GLOBE TRADE CENTRE S.A.

IFRS CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEARS ENDED
31 DECEMBER 2005 AND 2004

Note	31 December 2005	31 December 2004	
ASSETS			(restated)	
					
Non current assets				
	Investment property	16	682,928	442,951	
	Property, plant and equipment	15	150,249	179,138	
	Investment in associates	18	8,461	7,720	
	Loans granted to associates	18	11,066	10,618	
	Investment in marketable securities	17	-	19,106	
	Deferred tax asset	14	3,585	2,332	
	Advances to contractors		6,618	9,439	
	Goodwill	28	16,702	-	
	Other non-current assets	19	1,075	5,350	
	880,684	676,654	
Current Assets			
	Inventory 	37,485	23,551	
	Debtors	2,677	2,817	
	Accrued income and other receivables	20	29,179	1,715	
	VAT and other tax recoverable 	14,809	12,106	
	Income tax recoverable		1,959	922	
	Prepayments, deferred expenses		2,281	1,687	
	Short-term deposits	22	16,185	11,651	
	Cash and cash equivalents 	23	73,204	115,729	
	177,779	170,178	
			
TOTAL ASSETS	1,058,463	846,832	
			
EQUITY AND LIABILITIES			
Capital attributable to equity holders of the parent			
	Share capital 	26	5,632	5,602	
	Share premium 	26	140,198	138,209	
	Capital reserve	1,231	1,231	
	Hedge reserve	(284)	(1,719)	
	Net unrealized provision on investment in marketable  securities	-	1,699	
	Foreign currency translation		(6,743)	4,762	
          	Accumulated profit 	405,564	265,419	
	545,598	415,203	
				
Minority Interest		801	11,131	
Total Equity	546,399	426,334	
			
Long-term Liabilities			
	Long-term portion of long-term loans 	25	401,513	333,014	
	Deposits from tenants 		3,513	2,790	
	Long term payable	32	1,102	6,992	
	Provisions		-	450	
 	Provision for deferred tax liability 	14	40,914	10,088	
		447,042	353,334	
Current Liabilities			
	Trade and other payables 	23,999	23,920	
	Credit line	24	-	2,015	
	Current portion of long-term loans 	25	19,971	22,135	
	Current portion of long term payable	32	6,052	673	
	VAT and other taxes payable  	1,908	676	
	Income tax payable	3,920	1,875	
	Accruals 	4,732	9,959	
	Advances received	1,844	2,131	
	Deferred income	536	-	
   Derivatives	21	2,060	3,780	
	65,022	67,164	
			
TOTAL EQUITY AND LIABILITIES	1,058,463	846,832	

	Year ended 
31 December 2005		Year ended
 31 December 2004	
Note			(restated)	
				
Revenues from operations	8	95,639		56,367	
				
Costs of operations	9	(38,581)		(21,069)	
				
Gross margin from operations	57,058		35,298	
				
Selling expenses	10	(3,452)		(1,838)	
					
Administration expenses	11	(7,122)		(4,681)	
				
Share based payment	(1,891)		(1,899)	
				
Profit from revaluation of investment property	16	150,901		23,246	
				
Other income/ (expenses)		289		(596)	
				
Profit from continuing operations before tax and financial related income / (expense)	195,783		49,530	
				
Foreign exchange differences gain/(loss), net	(2,459)		5,062	
				
Financial expense, net	12	(19,637)		(15,276)	
				
Profit on sale of investment in marketable securities	17	4,091		-	
					
Share of profit/ (losses) from associates	18	533		1,456	
				
Profit before taxation	178,311		40,772	
				
Taxation                                      	14	(34,248)		170	
				
Profit for the year	144,063		40,942	
				
Attributable to:				
Equity holders 	140,145		36,009	
Minority interest	3,918		4,933	
				
Basic earnings per share (USD)	27	7.02		2.12	
Diluted earnings per share (USD)	27	6.95		2.09	

	

 	 Issued and paid in share capital 	 Share premium 	 Capital reserve 	Hedge reserve 	 Foreign currency translation  	 Net unrealized gain/(loss) on investment in marketable securities 	 Accumulated profit 	 Minority interest 	 Total 	
										
Balance as of 1 January 2004 	4,362	33,543	1,231	-	474	-	229,545	697	269,852	
Reclassification of loss from investment in marketable securities 	-	-	-	-	-	(1,000)	1,000	-	-	
Reclassification due to adoption of share base payment (IFRS 2) [Note 3]	-	1,135	-	-	-	-	(1,135)	-	-	
Restated balance as of 
1 January 2004 	4,362	34,678	1,231	-	474	(1,000)	229,410	697	269,852	
Issuance of shares 	1,240	101,632	-	-	-	-	-	-	102,872	
Share based payment	-	1,899	-	-	-	-	-	-	1,899	
Profit from investment in marketable security 	-	-	-	-	-	2,699	-	-	2,699	
Currency translation differences 	-	-	-	-	4,288	-	-	656	4,944	
Acquisition of  subsidiaries 	-	-	-	-	-	-	-	4,845	4,845	
Hedge transactions 	-	-	-	(1,719)	-	-	-	-	(1,719)	
Profit for the year ended 31 December 2004 	-	-	-	-	-	-	36,009	4,933	40,942	
Restated Balance as of 
31 December 2004  	5,602	138,209	1,231	(1,719)	4,762	1,699	265,419	11,131	426,334	
Issuance of shares 	30	98	-	-	-	-	-	-	128	
Share base payment 	-	1,891	-	-	-	-	-	-	1,891	
Currency translation differences 	-	-	-	-	(11,826)	-	-	(2,420)	(14,246)	
Sale of subsidiary		-	-	417	321	-	-	-	738	
Net change in investment in marketable securities 	-	-	-	-	-	(1,699)	-	-	(1,699)	
Acquisition of shares 	-	-	-	-	-	-	-	(11,828)	(11,828)	
Hedge transactions 	-	-	-	1,018	-	-	-	-	1,018	
Profit for the year ended 
31 December  2005 	-	-	-	-	-	-	140,145	3,918	144,063	
Balance as of 
31 December 2005 	5,632	140,198	1,231	(284)	(6,743)	-	405,564	801	546,399	

		Year ended
31 December 2005	Year ended
31 December 2004 	
			(restated)	
				
CASH FLOWS FROM OPERATING ACTIVITIES:				
Profit from continuing operations before tax and financial related income / (expense)		195,783	49,530	
Adjustments for:				
				
Revaluation of investment properties		(150,901)	(23,246)	
Share based payment		1,891	1,899	
Depreciation and amortization		241	493	
				
Operating cash before working capital changes		47,014	28,676	
				
Decrease/(increase) in debtors and prepayments and other current assets		(5,156)	(625)	
Decrease/(increase) in inventory		(3,615)	2,279	
Increase/(decrease) in provisions		(450)	450	
Increase in advances received		(287)	1,739	
Increase in other non-current assets		(78)	(211)	
Increase in short-term payables and accruals		785	332	
				
Cash generated from operations		38,213	32,640	
Interest paid		(23,006)	(18,596)	
Interest received		3,272	4,187	
Tax paid in the period		(2,892)	(1,064)	
Net cash from operating activities		15,587	17,167	
				
CASH FLOWS FROM INVESTING ACTIVITIES:				
Purchase of property, plant and equipment		(136,560)	(77,979)	
Sale of subsidiary	29		(14,060)	-	
Sale of investment in marketable securities	17		23,067	-	
Sale of investment properties and fixed assets			-	517	
Lease origination expenses		(990)	(4,400)	
Purchase of shares in subsidiaries	28		(28,128)	(773)	
Loans granted		(2,912)	(4,125)	
Loan repayments		850	3,680	
Increase in short term deposits		(4,646)	(581)	
Decrease in short term deposits		100	23,092	
Dividend received		122	193	
				
Net cash used in investing activities		(163,157)	(60,376)	
				
CASH FLOWS FROM FINANCING ACTIVITIES				
Proceeds from the issuance of shares		128	85,785	
Proceeds from the issuance of share capital to minority in subsidiary		-	5	
Proceeds from long-term borrowings		175,814	107,966	
Repayment of long-term borrowings		(63,108)	(78,989)	
Loans and shares origination cost		(749)	(4,891)	
Deposits received from tenants		723	994	
Net cash from financing activities		112,808	110,870	
				
Effect of foreign currency translation		(7,763)	1,539	
				
Net increase (decrease) in cash and cash equivalents		(42,525)	69,200	
				
Cash and cash equivalents, at the beginning of the year		115,729	46,529	
				
Cash and cash equivalents, at the end of the period		73,204	115,729	

1.	Principal activities

Globe Trade Centre S.A. (the “Company”, “GTC”) was registered in Warsaw on December 19, 1996, having previously operated under the name of Globe Trade Centre Sp. z o.o.  The Company’s registered office is in Warsaw at 41 Domaniewska Street. The Company owns through subsidiaries and associates commercial and residential real estate companies in Poland, Hungary, Romania, Serbia and Montenegro (Serbia), Croatia and Czech Republic. The Company is developing, and leasing or selling space to commercial and individual tenants, through its directly and indirectly owned subsidiaries.

Globe Trade Centre S.A. is the parent company of the capital group Globe Trade Centre (the “Group”).

The Group’s business activities are:
a)	Development and rental of office and retail space,
b)	Development and sale of residential units.

As of 31 December 2005 and 2004 the number of full time equivalent working in the Group companies was 78 and 81 respectively.

GTC is listed on the Warsaw Stock exchange.

The Company is a majority-owned subsidiary of GTC International B.V. (“GTC International”) of the Netherlands that holds 50.69% of the Company’s shares (see note 26). The ultimate parent of the Company is Kardan N.V of the Netherlands.

2.	Functional and reporting currencies

	The Company maintains its books of account in accordance with accounting principles and practices employed by enterprises in Poland as required by Polish accounting regulations. The accompanying consolidated financial statements reflect certain adjustments not reflected in the Company's books to present these statements in accordance with standards issued by the International Accounting Standards Board, and the International Financial Reporting Interpretations Committee (“IFRIC”). 
The currency of Polish economy is the Polish Zloty. The Company has elected US Dollar as its functional currency in the financial statements, since the Company believes that it reflects in a more appropriate manner the Company events and transactions in the financial statements.

2.	Functional and reporting currencies (continued)

The functional currency of some of GTC’s subsidiaries is a currency other than USD. The financial statements of those companies prepared in their functional currencies are included in the consolidated financial statements by translation into USD using the closing rate method outlined in IAS 21. Assets and liabilities are translated at the period end exchange rate, while income and expenses are translated at average exchange rates for the year. All resulting exchange differences are classified in equity as “Translation difference” without affecting earnings for the period.

