CONSOLIDATED INTERIM REPORT OF GLOBE TRADE CENTRE S.A. CAPITAL GROUP FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2016

Place and date of publication: Warsaw, 24 August 2016

GLOBE TRADE CENTRE S.A.

MANAGEMENT BOARD'S REPORT ON THE ACTIVITIES OF CAPITAL GROUP FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2016

Table of content

Item 1. Introduction	4
Item 2. Selected financial data	6
Item 3. Presentation of the Group	8
Item 3.1. General information about the Group	8
Item 3.2. Structure of the Group	9
Item 3.3. Changes to the principal rules of the management of the Company and the Group	9
Item 4. Main events	10
Item 5. Operating and financial review	11
Item 5.1. General factors affecting operating and financial results	11
Item 5.2. Specific factors affecting financial and operating results	14
Item 5.3.Presentation of differences between achieved financial results and published forecasts	14
Item 5. 4. Statement of financial position	15
Item 5.4.1. Key items of the statement of financial position	15
Item 5.4.2. Financial position as of 31 March 2016 compared to 31 December 2015	16
Item 5.5. Consolidated income statement	17
Item 5.5.1. Key items of the consolidated income statement	17
Item 5.5.2. Comparison of financial results for the six-month period ended 30 June 2016 with the result
for the corresponding period of 2015	19
Item 5.5.3. Comparison of financial results for the three-month period ended 30 June 2016 with the result
for the corresponding period of 2015	20
Item 5. 6. Consolidated cash flow statement	22
Item 5.6.1. Key items from consolidated cash flow statement	22
Item 5.6.2. Cash flow analysis	23
Item 5.7. Future liquidity and capital resources	24
Item 6. Information on loans granted with a particular emphasis on related entities	24
Item 7. Information on granted and received guarantees with a particular emphasis on guarantees granted to related entities	24
Item 8. Shareholders who, directly or indirectly, have substantial shareholding	25
Item 9. Shares in GTC held by members of the Management Board and the Supervisory Board	25
Item 10. Material transactions with related parties concluded on terms other than market terms	26
Item 11. Proceedings before a court or public authority involving Globe Trade Centre SA or its subsidiaries
the total value of the liabilities or claims of which amount to at least 10% of the Group's equity	26
Item 12. Key risk factors	27

Item 1. Introduction

The GTC Group is a leading developer and commercial real estate manager in CEE and SEE, operating in Poland, Romania, Hungary, Croatia, Serbia and Bulgaria. Additionally, it holds land in Ukraine and Russia and operates in the Czech Republic through its associates and joint ventures. The Group was established in 1994 and has been present in the real estate market since then.

The Group's portfolio comprises: (i) completed commercial properties; (ii) commercial properties under construction; (iii) a commercial landbank intended for future development or for sale and (iv) residential projects and landbank.

Since its establishment and as at 30 June 2016 the Group: (i) has developed approximately 970 thousand sq. m of commercial space and approximately 300 thousand sq. m of residential space; (ii) has sold approximately 430 thousand sq. m of commercial space in completed commercial properties and approximately 299 thousand sq. m of residential space; and (iii) has acquired approximately 61 thousand sq. m of commercial space in completed commercial properties.

As of 30 June 2016, the Group`s property portfolio comprised the following properties:

28 completed commercial properties, including 24 office properties and 4 retail properties with a combined commercial space of approximately 556 thousand sq. m, of which the Group's proportional interest amounts to approximately 533 thousand sq. m of NRA;
4 commercial projects under construction, including 3 office projects and 1 retail project with total NRA of approximately 105 thousand sq. m, of which the Group's proportional interest amounts to 105 thousand sq. m of NRA;
commercial landbank designated for future development, with approximately 893 thousand sq. m NRA;
1 residential project under construction with 4 thousand sq. m area designated for residential use;
residential projects and landbank designated for residential use approximately 325 thousand sq. m area designated for residential use; and
3 assets held for sale: 2 retail projects (Galleria Arad and Galleria Piatra Neamt in Romania) and land plot in Poland.

As of 30 June 2016, the book value of the Group's portfolio amounts to €1.454.703 with: (i) the Group's completed commercial properties accounting for 79% thereof; (ii) commercial properties under construction – 10%; (iii) a commercial landbank intended for future development or for sale – 8%; (iv) residential projects and landbank accounting for 2% and (v) assets held for sale accounting for 1%. Based on the Group's assessment approximately 95% of the portfolio is core and remaining 5% is non-core assets, including assets held for sale and residential projects.

As of 30 June 2016, the Group's completed properties in its three most significant markets, i.e. Poland, Hungary and Romania, constitute 41%, 18% and 16% of the total book value of all completed properties.

Additionally, the Group conducts operations in the Czech Republic, through its associates. The Group's proportional interest in assets in Czech Republic amounts to approximately 4 thousand sq. m of NRA in one office building. The Group also holds a land plot located in Russia, and a land plot designated for Ana Tower located in Romania.

Additionally, the Group manages third party assets, including: one office building in Budapest, three office buildings in Warsaw and one office building in Katowice.

The Company's shares are listed on the WSE and included in the WIG30 index and on the JSE. The Company's shares are also included in the Dow Jones STOXX Eastern Europe 300.

The Group's headquarters are located in Warsaw, at 17 Stycznia 45A Street.

In the Management Board's report references to the Company or GTC are to Globe Trade Centre S.A. and all references to the Group or the GTC Group are references to Globe Trade Centre S.A. and its consolidated subsidiaries. Expressions such as: "Shares" relate to the shares in Globe Trade Centre S.A., which were introduced to public trading on the Warsaw Stock Exchange in May 2004 and later and are marked under the PLGTC0000037 code and on Johannesburg Stock Exchange in August 2016 and are marked under the ISIN PLGTC0000037code; "Bonds" refers to the bonds issued by Globe Trade Centre S.A. and introduced to alternative trading market and marked with the ISIN codes PLGTC0000144 and PLGTC0000177; "the Report" refers to the consolidated interim report prepared pursuant to art. 90 of the Decree of the Finance Minister of 19 February 2009 on current and periodical information published by issuers of securities and conditions of qualifying as equivalent the information required by the provisions of law of a country not being a member state; "CEE" refers to the group of countries that are within the region of Central and Eastern Europe (Czech Republic, Hungary, Poland); "SEE" refers to the group of countries that are within the region of South-eastern Europe (Bulgaria, Croatia, Romania and Serbia); "net rentable area", "NRA", or "net leasable area", "NLA" refer to the metric of the area of a given property as indicated by the real property appraisal experts for the purposes of the preparation of the relevant real property valuations. With respect to commercial properties, net leasable (rentable) area is all the leasable area of a property exclusive of non-leasable space, such as hallways, building foyers, and areas devoted to heating and air conditioning installations, elevators and other utility areas. The specific methods of calculation of NRA may vary among particular properties, which is due to different methodologies and standards applicable in the various geographic markets on which the Group operates; "Commercial properties" refer to properties with respect to which GTC Group derives revenue from rent and includes both office and retail properties; "EUR", "€" or "euro" refers to the single currency of the participating Member States in the Third Stage of European Economic and Monetary Union of the Treaty Establishing the European Community, as amended from time to time; "PLN" or "zloty" refers to the lawful currency of Poland.

