+----------+
e. Theoretical tax reconciliation:
Following is a reconciliation of the theoretical tax expense, assuming all
income is taxed at the regular tax rate (see a. above) and the actual tax
expense:
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | Year ended December 31, |
+-----------------------------------------+-+-----------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Profit before income taxes | | 6,323 | | 22,635 | | 9,440 |
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Theoretical tax expense in | | 1,612 | | 5,772 | | 2,794 |
| respect of the profit - at | | | | | | |
| 25.5% (2007 - 25.5%, 2006 - | | | | | | |
| 29.6%) | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Increase (decrease) in taxes | | | | | | |
| resulting from: | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Share in profit of associates | | (301) | | - | | - |
| taxed at the associates' level | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Current year tax losses for | | 412 | | 1,496 | | 210 |
| which no deferred tax asset was | | | | | | |
| recognized | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Different tax rates applicable | | (387) | | (508) | | (595) |
| to foreign subsidiaries | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Non-deductible expenses | | 1,029 | | 364 | | 43 |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Non-taxable income | | (1,664) | | (4,649) | | (1,327) |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Other | | - | | 80 | | (46) |
+-----------------------------------------+-+---------+--+---------+--+---------+
| | | | | | | |
+-----------------------------------------+-+---------+--+---------+--+---------+
| Income tax expense | | 701 | | 2,555 | | 1,079 |
+-----------------------------------------+-+---------+--+---------+--+---------+
f. Tax assessments:
The Company has not been assessed for tax purposes since incorporation.
NOTE 14:- TRADE AND OTHER PAYABLES
+-------------------------------------------------+--+-----------+--+-----------+
| | | December 31, |
+-------------------------------------------------+--+--------------------------+
| | | 2008 | | 2007 |
+-------------------------------------------------+--+-----------+--+-----------+
| | | | | |
+-------------------------------------------------+--+-----------+--+-----------+
| Trade | | 2,292 | | 12,832 |
+-------------------------------------------------+--+-----------+--+-----------+
| Interest payable | | 454 | | 702 |
+-------------------------------------------------+--+-----------+--+-----------+
| Government authorities | | 1,017 | | 1,224 |
+-------------------------------------------------+--+-----------+--+-----------+
| Related parties (Note 24b) | | 345 | | 96 |
+-------------------------------------------------+--+-----------+--+-----------+
| Accrued expenses | | 409 | | 922 |
+-------------------------------------------------+--+-----------+--+-----------+
| Deferred income *) | | - | | 5,018 |
+-------------------------------------------------+--+-----------+--+-----------+
| Dividend payable to minority | | 460 | | 119 |
| shareholders | | | | |
+-------------------------------------------------+--+-----------+--+-----------+
| Other | | 1,325 | | 1,685 |
+-------------------------------------------------+--+-----------+--+-----------+
| | | | | |
+-------------------------------------------------+--+-----------+--+-----------+
| | | 6,302 | | 22,598 |
+-------------------------------------------------+--+-----------+--+-----------+
*) In November 2007, the Company sold its wholly-owned subsidiary, Piekarniza
Sp.z.o.o., to a jointly controlled company, Robyg Morena Sp.z.o.o. The
consideration in respect of this sale was recorded as a long-term loan in the
accounts of the Company. Since the collection of the loan was dependent upon
future funds to be received in connection with vacant land held by Piekarniza
Sp.z.o.o., the Company deferred the recognition of the gain on the sale until
the loan was collected in 2008 (see Note 22b).
NOTE 15:-COMMITMENTS, CONTINGENT LIABILITIES AND PLEDGES
a. As of December 31, 2008, the Group has purchase commitments in respect of
Group companies and construction projects amounting to approximately EUR 9,460.
b. Contingent liabilities, guarantees and pledges:
1. The balances of the secured liabilities and guarantees of the Group are as
follows:
+----------------------------------------+-+-----------+-+--------------+--------------+
| | | December 31, |
+----------------------------------------+-+----------------------------+
| | | 2008 | | 2007 |
+----------------------------------------+-+-----------+-+-----------------------------+
| Liabilities: | | | | |
+----------------------------------------+-+-----------+-+-----------------------------+
| Long-term loans | | 34,323 | | 52,646 |
| and other | | | | |
| liabilities | | | | |
| (including current | | | | |
| maturities) *) | | | | |
+----------------------------------------+-+-----------+-+-----------------------------+
| | | | | |
+----------------------------------------+-+-----------+-+-----------------------------+
| Guarantees **) | | 24,629 | | 27,324 |
+----------------------------------------+-+-----------+-+--------------+--------------+
*) The Group companies have made an undertaking to the banks not to repay
shareholders' loans until the loans to the banks have been repaid.
**) The Company guaranteed the bank loan of an associate and received
guarantees from another investor regarding its share of the loan.
2. To secure the aforementioned liabilities and guarantees, the Company and
the subsidiaries registered fixed charges on lands, share capital in
subsidiaries and the Company's share capital, as well as floating charges on the
assets.
3. The registration of the transfer of ownership in certain lands has yet to
be completed.
4. In 2007, a subcontractor of a Hungarian subsidiary's chief subcontractor
filed a claim against the subsidiary, alleging that the payment for commodities
and services supplied was not received. The estimated payout is EUR 940, should
the claim be successful.
The Company has been advised by its legal counsel that it is not probable that
the action will succeed and, accordingly, no provision for any liability has
been made in these financial statements.
5. Collaboration agreements with Lehman:
In October 2006, a collaboration agreement was signed with Lehman Brothers Real
Estate Partners L.P. ("Lehman"), which is based on a memorandum signed at the
end of 2005. The agreement provides for the right of Lehman to participate in
any of the Company's real estate projects in Poland, Hungary and Romania and
includes a mechanism for distribution of earnings, according to which the
Company is entitled to receive earnings exceeding its interest in the projects
if the yield on the investment in the project exceeds an internal rate of return
of 20%.
In October 2007, the Company signed a memorandum of understandings with Lehman
to reorganize the ownership and operations of jointly controlled entities in
Poland. In April 2008, the court approved the reorganization plan. Accordingly,
the Company and Lehman each contributed their interests in all
jointly-controlled Polish companies to a holding company (Robyg S.A.)
established for this purpose. In consideration of the contribution, the Company
and Lehman received an equal number of shares of Robyg S.A., thus retaining
(indirectly) the joint ownership of the Polish companies. In addition, the
collaboration agreement between the Company and Lehman was amended such that the
Company and Lehman do not have joint control of Robyg S.A.