3.	Basis of presentation and changes in accounting policies 

The accompanying consolidated balance sheet, consolidated income statements, consolidated statement of cash flows and consolidated statement of changes in equity reflect all adjustments which are necessary for a fair statement of the Company’s consolidated results of operations and cash flow for the year and the Company’s financial position as of 31 December 2005. 

The consolidated financial statements have been prepared in thousand USD.

The Company applied to the consolidated financial statements for the year ended on 31 December 2005 all International Financial Reporting Standards (IFRS) effective for accounting periods beginning on or before 1 January 2005. 

Effective 1 January 2005, the change in the Polish Accounting Act requires the Group to prepare its consolidated financial statement in accordance with IFRS that have been adopted by European Union (“EU”). At this particular time, due to the endorsement process of the EU, and activities of the Company, there are no differences between the policies applied by the Company based on IFRS and IFRS that have been endorsed by the Commission of the European Communities.

The consolidated financial statements have been prepared in accordance with IFRS and all applicable IFRS that have been adopted by the EU. 

3.	Basis of presentation and changes in accounting policies (continued)

The Company followed the same accounting policies and methods of computation in these consolidated financial statements as compared with the consolidated financial statements for the year 2004. There have been no changes in International Financial Reporting Standards for the year beginning 1 January 2005.

In the years 2003 and 2004, the IASB revised 13 existing International Accounting Standards, as described below:

-	IAS 1 Presentation of Financial Statements
-	IAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors 
-	IAS 10 Events After the Balance Sheet Date
-	IAS 16 Property, Plant and Equipment
-	IAS 17 Leases
-	IAS 21 The Effects of Changes in Foreign Exchange Rates
-	IAS 24 Related Party Disclosures
-	IAS 32 Financial Instruments: Disclosure and Presentation
-	IAS 36 Impairment of Assets
-	IAS 38 Intangible Assets
-	IAS 39 Financial Instruments: Recognition and Measurement
-	IAS 40 Investment Property
-	IFRS 5 Non-current Assets Held for Sale and Discontinued Operations   

The new revised standards are applied for annual periods beginning on or after 1 January 2005. The Company received and applied all the practical implication of the standards. Earlier changes to IAS 27, 28 and 31 were early adopted in the year ended 31 December 2004. Impact is as describes below.

In February 2004, the IASB issued IFRS 2 "Share-based Payment" ("IFRS 2"). The new standard is applied for annual periods beginning on or after 1 January 2005 and applied retrospectively to issues after November 2002 and not vested as at 1 January 2004. 

In March 2004, the IASB issued IFRS 3 "Business Combinations" ("IFRS 3"). The new standard together with amendments to IAS 36 and 38 came into force from 31 March 2004 and is effective for all acquisitions taking place after that date. 

Upon acquisition the group initially measures the identifiable assets and liabilities acquired at their fair values at the acquisitions date hence causing any minority interest in the acquired net assets to be stated at the minority proportion on the net fair values of those items.

In March 2004, the IASB issued IFRS 4 "Insurance Contracts" ("IFRS 4"). The new standard is applied for annual periods beginning on or after 1 January 2005. The adoption of the above standard did not impact the financial position or the financial result reported by the Group as there were no items or transactions being subject to this standard.  

3.	Basis of presentation and changes in accounting policies (continued)

In March 2004, the IASB issued IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" ("IFRS 5"). The new standard should be applied for annual periods beginning on or after 1 January 2005. The adoption of the above standard did not impact the financial position or the financial result reported by the Group as there were no items or transactions being subject to this standard.  

The Company applied those new standards in the financial statements for the year ended 31 December 2005.

Change in accounting policy and restatement of comparable periods

The Company applied to the consolidated financial statements for the year ended on 31 December 2005 all International Financial Reporting Standards effective for accounting periods beginning on or before 1 January 2005. 
In particular, the Company adopted each of the following new standards and applied them retrospectively:

IAS 39 “Financial instruments”

According to the revised IAS 39 the investment in available for sale financial asset is presented at fair value. A recognised gain or loss arising from a change in the fair value of such asset is recognised directly in equity.

This accounting treatment differs from the previous treatment, which the Company used until 31 December 2004 (Under previous IAS 39, the Company used to recognise gain or loss arising from a change in the fair value of a financial asset in the net profit or loss for the period). The impact is presented on next page.

IFRS 2 "Share-based Payment" 

A share-based payment is a transaction in which the entity receives or acquires goods or services as consideration for its equity instruments. The Company applied IFRS 2 in relation to series F, B and B1 shares.

The issuance of shares or rights to shares requires an increase in a component of equity. IFRS 2 requires the offsetting debit entry to be expensed when the payment for goods or services does not represent an asset. The total expense related to equity-settled share-based payments will equal the multiple of the total fair value of instruments that vest at the grant-date.

3.	Basis of presentation and changes in accounting policies (continued)

Impact on profit and loss, cash flow and equity statements comprises the following:

 	31 December 2004 –reported	31 December 2004 – restated	Difference	

Selected items from profit and loss statement				
				
Share based payment 	-	(1,899)	(1,899)	
Profit from marketable securities	2,045	-	(2,045)	
Tax expenses	824	170	(654)	
Profit for the year	45,540	40,942	(4,598)	
				
Selected items from equity statement				
				
Share premium	135,175	138,209	3,034	
Net unrealized provision on investment in marketable securities	-	1,699	1,699	
Accumulated profit	270,152	265,419	(4,733)	
Total equity	426,334	426,334	-	
				
Selected items from cash flow statement				
				
Profit from continuing operations (operating profit–reported) 	28,779	49,530	20,751	
Revaluation of investment property	-	(23,246)	(23,246)	
Share based payment	-	1,899	1,899	
Change in short term payables and accruals	(264)	332	596	
Net cash from operating activities	17,167	17,167	-	

4.	Accounting Policies 

(a)	Basis of accounting

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, derivative financial instruments, and available-for-sale financial assets that have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged (cash flow hedge) are adjusted to record changes in the fair values attributable to the risks that are being hedged.

4. 	Accounting Policies (continued) 

(b)	Property, Plant and Equipment

In accordance with IAS 40 property is divided into two categories: investment property and owner-occupied property. Investment properties are described in note 4(c). This note presents the policy of the Group in relation to owner-occupied property. 

Property, plant and equipment consist of vehicles, buildings, land improvement, equipment and construction in progress. Property, plant and equipment, which have been completed (as described further below) are recorded at historical cost. Depreciation is provided using the straight-line method over the estimated useful life of the asset.  

The following depreciation rates have been applied: 

	Depreciation rates	
Equipment	7 -20 %	
Land improvement	20 %	
Vehicles	20 %	

Assets in the course of construction are shown at cost. The direct costs paid to subcontractors for the renovation and improvement of the property are capitalised into construction in progress. Capitalised costs also include borrowing costs, planning and design costs, construction overheads and other related costs.  Construction in progress is not depreciated.
Reassessment of the useful life and impairment is done annually.

 (c)	Investment property

Investment property is property consist of land plots or a building or part of a building held to earn rental income and/or for capital appreciation.

The investment properties of the Group are presented based on the fair value model. The fair values are determined based on qualified independent appraisers valuation based on discounted projected cash flows from the investment properties.

4. 	Accounting Policies (continued) 

(d)	Investment in marketable securities

Investment in shares is classified as available-for-sale and is carried at fair value. The fair value is estimated based on the value of shares on the Warsaw Stock Exchange at the balance sheet date. The gain or loss arising from the change in fair value is included in equity as “Net unrealised provision on investment in marketable securities” for the year in which it arises, until the asset is derecognised.

(e)	Investment in associates

Investment in associates is accounted for under the equity method. The investment is carried in the balance sheet at cost plus post acquisition changes in the Group share of net assets of the associate.

(f)	Investment in jointly controlled entity

The interest in a jointly controlled entity is accounted for by proportionate consolidation, which involves recognising a proportionate share of the joint ventures assets, liabilities, income and expenses with similar items in the consolidated financial statement on a line-by-line basis.

(g)	Land leases

The premium relating to the perpetual leaseholds of land consists of costs incurred on the acquisition of the land leases. The leases have a term of 95 or 99 years. The leases take the form of operating leases and hence the premium paid for the perpetual leaseholds of land represents a prepaid rental expense.

(h)	Lease origination costs

The costs incurred to originate a lease (mainly brokers fees) for available rental space are deferred until the date of revaluation of the related investment property to its fair value.

4. 	Accounting Policies (continued) 

(i)	Inventory

Inventory is stated at the lower of cost and net realisable value. Costs relating to the construction of a project are included in inventory as follows:
i.	costs incurred relating to phases of the project not available for sale; and
ii.	costs incurred relating to units unsold associated with a phase of the project that is available for sale.
Such costs include:
i.	leasehold rights for land or land, construction costs paid to subcontractors for the construction of housing units; and
ii.	capitalised costs, which include borrowing costs, planning and design costs, construction overheads and other related costs.

(j)	Advances received

Advances received (related to pre-sales of residential units) are deferred to the extent that they are not reflected as income as described below in note 4(m).

(k)	Rental revenue

Rental revenues from leases are recognised as income over the lease term.

(l)	Interest and dividend income

Interest income is recognised on an accrual basis. 

Dividend income is recognised when the shareholders’ right to receive payments is established. 

4. 	Accounting Policies (continued) 

(m)	Contract revenue and costs recognition

Contract revenues relate to the Company’s subsidiaries with respect to the residential units’ project. The projects have been divided into several phases of development. Revenue from pre-sales of units in respect of projects which were under construction but not completed in a particular year has been recognised as revenue in such a year only to the extent of the construction and related costs (i.e. “cost of sales”, as discussed below) incurred in respect of such units as at the end of the year.  Therefore, income from pre-sales recognised as revenues and cost of sales relating to such pre-sales in the year will be equal. Cost of sales in respect of remaining unsold units in a phase in a particular year is capitalised as inventory within current assets. An expected loss, if any, on a sale, is recognised as an expense immediately. However, profit is recognised when a significant part of the phase has been sold and the profit can be reliably estimated.

With respect to phases which were significantly completed and the profit can be reliably estimated (as described above) in a particular year, sales revenue (i.e. either by way of advances under a pre-sale agreement in that year or a one time payment for final sale agreements) received in such a year is matched with the total cost of sales incurred to complete the units sold, less any cost of sales in respect of such phase reported in the previous year. Inventory relating to units sold in a year is expensed as cost of sales in that year. 

Once profit is recognised, accrued income is recognised against sales for the difference between the total amounts of sales according to agreements to amounts that have been already collected.

(n)	Borrowing costs

Borrowing costs (including interest and foreign exchange differences) are accrued and expensed in the period in which they are incurred except to the extent they are directly attributable to construction.  In such a case, borrowing costs are capitalised as part of the cost of the asset.