Presentation of financial information

Unless indicated otherwise, the financial information presented in this Report was prepared pursuant to International Financial Reporting Standards ("IFRS") as approved for use in the European Union.

All the financial data in this Report is presented in euro and expressed in thousands unless indicated otherwise.

Certain financial information in this Report was adjusted by rounding. As a result, certain numerical figures show as totals in this Report may not be exact arithmetic aggregations of the figures that precede them.

Forward-looking statements

This Report contains forward-looking statements relating to future expectations regarding the Group's business, financial condition and results of operations. You can find these statements by looking for words such as "may", "will", "expect", "anticipate", "believe", "estimate" and similar words used in this Report. By their nature, forwardlooking statements are subject to numerous assumptions, risks and uncertainties. Accordingly, actual results may differ materially from those expressed or implied by forward-looking statements. The Group cautions you not to place undue reliance on such statements, which speak only as of the date of this Report.

The cautionary statements set out above should be considered in connection with any subsequent written or oral forward-looking statements that the Group or persons acting on its behalf may issue. The Group does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Report.

The Group discloses important risk factors that could cause its actual results to differ materially from its expectations under Item 12. "Key risk factors" and Item 5. "Operating and financial review". These cautionary statements qualify all forward-looking statements attributable to us or persons acting on behalf of the Group. When the Group indicates that an event, condition or circumstance could or would have an adverse effect on the Group, it means to include effects upon its business, financial situation and results of operations.

Item 2. Selected financial data

The following tables present the Group's selected historical financial data for the three and six-month periods ended 30 June 2016 and 2015. The historical financial data should be read in conjunction with Item 5. "Operating and Financial Review" and the interim condensed consolidated financial statements for the three and six-month periods ended 30 June 2016 (including the notes thereto). The Group has derived the financial data presented in accordance with IFRS from the reviewed interim condensed consolidated financial statements for the three and six-month period ended 30 June 2016.

Selected financial data presented in PLN is derived from the interim condensed consolidated financial statements for the three and six-month period ended 30 June 2016 presented in accordance with IAS 34 Interim Financial Reporting as adopted by EU. and prepared in the Polish language and based on the Polish zloty.

The reader is advised not to view such conversions as a representation that such zloty amounts actually represent such euro amounts, or could be or could have been converted into euro at the rates indicated or at any other rate.

	For the six-month period ended 30 June					For the three-month period ended 30 June
		2016		2015		2016
(in thousands)	EUR	PLN	EUR	PLN	EUR	PLN	EUR	PLN
Interim Condensed Consolidated Income Statement
Revenues from operations	58,826	256,864	60,031	248,648	28,016	122,526	30,435	124,783
Cost of operations	(16,226)	(70,851)	(19,877)	(82,331)	(6,817)	29,826	(10,291)	(42,212)
Gross margin from operations	42,600	186,013	40,154	166,317	21,199	92,700	20,144	82,571
Selling expenses	(1,397)	(6,100)	(1,230)	(5,095)	(770)	(3,366)	(706)	(2,902)
Administrative expenses	(4,997)	(21,819)	(4,939)	(20,457)	(2,303)	(10,073)	(2,529)	(10,371)
Profit/(loss) from revaluation/impairment of assets, and impairment of residential projects	24,067	105,340	(1,826)	(7,659)	16,631	73,600	(1,444)	(6,097)
Share of profit in associates	(3,803)	(16.606)	(3,581)	(14,833)	(3.320)	(14,500)	(1,975)	(8,112)
Financial income/(expense), net	(12,726)	(55,568)	(15,975)	(66,169)	(6,445)	(28,181)	(7,716)	(31,603)
Net profit /(loss) Basic and diluted	35,207	153,983	6,064	25,065	18,868	83,340	(1,803)	(7,938)
earnings per share (not in thousands)	0.08	0.34	0.02	0.08	0.04	0.18	(0.01)	(0.02)
Weighted average number of issued ordinary shares (not in thousands)	460,216,478	460,216,478	351,310,288	351,310,288	460,216,478	460,216,478	351,310,288	351,310,288

	For the 6-month period ended 30 June
Consolidated Cash Flow Statement	2016		2015
	€	PLN	€	PLN
(in thousands)
Net cash from operating activities	36,412	158,993	35,161	145,636
Net cash used in investing activities	(205,227)	(896,124)	48,129	199,349
Net cash from/(used in) financing activities	74,591	325,702	(83,829)	(347,311)
Cash and cash equivalents at the end of the period	73,892	327,009	80,812	338,958

	As of 30 June 2016		As of 31 Dec. 2015
(in thousands)	€	PLN	€	PLN
Investment property	1,415,475	6,264,185	1,288,529	5,491,066
Inventory	3,235	14,316	3,161	13,471
Cash and cash equivalents	73,892	327,009	169,472	722,205
Total assets	1,663,038	7,359,775	1,559,550	6,646,024
Non-current liabilities	856,169	3,788,975	806,969	3,438,897
Current liabilities	145,262	642,857	131,379	559,871
Equity	661,607	2,927,943	621,202	2,647,256
Share capital	10,410	46,022	10,410	46,022

Consolidated statement of financial position

Item 3. Presentation of the Group

Item 3.1. General information about the Group

As of 30 June 2016, the Group`s property portfolio comprised the following properties:

28 completed commercial properties, including 24 office properties and 4 retail properties with a combined commercial space of approximately 556 thousand sq. m, of which the Group's proportional interest amounts to approximately 533 thousand sq. m of NRA;
3 commercial projects under construction, including 2 office projects and 1 retail project with total NRA of approximately 105 thousand sq. m, of which the Group's proportional interest amounts to 105 thousand sq. m of NRA;
commercial landbank designated for future development, with approximately 893 thousand sq. m NRA;
1 residential project under construction with 4 thousand sq. m area designated for residential use;
residential projects and landbank designated for residential use approximately 335 thousand sq. m area designated for residential use; and
3 assets held for sale, 2 retail projects (Galleria Arad and Galleria Piatra Neamt in Romania) and land plot in Poland.

As of 30 June 2016, the book value of the Group's portfolio amounts to €1.454.413 with: (i) the Group's completed commercial properties accounting for 79% thereof; (ii) commercial properties under construction – 10%; (iii) a commercial landbank intended for future development or for sale - 8%; (iv) residential projects and landbank accounting for 2% and (v) assets held for sale accounting for 1%. Based on the Group's assessment approximately 95% of the portfolio is core and remaining 5% is non-core assets, including assets held for sale and residential projects.