In addition, Lehman has agreed to purchase from the Company for a consideration
of EUR 26,000, the Company's right to receive earnings in excess of its interest
in projects with Lehman. The purchase is conditional on the floatation of ROBYG
S.A. on the Warsaw Stock Exchange by August 2008 at a valuation of at least a
certain amount. The consideration will be paid to the Company in the form of
ROBYG S.A shares equivalent to EUR 26,000 (see also Note 24).
6. In November 2006, the Company acquired a subsidiary which holds 50% of a
company established jointly with a local municipality in Budapest ("the
Municipality") for a consideration of up to 840 million Hungarian
Forint (approximately EUR 3,175).
According to the agreement between the subsidiary and the Municipality, the
Municipality shall transfer to the jointly owned company land with a total area
of about 154 thousand sq.m., the subsidiary has undertaken to provide financing
in the amount of approximately 1,323 million Hungarian Forint (approximately EUR
5,000) for the development of a residential building project. The financing will
be made available as the land is transferred to the jointly owned company. As of
the balance sheet date, the Municipality had transferred to the jointly owned
company land comprising about 27 thousand sq.m., and the Company had paid a
consideration of EUR 720 and had provided financing of approximately EUR 920 for
development of the land.
NOTE 16:- DIVIDENDS PAID AND PROPOSED
+--------------------------------------+-+----------+--+----------+--+----------+
| | | Year ended December 31, |
+--------------------------------------+-+--------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+--------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+--------------------------------------+-+----------+--+----------+--+----------+
| Dividends on Ordinary | | 10,995 | | 4,037 | | - |
| shares declared and paid | | | | | | |
+--------------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+--------------------------------------+-+----------+--+----------+--+----------+
| Dividend per share | | 0.06 | | 0.02 | | - |
+--------------------------------------+-+----------+--+----------+--+----------+
NOTE 17:- SHARE CAPITAL AND PREMIUM
a. Composition:
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | Number | | Share | | Share | | Treasury |
| | | of | | capital | | premium | | shares |
| | | shares | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 12,000,000 | | 2,400 | | 8,422 | | - |
| January 1, | | | | | | | | |
| 2006 | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Split of | | 108,000,000 | | - | | - | | - |
| shares (1) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Share-based | | - | | - | | 275 | | - |
| compensation | | | | | | | | |
| (2) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Proceeds from | | 12,987,013 | | 260 | | 11,827 | | - |
| shares issued | | | | | | | | |
| (3) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 132,987,013 | | 2,660 | | 20,524 | | - |
| December 31, | | | | | | | | |
| 2006 | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Share-based | | - | | - | | 47 | | - |
| compensation | | | | | | | | |
| (2) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Proceeds from | | 13,000,000 | | 260 | | 15,761 | | - |
| shares issued | | | | | | | | |
| (4) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Proceeds from | | 25,762,414 | | 515 | | 31,083 | | - |
| shares issued | | | | | | | | |
| (5) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 171,749,427 | | 3,435 | | 67,415 | | - |
| December 31, | | | | | | | | |
| 2007 | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Purchase of | | (650,000) | | - | | - | | (527) |
| treasury | | | | | | | | |
| shares (6) | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Exercise of | | 700,000 | | 14 | | 58 | | - |
| options | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 171,799,427 | | 3,449 | | 67,473 | | (527) |
| December 31, | | | | | | | | |
| 2008 | | | | | | | | |
+--------------------------+-+----------------+-+--------------------------------------------------------------+-+-----------+-+----------------------------------------------------------------+
(1) On May 30, 2006, the issued share capital which was composed of
12,000,000 Ordinary shares of EUR 0.2 par value each was split into 120,000,000
Ordinary shares of EUR 0.02 par value each. All share and per share amounts in
these financial statements have been restated to reflect this split.
(2) During 2006, 2,500,000 options were granted to senior employees and
directors of the Company and of related companies. Each option may be exercised
to purchase one Ordinary share of the Company at an exercise price of $ 0.192.
The options vest in six equal portions over an eighteen-month period, commencing
three months after the date of grant. Any options not exercised within nine
years from date of grant will expire, unless extended by the Board of Directors.
The fair value of the options granted determined using the Black-Scholes option
valuation model was approximately $ 427 thousand (EUR 352). The significant inputs
in the model were share price - $ 0.34, exercise price - $ 0.192, standard
volatility - 61%, expected option life - two years, annual risk-free interest
rate - 4.5%, and expected dividend yield - zero.
The Company recorded in the financial statements an expense in general and
administrative expenses amounting to approximately EUR 47 in 2007 and EUR 275 in
2006, and a corresponding increase in shareholders' equity.
During 2008, 700,000 options were exercised for approximately EUR 12. At December
31, 2008, 1,800,000 options are outstanding and exercisable.
(3) On June 27, 2006, the Company issued 12,987,013 Ordinary shares on the
AIM in London in consideration of EUR 14,493 (GBP 10 million). The issue expenses
amounted to EUR 2,406 and the net proceeds after issue expenses amounted to EUR
12,087. The shareholders of the Company that held shares prior to this issue
acquired 1,143,000 Ordinary shares as part of the issue for a total
consideration of EUR 1,275 (GBP 880 thousand).
(4) On January 23, 2007, the Company issued to investors 13 million Ordinary
shares at GBP 0.85 per share (EUR 1.3 per share). The total proceeds from the
issue amounted to approximately GBP 11 million (EUR 16,700). The issue expenses of
approximately EUR 600 were offset against the share premium.
(5) On March 6, 2007, an investment agreement with an associate of Lehman,
LBREP II Neptune S.a.r.l (LBREP), was signed. According to the agreement, the
Company issued to LBREP 25,762,414 Ordinary shares at GBP 0.85 per share (EUR 1.25
per share). The proceeds from this issue amounted to approximately GBP 21,900
thousand (EUR 32,100). As a result of the issue, LBREP acquired 15% of the
Company's issued and outstanding share capital. The issue expenses of EUR 500 were
offset against the share premium.