Debt issuance expenses are deducted from the amount of debt originally recognised. These costs are amortised through the income statement over the estimated duration of the loan, except to the extent that they are directly attributable to construction. Debt issuance expenses represent an adjustment to effective interest rates. 

(o)	Share issuance expenses

Share issuance costs are deducted from equity (share premium), net of any related income tax benefits.

4.	Accounting Policies (continued) 

(p)	Income taxes

The current provision for corporate income tax for the Group companies is calculated in accordance with tax regulations ruling in particular country of operations and is based on the profit or loss reported under relevant tax regulations. 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Deferred tax assets and liabilities are measured using the tax rates enacted to taxable income in the years in which these temporary differences are expected to be recovered or settled.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which each company of the Group expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets are recognised when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be utilised. 

At each balance sheet date, the Group companies re-assess unrecognised deferred tax assets and the carrying amount of deferred tax assets. The companies recognise a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 

The companies conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised.

(q)	Foreign exchange differences

Transactions denominated in a foreign currency (including Polish Zloty) are recorded in US Dollars at the actual exchange rates prevailing at the date of the transaction.  Monetary assets and liabilities denominated in foreign currencies are revalued at period-end using period-end exchange rates. Foreign currency translation differences are charged to the income statement.

4.	Accounting Policies (continued)

(r)	Financial instruments

All financial assets and financial liabilities are recognised on the balance sheet date. All these financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given or received to acquire the financial asset or liability. All purchases of financial assets (whose delivery time is regulated in the market) are accounted at trade date.

The table below presents the measurement categorisation of financial assets and liabilities:

Category		Balance sheet item		Measurement
	
Financial assets
					
Held for trading		Cash and cash equivalent
		Fair value	
Held to maturity
		Short-term investments, deposits and financial assets
		Amortised costs	
Loans and receivables originated by the enterprise		Trade and other debtors 		Amortised costs
	
Available-for-sale financial assets		Investment in marketable securities		Fair value	
Trade and other receivables		Short term and long term receivables		Amortised costs
	
Financial Liabilities
					
Trade and other payables	
		Other payables		Amortised costs
	
		Loans		Amortised costs	
		Credit line		Amortised costs
	
		Long term payables		Amortised costs
	
Derivatives
					
Held for trading		Interest Rate Swap		Fair value- adjusted to income statements	
Hedging 		Interest Rate Swaps 		Fair value- adjusted to equity	
Held for trading		Interest Rate collars		Fair value- adjusted to income statements	

4.	Accounting Policies (continued)

The Group recognises a financial asset and financial liability in its balance sheet, when and only when, it becomes a party to the contractual provisions of the instrument. The derecognizing takes place when the Company no longer controls the contractual rights that comprise the financial instrument. The carrying value of these financial instruments in the accompanying financial statements, except for long-term loans, is short term in nature. As a result their current carrying value approximates their fair value. The carrying value of long term loans bearing variable rate approximates their fair value as the rate is linked to the market.

The fair value of loans bearing fixed interest rates is higher than the value  at amortised cost presented in these financial statements by c.a. USD 4.8 million. Underlying financial instruments are described in note 25. 

(s)	Cash and cash equivalents

Cash comprises cash on hand and on-call deposits. Cash equivalents are short-term highly liquid investments that readily convert to a known amount of cash and which are subject to insignificant risk of changes in value.

(t)	Trade and other receivables

Trade receivables are carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts allowance is made when collections of the full amount is no longer probable, based on historical collection patterns or alternatively having regard to the age of the receivable balances. 

 (u)	Impairment of assets 

The carrying value of assets is periodically reviewed by the Management to determine whether impairment may exist. Based upon its most recent analysis management believes that any material impairment of assets that existed at the balance sheet date, was reflected in these financial statements.
Goodwill impairment is tested annually. Impairment is determined by assessing the recoverable amount of the cash generating unit, to which the goodwill relates.

4. 	Accounting Policies (continued) 

(w)	Purchase of shares of minority

If the Company increase/decrease its share in the net assets of its controlled subsidiaries, the appropriate share of the net assets is transferred from the minority interest to the proper component of the equity attributable to equity holders of the parent.

If the Company increases/decreases its share in the net assets of its controlled subsidiaries, the excess of the cost over the acquirer’s interest in the net asset is recognised as goodwill. Impairment of goodwill is tested annually.

(x) 	Derivatives

The Group uses interest rate swaps and collars to hedge its risks associated with interest rate volatility (cash flow hedges).

In relation to the instruments, which meet the conditions of Cash Flow hedges, the portion of gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in net profit or loss.

Hedge accounting is discontinued when the hedging instrument expires, or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point of time, any cumulative gain or loss recognised in equity is transferred to net profit or loss for the year.

For derivatives that do not qualify for hedge accounting, any gain or losses arising from changes in fair value are recorded directly to net profit and loss of the year.

(y)	Estimations

	The preparation of financial statements in accordance with International Financial Reporting Standards requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at balance date. The actual results may differ from these estimates.

4.	Accounting Policies (continued)

(z)	Basis of Consolidation

The consolidated financial statements comprise the financial statements of GTC S.A and its subsidiaries prepared using consistent accounting policies.
	
Control is presumed to exist when the Company owns, directly or indirectly through its subsidiaries, more than half of the voting rights of a given entity, unless it can be clearly demonstrated that such ownership does not constitute control. Control is also exercised where the Group has power to govern the financial and operating policies of an entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. 

All inter-company balance and transactions have been eliminated. 

 (aa) 	Provisions

Provisions are recognised when the Company has present obligation, (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. 

(ab)	Share-based payment transactions

Employees (including directors) of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares. 
The cost of equity-settled transactions with employees is measured by reference to the share value at the date at which they were granted. The fair value is determined by the share price at the granting date. 

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired.

4. 	Accounting Policies (continued) 

(ac)	New accounting pronouncements 

In December 2004, the IASB issued IFRS 6 “Exploration for and Evaluation of Mineral Resources” (“IFRS 6”). The new standard should be applied for annual periods beginning on or after 1 January 2006. The new standard is not applicable to the Company.

In August 2005, the IASB issued IFRS 7 “Financial Instruments: Disclosures”. The new standard should be applied for annual periods beginning on or after 1 January 2007. The new standard issued will not impact the Company’s financial position and results in the future as it relates to disclosure only.

In December 2004, the IASB issued IFRIC 4 “Determining Whether an Arrangement Contains a Lease” and IFRIC 5 “Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds”. The new interpretations should be applied for annual periods beginning on or after 1 January 2006. The Company expects that these new interpretation will not impact the financial position and results.

In September 2005, the IASB issued IFRIC 6 “Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment”. The new interpretation should be applied for periods beginning on or after 1 December 2005. The Company expects that these new interpretation will not impact the financial position and results.

In November 2005, the IASB issued IFRIC 7 “Financial Reporting in Hyperinflationary Economies”. The new interpretation should be applied for annual periods beginning on or after 1 March 2006. The Company expects that these new interpretation will not impact the financial position and results.

In January 2006, the IASB issued IFRIC 8 “Scope of IFRS 2”. The new interpretation should be applied for annual periods beginning on or after 1 May 2006. The Company expects that these new interpretation will not impact the financial position and results.

5.	Investment in Subsidiaries, Associates and Joint Ventures 

The consolidated financial statements include the financial statements of the Company, its subsidiaries and jointly controlled entity listed below together with direct and indirect ownership of these consolidated subsidiaries as at the end of each period:

Name	Holding Company	Country of
 incorporation	31 December 2005 **	31 December 2004 **	
GTC Mars Sp. z o.o. („GTC Mars”)	GTC S.A	Poland	100%	100%	
GTC Galeria Sp. z o.o. („GTC Galeria") (***)	GTC S.A	Poland	-	100%	
GTC Taurus Sp. z o.o. („GTC Taurus")	GTC S.A	Poland	100%	100%	
GTC CH Galeria Sp. z o.o („GTC CH Galeria”) (****)	GTC S.A	Poland	100%	100%	
Darat Sp. z o.o. („Darat”)	GTC S.A	Poland	100%	100%	
GTC Konstancja Sp. z o.o. („GTC Konstancja”)	GTC S.A	Poland	100%	100%	
GTC Korona S.A („GTC Korona”)	GTC S.A	Poland	100%	100%	
Globis Poznań Sp. z o.o („Globis Poznan”)	GTC S.A	Poland	100%	75%	
GTC Alp Sp. z o.o (formerly „GTC Topaz”), („GTC Alp”)	GTC S.A	Poland	-	100%	
GTC Vega Sp. z o.o. („GTC Vega”)	GTC S.A	Poland	100%	100%	
GTC Aeropark Sp. z o.o. („GTC Aeropark”)	GTC S.A	Poland	100%	100%	
GTC Topaz Office  Sp. z o.o. („GTC Topaz Office ”)	GTC S.A	Poland	100%	100%	
Globis Wroclaw Sp. z o.o („Globis Wroclaw”)	GTC S.A	Poland	100%	75%	
GTC Galeria Kazimierz Sp. z o.o. (formerly „GTC Merkury”) („GTC Galeria Kazimierz”)	GTC S.A	Poland	100%	100%	
GTC Orion Sp. z o.o. („GTC Orion”)	GTC S.A	Poland	100%	100%	
GTC Satellite Sp. z o.o. („GTC Satellite”) (formerly “GTC Saturn”)	GTC S.A	Poland	100%	100%	
GTC Sonata Sp. z o.o. („GTC Sonata ”)	GTC S.A	Poland	100%	100%	
GTC Platinium Sp. z o.o. („GTC Platinium”)	GTC S.A	Poland	100%	100%	
Rodamco CH1 Sp. z o.o. („Rodamco CH1”)*	GTC CH  Galeria	Poland	50%	50%	
GTC Com 1 Sp. z o.o. („GTC Com 1”)	GTC S.A	Poland	100%	100%	
GTC Com 2 Sp. z o.o. („GTC Com 2”)	GTC S.A	Poland	100%	100%	
GTC Galeria CTWA  Sp. z o.o. („Galeria CTWA ”)	GTC S.A	Poland	100%	100%	
GTC Hungary Real Estate Development Company Ltd. (“GTC Hungary”)	GTC S.A	Hungary
	97.5%	65.6%	
Vaci Ut 81-85 Ltd.	GTC Hungary	Hungary	97.5%	65.6%	
Riverside Apartments Ltd. (“Riverside”)	GTC Hungary	Hungary	97.5%	65.6%	
Vector-H Ltd.	GTC Hungary	Hungary	97.5%	65.6%	
INVentures Vagyonkezelő Kft.	GTC Hungary	Hungary	97.5%	-	
Residential Auto Kft.	GTC Hungary	Hungary	97.5%	-	
Office Auto Kft.	GTC Hungary	Hungary	97.5%	-	
Center Point I. Ltd. (“Center Point I”)	GTC Hungary	Hungary	97.5%	65.6%	
Center Point II. Ltd. (“Center Point II”)	GTC Hungary	Hungary	97.5%	65.6%	
River Loft Ltd.	GTC Hungary	Hungary	97.5%	65.6%	
GTC Real Estate Investments Romania B.V. (“GTC Romania”)	GTC S.A	Netherlands	94.6%	54.4%	
Complexul Multifunctional Victoria S.R.L	Titulescu Investments B.V	Romania	94.6%	54.4%	
Arura Business Complex S.R.L	GTC Romania	Romania	94.6%	-	
Jasmin  residential Complex S.R.L	GTC Romania	Romania	94.6%	-	
Towers International Property S.R.L	GTC Romania	Romania	94.6%	54.4%	
International Hotel and Tourism S.R.L	GTC Romania	Romania	94.6%	54.4%	
International Shopping Centre S.R.L	GTC Romania	Romania	94.6%	54.4%	
Titulescu Investments B.V (“Titulescu”)	GTC Romania	Romania	94.6%	54.4%	
GTC Real Estate Investments Serbia B.V. (“GTC Serbia”)	GTC S.A	Netherlands	97.5%	65.6%	
GTC Business Park Doo	GTC Serbia	Serbia and
Montenegro (Serbia)	97.5%	65.6%	
GTC Commercial Centres Doo	GTC Serbia	Serbia and
Montenegro (Serbia)	97.5%	65.6%	
GTC Real Estate Developments d.o.o.	GTC Commercial Centres Doo	Serbia and Montenegro (Serbia	97.5%	-	
GTC International Development Doo	GTC Serbia	Serbia and
Montenegro (Serbia)	97.5%	65.6%	
GTC Real Estate Investments Croatia BV („GTC Croatia”)	GTC S.A	Netherlands	97.2%	82.5%	
Euro Structor d.o.o.	GTC Croatia	Croatia	68.0%	57.8%	
GTC Nekretnine Zagreb d.o.o.(“GTC Zagreb”)	GTC Croatia	Croatia	97.2%	82.5%	
* Proportionate consolidation.
** Share of GTC.
***On 9 September 2005, the company was merged with GTC and ceased to exist.
(****) As of 31 December 2004 the company held by GTC Galeria