Additionally, the Group manages third party assets, including: one office building in Budapest and three office buildings in Warsaw and one office building in Katowice.

The Company's shares are listed on the WSE and included in the WIG30 index and on the JSE. The Company's shares are also included in the Dow Jones STOXX Eastern Europe 300.

The Group's headquarters are located in Warsaw, at 17 Stycznia 45A Street.

Item 3.2. Structure of the Group

The structure of Globe Trade Centre S.A. Capital Group is presented in the Consolidated Financial Statements for the six- month period ended 30 June 2016 in Note 4 "Investment in subsidiaries, associates and joint ventures".

The following changes in structure of the Group occurred in the six months period ended 30 June 2016:

GTC S.A purchased the minority stake in GTC Real Estate Investments Ukraine B.V.
Immo Buda Kft and Szemi Ingatlan Ltd were merged into Albertfalva Kft (Hungary)
GTC Renaissance Plaza Kft changed its name to GTC White House Kft (Hungary)
VRK Tower Kft. was established (Hungary)
Galeria Ikonomov GmbH (Austria) was liquidated

Item 3.3. Changes to the principal rules of the management of the Company and the Group

There were no changes to the principal rules of management of the Company and the Group.

Item 4. Main events

Following events took place during the six-month period ended 30 June 2016:

In January 2016, GTC Group acquired the remaining 10% in GTC Ukraine B.V, and the minority shareholder's loans granted to the project, for a consideration of €1 (not in thousand). Following the transaction GTC remained the sole owner of the subsidiary. As a result of the transaction, the negative Non-Controlling interest increased by €2,200 and the capital reserve increased by €400 and the NCI loans decreased by €2,600. Consequently, the total equity increased by €2,600.

On 28 January 2016, the Group acquired Pixel office building in Poznań. The office building is entirely leased to renowned tenants. The Group intends to hold the office building as part of the income-producing portfolio of the GTC Group. The net purchase price for the property and other rights and movable assets under the Agreement amounted to €32,200. The office building is entirely leased to renowned tenants. The Group intends to hold the office building as part of the income-producing portfolio of the GTC Group. The purchase of the Property was financed by the Group's own sources and a bank loan from PKO BP in the amount of €22,500.

On 30 March 2016, a common plan of a cross-border merger by acquisition of GTC S.A. with its subsidiary, a corporation under Dutch law under the name GTC RH B.V. with its registered office in Amsterdam, whose 100% shares are owned by the Company was drawn up. The signing of the merger plan by the Management Board of GTC S.A. is tantamount to taking a decision on the intention to carry out a cross-border merger of GTC S.A. with GTC RH B.V. by acquisition.

On 30 March 2016, a common plan of a cross-border merger by acquisition of GTC S.A. with its subsidiary, a corporation under Dutch law under the name GTC Real Estate Investments Ukraine B.V. with its registered office in Amsterdam, whose 100% shares are owned by the Company was drawn up. The signing of the merger plan by the Management Board of GTC S.A. is tantamount to taking a decision on the intention to carry out a crossborder merger of GTC S.A. with GTC Real Estate Investments Ukraine B.V.by acquisition.

In April 2016, the Group purchased two office buildings in Bucharest (Premium Plaza and Premium Point), consisting of approximately 15,000 sq. m of the total leasable area for a total purchase price of €32,000. Property acquisition was financed by the Group's own sources.

In April 2016, the second phase of University Business Park in Łódź received occupancy permit, marking the completion of the investment. The UBP complex comprises two A-class office buildings and the total leasable area of the complex is 39,000 sq. m.

In June 2016, the Company in its capacity as creditor, filed a petition for the Bulgarian Court to determine whether Galleria - Stara Zagora AD (GSZ) is over indebted and allow for conversion of both shareholders' loans into equity. The Company holds 75% of GSZ and such conversion may dilute the minority shareholder as presented in the NCI balance as of 30 June, 2016. The NCI debt net of NCI loans to GSZ as of 30 June 2016, is €14,400.

Events that took place after 30 June 2016:

On 1 July 2016 The Group acquired two office buildings: Neptun Office Center and Sterlinga Business Center, located in Gdansk and Lodz respectively. These two Class A office buildings, featuring modern design and a total of 30,000 sq. m GLA of office space and 364 parking places, will enrich the Group's Polish investment portfolio. Additionally, the Company has signed a loan agreements for financing of these projects with Pekao S.A. in the amount of €22,500 and €17,600 respectively, and loan agreements for financing the VAT of these projects. The loans were received on 30 June 2016 and the related funds (including long term bank loans, VAT loans, and GTC's own sources) are presented as deposits in Escrow accounts for purchase of assets as of 30 June 2016.

In July 2016 the Group has signed a loan agreement for financing of the Duna Tower office project in Budapest with OTP Bank Nyrt (the "Bank"). The total nominal amount of the new loan is €28,000. Furthermore, the Company and the Bank undertook to refinance the €38,900. Center Point loans currently financed by MKB Bank Zrt. with a new €47,000 loan facility.

In July 2016 the Group sold a major part of the land known as Konstancja Commercial land consisting of 9 hectare for approx. €6,900 (PLN 30,500).

In July 2016 the Group has acquired an SPV Artico Sp.z o.o. that develops an office building in Warsaw. The building will consist of aprox. 7,775 sq. m. of leasable area and is almost fully pre-leased. The building is scheduled to be completed during 2017.

In June 2016, CID sold the Harfa shopping centre in Prague. In July 2016, it repaid GTC's loan in the amount of €11,300.

In August 2016, the Group sold its shares in Lighthouse for €1.300.

In July 2016, Johannesburg Stock Exchange Limited ("JSE") has approved The Company's inward listing on the bourse's main board. Listing commenced on 18 August 2016.

In August 2016, the Group sold Galleria Piatra Neamt in Romania for €2,700 classified as assets held for sale as of 30 June 2016.

On 12 August 2016 the Group signed an extension of the loan agreement with MKB (SZKK) regarding Sasad project. According to the agreement the loan will be extended by three years until 30 June 2019, and will be amortized in 4 equal annual payments starting upon signing.

Item 5. Operating and financial review

Item 5.1. General factors affecting operating and financial results

General factors affecting operating and financial results

The key factors affecting the Group's financial and operating results are discussed below. The Management believes that the following factors and important market trends have significantly affected the Group's results of operations since the end of period covered by the latest published audited financial statements, and the Group expects that such factors and trends will continue to have a significant impact on the Group's results of operations in the future.

Economic conditions in CEE and SEE

The Group's business results have been affected by the global financial crisis, which started in 2008/2009. The global crisis on the financial markets impacted the condition of many financial institutions, and governments were often forced to intervene on the capital markets on an unprecedented scale. Such turbulence resulted in businesses having restricted access to bank financing, an increase in interest rates charged on bank loans and a decrease in consumer spending with many tenants making requests for temporary or permanent rent reduction or downsizing of rental space. All these factors impacted the real estate market as well as resulted in a decrease in the value of real estate.