(6) In April 2008, the Company made market purchases for 650,000 Ordinary
shares of the Company, representing approximately 0.38% of the issued share
capital of the Company, at an average price of 65 pence per share.
b. Other reserves:
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | Inventory | | Currency | |Acquisition | |Statutory | | Total |
| | |revaluation | |translation | | | | reserve | | |
| | | | | adjustment | |of minority | | (*) | | |
| | | | | | | interest | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 1,743 | | 690 | | 65 | | - | | 2,498 |
| January 1, | | | | | | | | | | |
| 2006 | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Transfer of | | (493) | | - | | - | | - | | (493) |
| revaluation | | | | | | | | | | |
| reserve | | | | | | | | | | |
| upon | | | | | | | | | | |
| disposal of | | | | | | | | | | |
| inventory | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Currency | | - | | (1,246) | | - | | - | | (1,246) |
| translation | | | | | | | | | | |
| differences | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 1,250 | | (556) | | 65 | | - | | 759 |
| December | | | | | | | | | | |
| 31, 2006 | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Transfer of | | (160) | | - | | - | | - | | (160) |
| revaluation | | | | | | | | | | |
| reserve | | | | | | | | | | |
| upon | | | | | | | | | | |
| disposal of | | | | | | | | | | |
| inventory | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Sale of | | - | | (110) | | - | | - | | (110) |
| shares of | | | | | | | | | | |
| subsidiary | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Currency | | - | | (4,735) | | - | | - | | (4,735) |
| translation | | | | | | | | | | |
| differences | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Reclassification | | - | | - | | - | | 4,188 | | 4,188 |
| according to | | | | | | | | | | |
| statutory | | | | | | | | | | |
| requirements | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | - | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 1,090 | | (5,401) | | 65 | | 4,188 | | (58) |
| December | | | | | | | | | | |
| 31, 2007 | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Reclassification | | - | | (408) | | - | | - | | (408) |
| upon sale of | | | | | | | | | | |
| shares of | | | | | | | | | | |
| subsidiaries | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Currency | | - | | (2,211) | | - | | - | | (2,211) |
| translation | | | | | | | | | | |
| differences | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Reclassification | | - | | - | | - | | 3,163 | | 3,163 |
| according to | | | | | | | | | | |
| statutory | | | | | | | | | | |
| requirements | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
| Balance at | | 1,090 | | (8,020) | | 65 | | 7,351 | | 486 |
| December | | | | | | | | | | |
| 31, 2008 | | | | | | | | | | |
+-----------------------------+------+-------------+-+-------------+-+-------------+-+-----------+-+----------------------------------------------------------------+
(*) In accordance with the Dutch law, profit from fair value adjustment of
investment property unrealized and undistributed profits of investees that are
not subsidiaries, are restricted for distribution.
NOTE 18:- OTHER LIABILITIES
California Group S.R.L ("California"), a Romanian subsidiary of the Company,
entered into an agreement to purchase an additional plot of land ("the New
Plot") located next to California's existing plot of vacant land. This purchase
was contingent upon the purchase of a third plot of land ("the Third Plot")
which is located next to the New Plot.
In May 2008, an agreement for the purchase of the two plots of land by
California was signed. California intends to construct a residential housing
project on the total land area of approximately 9,200 sq.m.
According to the above agreement, in consideration for the New Plot, the sellers
are entitled to receive 17% of the revenues from the sale of units in the entire
project.
At the date of acquisition for the New Plot, the Company recorded a liability to
the sellers of the New Plot according to the fair value of the land, based on an
independent appraisal. After initial recognition, the liability is subsequently
measured at fair value (based on projected discounted cash flows). Gains or
losses arising from changes in the fair value of the liability are recognized in
the statement of income.
In respect of the Third Plot, the sellers are entitled to receive 49% of the net
profit from the entire project less an amount of EUR 450. The agreement provides
for joint control with the sellers of the Third Plot. Accordingly, the
investment in the subsidiary is accounted for by the proportionate consolidation
method.
NOTE 19:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's principal financial instruments comprise bank loans and overdrafts,
and debentures. The main purpose of these financial instruments is to raise
finance for the Group's operations. The Group has various financial assets such
as trade receivables, cash and cash equivalents and short-term deposits, which
arise directly from its operations, and also has granted loans for affiliated
companies.
The main risks arising from the Group's financial instruments are cash flow
interest rate risk, foreign currency risk and credit risk. The Board of
Directors reviews and agrees on policies for managing each of these risks which
are recognized below.
a. Foreign exchange risk:
1. The Group operates in Hungary, Poland, Romania and Croatia and therefore
is exposed to foreign exchange risk arising from various currency exposures.
However, most of the receivables and the payables of each entity in the Group
are denominated in the entity's functional currency, and therefore, the Group is
mainly exposed in respect of loans received and granted that are denominated in
currency other than each entity's functional currency.
2. In order to reduce exposure to currency risk of the debentures (series C)
, as described in Note 12d.3, the Company entered into a cross currency swap,
according to which the Company receives interest in NIS, linked to the CPI,
bearing annual interest of 8% (identical to the terms of the debentures), and
pays an amount in Euro linked to the six-month Euribor plus a margin of 6.6%.
In addition, the Company fixed the exchange rate of the Euro/NIS at the rate of
5.48. This derivative does not qualify as a hedge under IFRS and, consequently,
all changes in the fair value are recorded directly in the income statement.
The following table demonstrates the pre-tax impact of a 10% change in the
currency rates with the most significant exposure, with all other variables held
constant:
+--------------------+-+------------+-+------------+-+------------+-+----------+
| | | December 31, |
+--------------------+-+-------------------------------------------------------+
| | | 2008 | | 2007 |
+--------------------+-+---------------------------+-+-------------------------+
| | | Increase | | Decrease | | Increase | |Decrease |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| | | | | | | | | |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| U.S. dollar | | 569 | | (569) | | (4,797) | | 4,797 |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| Euro | | 2,464 | | (2,464) | | 842 | | (842) |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| Polish Zloty | | 4,097 | | (4,097) | | 1,458 | | (1,458) |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| Hungarian | | 3,504 | | (3,504) | | 111 | | (111) |
| Forint | | | | | | | | |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| New Israeli | | (4,158) | | 4,158 | | (3,268) | | 3,268 |
| Shekel | | | | | | | | |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| Croatian Kuna | | 10 | | (10) | | 19 | | (19) |
+--------------------+-+------------+-+------------+-+------------+-+----------+
| Ron | | 497 | | (497) | | - | | - |
+--------------------+-+------------+-+------------+-+------------+-+----------+
b. Interest rate risk:
The Group's exposure to the risk of changes in market interest rates relates
primarily to the Groups long-term debt obligations and other financial assets
with floating interest rates. Loans obtained and granted at variable rates
expose the Group to cash flow interest risk, which could have adverse effects on
the Group's net income or financial position. Changes in interest rates cause
variations in interest income and expenses on interest-bearing assets and
liabilities.
Financial instruments with fixed interest rates expose the Group to fair value
interest risk.
The following table demonstrates the sensitivity to a reasonably possible change
in interest rates, with all other variables held constant, of the Group's profit
before tax. There is no impact on the Group's equity.