5.	Investment in Subsidiaries, Associates and Joint Ventures 

Investment in Associates

The Company has a 31.6% interest in the following associates:

Lighthouse Holdings Limited S.A. (“Lighthouse”)
Vokovice BCP Holding S.A. (“Vokovice”)
Holesovice Residential Holdings S.A. (“Holesovice”)
CID Holdings Limited S.A. (“CID”)

The above associates hold from 87.5% to 95.5% in companies which are involved in real estate development in Czech Republic (see note 18).

6.	Projects description 

The Company is developing, and leasing or selling space to commercial and individual tenants, through its direct and indirect investments in subsidiaries, joint ventures and associates. 

Current projects in different stages of development are described in the tables below:

Completed projects

Country	Property	Total rentable/saleable space (sq.m)	Details	
Poland  	Mokotow Business Park 	107,200	Nine office buildings in Warsaw	
	Galeria Kazimierz	36,200	Shopping centre in Krakow	
	Galeria Mokotow	58,600	Shopping centre in Warsaw	
	Galileo office building	10,300	Office building in Krakow	
	Globis Poznan office building	13,000	Office building in Poznan	
	Konstancja Residential phase 1 (fully sold during year 2005)	17,500	Residential project in Konstancin	
Hungary 	Center Point I	18,600	Office building in Budapest	
	Riverside 1 residential project (over 95% has been sold)		Residential project in Budapest	
		33,500		
Serbia	GTC House- Office	13,500	Office building in Belgrad	
Czech	Lighthouse Towers	27,140	Office building in Prague	

6.	Projects description (continues)

Projects under construction / to be constructed

 	Property	Estimated Net Rentable/Saleable space (sq.m)	Details	
Country				
Poland	Wroclaw	12,300	Office building in Wroclaw	
	Newton	10,000	Office building in Krakow	
	Galileo offices	13,000	Office buildings in Krakow	
	Kazimierz Hotel+office	24,000	Commercial project in Krakow	
	Vega	18,500	Office building in Warsaw	
	Topaz building	11,100	Office building in Warsaw	
	Nefrit building	15,300	Office building in Warsaw	
	Land plot	23,000	Residential projects in Krakow	
	Galeria Czestochowa	49,800	Shopping center in Czestochowa	
	Konstancja Residential phase 2	16,000	Residential project in Konstancin	
	Konstancja Residential other phases 	31,000	Residential project in Konstancin	
	Sattelite office park	40,000	Commercial project in Warsaw	
	Konstancja Residential phase 3	8,400	Residential project in Konstancin	
	Konstancja Commercial	42,000	Commercial project in Konstancin	
	Aeropark (6 buildings)	59,500	Commercial project in Warsaw	
Hungary 	Centre Point Phase II	23,000	Office project in Budapest	
	District 11	42,000	Residential project in Budapest	
	Spiral	39,000	Office building in Budapest	
	Riverloft – Residential 	13,500	Residential project in Budapest	
	Riverloft – Commercial 	5,800	Commercial project in Budapest	
Czech	Bess	7,500	Office building in Prague	
	 Green City	88,000	Residential project in Prague	
	 Prague marine	115,000	Residential project in Prague	
	Sarka BP	23,400	Vokovice (existing logistic center  to be converted into residential project	
Romania	Galeria Bucharest	54,000	Shopping centre in Bucharest	
	 Jasmin/Aurora	58,900	Residential and office project in Bucharest	
	 Red roads	58,500	Residential project in Bucharest	
	Green Dream 	24,800	Residential project in Bucharest	
	America House 	26,000	Office building in Bucharest	
Serbia	Block 19a	29,800	Residential and office project	
Croatia 	Avenue mall	32,800	Shopping and office centre in Zagreb	

There is no seasonality in the business of the Group companies.

7.	Events in the period

In February 2005, GTC Romania, through one of its subsidiaries, International Hotel and Tourism SRL, signed an agreement for the purchase of a land plot of 120,000 sq.m. in Bucharest, Romania for a total consideration of EUR 15.5 million. The land, located in a prime location in the northern part of Bucharest will be developed into a major shopping center, office and residential complex. 

On 3 March 2005, the Company purchased from Orbis 2,000 shares in Globis Poznan and 25 shares in Globis Wrocław constituting 25% of their share capital. After the transaction the Company owns 100% of the share capital of Globis Poznan and Globis Wrocław.
On 16 March 2005, Galeria Kazimierz shopping centre was successfully completed and opened to public. 
On 7 April 2005 the Regional Court in Warsaw updated the National Court Register entry concerning the share capital, which increased up to 19,964,841 PLN.

On 9 May 2005 the Company executed with T.U. Allianz Polska Sp. z o.o. preliminary Sale of Shares Agreement of 43,511 shares of the company GTC Alp with the total nominal value of 21,755,500 PLN representing 100% of the share capital and votes on the Shareholders Meeting of GTC Alp.

The final sale agreement was signed on 29 December 2005 (see note 29).

On 19 May 2005 GTC  Galeria CTWA signed a preliminary agreement for the acquisition of a land plot of 90,000 sq.m. in Czestochowa, Poland. GTC Poland intends to develop the land into a third generation shopping centre. The completion of the transaction is subject to certain conditions, as stipulated in the preliminary agreement.

In September 2005, GTC House, an office building in Belgrad was successfully completed.

On 20 September 2005, GTC and other shareholders of GTC Hungary, GTC Serbia and GTC Romania bought the shares from FIC Globe B.V. (see note 28).

On 30 November 2005, GTC and other shareholders of Romania bought the shares from Firestorm (see note 28).

On 15 December 2005, GTC and other shareholders of GTC Hungary, GTC Serbia GTC Croatia and GTC Romania bought the shares from A.D.R.I (see note 28).

7.	Events in the period (continued)

On 6 December 2005, GTC signed with Accor an agreement, according to which, GTC sold Orbis shares to Accor. The transaction was completed on 14 December 2005 (see note 17).

On 28 December 2005, GTC Sonata purchased a land plot in Krakow, Poland. The land will be developed into a residential complex. 

On 21 December 2005, GTC and Fellstone Limited signed a conditional Preliminary Share Purchase Agreement for the sale of 50% stake in the company that holds Galeria Kazimierz shopping centre. According to the agreement, GTC will continue to manage the shopping centre. 

On 14 December 2005, GTC Hungary completed the acquisition of the Spiral Commercial Centre project. As part of the transaction, GTC Hungary acquired two companies, which owns two office buildings. Presently, the existing buildings are partly leased. It is planned that the existing buildings will continue to generate income during the development period to the extent feasible and gradually be demolished to facilitate the new office development.

8. 	Revenue from operations

Revenue from operations comprises the following:

	Year ended 31 December 2005
	Year ended 31 December 2004

Office and commercial revenue	70,417	49,542	
Residential revenue	25,222	6,825	
	95,639	56,367	

	The Company has entered into various operational lease contracts with tenants related to properties in Poland, Romania, Croatia, Serbia, and Hungary. The aggregate amount of contracted future rental income amounts to approximately USD 272 million, of which approximately 18% is due within one year and 24% is due after five years.

	The majority of revenue from operations is earned predominantly on the basis of amounts denominated in, directly linked to or indexed by reference to the US Dollar.

9. 	Cost of operations

Costs of operations comprise the following:

	Year ended 31 December 2005
	Year ended 31 December 2004

Cost of office and commercial operations	19,404	14,975	
Residential costs	19,177	6,094	
	38,581	21,069	

10. 	Selling expenses

Selling expenses comprise the following:

	Year ended 31 December 2005
	Year ended 31 December 2004

Brokerage and similar fees 	331	480	
Advertising	2,734	1,056	
Payroll and related expenses	387	302	
	3,452	1,838	

11. 	Administration expenses

Administration expenses comprise the following:

	Year ended 31 December 2005
	Year ended 31 December 2004

			
Payroll and related expenses	2,604	1,753	
Management fees, office and other expenses	2,256	1,580	
Audit, legal and other advisers	1,671	860	
Shopping centre management fee	387	378	
Depreciation and amortisation	204	110	
	7,122	4,681	

12. 	Financial income /(expense), net

Financial income /(expense), net, comprise the following:

	Year ended 31 December 2005
	Year ended 31 December 2004

Interest income	                    3,582 	4,443	
Interest expense	                 (22,227)	(19,671)	
Other financial income/(expense)	                         -   		
- amortisation of deferred financial costs	                      (977)	(937)	
- change in fair value of financial instruments	                      (246)	665	
-dividend received	                       231 	224	
	                 (19,637)	(15,276)	

13.	Segmental analysis   

The Group’s business activities, which are the primary segments, can be categorised into two main segments:

1.	Development and rental of office space and shopping malls (“office and commercial”) and
2.	Development and sale of houses and apartment units (“residential”).