The crisis experienced by the financial markets slowed down the general economy in the countries, where the Group operates. The economic downturn in those countries resulted in reduced demand for property, growth of vacancy rates, and increased competition in the real estate market, which adversely affected the Group's ability to sell or let its completed projects at their expected yields and rates of return.

The reduced demand for property that, on the one hand, resulted in a drop in sales dynamics, and, on the other, an increase in vacancy rates and lower rent revenues from leased space, significantly impacted the results of operations of the Group. Specifically, the Group was forced to change some of its investment plans, for example numerous projects in Bulgaria, Romania and Croatia, as those projects did not meet the initially assumed returns targets. Additionally, the Group was not able to develop numerous plans in the countries where it operates.

Real estate market in CEE and SEE

The Group derives the majority of its revenue from operations from rental activities, including rental and service revenue. For the six month period ended 30 June 2016 and for the six month period ended 30 June 2015, the Group derived 71% and 67% of its revenues from operations as rental revenue, which greatly depends on the rental rates per sq. m and occupancy rates. The amount the Group can charge for rent largely depends on the property's location and condition and is influenced by local market trends and the state of local economies. The Group's revenue from rent is particularly affected by the delivery of new rent spaces, changes in vacancy rates and the Group's ability to implement rent increases. Rental income is also dependent upon the time of completion of the Group's development projects as well as on its ability to let such completed properties at favorable rent levels. Moreover, for the six month period ended 30 June 2016 and for the six month period ended 30 June 2015, the Group derived 23% and 21% of its revenues from operations as service revenue, which reflects certain costs the Group passes on to its tenants.

The vast majority of the Group's lease agreements are concluded in Euro and include a clause that provides for the full indexation of the rent linked to the European Index of Consumer Prices. When a lease is concluded in another currency, it is typically linked to the consumer price index of the relevant country of the currency.

To a certain extent, the Group's operational results are influenced by its ability to sell residential units, which for the six month period ended 30 June 2016 and for the six month period ended 30 June 2015, amounted for 6% and 12% of the Group's total revenues, respectively. The supply of new apartments in the different markets in which the Group operates and the demand on such markets affect apartment prices. The demand for apartments is further impacted by fluctuations in interest rates, the availability of credit and the mortgage market in general. For example, the Group's residential revenues decreased steadily over the last few years due to the slowdown in the sale of residential properties coupled with an increase in discounts which had to be granted to purchasers of the Group's apartments in order to facilitate sales.

Real estate valuation

The Group's results of operations depend heavily on the fluctuation of the value of assets on the property markets. The Group revalues its investment properties at least twice per year. Any change in fair value of investment property is thereafter recognized as a gain or loss in the income statement.

The following three significant factors influence the valuation of the Group's properties: (i) the cash flow arising from operational performance, (ii) the expected rental rates and (iii) the capitalization rates that result from the interest rates in the market and the risk premiums applied to the Group's business.

The cash flow arising from operational performance is primarily determined by current gross rental income per square meter, vacancy rate trends, total portfolio size, maintenance and administrative expenses, and operating expenses. Expected rental values are determined predominantly by expected development of the macroeconomic indicators as GDP growth, disposable income, etc. as well as micro conditions such as new developments in the immediate neighborhood, competition, etc. Capitalization rates are influenced by prevailing interest rates and risk premium. In the absence of other changes when capitalization rates increase, market value decreases and vice versa. Small changes in one or some of these factors can have a considerable effect on the fair value of the Group's investment properties and on the results of its operations.

Moreover, the valuation of the Group's landbank additionally depends on among others the building rights and the expected timing of the projects. The value of landbank which is assessed using a comparative method is determined by referring to the market prices applied in transactions relating to similar properties.

The Group recognized net profit from revaluation and impairment of assets and residential projects of €24,067 and loss of €1,826 in the six month period ended 30 June 2016 and in six month period ended 30 June 2015, respectively.

Impact of interest rate movements

Substantially all of the loans of the Group have a variable interest rate, mainly connected to EURIBOR. The bonds issued by the Company are denominated in PLN and bear interest connected to WIBOR. Increases in interest rates generally increase the Group's financing costs. As of 30 June 2016 and 31 December 2015 approximately 66% and 58% of the Group's loans were hedged or partially hedged. For example, an interest rate increase of 50 basis points for the year ended 31 December 2015 would have increased the Group's interest expense for the year ended 31 December 2015 by approximately €1,115. In addition, in an economic environment in which availability of financing is not scarce, demand for investment properties generally tends to increase when interest rates are low, which can lead to higher valuations of the Group's existing investment portfolio. Conversely, increased interest rates generally adversely affect the valuation of the Group's properties, which can result in recognition of impairment that could negatively affect the Group's income.

Historically, EURIBOR rates have demonstrated significant volatility, changing from 1.343% as of 2 January 2012, through 0.188% as of 2 January 2013, to 0.280% as of 3 January 2014, 0,076% as of 2 January 2015 and –0,1320% as of 4 January 2016 (EURIBOR for three-month deposits).

Impact of foreign exchange rate movements

For the six month period ended 30 June 2016 and for the six month period ended 30 June 2015 a vast majority of the Group's revenues and costs were incurred or derived in euro. Nonetheless, the exchange rates against euro of the local currencies of the countries in which the Group operates are an important factor as the credit facilities that are obtained may be denominated in either euro or local currencies.

The Group reports its financial statements in euro, its operations, however, are based locally in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, Slovakia and other countries. The Group receives the majority of its revenue from rent denominated in euro, however, it receives a certain portion of its income (including the proceeds from the sales of residential real estate) and incurs most of its costs (including the vast majority of its selling expenses and administrative expenses) in local currencies, including the Polish zloty, Bulgarian leva, Czech korunas, Croatian cunas, Hungarian forints, Romanian lei and Serbian dinars. In particular, the significant portion of the financial costs incurred by the Group includes: (i) the interest on the bonds issued by the Group in Polish zloty and (ii) the interest on the loan taken by the Group in Hungarian forints. The exchange rates between local currencies and euro have historically fluctuated.

The income tax expense (both actual and deferred) in the jurisdictions in which the Group conducts its operations is incurred in such local currencies. Consequently, such income tax expense was and may continue to be materially affected by foreign exchange rate movements.

Accordingly, the foreign exchange rate movements have a material impact on the Group's operations and financial results.

Availability of financing

In the CEE and SEE markets, real estate development companies, including the companies of the Group, usually finance their real estate projects with proceeds from bank loans, loans extended by their holding companies or the issuance of debt securities. The availability and cost of procuring financing are of material importance to the implementation of the Group's projects and for the Group's development prospects, as well as its ability to repay existing debt. Finally, the availability and cost of financing may impact the Group's sales dynamics and the Group's net profit.