+------------------------------------------+-+-------------+--+-------------+
| | | Increase | | Decrease |
| | | in 100 | | in 100 |
| | | basis | | basis |
| | | points | | points |
+------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------+-+-------------+--+-------------+
| 2008: | | | | |
+------------------------------------------+-+-------------+--+-------------+
| U.S. dollar | | 56 | | (56) |
+------------------------------------------+-+-------------+--+-------------+
| Euro | | (50) | | 50 |
+------------------------------------------+-+-------------+--+-------------+
| Polish Zloty | | 311 | | (311) |
+------------------------------------------+-+-------------+--+-------------+
| Hungarian Forint | | (241) | | 241 |
+------------------------------------------+-+-------------+--+-------------+
| Ron | | - | | - |
+------------------------------------------+-+-------------+--+-------------+
| New Israeli Shekel | | (15) | | 15 |
+------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------+-+-------------+--+-------------+
| 2007: | | | | |
+------------------------------------------+-+-------------+--+-------------+
| U.S. dollar | | 101 | | (101) |
+------------------------------------------+-+-------------+--+-------------+
| Euro | | 101 | | (101) |
+------------------------------------------+-+-------------+--+-------------+
| Polish Zloty | | (83) | | 83 |
+------------------------------------------+-+-------------+--+-------------+
| Hungarian Forint | | (77) | | 77 |
+------------------------------------------+-+-------------+--+-------------+
| Ron | | - | | - |
+------------------------------------------+-+-------------+--+-------------+
| New Israeli Shekel | | 194 | | (194) |
+------------------------------------------+-+-------------+--+-------------+
c. Credit risk:
Receivables are monitored on an ongoing basis, resulting in the Group's exposure
to bad debts being immaterial.
With respect to credit risk arising from the other financial assets of the
Group, which comprise cash and cash equivalents and deposits, the Group's
exposure to credit risk arises from default of the counterparty, with a maximum
exposure equal to the carrying amount of these instruments.
d. Liquidity risk:
The Group's objective is to maintain a balance between continuity of funding and
flexibility through the use of bank overdrafts, bank loans and debentures.
The table below summarizes the maturity profile of the Group's financial
liabilities at December 31, 2008 based on contractual undiscounted payments.
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| | | Year ended December 31, 2008 |
+--------------------------------+-+--------------------------------------------------------------------+
| | | On | | Less | | 1-5 | | More | | Total |
| | | demand | | than | | years | | than | | |
| | | | | 12 | | | | 5 | | |
| | | | | months | | | | years | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Interest-bearing | | - | | 39,976 | | 64,738 | | 23,825 | | 128,539 |
| loans and | | | | | | | | | | |
| borrowings | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Trade and | | - | | 4,700 | | - | | - | | 4,700 |
| other payables | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Other | | - | | - | | 2,971 | | 1,393 | | 4,364 |
| financial | | | | | | | | | | |
| liabilities | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| | | Year ended December 31, 2007 |
+--------------------------------+-+--------------------------------------------------------------------+
| | | On | | Less | | 1-5 | | More | | Total |
| | | demand | | than | | years | | than | | |
| | | | | 12 | | | | 5 | | |
| | | | | months | | | | years | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Interest-bearing | | - | | 33,499 | | 76,071 | | 30,647 | | 140,217 |
| loans and | | | | | | | | | | |
| borrowings | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Trade and | | - | | 16,021 | | - | | - | | 16,021 |
| other payables | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
| Other | | - | | 781 | | - | | - | | 781 |
| financial | | | | | | | | | | |
| liabilities | | | | | | | | | | |
+--------------------------------+-+-----------+-+-----------+-+-----------+-+-----------+-+------------+
e.Political risk:
The Group has significant business in Central and Eastern Europe. Certain CEE
countries are considered as emerging markets. Political and economic changes in
these regions can have consequences for the Group's activities there, as well as
an impact on the results and financial positions of the Group. By close
monitoring of these businesses the board of management intends to limit the
risks of those changes.
f. Capital management:
The primary objective of the Group's capital management is to ensure that it
maintains a strong credit rating and healthy capital ratios in order to support
its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of
changes in economic conditions. To maintain or adjust the capital structure, the
Group may adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares. No changes were made in the objectives,
policies or processes during the years ended December 31, 2008 and 2007.
The Group monitors capital using a gearing ratio, which is net financial debt
divided by total equity plus net debt. The Group's policy is to keep the gearing
lower than 55%. The Group includes within net financial debt, interest-bearing
loans and borrowings, less cash and cash equivalents, and short-term deposits.
+------------------------------------------------+-+-------------+--+-------------+
| | | 2008 | | 2007 |
+------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Interest-bearing loans and | | 108,135 | | 121,390 |
| borrowings | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Less - cash and short-term deposits | | (44,713) | | (85,956) |
+------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Net financial debt | | 63,422 | | 35,434 |
+------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Total equity | | 79,903 | | 88,895 |
+------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Capital and net debt | | 143,325 | | 124,329 |
+------------------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------------------+-+-------------+--+-------------+
| Gearing ratio | | 44% | | 29% |
+------------------------------------------------+-+-------------+--+-------------+
g. Fair value of financial instruments:
Set out below is a comparison by category of carrying amounts and fair values of
all of the Group's financial instruments:
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| | | Carrying amount | | Fair value |
+-----------------------------------+-+---------------------+-+---------------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Financial assets | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Cash | | 22,056 | | 70,905 | | 22,056 | | 70,905 |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Deposits | | 22,657 | | 15,051 | | 22,657 | | 15,051 |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Loan | | 16,746 | | 35,298 | | 16,641 | | 35,028 |
| notes | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Loans to | | 41,012 | | - | | 40,557 | | - |
| associates | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Financial liabilities | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Interest-bearing loans and | | | | | | | | |
| borrowings: | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Floating | | 50,230 | | 56,303 | | 50,050 | | 56,303 |
| rate | | | | | | | | |
| borrowings | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Fixed rate | | 57,905 | | 65,087 | | 21,258 | | 62,813 |
| borrowings | | | | | | | | |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
| Other liabilities | | 2,482 | | 715 | | 2,482 | | 715 |
+-----------------------------------+-+---------+-+---------+-+---------+-+---------+
Interest on financial instruments classified as floating rate is repriced at
intervals of less than six months. Interest on financial instruments classified
as fixed rate is fixed until the maturity of the instrument. The other financial
instruments of the Group that are not included in the above tables are
non-interest bearing and are therefore not subject to interest rate risk.