	The Group’s activities are located in Poland, Hungary, Romania, Croatia, Serbia and Montenegro.

	Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and property, plant and equipment, net of allowances and provisions. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. 
	Segment liabilities include all operating liabilities and consist principally of accounts payable, wages, and taxes currently payable and accrued liabilities. 

13.	Segmental analysis (continued)   

	Segment analysis for the years ended 31 December 2005 and 31 December 2004 is presented below:
	
	Poland	Hungary	Romania	Serbia	Croatia	Consolidated	
	31 December 2005	31 December 2004	31 December 2005	31 December 2004	31 December 2005	31 December 2004	31 December 2005	31 December 2004	31 December 2005	31 December 2004	31 December 2005	31 December 2004	
  Rental result  	64,781	47,075	4,087	2,467	-	-	1,265	-	284	-	70,417	49,542	
  Residential income  	21,038	4,312	4,184	2,513	-	-	-	-	-	-	25,222	6,825	
  Total income  	85,819	51,387	8,271	4,980	-	-	1,265	-	284	-	95,639	56,367	
													
  Office and commercial costs  	18,123	14,306	1,036	669	-	-	245	-	-	-	19,404	14,975	
  Residential costs  	14,999	4,164	4,178	1,930	-	-	-	-	-	-	19,177	6,094	
  Total costs  	33,122	18,470	5,214	2,599	-	-	245	-	-	-	38,581	21,069	
													
  Office and commercial result  	46,658	32,769	3,051	1,798	-	-	1,020	-	284	-	51,013	34,567	
  Residential result  	6,039	148	6	583	-	-	-	-	-	-	6,045	731	
  Total result  	52,697	32,917	3,057	2,381	-	-	1,020	-	284	-	57,058	35,298	
													
  Unallocated corporate expenses  	-	-	-	-	-	-	-	-	-	-	(12,176)	(9,014)	
  Revaluation of investment property, net impairment of fixed assets – office and commercial 	136,618	6,203	4,171	17,043	-	-	10,112	-	-	-	150,901	23,246	
  Profit from continuing operations	-	-	-	-	-	-	-	-	-	-	195,783	49,530	
  Foreign currency translation gain (loss), net  	-	-	-	-	-	-	-	-	-	-	(2,459)	5,062	
 Profit from sell of marketable securities 											4,091		
  Interest income  	-	-	-	-	-	-	-	-	-	-	3,582	4,443	
  Other interest expense and similar charges, net   	-	-	-	-	-	-	-	-	-	-	(23,219)	(19,719)	
  Equity profit  											533	1,456	
  Taxation  	-	-	-	-	-	-	-	-	-	-	(34,248)	170	
  Profit for the year  	-	-	-	-	-	-	-	-	-	-	144,063	40,942	
  Minority interest  	-	-	-	-	-	-	-	-	-	-	3,918	4,933	
  Equity holders of the parent  	-	-	-	-	-	-	-	-	-	-	140,145	36,009	
													
  Segment assets  													
  Allocated assets office and comercial  	702,328	584,507	94,507	57,178	53,523	9,578	37,261	21,822	20,696	7,246	908,315	680,331	
  Allocated assets residential  	16,126	20,281	14,918	14,925	382		9,644				41,070	35,206	
  Unallocated corporate assets  	100,518	114,701	7,000	16,594			1,561				109,079	131,295	
  Consolidated total assets  	818,971	719,489	116,425	88,697	53,905	9,578	48,466	21,822	20,696	7,246	1,058,463	846,832	
  Segment liabilities  													
  Allocated liabilities office and commercial  	24,875	33,226	3,351	8,904	32,345	1,192	10,316	10,785	8,716	1,323	79,603	55,430	
  Allocated liabilities residential  	2,159	4,586	2,426	3,137			316				4,901	7,723	
  Unallocated corporate liabilities  	338,505	276,536	76,343	56,810		7,606	12,712	10,201		6,192	427,560	357,345	
  Consolidated total liabilities  	365,539	314,348	82,120	68,851	32,345	8,798	23,344	20,986	8,716	7,515	512,064	420,498	
  Capital expenditures  	61,273	52,459	24,827	9,804	33,766	8,154	8,058	7,451	8,636	111	136,560	77,979	
  Depreciation of fixed asset  	147	110	55		15		11		13		241	110	
  Non cash expenses other than depreciation  		383									-	383	

14. 	Taxation

The major components of tax expense are as follows:

 	Year ended 31 December 2005
	Year ended 31 December 2004
(restated)	
			
Current tax expense	5,632	1,110	
Tax related to previous years	-	1,766	
Deferred tax (credit)/expense	28,616	(2,706)	
 	34,248	(170)	

The Group companies pay taxes in the following jurisdictions: Poland, Serbia, Romania, Hungary, Netherlands, Luxemburg and Croatia. The Group does not constitute a tax group under local legislation. Therefore every company in the Group is a separate taxpayer.

14. 	Taxation (continued)

The reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rates is presented below:

		Year ended 31 December 2005
		Year ended 31 December 2004
(restated)	
				
Accounting profit before tax 	178,318		40,772	
					
Accounting profit at the applicable tax rate in each country of activity	32,682		7,109	
Tax effect of expenses/(income) that are not deductible in determining taxable profit	1,321
		397	
Share of profit in associates	(101)		(277)	
Tax effect of foreign currency differences 	373		(9,767)	
Tax related to previous years	-		1,766	
Unrecognised deferred tax asset	(27)		602	
					
Tax expense / (income)	34,248		(170)	

14. 	Taxation (continued)

The components of the deferred tax balance were calculated at a rate applicable when the Group expects to recover or settle the carrying amount of the asset or liability.

Deferred tax assets comprise the following:

 	  As of 1 January 2004  	Consolidation of new acquired subsidiaries  	  Credit / (charge) to equity  	  Credit / (charge) to income statement   	  As of  31 December 2004  	  Credit / (charge) to equity  	  Credit / (charge) to income statement  	  Foreign exchange differences  	  As of  31 December 2005  	
										
Deferred tax assets    		 			 				 	
 Financial instruments  	2,842	-	403	871	4,116		(1,943)		2,173	
Impairment of assets							1,971		1,971	
Tax loss carry forwards    	1,028	863	-	931	2,822		150		2,972	
    Other    	-	83	-	(26)	57		(57)			
Deferred tax liabilities    										
Deferred taxation on revaluation    	-	-	-	(203)	(203)		203			
 Basis differences in fixed assets    	(1,269)	247	-	71	(951)		994		43	
    Depreciation     	(6)	-	-	(174)	(180)		180			
 Basis differences in inventory    	(541)	-	-	(131)	(672)		(203)		(875)	
  Other  	-	-	-	(1)	(1)		(69)		(70)	
Total    	2,054	1,193	403	1,338	4,988		1,226		6,214	
    Valuation reserve    	(2,054)	-	-	(602)	(2,656)		27		(2,629)	
Net deferred tax assets  	-	1,193	403	736	2,332		1,253		3,585	

14. 	Taxation (continued)

Deferred tax liability comprises the following:

 	 As of 1 January 2004 
 	 Consolidation of new  acquired subsidiaries 	 Credit / (charge) to income statement 	 Credit / 
 (charge) to equity 	 As of 31 December 2004 	 Credit / (charge) to income statement 	 Credit / 
 (charge) to equity 	  Foreign exchange differences  	 As of 31 December 2005 	
Deferred tax assets   	 									
Deferred taxation on impairments of fixed asset   	1,971	-	-	-	1,971	(1,971)			-	
 Tax loss carry forwards   	1,248
	-	1,032	561	2,841	(238)			2,603	
Other   	11	-	(685)	-	(674)	507			(167)	
Deferred tax liabilities   										
Financial instruments 	(1,412)	(564)	9,002	-	7,026	(16,849)	(1,841)	175	(11,489)	
Deferred taxation on revaluation   	(4,395)	(1,561)	(3,898)	-	(9,854)	(19,491)		709	(28,636)	
Basis differences in fixed assets   	-	-	-	-	-	11,081			11,081	
 Depreciation    	(8,765)	-	(2,633)	-	(11,398)	(2,717)			(14,115)	
Basis differences in inventory	(65)	-	65	-	-	(191)			(191)	
Total   	(11,407)	(2,125)	2,883	561	(10,088)	(29,869)	(1,841)	884	(40,914)	
Valuation reserve   	-	-	-	-	-					
Net deferred tax liability   	(11,407)	(2,125)	2,883	561	(10,088)	(29,869)	(1,841)	884	(40,914)	

The enacted tax rates in the various counties were as follows:

Tax rate	Year ended 31 December 2005	Year ended 31 December 2004	
Poland	19%	19%	
Hungary	16%	16%	
Serbia	10%	10%	
Croatia	20%	20%	
Romania	16%	25%	
Netherlands	35%	35%	

14. 	Taxation (continued)

Taking into consideration the structure of the Group, the tax base of some investment properties is higher than its original historic costs. Accordingly no deferred tax liability is required on the difference between the tax base and historic costs of those assets. 

Future benefit for deferred tax assets have been reflected in these consolidated financial statements only if it is probable that taxable profits will be available when timing differences that gave rise to such deferred tax asset reverse. 

The Group has contributed organised parts of its business, which comprise of certain office buildings, a shopping centre and associated assets and liabilities into certain subsidiaries. In accordance with local regulations, the contributed buildings were revalued as of the date of contribution. The revalued amounts now form the tax base for these assets in the subsidiaries. 

If the Company sells all of the shares in those subsidiaries, the cost that will be deductible for tax purposes will be the net historical cost of the contributed items prior to the revaluation and in such a case the tax liability that would arise at that date is estimated at $ 51 million. The Company has no present intention to sell the shares of those subsidiaries, and therefore did not recognised the related liability.

Regulations regarding VAT, corporate income tax and social security contributions are subject to frequent changes.  These frequent changes result in there being little point of reference and few established precedents that may be followed. The binding regulations also contain uncertainties, resulting in differences in opinion regarding the legal interpretation of tax regulations both between government bodies, and between government bodies and companies. Tax settlements and other areas of activity (e.g. customs or foreign currency related issues) may be subject to inspection by administrative bodies authorised to impose high penalties and fines, and any additional taxation liabilities calculated as a result must be paid together with high interest. The above circumstances mean that tax exposure is greater in the Group’s countries than in countries that have a more established taxation system.  

Tax settlements may be subject to inspections by tax authorities. Accordingly the amounts shown in the financial statements may change at a later date as a result of the final decision of the tax authorities.