In the past, the principal sources of financing for the Group's core business included, apart from proceeds from asset disposals, bank loans and proceeds from bonds issued by the Company.

Item 5.2. Specific factors affecting financial and operating results

In November 2015, the Group acquired Duna Tower office building in Budapest, Hungary, the total acquisition cost amount to €53,080. Duna Tower office building is located in the 13th District of Budapest and is leased to international tenants.

In December 2015, the Group acquired remaining 41.1% in BCG (owner of a company, which owns City Gate office building in Bucharest) for the total amount of €18,108 which was paid in 2016. The impact of on the equity attributable to equity holders of the parent amounted to an increase of €5,400.

On 28 January 2016, the Group acquired Pixel office building in Poznań. The office building is entirely leased to renowned tenants. The Company intends to hold the office building as part of the income-producing portfolio of the GTC Group. The net purchase price for the property and other rights and movable assets under the Agreement amounted to €32,200.

In April 2016, the Group purchased two office buildings in Bucharest (Premium Plaza and Premium Point) for €32,000, consisting of approximately 15,000 sq. m of the total leasable area.

In April 2016, GTC Group acquired the remaining 49.9% in Complexul Residential Colentina S.R.L, and the minority shareholder's loans granted to the project, for a consideration of €12.5. Following the transaction GTC remained the sole owner of the subsidiary.

Item 5.3.Presentation of differences between achieved financial results and published forecasts

The Group did not present forecasts for first half or full year 2016.

Item 5. 4. Statement of financial position

Item 5.4.1. Key items of the statement of financial position

Investment property

Investment properties that are owned by the Group comprise office and commercial space, including property under construction. Investment property can be split up into: (i) completed investment property; (ii) investment property under construction; and (iii) commercial landplots.

Residential landbank

The Group classifies its residential inventory as current or non-current assets based on their development stage within the business operating cycle. The normal operating cycle in most cases falls within a period of one to five years. The Group classifies residential inventory the development of which is planned to be commenced at least one year after the balance sheet date as residential landbank, which is part of its non-current assets.

Investment in associates and joint ventures

Investment in associates and joint ventures is accounted for pursuant to the equity method. Such investment is carried in the statement of financial position at cost plus post-acquisition changes in the Group's share of the net assets of the associate and joint ventures.

Assets held for sale

Assets held for sale comprise office or retail space and land plots that are designated for sale.

Inventory

Inventory relates to residential projects under construction and is stated at the lower of cost and net realisable value. Expenditures relating to the construction of a project are included in inventory.

Short-term deposits

Short-term and long-term deposits are restricted and can be used only for certain operating activities as determined by underlying contractual commitments.

Derivatives

Derivatives include instruments held by the Group that hedge the risk involved in the fluctuations of interest and currency rates. In relation to the instruments qualified as cash flow hedges, the portion of gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in other comprehensive income and the ineffective portion is recognized in net profit or loss. The classification of hedges in the statement of financial position depends on their maturity. For derivatives that do not qualify for hedge accounting, any gain or losses arising from changes in fair value are recorded directly in net profit and loss for the year. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments

Item 5.4.2. Financial position as of 30 June 2016 compared to 31 December 2015

Total assets increased by €103,488 (7%) to €1,663,038 as of 30 June 2016. This increase was mainly due to an increase in investment property which is driven by acquisitions and development activity.

Assets

The value of investment property increased by €126,946 (10%) to €1,415,475 as of 30 June 2016 from €1,288,529 as of 31 December 2015 mainly as a result of an investment of €76,387 in acquisition of Pixel (an office building in Poznań), Premium Plaza and Premium Point (office buildings in Bucharest) and a landplot in Budapest as well as an investment into assets under construction of €37,127 mainly in Galeria Północna shopping centre in Warsaw, University Business Park B in Łódź and Fortyone office building in Belgrade as well as revaluation gain attributed to these projects.

The value of assets held for sale amounted to €11,709 as of 30 June 2016 and included Galleria Arad and Galleria Piatra Neamt in Romania and a land plot in Poland that were under preliminary sale agreements as of 30 June 2016.

The value of escrow accounts for purchase of assets amounted to €70,107 as of 30 June 2016 and related to the purchase price (including VAT) of Neptun Office Center and Sterlinga Business Center. The acquisition of these asset was finalized in July 2016. Funds in the amount of €22,500 and €17,600 respectively, was from loans with Pekao S.A for financing of these projects ( including VAT).

The value of cash and cash equivalents decreased by €95,580 (56%) to €73,892 as of 30 June 2016 from 169,472 as of 31 December 2015, mainly as a result of the investment activities mentioned above.

Liabilities

The value of loans and bonds increased by €74,955 (10%) to €814,067 as of 30 June 2016 from €739,112 as of 31 December 2015. This increase comes mainly from drawdowns of €22,550 under new loan facility related to newly acquired Pixel office building, €52,651 under new loan facilities related to newly acquired Sterlinga Business Center and Neptun Office Center office buildings.

Provision for deferred tax increased by €9,624 (7%) to €143,079 as of 30 June 2016 from €133,455 as of 31 December 2015. This increase is related mainly to revaluation gains and FX accrued on intercompany loans granted by GTC S.A. to GTC RH B.V..

Payables related to purchase of non-controlling interest decreased by €18,108 (100%) to €0 as of 30 June 2016 from €18,108 as of 31 December 2015 as a result of payment for buyout of the minority partner in City Gate.

Equity

Equity increased by €40,405 (7%) to €661,607 as of 30 June 2016 from €621,202 as of 31 December 2015 mainly due to an increase in accumulated profit by €35,264 to €191,911 as of 30 June 2016.

Item 5.5. Consolidated income statement

Item 5.5.1. Key items of the consolidated income statement

Revenues from operations

Revenues from operations consist of:

rental income, which consists of monthly rental payments paid by tenants of the Group's investment properties for the office or retail space rented by such tenants. Rental income is recognized as income over the lease term;
service income, which comprises fees paid by the tenants of the Group's investment properties to cover the costs of the services provided by the Group in relation to their leases; and
residential revenue, which comprises proceeds from the sales of houses or apartments, which is recognized when such houses or apartments have been substantially constructed, accepted by the customer and a significant amount resulting from the sale agreement has been paid by the purchaser.

Cost of operations

Costs of operations consist of:

service costs, which consist of all the costs that are related to the management services provided to the individual tenants within the Group's properties — service costs should be covered by service income; and
residential costs, which comprise the costs that are related to the development of residential properties sold. The costs related to the development of residential properties incurred during the construction period are capitalized in inventory. Once income is recognized, the costs in respect of sold units are expensed.

Gross margin from operations

Gross margin from operations is equal to the revenues from operations less the cost of operations.