NOTE 20:- MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| | | Year ended December 31, |
+-----------------------------------------+-+---------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| | | | | | | |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Professional fees | | 1,462 | | 1,122 | | 605 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Management fees | | 396 | | 71 | | 295 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Rent and office maintenance | | 620 | | 320 | | 200 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Marketing | | 514 | | 814 | | 490 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Salaries (including director's | | 2,260 | | 2,643 | | 907 |
| fees (1)) | | | | | | |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Share-based compensation | | - | | 47 | | 275 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Travel expenses | | 284 | | 356 | | 113 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| Other | | 815 | | 593 | | 473 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| | | | | | | |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
| | | 6,351 | | 5,966 | | 3,358 |
+-----------------------------------------+-+-----------+-+-----------+-+-----------+
(1) Director's fees:
+------------------------------------+-+----------+-+----------+--+----------+
| | | 2008 | | 2007 | | 2006 |
+------------------------------------+-+----------+-+----------+--+----------+
| | | | | | | |
+------------------------------------+-+----------+-+----------+--+----------+
| Director's fees *) | | 1,113 | | 989 | | 545 |
+------------------------------------+-+----------+-+----------+--+----------+
| Directors insurance | | 45 | | 45 | | 22 |
+------------------------------------+-+----------+-+----------+--+----------+
| Bonuses | | 26 | | 646 | | 54 |
+------------------------------------+-+----------+-+----------+--+----------+
| | | | | | | |
+------------------------------------+-+----------+-+----------+--+----------+
| | | 1,184 | | 1,680 | | 621 |
+------------------------------------+-+----------+-+----------+--+----------+
*) The executive director's and non executive fees (including bonuses) for
the year 2008 are as follows:
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | 2008 |
+-----+-----------------+-+-----------------------------------------------------------------------+
| | | |Outstanding | | Fees in | | Bonus in | | Share | | Total |
| | | | amount of | |thousands | |thousands | | based | | for |
| | | | options | | | | | |compensation | |the year |
| | | | | | | | | |in thousands | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Executive | | | | | | | | | | |
| | directors | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | O.Katzenelson, | | - | | 485 | | - | | - | | 485 |
| | CEO | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Shaul Lotan, | | - | | 181 | | - | | - | | 181 |
| | Chairman | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Ran Yaakobs, | | 500,000 | | 190 | | 16 | | - | | 206 |
| | CFO *) | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 500,000 | | 856 | | 16 | | - | | 872 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Non-executive | | | | | | | | | | |
| | directors | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | Yosef Zimer *) | | 500,000 | | 55 | | 10 | | - | | 65 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Ron Hadasi | | - | | 24 | | - | | - | | 24 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Gilly Jacoby | | - | | 29 | | - | | - | | 29 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 4. | Karl Ferenc | | - | | 30 | | - | | - | | 30 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 5. | Eyal Keltsh | | - | | 77 | | - | | - | | 77 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 6. | Gerald Parkes | | - | | 24 | | - | | - | | 24 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 7. | David Dekel | | - | | 18 | | - | | - | | 18 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 500,000 | | 257 | | 10 | | - | | 267 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 1,000,000 | | 1,113 | | 26 | | - | | 1,139 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
*) All the options were granted in 2006; in 2008 no new options were granted
or exercised.
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | 2007 |
+-----+-----------------+-+-----------------------------------------------------------------------+
| | | |Outstanding | | Fees in | | Bonus in | | Share | | Total |
| | | | amount of | |thousands | |thousands | | based | | for |
| | | | options | | | | | |compensation | |the year |
| | | | | | | | | |in thousands | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Executive | | | | | | | | | | |
| | members | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | O.Katzenelson, | | - | | 447 | | 420 | | - | | 867 |
| | CEO | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Shaul Lotan, | | - | | 179 | | 103 | | - | | 282 |
| | Chairman | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Ran Yaakobs, | | 500,000 | | 144 | | 88 | | 10 | | 242 |
| | CFO *) | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 500,000 | | 770 | | 611 | | 10 | | 1,391 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Non-executive | | | | | | | | | | |
| | members | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | Yosef Zimer *) | | 500,000 | | 51 | | 35 | | 9 | | 95 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Shimon | | - | | 21 | | - | | - | | 21 |
| | Katzenelson | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Ron Hadasi | | - | | 9 | | - | | - | | 9 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 4. | Gilly Jacoby | | - | | 23 | | - | | - | | 23 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 5. | Karl Ferenc | | - | | 25 | | - | | - | | 25 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 6. | Eyal Keltsh | | - | | 72 | | - | | - | | 72 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 7. | Gerald Parkes | | - | | 18 | | - | | - | | 18 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | - | | 219 | | 35 | | 9 | | 263 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 1,000,000 | | 989 | | 646 | | 19 | | 1,654 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
*) All the options were granted in 2006; in 2007, no new options were granted
or exercised.
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | 2006 |
+-----+-----------------+-+-----------------------------------------------------------------------+
| | | |Outstanding | | Fees in | | Bonus in | | Share | | Total |
| | | | amount of | |thousands | |thousands | | based | | for |
| | | | options | | | | | |compensation | |the year |
| | | | | | | | | |in thousands | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Executive | | | | | | | | | | |
| | members | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | O.Katzenelson, | | - | | 241 | | - | | - | | 241 |
| | CEO | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Shaul Lotan, | | - | | 135 | | - | | - | | 135 |
| | Chairman | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Ran Yaakobs, | | 500,000 | | 75 | | 32 | | 55 | | 162 |
| | CFO | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 500,000 | | 451 | | 32 | | 55 | | 538 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Non-executive | | | | | | | | | | |
| | members | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 1. | Yosef Zimer | | 500,000 | | 26 | | 22 | | 55 | | 103 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 2. | Shimon | | - | | 9 | | - | | - | | 9 |
| | Katzenelson | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 3. | Jon Kempster | | - | | 18 | | - | | - | | 18 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 4. | Gilly Jacoby | | - | | 13 | | - | | - | | 13 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 5. | Karl Ferenc | | - | | 13 | | - | | - | | 13 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| 6. | Eyal Keltsh | | - | | 15 | | - | | - | | 15 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 500,000 | | 94 | | 22 | | 55 | | 171 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | | | | | | | | | | | |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