14. 	Taxation (continued)

The Group companies have deferred tax assets on losses carried forward as of 31 December 2005 available in the amount of USD 5,575 thousand which, if not utilised, expire as follows:

a.	Deferred tax asset on tax loss amounting to USD 112 thousand may be utilised in any year.
b.	Deferred tax asset on tax loss amounting to USD 2,018 thousand may be utilised until 2010.
c.	Deferred tax asset on tax loss amounting to USD 1,800 thousand may be utilised until 2009.
d.	Deferred tax asset on tax loss amounting to USD 1,090 thousand may be utilised until 2008.
e.	Deferred tax asset on tax loss amounting to USD 291 thousand may be utilised until 2007.
f.	Deferred tax asset on tax loss amounting to USD 264 thousand may be utilised until 2006.

15.	Property, Plant and Equipment 

The movement in property, plant and equipment for the periods ended 31 December 2005 and 31 December 2004 was as follows:

	Buildings	Land improvement	Equipment	Vehicles	Construction
in Progress (*)	Total	
Cost 							
As at 1 January 2004	261	49	3,337	209	46,543	50,399	
Acquisition of subsidiaries 	-	-	156	95	36,530	36,781	
Additions/(transfers),net	-	-	208	166	86,431	86,805	
Translation differences	-	-	-	-	8,683	8,683	
							
As at 31 December 2004 	261	49	3,701	470	178,187	182,668	
							
Accumulated Depreciation							
As at 1 January 2004	7	2	3,164	121	-	3,294	
Acquisition of subsidiaries	-	-	73	53	-	126	
Charge for the year	5	5	46	54	-	110	
							
As at 31 December 2004 	12	7	3,283	228	-	3,530	
							
Net book value as at 
31 December 2004 	249	42	418	242	178,187	179,138	
							
Cost 							
As at 1 January 2005	261	49	3,701	470	178,187	182,668	
Additions / (transfers), net			           311 	        180 	         125,751 	    126,242 	
Disposals and other decreases		           (49)		         (72)		         (121)	
Transfers to other assets	(261)				(135,043)	(135,304)	
Foreign exchange differences					         (19,558)	     (19,558)	
							
As at 31 December 2005	                     - 	              - 	        4,012 	        578 	         149,337 	    153,927 	
							
Accumulated Depreciation							
As at 1 January 2005	          12 	            7 	        3,283 	        228 	                   - 	       3,530 	
Charge for the year	                    2 		           164 	          75 		          241 	
Transfers to other assets	         (14)					           (14)	
Disposals		             (7)		         (72)		           (79)	
							
As at 31 December 2005	            - 	- 	        3,447 	        231 		       3,678 	
							
Net book value as at  
31 December 2005	-	-	           565 	        347 	         149,337 	    150,249 	

(*) As of 31 December 2005 and 31 December 2004, construction in progress includes amounts of USD 53,770 thousand (USD 22,391 thousand in freehold rest in leases) and USD 72,596 (USD 34,042 thousand in freehold rest in leases) thousand representing land in projects in various development stages. 

15.	Property, Plant and Equipment (continued)

Borrowing costs capitalised during the course of construction include mainly interest on funds borrowed to finance construction as indicated below:

Year 2004	2,046	
Year 2005	4,166	

.

	16.	Investment Property 

The investment properties that are owned by the Group are office and commercial space. The movement in investment property for the periods ended 31 December 2005 and 31 December 2004 was as follows:

Fair value as of 1 January 2004	373,996	
		
Additions , including:		
 - Acquisition of subsidiaries	35,123	
 - Capitalised subsequent expenditure	2,985	
 - Accrued income (lease incentives granted)	1,642	
 - Brokers fees	1,298	
Adjustment to fair value	23,246	
Transfers to other assets	(546)	
Disposals	(500)	
Translation differences	5,707	
		
Fair value as of 31 December 2004	442,951	
		
Additions , including:		
 - Capitalised expenditure	142,365	
- Other expenses	282	
 - Brokers fees and other incentives	5,679	
Adjustment to fair value 	150,901	
Disposals	(39,617)	
Translation differences	(19,633)	
Fair value as of 31 December 2005	682,928	

There were no investment properties that did not generate rental income during the year.

17.	Investment in marketable securities

The whole amount of the marketable securities as of 31 December 2004 related to Orbis shares. Orbis shares constituted a long term investment classified according to IAS 39 as available for sale financial asset.

On July 26, 2000 a consortium, of which the Company is a member, purchased from the Ministry of Treasury 35,37% stake in Orbis S.A. Apart from GTC, the consortium includes Accor and FIC Globe LLC (a shareholder of the Company at the transaction date). According to the agreement GTC purchased 2,303,853 shares (5% of the Orbis share capital).

On 6 December 2005, the Company signed sale agreement with Accor, according to which Accor bought Orbis shares from the Company. The sale price was PLN 32 (USD 10) per share.
The transaction was completed on 14 December 2005.
The profit on this transaction amounted to USD 4,091 thousand.

18.	Investment in associates

The investment in associates comprises the following:

	31 December 2005
	31 December 2004 	
			
Shares	6,308	6,305	
Translation differences	164	(41)	
Equity profit	1,989	1,456	
Investment in associates	8,461	7,720	

Selected financial information of the associates comprises the following:

	31 December 2005 	31 December 2004	
 			
Assets	          101,274 	           80,003 	
Liabilities	           92,991 	           77,650 	
Revenues from operations	             4,441 	             2,978 	
Profit for the period	             1,686 	             4,605 	

The Company granted loans to its associates. As of 31 December 2005 and 31 December 2004, the loans amounted to USD 11,066 thousand and USD 10,618 thousand respectively. The loans finance investments in those associates. The loans do not have specified maturity date The loans are denominated in EUR with the interest based on EURIBOR plus margin.

19. 	Other non-current assets

	Included within other non-current assets are the following:

	31 December 2005
	31 December 2004 	
			
Lease origination costs	624	4,789	
Deferred debt expenses (*)	451	561	
	1,075	5,350	
        (*)Expenses related to loan that has not been drawn-down. 

20.	Accrued income and other receivables

Accrued income consists of the following:

	31 December 2005
	31 December 2004 	
			
Sale of residential units	1,711	450	
Sale of subsidiary (*)	26,505	-	
Services and other	963	1,265	
	29,179	1,715	
(*) The amounts relates to sale of GTC Alp (see note 29)

21. 	Derivatives
	
The Company has the following derivatives: 

Party	Loan hedged	Commence	Expiration date	Interest rate on bank loan (swapped)	Interest to be paid by the Company	Accounting treatment	
EUROHYPO (*)	Loan from EUROHYPO(GTC Alp)	January 2006	December 2007	Floating	Cap 3.98% 	Directly to Equity
	
		January 2008	December 2011		Collar 3.5%-4.7%	Profit and Loss	
EUROHYPO	Loan from EUROHYPO (GTC Topaz offices)	January 2006	December 2007	Floating	Cap 3.5% 	Directly to Equity
	
		January 2008	December 2011		Collar 3.2%-4.1%	Profit and Loss	
Aareal bank	Loan from Aareal (GTC Galeria Kazimierz)	April 2005	March 2007	Floating	Fixed 3.32% 	Directly to Equity
	
		April 2007	March 2011		Collar 3.25%-5.5%	Profit and Loss	
Deutsche Bank	Loan from BPH Bank (GTC Mars)	December 2001	July 2006	Fixed	Floating	Profit and Loss	

(*) The instrument was disposed as part of the sale of GTC Alp (see note 29)

22.	Short-term deposits

Short-term deposits can be used specifically for certain operating activities as determined by specific loan agreements. 

23.	Cash and cash equivalents

	31 December 2005
	31 December 2004 (restated)	
Cash in hand	25	17	
Cash in bank and deposits	73,179	115,712	
	73,204	115,729	
All cash and cash equivalents are available for use by the Group. 

24. 	Short-term loans and overdrafts

GTC Konstancja has signed a revolving credit line agreement with BRE for the amount of $2 million. A part of the freehold land in GTC Konstancja has been mortgaged, in order to secure an overdraft facility. The interest rate on this facility is LIBOR + 1.5 % p.a. As of 31 December 2005 as well as 31 December 2004, there was no outstanding amount.

GTC Hunagary has signed a short term credit facility of $2 million at CITIBANK Rt., bearing an annual interest rate of three-month USD LIBOR plus 1.75% margin.  Drawdown from the credit facility amounts to $2 million as of December 31, 2004. This credit facility is secured by a cash collateral contract between Citibank Rt. and GTC International based on a deposit at Citibank Rt. in the amount of $2 million. The total credit facility was repaid on February 2005.

25.	Long-term loans

Long-term loans comprise the following:

 	31 December 2005
	31 December 2004 

Loan from BPH Bank (GTC Mars)	114,167	120,884	
Loan from Aareal Bank (Rodamco CH1)	53,842	54,645	
Loan from BPH (GTC Taurus)	18,971	19,969	
Loan from Aareal Bank (GTC Galeria Kazimierz)	77,675	39,222	
Loan from WBK (Globis Poznan)	11,212	10,776	
Loan from WBK (GTC Korona)	11,398	8,888	
Loan from EUROHYPO (GTC Alp)	-	6,421	
Loan from EUROHYPO (GTC Topaz office)	17,752	-	
Loan from Orbis S.A (Globis Poznan)	-	1,055	
Loan from MKB (Centre Point I)	37,529	45,744	
Loan from MKB (Centre Point II)	16,077	-	
Loan from MKB (Riverloft 1)	7,376	3,961	
Loan from MKB (Riverloft 2)	1,879	-	
Loan from MKB (Spiral)	8,791		
Loans from GTC International (GTC)	2,097	17,629	
Loan from EBRD and Raiffeisen Bank (GTC Serbia)	11,953	6,771	
Loan from EBRD and Raiffeisen Bank (GTC Romania)	27,774	-	
Loan from OVAG (GTC Croatia)	-	5,428	
Loan from MKB and Zagrabecka Banka (GTC Croatia)	5,037	-	
Loans from minorities in subsidiaries	3,138	19,212	
Deferred issuance debt expenses	(5,184)	(5,456)	
	421,484	355,149	

25.	Long-term loans (continued)
Long-term loans have been separated into the current portion and the long-term portion as disclosed below:

 	31 December 2005
	31 December 2004 
	
Current portion of long term loans:			
Loan from BPH Bank (GTC Mars)	7,000	6,500	
Loan from Aareal Bank (Rodamco CH1)	2,448	2,450	
Loan from BPH (GTC Taurus)	1,092	998	
Loan from Aareal Bank (GTC Galeria Kazimierz)	3,811	2,251	
Loan from WBK (Globis Poznan)	600	546	
Loan from WBK (GTC Korona)	610	450	
Loan from EUROHYPO (GTC Topaz office)	337		
Loan from MKB (Centre Point I)	1,200	2,432	
Loan from MKB (Riverloft 1 )	314	-	
Loan from MKB (Spiral)	1,206		
Loan from EBRD and Raiffeisen Bank (GTC Serbia)	875	361	
Loan from EBRD and Raiffeisen Bank (GTC Romania)	554		
Loans from minorities in subsidiaries	-	6,233	
Deferred Issuance debt expenses	(76)	                (86)	
 	19,971	22,135	