Selling expenses

Selling expenses include:

brokerage and similar fees incurred to originate the lease or sale of space;
marketing and advertising costs; and
payroll and related expenses directly related to leasing or sales personnel.

Administrative expenses

Administration expenses include:

payroll, management fees and other expenses that include the salaries of all employees that are not directly involved in sales or rental activities;
provisions made to account for the share-based incentive program that was granted to key personnel;
costs related to the sale of investment properties;
costs of audit, legal and other advisors;
office expenses;
depreciation and amortization expenses include depreciation and amortization of the Group's property, plant and equipment;
exchange gains or losses; and
others.

Profit/(loss) from the revaluation/impairment of assets

Net valuation gains (loss) on investment property and investment properties under development reflect the change in the fair value of investment properties and investment property under development.

Financial income/(expense), net

Financial income includes interest on loans granted to associate companies and interest on bank deposits.

Financial expenses include interest on borrowings and deferred debt rising expenses. Borrowing costs are expensed in the period in which they are incurred, except for those that are directly attributable to construction. In such a case, borrowing costs are capitalized as part of the cost of the asset. Borrowing costs include interest and foreign exchange differences.

Additionally, financial income or expenses include settlement of financial assets and gain or losses arising from changes in fair value of derivatives that do not qualify for hedge accounting.

Taxation

Income tax on profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted as of the balance sheet date and any adjustments to tax payable in respect of previous years. Generally, the Group disposes of property holding companies rather than the real estate itself, in part because in certain jurisdictions the sale and disposal of real estate is generally subject to real estate transfer tax and/or VAT.

Item 5.5.2. Comparison of financial results for the six-month period ended 30 June 2016 with the result for the corresponding period of 2015

Revenues from operations

Revenues from operations decreased by €1,205 to €58,826 in the six-month period ended 30 June 2016. Residential revenues decreased by €3,439 to €3,776 due to completion of sale of almost all residential projects. Rental and service revenues increased by €2,234 to €55,050 due to acquisition of Duna Tower, Pixel, Premium Plaza and Premium Point, partially offset by sale of Kazimierz Office Centre, Galleria Buzau, Jarosova and Avenue Mall Osijek in 2015.

Cost of operations

Cost of operations decreased by €3,651 to €16,226 in the six-month period ended 30 June 2016. Residential costs decreased by €3,846 to €2,953 resulting from completion of sale of almost all residential projects. Cost of rental operations increased by €195 to €13,273 as a result of the purchase of Duna, Pixel, Premium Point and Premium Plaza partially offset by sale of Kazimierz Office Centre, Galleria Buzau, Jarosova and Avenue Mall Osijek in 2015.

Gross margin from operations

Gross margin (profit) from operations increased by €2,446 to €42,600 in the six-month period ended 30 June 2016. The gross margin (profit) on rental activities increased by €2,039 to €41,777. Gross margin on rental activities in the six-month period ended 30 June 2016 was 76% compared to 75% in the corresponding period of 2015. The gross margin (profit) on residential activities increased by €407 to €823.

Selling expenses

Selling expenses increased by €167 to €1,397 in the six-month period ended 30 June 2016 from €1,230 in the corresponding period of 2015.

Administrative expenses

Administrative expenses (before provision for stock based program) increased by €281 to €5,115 in the six-month period ended 30 June 2016. In addition, mark-to-market of Phantom Shares program resulted in recognition of income of €118 in the six-month period ended 30 June 2016 compared to €105 expenses in the corresponding period of 2015.

Profit/(loss) from the revaluation/impairment of assets and impairment of residential projects

Net profit from the revaluation of the investment properties and impairment of residential projects amounted to €24,067 in the six-month period ended 30 June 2016, as compared to a loss of €1,826 in the corresponding period of 2015. Net profit from the revaluation of the investment properties and impairment of residential projects reflects mainly progress in the construction of Galeria Północna, University Business Park B and Fortyone II as well as profit from the revaluation of Galeria Jurajska and Galleria Burgas following an improvement in their operating results.

Other income/(expense), net

Other expenses (net of other income) related to landbank properties were at €819 in the six-month period ended 30 June 2016 as compared to an income of €272 in the corresponding period of 2015.

Foreign exchange gain/(loss)

Foreign exchange gain amounted to €3,138 in the six-month period ended 30 June 2016, as compared to a foreign exchange loss amounting to €1,634 in the corresponding period of 2015, mostly due to weakening of PLN to EUR which positively impacted the value of PLN denominated bonds.

Financial income/(cost), net

Net financial cost amounted to €12,726 in the six-month period ended 30 June 2016 as compared to €15,975 in the corresponding period of 2015 mainly due to refinancing and deleveraging activity, loan restructuring and repayment of loan related to sold assets. The decrease was also supported by change in hedging strategy which allowed to benefit from a low EURIBOR environment and resulted in a decrease in average borrowing cost to 3.2% in the six-month period ended 30 June 2016 from 3.4% in the corresponding period of 2015.

Share of loss of associates

Share of loss of associates was €3,803 in the six-month period ended 30 June 2016 as compared to a share of loss of €3,581 in the corresponding period of 2015 mainly resulting from bringing assets to their sale price due to disposal of Galeria Harfa, Harfa Office and Prague Marine Office as well as a land plot in Russia.

Taxation

Taxation amounted to €10,854 the six-month period ended 30 June 2016. Taxation consist of €9,200 of deferred tax expenses €1,654 of current tax expenses.

Net profit/ (loss)

Net profit amounted to €35,207 in the six-month period ended 30 June 2016, as compared to €6,064 in the corresponding period of 2015, mostly due to improvement in operating results, recognition of profit from the revaluation of the investment properties and impairment of residential projects of €24,067 combined with significant decrease in financial cost net.

Item 5.5.3. Comparison of financial results for the three-month period ended 30 June 2016 with the result for the corresponding period of 2015

Revenues from operations

Revenues from operations increased by €2,419 to €28,016 in the three-month period ended 30 June 2016. Residential revenues decreased by €4,150 to €76 due to completion of sale of almost all residential projects. Rental and service revenues increased by €1,731 to €27,940 due to acquisition of Duna Tower, Premium Point, Premium Plaza and Pixel, partially offset by sale of Kazimierz Office Centre, Galleria Buzau, Jarosova and Avenue Mall Osijek in 2015.

Cost of operations

Cost of operations decreased by €3,474 to €6,817 in the three-month period ended 30 June 2016. Residential costs decreased by €4,130 to €75 resulting from completion of sale of almost all residential projects. Cost of rental operations increased by €656 to €6,742 as a result of the purchase of Duna, Pixel, Premium Point and Premium Plaza partially offset by sale of Kazimierz Office Centre, Galleria Buzau, Jarosova and Avenue Mall Osijek in 2015.