| | Total | | 1,00,000 | | 545 | | 54 | | 110 | | 709 |
+-----+-----------------+-+-------------+-+-----------+-+-----------+-+--------------+-+----------+
NOTE 21:- FINANCE INCOME (COSTS)
+-----------------------------------+-+----------+-+----------+--+----------+
| | | Year ended December 31, |
+-----------------------------------+-+-------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------+-+----------+-+----------+--+----------+
a. Finance costs:
+----------------------------------+-+-------------+-+-------------+--+----------+
| | | | | | | |
+----------------------------------+-+-------------+-+-------------+--+----------+
| Interest expense | | (10,476) | | (4,983) | | (3,217) |
+----------------------------------+-+-------------+-+-------------+--+----------+
| Exchange differences | | (19,109) | | (11,564) | | (1,940) |
+----------------------------------+-+-------------+-+-------------+--+----------+
| Bank charges and other, | | (1,163) | | (1,015) | | (498) |
| net | | | | | | |
+----------------------------------+-+-------------+-+-------------+--+----------+
| | | | | | | |
+----------------------------------+-+-------------+-+-------------+--+----------+
| | | (30,748) | | (17,562) | | (5,655) |
+----------------------------------+-+-------------+-+-------------+--+----------+
| Capitalized borrowing | | 3,063 | | 1,528 | | 2,053 |
| costs | | | | | | |
+----------------------------------+-+-------------+-+-------------+--+----------+
| | | | | | | |
+----------------------------------+-+-------------+-+-------------+--+----------+
| | | (27,685) | | (16,034) | | (3,602) |
+----------------------------------+-+-------------+-+-------------+--+----------+
b. Finance income:
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| | | | | | | |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| Financial assets at fair | | 131 | | - | | - |
| value through profit and | | | | | | |
| loss | | | | | | |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| Gain on early repayment | | 7,937 | | - | | - |
| of debentures | | | | | | |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| Interest income | | 10,505 | | 7,259 | | 915 |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| Exchange differences | | 6,699 | | 16,395 | | 4,920 |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| | | | | | | |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
| | | 25,272 | | 23,654 | | 5,835 |
+-----------------------------------+-+-----------+-+-----------+--+-----------+
NOTE 22:- OTHER INCOME AND OTHER EXPENSES
a. Other income:
+------------------------------------+-+-----------+-+-----------+-+-----------+
| | | Year ended December 31, |
+------------------------------------+-+---------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+------------------------------------+-+-----------+-+-----------+-+-----------+
| | | | | | | |
+------------------------------------+-+-----------+-+-----------+-+-----------+
| Gain on sale of interests in | | 6,527 | | 8,314 | | 4,183 |
| subsidiaries and joint ventures | | | | | | |
+------------------------------------+-+-----------+-+-----------+-+-----------+
| Other | | (197) | | 307 | | 33 |
+------------------------------------+-+-----------+-+-----------+-+-----------+
| | | | | | | |
+------------------------------------+-+-----------+-+-----------+-+-----------+
| | | 6,330 | | 8,621 | | 4,216 |
+------------------------------------+-+-----------+-+-----------+-+-----------+
b. Year ended December 31, 2008:
As described in Note 14, the Company sold its wholly-owned subsidiary to a
jointly controlled company and deferred the recognition of the gain on the sale
until the loan, which was recorded in respect of this sale, was collected.
During the third quarter, the Company collected the loan and recognized the gain
in the amount of approximately EUR 5,300.
NOTE 23:- EARNINGS PER SHARE
Earnings per share are calculated by dividing the profit attributable to equity
holders of the Company by the weighted average number of Ordinary shares in
issue after giving effect to the split:
+-----------------------------------------+-+------------+-+------------+--+------------+
| | | Year ended December 31, |
+-----------------------------------------+-+-------------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+-----------------------------------------+-+------------+-+------------+--+------------+
| | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Profit attributable to | | 5,529 | | 19,270 | | 7,031 |
| equity holders of the | | | | | | |
| parent | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Weighted average number of | | 171,693 | | 166,342 | | 126,495 |
| Ordinary shares outstanding | | | | | | |
| (thousands) | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Effect of dilution: | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Share options | | 910 | | 1,811 | | 1,621 |
+-----------------------------------------+-+------------+-+------------+--+------------+
| | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Adjusted weighted average | | 172,603 | | 168,153 | | 128,116 |
| number of Ordinary shares | | | | | | |
| for diluted earnings per | | | | | | |
| share | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
| Profit per share (basic and | | 0.03 | | 0.12 | | 0.06 |
| diluted) (EUR per share) | | | | | | |
+-----------------------------------------+-+------------+-+------------+--+------------+
NOTE 24:- RELATED PARTY DISCLOSURES
The financial statements include the financial statements of Nanette Real Estate
Group N.V. and the subsidiaries listed in the Appendix to the consolidated
financial statements.
a. Transactions with related parties:
1. Composition:
+---------------------------------+-+----------+--+----------+--+----------+
| | | Year ended December 31, |
+---------------------------------+-+--------------------------------------+
| | | 2008 | | 2007 | | 2006 |
+---------------------------------+-+----------+--+----------+--+----------+
| General and | | | | | | |
| administrative | | | | | | |
| expenses: | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Key | | 1,139 | | 1,654 | | 709 |
| management | | | | | | |
| personnel | | | | | | |
| of the | | | | | | |
| Group | | | | | | |
| (including | | | | | | |
| directors' | | | | | | |
| fees *) | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Shareholders | | 288 | | 244 | | 377 |
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| | | 1,427 | | 1,898 | | 1,086 |
+---------------------------------+-+----------+--+----------+--+----------+
| Finance income: | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Proportionately | | 1,606 | | 1,510 | | 405 |
| consolidated | | | | | | |
| entities | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Finance costs: | | | | | | |
+---------------------------------+-+----------+--+----------+--+----------+
| Shareholders | | 914 | | 705 | | 2 |
+---------------------------------+-+----------+--+----------+--+----------+
*) Compensation of key management personnel composed as follows:
+----------------------------+-+----------+--+----------+--+----------+
| | | 2008 | | 2007 | | 2006 |
+----------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+----------------------------+-+----------+--+----------+--+----------+
| Short-term | | 1,139 | | 1,635 | | 599 |
| benefits | | | | | | |
+----------------------------+-+----------+--+----------+--+----------+
| Share-based | | - | | 19 | | 110 |
| compensation | | | | | | |
+----------------------------+-+----------+--+----------+--+----------+
| | | | | | | |
+----------------------------+-+----------+--+----------+--+----------+
| | | 1,139 | | 1,654 | | 709 |
+----------------------------+-+----------+--+----------+--+----------+
2. Management fees in the amount of EUR 272 to a company controlled by key
management personnel were capitalized to inventory cost in 2008 (2007 - EUR 379).