 	31 December 2005
	31 December 2004 
	
Long term portion of long term loans:			
Loan from BPH Bank (GTC Mars)	107,167	114,384	
Loan from Aareal Bank (Rodamco CH1)	51,394	52,195	
Loan from BPH (GTC Taurus)	17,879	18,971	
Loan from Aareal Bank (GTC Galeria Kazimierz)	73,864	36,971	
Loan from WBK (Globis Poznan)	10,612	10,230	
Loan from WBK (GTC Korona)	10,788	8,438	
Loan from EUROHYPO (GTC Alp)	-	6,421	
Loan from EUROHYPO (GTC Topaz office)	17,415	-	
Loan from Orbis S.A (Globis Poznan)		1,055	
Loan from MKB (Centre Point I)	36,329	43,312	
Loan from MKB (Centre Point II)	16,077	-	
Loan from MKB (Riverloft 1)	7,062	3,961	
Loan from MKB (Riverloft 2)	1,879		
Loan from MKB (Spiral)	7,585	-	
Loan from GTC International 	2,097	17,629	
Loan from EBRD and Raiffeisen Bank (GTC Serbia)	11,078	6,410	
Loan from EBRD and Raiffeisen Bank (GTC Romania)	27,220	-	
Loan from OVAG (GTC Croatia)	-	5,428	
Loan from MKB and Zagrabecka Banka (GTC Croatia)	5,037	-	
Loans from minorities in subsidiaries	3,138	12,979	
Deferred Issuance debt expenses	(5,108)	(5,370)	
 	401,513	333,014	

25.	Long-term loans (continued)

The table below presents information and terms of the long term loans:

 	Total available	Tranches	Repayments	Expiration date	Interest rate fixed/floating	Interest rate	Collaterals	
	amount	 	 					
								
Loans from BPH Bank (GTC Mars)	USD 165 million	USD 130 million	Monthly instalments	Aug-2009	Fixed	LIBOR+2%	(**)	
						+SWAP (*)		
		USD 25 million	Aug-2009	Aug-2009	Fixed	LIBOR+2%	(**)	
						+SWAP  (*)		
		USD 10 million	Semi annual , based on excess cash flow	Aug-2009	Floating	LIBOR+2%	(**)	
Loans from Aareal Bank (Rodamco CH1) 
(***)	USD 130.8 million	USD 90 million	Monthly installments	Dec-2015	Fixed	LIBOR+1.75%	(**)	
		USD 10 million
	Semi annual , based on excess cash flow
	Dec-2015
	Floating
	LIBOR+1.75%	(**)

		USD 23 million	Monthly installments	Dec-2015	Fixed	
LIBOR + 1.75%
+SWAP  (*)	(**)	
		USD 1.5 million	Semi annual , based on excess cash flow	Dec-2015	Floating	LIBOR+1.75%	(**)	
						+SWAP  (*)		
		USD 6.3 million	Semi annual , based on excess cash flow	Dec-2015	Floating	LIBOR+1.75%	(**)	
Loan from BPH (GTC Taurus)	USD 22.5 million	-	Monthly installments	Dec-2011	Fixed	LIBOR+2%	(**)	
						+SWAP  (*)		
Loans from Aareal Bank (GTC Galeria Kazimierz)	Euro 68 million	Euro 55 million	Monthly installments starting from Mar-2005	Mar-2015	Construction period-floating,	EURIBOR +1.9% during construction, EURIBOR r+1.6%+	(**)	
					After completion-fixed	SWAP after completion		
		Euro 13 million	Semi annual  based on excess cash flow,starting from Mar-2005	Mar-2015	Floating	EURIBOR+1.6%	(**)	
Loan from WBK (Globis Poznan)	Euro 10 million	-	48 quarterly installments starting from Nov. 2004	Nov-2016	Floating	EURIBOR+1.5%	(**)	
Loan from WBK (GTC Korona)	USD 12 million	-	48 quarterly installments starting from Nov. 2004	Nov-2016	Floating	LIBOR+1.5%	(**)	
Loan from EUROHYPO (GTC Alp)	Euro 22.5 million	-	Monthly installments starting from January 2006	Dec-2014	Floating	EURIBOR+1.3% during construction, EURIBOR+1.2%+	(**)	
						SWAP after completion		
Loan from EUROHYPO (GTC Topaz Office)	Euro 15 million	-	Monthly installments starting from January 2006	Dec-2014	Floating	EURIBOR+1.4% during construction, EURIBOR+1.3%+	(**)	
						SWAP after completion		

25.	Long-term loans (continued)

	Total available	Tranches	Repayments	Expiration date	Interest rate fixed/floating	Interest rate	Securities	
	amount							
								
Loan from Orbis SA  (Globis Poznan)	USD and PLN loans	 -	n/a	2006-2007	Floating	LIBOR+3.5%  (*)
WIBOR+3.5%  	(**)	
Loan from MKB (Centre Point I+II)	EUR 92.7 million	EUR 33.5 million	quarterly repayments 	2019	Floating	EURIBOR + 1.6 %	(**)	
		EUR 21.2 million	quarterly repayments	2019	Floating	EURIBOR + 1.65 %		
		EUR 38 million	Refinance  	2019	Floating	EURIBOR + 1.6 %		
Loan from MKB (River Loft 1)		HUF 691 million	30  June 2006	30  June 2006	Floating	BUBOR+ 1.85%	(**)	
Loan from HVB (River Loft 2)		HUF 700 million	30  June 2007	30  June 2007	Floating 	BUBOR+ 2%	(**)	
		HUF 1,877 million	30  June 2007	30  June 2007	Floating 	BUBOR+ 2%	(**)	
		EUR 1,055 thousand	30  June 2007	30  June 2007	Floating 	EURIBOR + 2%	(**)	
		HUF 440 million	30  June 2007	30  June 2007	Floating 	BUBOR+ 2%	(**)	
		EUR  4 million	30  June 2007	30  June 2007	Floating 	EURIBOR + 1.85%	(**)	
		EUR  5.5 million	Refinance 		Floating	EURIBOR + 1.85%	(**)	
Loan from MKB (Spiral)		HUF  1,620 million		28 September 2007	Floating	BUBOR+ 1.5%	(**)	
		HUF  275.5 million		28 April 2006	Floating	BUBOR+ 1.5%	(**)	
GTC International	USD/Euro 	 -

	n/a	2006-2008	Fixed/Floating	The higher of 8.5% 
and LIBOR/EURIBOR+2.5%	(**)	
Loan from EBRD (GTC Serbia)	Euro 10.16 million	-	Starting from May 2005	2013	Floating	EURIBOR 2%-4.5%	(**)	
Loan from EBRD (GTC Romania)	Euro 27.12 million	-	Starting from August 2006	2018	Floating	EURIBOR 2%-4.5%	(**)	
Loan from MKB (GTC Croatia)	Euro 48.1 million	-		2020	Floating	EURIBOR+2.2%-2.4%	(**)	
Loan from OVAG (GTC Croatia)	Euro 4.05 million	-	One payment	Until 31 December 2005	Floating	EURIBOR + 3%  	(**)	
Loans from minorities in subsidiaries	USD/Euro 		Not specified	Not specified	Fixed/Floating	The higher of 8.5% and LIBOR/EURIBOR+2.5%		

(*)	Interest rate determined as at the drawdown date.  
(**) 	Mortgage over the asset together with assignment of the associated receivables and insurance rights.
(***) GTC consolidates 50% of this loan as a result of its 50% ownership in Rodamco CH1, which is the borrower. 

The value of the assets pledged as security is higher than the value of the related loans. 

The average effective interest rate on the Group’s loans during the year 2005 was 6.4% (7.8% in year 2004).

26.	Capital and Reserves

As at 31 December 2005 the shareholder structure is as follows:

Number of	Share	Total	Total	Percentage	
Shares	series	Value	value		
 	 	In PLN	in USD	 	
	 				
13,928,621	A	13,928,621	4,151,730	69.7%	
115,224	B	115,224	26,660	0.6%	
23,544	B1 (**)	23,544	5,849	0.1%	
835,654	C	835,654	183,824	4.2%	
996,162	D	996,162	247,469	5.0%	
3,968,915	E	3,968,915	985,968	19.9%	
96,721	F (*)	96,721	30,422	0.5%	
19,964,841		19,964,841	5,631,922	100.0%	

The major shareholder of the Company as of 31 December 2005 was GTC International B.V. with total number of shares held 10,119,378 which constitute 50.69% of total shares. 

Other shareholders who as of 31 December 2005 held above 5% of the Company shares were as follows:

 - ING Nationale Nederlanden	
 - Commercial Union	
 - J.P Morgan Chase Co.	

(*)	On 2 February 2004, the Extraordinary Shareholders’ Meeting of the Company was held. The Extraordinary Shareholders’ Meeting adopted resolutions regarding the increase of share capital. 

As part of the increase, the shareholder’s meeting resolved to issue of 446,385 conditional shares with the nominal value of 1 PLN per share (seria F), to be subscribed for in tranches, until 31 December 2007, by the Chairman of the Supervisory Board, Mr. Eli Alroy as an incentive plan.

26.	Capital and Reserves (continued)

On 10 January 2005, 148,795 Subscription Warrants were issued which were subscribed for by Mr. Eli Alroy. 

Each of the Subscription Warrants authorises to subscribe for 1 Series F Share of the Company at PLN 1 or at the PLN equivalent of USD 13.44. The amount of Warrants subscribed at 1 PLN decrease the total number of Warrants that can be subscribed.

On 18 January 2005 Mr Eli Alroy exercised 89,001 Subscription Warrants at a price of PLN 1, and on 19 January 2005 7,720 Subscription Warrants at a price of PLN 41.71. The remaining 52,074 Subscription Warrants expired and will not be exercised.

(**) As of 31 December 2005 and 31 December 2004 117,768 B and B1 shares were designated to Members of the Board, out of which 20,695 shares are vested until November 2006, and 8,538 are vested until November 2007.