Gross margin from operations

Gross margin (profit) from operations increased by €1,055 to €21,199 in the three-month period ended 30 June 2016. The gross margin (profit) on rental activities increased by €1,075 to €21,198. Gross margin on rental activities in the three-month period ended 30 June 2016 was 76% compared to 77% in the corresponding period of 2015. The gross margin (profit) on residential activities decreased by €20 to €1.

Selling expenses

Selling expenses decreased by €64 to €770 in the three-month period ended 30 June 2016 from €706 in the corresponding period of 2015.

Administrative expenses

Administrative expenses (before provision for stock based program) decreased by €25 to €2,474 in the threemonth period ended 30 June 2016. In addition, mark-to-market of Phantom Shares program resulted in recognition of cost of €171 in the three-month period ended 31 March 2016 compared to €30 of income in the corresponding period of 2015.

Profit/(loss) from the revaluation/impairment of assets and impairment of residential projects

Net profit from the revaluation of the investment properties and impairment of residential projects amounted to €16,631 in the three-month period ended 30 June 2016, as compared to a loss of €1,444 in the corresponding period of 2015. Net profit from the revaluation of the investment properties and impairment of residential reflects mainly progress in the construction of Galeria Północna, University Business Park B and Fortyone II as well as profit from the revaluation of Galeria Jurajska and Galleria Burgas.

Other income/(expense), net

Other expenses (net of other income) related to landbank properties were at €414 in the three-month period ended 30 June 2016 as compared to an income of €150 in the corresponding period of 2015.

Foreign exchange gain/(loss)

Foreign exchange gain amounted to €2,843 in the three-month period ended 30 June 2016, as compared to a foreign exchange gain amounting to €1,819 in the corresponding period of 2015, mostly due to weakening of PLN to EUR which positively impacted the value of PLN denominated bonds.

Financial income/(cost), net

Net financial cost amounted to €6,445 in the three-month period ended 30 June 2016 as compared to €7,716 in the corresponding period of 2015 mainly due to refinancing and deleveraging activity, loan restructuring and repayment of loan related to sold assets. The decrease was also supported by change in hedging strategy which allowed to benefit from a low EURIBOR environment and resulted in a decrease in average borrowing cost to 3.2% in the three-month period ended 30 June 2016 from 3.4% in the corresponding period of 2015.

Share of loss of associates

Share of loss of associates was €3,320 in the three-month period ended 30 June 2016 as compared to a share of loss of €1,975 in the corresponding period of 2015 mainly resulting from bringing assets to their sale price due to disposal of Galeria Harfa, Harfa Office and Prague Marine Office as well as a landplot in Russia.

Taxation

Taxation amounted to €8,553 the three-month period ended 30 June 2016. Taxation consist of €7,823 of deferred tax expenses €730 of current tax expenses.

Net profit/ (loss)

Net profit amounted to €18,868 in the three-month period ended 30 June 2016, as compared to €1,803 in the corresponding period of 2015, mostly due to improvement in operating results, recognition of profit from the revaluation of the investment properties and impairment of residential projects of €16,631 combined with significant decrease in net financial cost.

Item 5. 6. Consolidated cash flow statement

Item 5.6.1. Key items from consolidated cash flow statement

Net cash from (used in) operating activities

The operating cash flow is the cash that the Group generates through running its business and comprises cash inflows from rental activities and sale of residential projects.

Net cash used in investing activities

The investing cash flow is the aggregate change in the Group's cash position resulting from any gains (or losses) from investments in the financial markets, investment properties and operating subsidiaries, as well as changes resulting from amounts spent on investments in capital assets, such as property, plant and equipment.

Net cash from (used in) financing activities

The cash flow from (used in) financing activities accounts for, inter alia, the payment of cash dividends, receiving proceeds from loans or bond and issuing stock.

Cash and cash equivalents

Cash balance consists of cash in banks. Cash in banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. All cash is deposited in banks no matter the negligible amount. All cash and cash equivalents are available for use by the Group.

Item 5.6.2. Cash flow analysis

The table below presents an extract of the cash flow for the period of six month ended on 30 June 2016 and 2015:

	six month ended	six month ended
	30 June 16	30 June 15
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash from operating activities	36,412	35,161

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property under construction	(49,432)	(11,683)
Purchase of completed investment property	(76,387)	-
Increase in Escrow accounts for purchase of assets	(70,107)	-
Sale of investment property	2,729	51,279
Advances received for sale of subsidiaries/assets	3,930
Liquidation of joint venture		3,890
Purchase of minority	(18,121)	(800)
Sale of associate	2,009
VAT/CIT on sale of investment property		5,001
Other, interest and similar costs	152	442
Net cash from (used in) investing activities	(205,227)	48,129
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings	129,190	17,658
Repayment of long-term borrowings	(43,507)	(88,599)
Repayment of hedge		(1,489)
Interest paid	(12,386)	(14,335)
Loans origination cost	(317)
Decrease (increase) in short term deposits	1,611	2,936
Net cash from (used in) financing activities	74,591	(83,829)

Effect of foreign currency translation	(1,356)	665
Net increase/(decrease) in cash and cash equivalents	(95,580)	126
Cash and cash equivalents, at the beginning of the year	169,472	81,063
Cash and cash equivalents, at the end of the year	73,892	80,812

Cash flow from operating activities was €36,412 in the six-month period ended 30 June 2016 compared to €35,161 in the six-month period ended 30 June 2015 mainly due to an increase of revenue from rental activity by €2,234.

Cash flow used in investing activities amounted to €205,227 in the six-month period ended 30 June 2016 compared to €48,129 cash flow from investing in the six-month period ended 30 June 2015. Cash flow used in investing activities mostly composed of expenditure on investment property of €76,387 in the six-month period ended 30 June 2016 related mainly to purchase of one office building in Poland (Pixel) and two office buildings in Romania (Premium Point and Premium Plaza); €70,107 in Escrow accounts related to acquisition of two office buildings in Poland which was completed in July 2016; expenditure on investment property under construction of €49,432 that related mainly to investment in Fortyone (Belgrade, Serbia), University Business Park (Łódź, Poland) and Galeria Północna (Warsaw, Poland) and expenditure on investment in buyout of minority partner in City Gate of €18,121.

Cash flow from financing activities amounted to €74,591 in the six-month period ended 30 June 2016, compared to €83,829 of cash flow used in financing activities in the six-month period ended 30 June 2015. Cash flow from financing activities mostly composed of proceeds from long-term borrowings of €129,190 coming from mainly from a loan related to Neptun Office Centre (including VAT) in amount of €29,400, a loan related to Sterlinga Business Centre (including Vat) in amount of €23,300, a loan related to Pixel in amount of €22,600 and a drown dawn related to Galeria Północna in amount of €20,700 offset partially by repayment of long term borrowings of €43,507 coming mainly from amortization of investment loans and partial repayment of loans related to Galleria Arad and Galleria Stara Zagora following the restructuring oof certain loans that we completed last year.