3. Agreements with Lehman (a shareholder), see Note 15b(5).
b. Balances with related parties:
+--------------------------------------------+---------+--+------------+-+------------+
| | | December 31, |
+--------------------------------------------+------------+---------------------------+
| | | 2008 | | 2007 |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Accounts receivable - other | | 898 | | - |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Highest balance during the year | | 898 | | - |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Other financial assets: | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Proportionately consolidated | | 16,615 | | 28,093 |
| entity (1) | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Shareholder | | - | | 835 |
+------------------------------------------------------+--+------------+-+------------+
| Other | | - | | 6,370 |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| | | 16,615 | | 35,298 |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Loans to associates (2) | | 41,012 | | - |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Short-term loans from shareholder (3) | | 5,517 | | 3,849 |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Long-term loans before deducting current | | - | | 10,603 |
| maturities from shareholder | | | | |
+------------------------------------------------------+--+------------+-+------------+
| | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Liabilities - other: | | | | |
+------------------------------------------------------+--+------------+-+------------+
| Shareholder | | 345 | | 96 |
+--------------------------------------------+---------+--+------------+-+------------+
(1) Terms and conditions of loans to proportionately consolidated entity:
+------------------------------------+-+-------------+--+-------------+
| | | Weighted | | December |
| | | average | | 31, |
| | | interest | | 2008 |
| | | rate (*) | | |
+------------------------------------+-+-------------+--+-------------+
| | | % | | |
+------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------+-+-------------+--+-------------+
| In Euros | | 5.12 | | 6,990 |
+------------------------------------+-+-------------+--+-------------+
| In U.S. dollars | | - | | 1,142 |
+------------------------------------+-+-------------+--+-------------+
| In Hungarian Forint | | 13 | | 8,483 |
+------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------+-+-------------+--+-------------+
| | | | | 16,615 |
+------------------------------------+-+-------------+--+-------------+
(*) Fixed interest rate as of December 31, 2008.
The replacement dates of these loans have not yet been determined.
(2) For terms and conditions (see Note 8f).
(3) Terms and conditions of loans from shareholders:
+------------------------------------+-+-------------+--+-------------+
| | | Weighted | | December |
| | | average | | 31, |
| | | interest | | 2008 |
| | | rate | | |
+------------------------------------+-+-------------+--+-------------+
| | | % | | |
+------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------+-+-------------+--+-------------+
| In Euros (1) | | 5.89% | | 3,850 |
+------------------------------------+-+-------------+--+-------------+
| In Hungarian Forint (2) | | 10.50% | | 1,667 |
+------------------------------------+-+-------------+--+-------------+
| | | | | |
+------------------------------------+-+-------------+--+-------------+
| | | | | 5,517 |
+------------------------------------+-+-------------+--+-------------+
(1) Interest in respect of these loans is based on EURIBOR, with a margin of
3% and capped at 7%.
(2) Interest in respect of these loans is based on BUBOR, with a margin of
0.50%.
The replacement dates of these loans have not yet been determined.
NOTE 25:- SEGMENT INFORMATION
a. General:
The Group operates internationally and its organizational structure is based on
geographical areas. Accordingly, the division of operations in this manner
represents the basis according to which the Group reports data for management
purposes. The segments are determined according to the countries from which the
Group's revenues are generated. The Company has two reportable segments: Hungary
and Poland.
b. Operating segment data:
As of December 31, 2008 and for the year then ended:
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | Hungary | | Poland | | Other | | Consolidated |
| | | | | *) | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Income | | | | | | | | |
| statement | | | | | | | | |
| data: | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Revenues | | 18,322 | | 8,047 | | 160 | | 26,529 |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Segment | | 3,806 | | 2,811 | | (355) | | 6,262 |
| results - | | | | | | | | |
| operating | | | | | | | | |
| profit | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Unallocated | | | | | | | | 3,856 |
| general | | | | | | | | |
| corporate | | | | | | | | |
| expenses | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Operating | | | | | | | | 2,406 |
| profit | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Finance | | | | | | | | (27,685) |
| costs | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Finance | | | | | | | | 25,272 |
| income | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Other income | | | | | | | | 6,330 |
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
| Profit | | | | | | | | 6,323 |
| before taxes | | | | | | | | |
| on income | | | | | | | | |
+-------------------------+-+------------+-+-----------+-+----------+-+-----------------+
As of December 31, 2007 and for the year then ended:
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | Hungary | | Poland | | Other | | Consolidated |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Income | | | | | | | | |
| statement data: | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Revenues | | 18,101 | | 15,007 | | 66 | | 33,174 |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Segment results | | 3,602 | | 6,974 | | (288) | | 10,288 |
| - operating | | | | | | | | |
| profit | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Unallocated | | | | | | | | 3,894 |
| general | | | | | | | | |
| corporate | | | | | | | | |
| expenses | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Operating | | | | | | | | 6,394 |
| profit | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Finance costs | | | | | | | | (16,034) |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Finance income | | | | | | | | 23,654 |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Other income | | | | | | | | 8,621 |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
| Profit before | | | | | | | | 22,635 |
| taxes on income | | | | | | | | |
+----------------------------+-+------------+--+-----------+--+----------+--+-----------------+
*) In the second quarter of 2008, jointly controlled Polish companies that
were proportionately consolidated in previous periods were transferred to a
holding company in which the Company accounts for its interest using the equity
method (see Note 8e). Accordingly, commencing from the second quarter of 2008,
segment revenues for Poland no longer include the revenues and results of these
Polish companies. Segment results include the share in profit of the holding
company (associate).
As of December 31, 2006 and for the year then ended:
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | Hungary | | Poland | | Consolidated |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Income statement | | | | | | |
| data: | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Revenues | | 21,203 | | 10,666 | | 31,869 |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Segment results - | | 2,500 | | 2,448 | | 4,948 |
| operating profit | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Unallocated general | | | | | | 1,957 |
| corporate expenses | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Operating profit | | | | | | 2,991 |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Finance costs | | | | | | (3,602) |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Finance income | | | | | | 5,835 |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Other income | | | | | | 4,216 |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
| Profit before taxes | | | | | | 9,440 |
| on income | | | | | | |
+----------------------------------+-+------------+--+-----------+--+-----------------+
NOTE 26:-EVENTS SUBSEQUENT TO BALANCE SHEET DATE
a. Subsequent to the balance sheet date, the Company purchased its own
debentures (series B and series C) on the Tel-Aviv Stock Exchange, at par value
of NIS 2,416,577 and NIS 10.1 million, respectively (approximately EUR 2.4
million), for a total consideration of NIS 0.8 million and NIS 5.2 million
(approximately EUR 1.1 million), respectively. The profit from these purchases was
recognized in the income statement in the first quarter of 2009.
b. During February 2009, the Company (through a wholly-owned subsidiary)
completed the purchase of an additional 15% of the issued and outstanding share
capital of Osnova-C (see Note 8d), for a nominal consideration of approximately
$ 1 (EUR 1). The Company also granted loans to Osnova-C, in the total amount of $
6,350 thousand (EUR 4,536) includes $ 350 which were required by the Osnova-C as
an additional Investment from the Shareholders, at an annual interest rate of
LIBOR, with a margin of 5%. Subsequent to this purchase, the Company holds 30%
of the share capital of Osnova-C.
c. On March 25, 2009, Midrug Ltd. downgraded credit rating of the debentures
(series B and C) to local rating of Baa1.