	Movement in number of shares

The reconciliation of the number of shares outstanding as at the beginning and at the end of the respective years is presented below: 

	31 December 2005 	31 December 2004

Number of shares as at the beginning of the year	19,868,120	14,879,499	
Issuance of shares	96,721	4,988,621	
Number of shares as at the end of the period	19,964,841	19,868,120	

	Movement in share premium

Movement in share premium is presented in the table below:

	31 December 2005 	31 December 2004
(restated))	
Balance at the beginning of the year	138,209	34,678	
Issuance of shares	98	104,021	
Shares issuance expenses	-	(2,950)	
Share based payment	1,891	1899	
Tax benefit resulted from shares issuance expenses	-	561	
Balance at the end of the period	140,198	138,209	

27.	Earnings per share
		
	Basic and diluted earnings per share were calculated as follows:

	Year ended 31 December	
	2005
	2004
	
Net profit after tax attributable to equity holders (USD)	140,145,000	 36,009,000 	
Weighted average number of shares for calculating basic earnings per share	19,960,071	 16,984,287 	
			
Basic earnings per share (USD)	7.02	2.12 	
Weighted average number of shares for calculating diluted earnings per share	20,154,179	 17,157,192 	
			
Diluted earnings per share (USD)	6.95	2.09 	

	Year ended 31 December	
	2005

	2004

Weighted average number of shares for calculating basic earnings per share	19,960,071	16,984,287	
			
Adjustment for share options (series F) (*)	194,108	      172,905 	
			
Weighted average number of shares for calculating diluted earnings per share	20,154,179	17,157,192	

  (*) See note 26

28. 	Purchase of minority

On 3 March 2005, the Company purchased from Orbis 2,000 shares in Globis Poznan and 25 shares in Globis Wrocław constituting 25% of their share capital. After the transaction the Company owns 100% of the share capital of Globis Poznan and Globis Wroclaw.

The amount paid for the shares was USD 0,7 million.

On 11 August 2005, GTC and other shareholders of GTC Hungary, GTC Serbia and GTC Romania bought shares from FIC Globe B.V. constituting:

-	15.72% of the share capital in GTC Romania (out of which 11.59% purchased by the Company based on its current pro-rata holdings); 
- 	13.13% of the share capital of GTC Serbia and GTC Hungary (out of which 9.92% purchased by the Company based on its current pro-rata holdings).

The transaction was completed on September 20, 2005.

The amount paid for the shares was USD 7.8 million. Goodwill resulting from the transaction amounted to USD 4.0 million. Additionally, the loans granted by FIC Globe to those subsidiaries in the amount of USD 5.3 million were fully repaid.

On 15 December, 2005 the Company and AYRAD (a company controlled by Mr. Eli Alroy (together “the Purchasers”)) signed a share purchase agreement with ADRI International B.V. (‘ADRI’) to acquire share in GTC Hungary, GTC Serbia, GTC Croatia and GTC Romania constituting:
	
-	21.98% of the share capital in GTC Romania (out of which 20.78% purchased by the Company based on its current pro-rata holdings); 
- 	22.49% of the share capital of GTC Serbia and GTC Hungary (out of which 21.92% purchased by the Company based on its current pro-rata holdings).
-	15.16% of the capital in GTC Croatia (out of which 14.74% purchased by the Company on the pro-rata holdings)

The transaction was completed on December 15, 2005.

The amount paid for the shares was USD 19.2 million. Goodwill resulting from the transaction amounted to USD 12.3 million. Additionally, the loans granted to those subsidiaries by ADRI in the amount of USD 10.6 million were fully repaid.

In relation with the Share Purchase Agreement dated April 8, 2004, on 30 November 2005, GTC and other shareholders bought from Firestorm Services LLC (“Firestorm”) shares in GTC Romania that constitute of 10.49% of the share capital in GTC Romania (out of which 8.21% purchased by the Company based on its current pro-rata holdings). The amount paid for the shares was USD 0.4 million. Goodwill resulting from the transaction amounted to USD 0,4 million.

28. 	Purchase of minority (continued)

As of 31 December 2005 the company holds:

-	94.55% of the share capital in GTC Romania
-	97.48% of the share capital in GTC Hungary and GTC Serbia
-	97.24% of the share capital in GTC Croatia
The remaining shares are held by AYRAD the company controlled by Mr Eli Alroy.

29.	Sale of subsidiary

On 9 May 2005 the Company executed with T.U. Allianz Polska Sp. z o.o. preliminary Sale of Shares Agreement of 43,511 shares of the company GTC Alp with the total nominal value of PLN 21,755,500 representing 100% of the share capital and votes on the Shareholders Meeting of GTC Alp.

The final sale agreement was signed on 29 December 2005.
As of 31 December 2005, the Company does not consolidated the assets and liabilities of GTC Alp.

The Company’s interest in GTC Alp as of 29 December 2005 comprises the following:

	29 December 2005 	
		
Investment property	39,535	
Cash 	14,060	
Current assets (other than cash)	2,293	
Current liabilities	(5,193)	
Long term liabilities	(28,775)	
Net assets	21,920	
		
Accrued income as of 31 December 2005	26,505	
Cash paid as of 31 December 2005	-	
Cash outflow resulted from sale	(14,060)	

30.	Proportionate consolidation

The Company proportionally consolidated assets and liabilities of Rodamco CH1. 

	The Company’s interest in Rodamco CH1 comprises the following:

	31 December 2005 	31 December 2004

Cash 	3,373	3,583	
Blocked deposits	1,084	788	
Non current assets	136,634	100,109	
Long term liabilities	(62,527)	(56,698)	
Current assets (other than cash and blocked deposits)	521	375	
Current liabilities	(4,337)	(3,129)	
			
Net assets	74,748	45,028	

Total share in income of Rodamco CH1 for the year ended 31 December 2005 and 2004 was income of USD 48.2 and 23.8 million, and total share in expenses was USD 15.3 and 10.8 million respectively.

31.	Related party transactions

Service and consultancy fees relate to management services provided by GTC International, Kardan Real Estate, Tamlot and AYRAD for the benefit of the Group companies. 

The transactions and balances with related parties are presented below:

	Year ended 31 December 2005	Year ended 31 December 2004	
Transaction			
Service and consultancy fees	745	728	
Consultancy fees relating to  interest in Galeria Mokotow	387	378	

Balances	31 December 2005	31 December 2004	
Loans from GTC International	2,097	17,629	
Loans from minorities in subsidiaries	2,002	14,333	
Number of shares designated to employees	29,233	49,928	
Number of conditional shares	297,590	446,385	
Other receivables (*)	166	61	
Payables	170	65	

(*) As of 31 December 2005 and 2004 loans granted to management board or supervisory board members amounted to USD 162 thousand and USD 48 thousand respectively. Remaining amount in “other receivables” represents the settlements with Rodamco CH1. 

31.	Related party transactions (continued)

0n 9 December 2005, GTC signed an agreement with management board member, according to which, GTC will sell to the board member a house in one of its residential development, for a total amount of USD 238 thousand. 

AYRAD (a company controlled by Mr. Eli Alroy), remuneration for the year ended 31 December 2005, amounted to 317 thousand USD and 96,721 shares (see note 28), and for the year ended 31 December 2004, USD 369 thousand.
Tamlot (a company controlled by Mr. Alain Ickovics, member of the Supervisory Board), remuneration for the year ended 31 December 2005, amounted to USD 96 thousand, and for the year ended 31 December 2004, USD 96 thousand.
Mr Mariusz Gredowicz, member of the Supervisory Board, remuneration for the year ended 31 December 2005, amounted to USD 9 thousand, and for the year ended 31 December 2004, USD 5 thousand.
The other members of the Supervisory Board were not remunerated during the year 2005.

Management Board remuneration for the year ended 31 December 2005, amounted to USD 845 thousand and 20,695 shares, and for the year ended 31 December 2004, USD 545 thousand and 20,695 shares.

Transactions with minorities in subsidiaries are described in note 28.

32.	Long term payable

In December 2004, GTC Business Park won a tender for the lease of a 10,270 sq.m land located in Belgrade, Serbia, for the purpose of the development of business-residential building. The lease is for a period of 99 years.
The total consideration for the land amounts to Euro 6.5 million (USD 7.8 million) payable in instalments to the agency of the city of Belgrade. As a collateral GTC Business Park provided the agency with a bank guarantee in the amount of approximately Euro 0.7 million ( USD 0.9 million).

The lease is paid as followed:
Advance payment of Euro 0.8 million (USD 1 million) has been made; Euro 1.8 million (USD 2.1 million) no later than June 2006; Euro 1.8 million (USD 2.1 million) no later than December 2006; and the balance is paid in 12 quarterly instalments starting on June 20, 2005. The lease price is linked to the Serbian consumer price index.

33.	Commitments and Guarantees

As of 31 December 2005, the Group had commitments contracted for in relation to future building construction, amounting to $97 million. These commitments are expected to be financed from available cash and current financing facilities, other external financing or future instalments under already contracted sale agreements and yet to be contracted sale agreements. 

As of 31 December 2005, the GTC guaranteed to third parties the performance of its subsidiaries in relation to cost overrun and loan repayment. The total amount guaranteed is $49 million.

34.  	Financial risk management objectives and policies
	
The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk, foreign currency risk, and credit risk. 

Interest rate risk	

The Group exposure to market risk for changes in interest rates relates primarily to the Group's long-term debt obligations.
The Group’s policy is to obtain finance bearing variable interest rate debt. To manage the interest rate risk in a cost-efficient manner, the Group enters into interest rate swaps or collar transactions. 

Foreign currency risk

An operating units enters into transactions in currencies other than the Group's functional currency. Therefore the unit hedges the currency risk by matching the currency of the income with that of the construction, financing and operating currency. 

34.	Financial risk management objectives and policies (continued)

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding its investments and timely servicing its debt and maintaining sufficient working capital resources.
The Group's current ratio is 2.73, which reflects sufficient working capital to facilitate all on-going and contingent operations of the Group. In addition, the ratio of Total Liabilities to Total Assets is 48%, which reflects depleted liquidity risk.

Credit risk

Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation. To manage this risk the Group periodically assesses the financial viability of its customers. The Group does not expect any counter parties to fail in meeting their obligations. The Group has no significant concentration of credit risk with any single counterparty or Group counterparties.

35.	Selected financial information translated into Euro

 	According to the statutory reporting requirements selected financial information of the company that were translated into Euro comprises the following:

 in thousand
Euro	31 December 2005 	31 December
2004	
 		(restated)	
Revenues from operations	76,837	45,426	
Gross margin from operations	45,841	28,446	
Profit from continuing operations before tax and finance costs	157,293	39,916	
Profit for the period	115,741	32,995	
Assets	894,350	934,684	
Liabilities	432,669	622,122	
Total equity	461,681	312,562	
Current assets	150,215	124,764	
Current liabilities	54,940	49,240	

The National Bank of Poland (NBP) USD/EUR rates used for translation the above information, were as follows:

	31 December 2005	31 December 2004	
Average rate for the period	1.24	1.24	
Rate at the end of period	1.18	1.36	

36. 	Subsequent events

Till the date of authorisation of this consolidated financial statement there were no subsequent events that were not, but should have been reflected in the consolidated financial statement for the year ended 31 December 2005.

37. 	Other

The consolidated financial statements were authorised for issue by the Management Board on 22 February 2006.