LIST OF SUBSIDIARIES, PROPORTIONATELY CONSOLIDATED COMPANIES
AND ASSOCIATES
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | Shareholding and control |
+--------------------------------------+-+------------------------+--+--------------------------------------+
| | | | | December 31, |
+--------------------------------------+-+------------------------+--+--------------------------------------+
| Name of company | | Country | | 2008 | | 2007 | | 2006 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | % |
+--------------------------------------+-+------------------------+--+--------------------------------------+
| Subsidiaries: | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Investment | | Poland | | 70.10 | | 70.10 | | 70.10 |
| Sp.z.o.o. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Thokoly Udvar Kft. | | Hungary | | 100.00 | | 100.00 | | 89.33 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Zold Park Haz Kft. | | Hungary | | 77.50 | | 77.50 | | 77.50 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Foodex 2003 Kft. | | Hungary | | 100.00 | | 100.00 | | 57.50 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Karolina Udvar Kft. | | Hungary | | 100.00 | | 100.00 | | 57.50 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| MZM Properties Sp.z.o.o. | | Poland | | - | | - | | 90.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg B.V. | | Netherlands | | 100.00 | | 100.00 | | 89.33 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Orgod Sp.z.o.o. | | Poland | | 100.00 | | 100.00 | | 46.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Galicia Sp.z.o.o. | | Poland | | 100.00 | | 80.00 | | 80.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Morena Sp.z.o.o. | | Poland | | - | | - | | 80.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| IMMO Prop. Kft. | | Hungary | | 100.00 | | 100.00 | | 57.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Kamaraerdo Kft. | | Hungary | | 100.00 | | 100.00 | | 100.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Construction | | Hungary | | 100.00 | | 100.00 | | 100.00 |
| Kft. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Star Development | | Poland | | 100.00 | | 100.00 | | - |
| Sp.z.o.o. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Real Estate | | Romania | | 100.00 | | 100.00 | | - |
| Development Srl. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette North Star | | Romania | | 100.00 | | 100.00 | | - |
| Properties Srl. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| California Group Srl. | | Romania | | 100.00 | | 100.00 | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Borovje D.O.O. | | Croatia | | 100.00 | | 100.00 | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Etgar Financial Services | | Israel | | 100.00 | | - | | - |
| Ltd. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Albert Ingatian | | Hungary | | 100.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Paty Plots | | Hungary | | 100.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Holdings | | Cyprus | | 100.00 | | - | | - |
| (Ukraine) Ltd. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Laniste D.O.O. | | Croatia | | 100.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Nekretnine | | Croatia | | 100.00 | | - | | - |
| D.O.O. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Construction rom | | Romania | | 100.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Proportionately | | | | | | | | |
| consolidated companies: | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Palacowa Sp.z.o.o. | | Poland | | - | | 50.00 | | 50.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| OK Investment Sp.z.o.o. | | Poland | | 50.00 | | 50.00 | | 50.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Wilanow II | | Poland | | - | | 42.50 | | 32.50 |
| Sp.z.o.o. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Gondola HAZ K.f.t. | | Hungary | | 50.00 | | 50.00 | | 50.00 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Real Prop House K.f.t. | | Hungary | | 50.01 | | 50.01 | | 50.01 |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| MZM Properties Sp.z.o.o. | | Poland | | - | | 45.00 | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Morena Sp.z.o.o. | | Poland | | - | | 40.00 | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg City Apartments | | Poland | | - | | 37.50 | | - |
| Sp.z.o.o. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Pipera | | Romania | | 50.00 | | 50.00 | | - |
| Properties Srl. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette City Gate | | Romania | | 50.00 | | 50.00 | | - |
| Timisoara Srl. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Heights Timisoara | | Romania | | 50.00 | | 50.00 | | - |
| Srl. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Nanette Bucharest | | Romania | | 50.00 | | 50.00 | | - |
| Properties | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| EDR Construction Brasov | | Holland | | 55.00 | | - | | - |
| B.V. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| UKRA Real Estate B.V. | | Holland | | 50.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Subsidiary of UKRA Real | | | | | | | | |
| Estate B.V.: | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| PP Plots | | Hungary | | 100.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Proportionately | | | | | | | | |
| consolidated company of | | | | | | | | |
| EDR Construction Brasov | | | | | | | | |
| B.V.: | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Taltoring | | Hungary | | 50.00 | | - | | - |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Proportionately | | | | | | | | |
| consolidated companies | | | | | | | | |
| of Robyg B.V.: | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
| Robyg Development | | Poland | | - | | 50.00 | | 50.00 |
| Sp.z.o.o. | | | | | | | | |
+--------------------------------------+-+------------------------+--+-----------+--+-----------+--+--------+
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | Shareholding and control |
+-------------------------------------+-+--------------------+--+--------------------------------------+
| | | | | December 31, |
+-------------------------------------+-+--------------------+--+--------------------------------------+
| Name of company | | Country | | 2008 | | 2007 | | 2006 |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | % |
+-------------------------------------+-+--------------------+--+--------------------------------------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Subsidiary of MZM | | | | | | | | |
| Properties Sp.z.o.o. - | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Park Sp.z.o.o. | | Poland | | 99.00 | | 70.00 | | 70.00 |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Subsidiary of Robyg | | | | | | | | |
| Morena Sp.z.o.o.: | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Piekarnicza Sp.z.o.o. | | Poland | | 100.00 | | 100.00 | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Proportionately | | | | | | | | |
| consolidated company of | | | | | | | | |
| Kamaraerdo K.f.t.: | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Kamara-Projekt K.f.t. | | Hungary | | 50.00 | | 50.00 | | 50.00 |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Associated companies of | | | | | | | | |
| Nanette Holdings | | | | | | | | |
| (Ukraine) Ltd.: | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Olimpia Real Estate LLC | | Ukraine | | 15.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Osanova C. | | Ukraine | | 15.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Associated company: | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg S.A. | | Poland | | 48.18 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Subsidiaries of Robyg | | | | | | | | |
| S.A. | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| MZM Properties | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Morena Sp.z.o.o. | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Palacowa Sp.z.o.o. | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Wilanow II | | Poland | | 85.00 | | - | | - |
| Sp.z.o.o. | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg city Apartments | | Poland | | 75 | | - | | - |
| Sp.z.o.o. | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Development | | Poland | | 100.00 | | - | | - |
| SP.z.o.o. | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Jagondo Estates | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Marina Tower | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Wroclaw I | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Wroclaw II | | Poland | | 100.00 | | - | | - |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
| Robyg Zarzadzanie | | Poland | | 100.00 | | - | | - |
| Zp.z.o.o. | | | | | | | | |
+-------------------------------------+-+--------------------+--+-----------+--+-----------+--+--------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR CKKKDNBKBNNN
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