Cash and cash equivalents as of 30 June 2016 amounted to €73,892 compared to €169,472 as of 30 June 2015. The Group keeps its cash in the form of bank deposits, mostly in Euro, with various international banks.

Item 5.7. Future liquidity and capital resources

As of 30 June 2016, the Group holds cash and cash equivalent in the amount of approximately €73,892. The Group attempts to efficiently manage all its liabilities and is currently reviewing its funding plans related to: (i) development and acquisition of commercial properties, (ii) debt servicing of its existing assets portfolio and (iii) capex. Such funding will be sourced through available cash, operating income, sales of assets and refinancing.

As of 30 June 2016, the Group's non-current liabilities amounted to €856,169 compared to €806,969 as of 31 December 2015.

The Group's total debt from long and short-term loans and borrowings as of 30 June 2016 amounted to €814,067 as compared to €739,112 as of 31 December 2015. The Group's loans and borrowings are mainly denominated in Euro, except for the corporate bonds that are denominated in PLN.

The Group's loan-to-value ratio amounted to 43% as of 30 June 2016, as compared to 39% as of 31 December 2015. The Group's strategy is to keep its loan-to-value ratio at the level of around 50%.

As of 30 June 2016, 66% of the Group's loans (by value) were hedged against interest fluctuations, mostly through interest rate swaps and currency swap as mentioned above.

Item 6. Information on loans granted with a particular emphasis on related entities

During the six-month period the Group did not grant loans of the value that exceeds 10% of its capital.

Item 7. Information on granted and received guarantees with a particular emphasis on guarantees granted to related entities

During the six-month period the Group did not grant guarantees of the value that exceeds 10% of its capital.

Company granted guarantees to third parties in order to secure construction cost-overruns and loans to its subsidiaries. Additionally, in connection with the sale of its assets, the Company gave typical warranties under the sale agreements, which are limited in time and amount. The risk involved in above warranties is very low.

In the normal course of our business activities the Group receive guarantees from the majority of its tenants to secure the rental payments on the leased space.

Item 8. Shareholders who, directly or indirectly, have substantial shareholding

The following table presents the Company's shareholders, who had no less than 5% of votes at the Ordinary Shareholders Meeting of GTC S.A., as of the date of publication of this Report. The table is prepared based on information received directly from the shareholders and takes into consideration the changes in the shareholding structure arising from, inter alia:

deposit certificate attached to statement of OFE PZU "Złota Jesień". (see: Current report no 15/2016);
deposit certificate attached to statement of LSREF III GTC Investments B.V and Lone Star Real Estate Partners III L.P. (see: Current report no 14/2016) and
deposit certificate attached to statement of AVIVA OFE Aviva BZ WBK (see: Current report no 10/2016).

Shareholder	Number of shares and rights to the shares held	% of share capital	Number of votes	% of votes
LSREF III GTC Investments B.V.¹	278,849,657	60,59%	278,849,657	60,59%
OFE PZU Złota Jesień	47,847,000	10.40%	47,847,000	10.40%
AVIVA OFE Aviva BZ WBK	32,922,000	7.15%	32,922,000	7.15%
Other shareholders	100,597,821	21.86%	100,597,821	21.86%
Total	460,216,478	100.00%	460,216,478	100.00%

¹LSREF III GTC Investments B.V. is related to Lone Star Real Estate Partners III L.P.

Item 9. Shares in GTC held by members of the Management Board and the Supervisory Board

Shares held by members of the Management Board

The following table presents shares owned directly or indirectly by members of the Company's Management Board as of 24 August 2016, the date of publication of this interim report, and changes in their holdings since the date of publication of Group's last financial report (quarterly report for the three-month period ended 31 March 2016) on 12 May 2016.

The information included in the table is based on information received from members of the Management Board pursuant to Art. 160 sec. 1 of the Act on Trading in Financial Instruments.

	Balance as of 24 August 2016	Nominal value of shares in PLN	Change since 12 May 2016
Management Board Member	(not in thousand)	(not in thousand)	(not in thousand)
Thomas Kurzmann	0	0	No change
Erez Boniel	143,500	14,350	No change
Total	143,500	14,350

Phantom Shares held by members of the Management Board

The following table presents Phantom Shares owned directly or indirectly by members of the Company's Management Board as of 30 June 2016 and changes since 31 March 2016.

	Balance as of 30 June 2016	Change since 31 March 2016
Management Board Member	(not in thousand)	(not in thousand)
Thomas Kurzmann	512,000	No change
Erez Boniel	204,800	Increase by 204,800

Shares of GTC held by members of the Supervisory Board

The following table presents shares owned directly or indirectly by members of the Company's Supervisory Board as of 24 August 2016, the date of publication of this interim report, and changes in their holdings since the date of publication of Group's last financial report (quarterly report for the three-month period ended 31 March 2016) on 12 May 2016.

The information included in the table is based on information received from members of the Supervisory Board pursuant to Art. 160 sec. 1 of the Act on Trading in Financial Instruments.

Members of Supervisory Board	Balance as of 24 August 2016 (not in thousand)	Nominal value of shares in PLN (not in thousand)	Change since 12 May 2016
Alexander Hesse	0	0	No change
Philippe Couturier	0	0	No change
Michael Damnitz	0	0	No change
Jan Düdden	0	0	No change
Mariusz Grendowicz	10,158	1,016	No change
Jarosław Karasiński	0	0	No change
Marcin Murawski	0	0	No change
Katharina Schade	0	0	No change
Total	10,158	1,016

Item 10.Material transactions with related parties concluded on terms other than market terms

The Group did not conduct any material transactions with the related parties that are not based on arms length basis.

Item 11. Proceedings before a court or public authority involving Globe Trade Centre SA or its subsidiaries the total value of the liabilities or claims of which amount to at least 10% of the Group's equity

There are no individual proceeding or group of proceedings before a court or public authority involving Globe Trade Centre SA or its subsidiaries, with the total value of liabilities or claims of 10% or more of the Company's equity.

Risk Factors Relating to the Group's Business

The Group's business could be affected if the general economic conditions in the countries in which the Group operates continue or worsen

The deterioration of the general economic conditions and the real estate market in the countries where the Group operates may adversely affect the willingness and ability of customers to secure financing and purchase or lease property. If such demand falls, the Group may have to sell or let its projects at a loss or may not be able to sell or let its projects at all. A potential downturn in the general economic conditions and the real estate market in Poland or other countries in which the Group operates may also lead to a drop in the market value of the Group's properties. The crisis on the financial markets may also adversely affect the Group's business in other ways, for example if tenants of the Group or the financial institutions that provide the Group with financing go bankrupt.

For example, due to the worsening macroeconomic situation and strong competition (which has led to a reduction in rents which were dependent, to a large degree, on the tenants' turnover), the Group had to lease out the Avenue Mall Osijek shopping centre at a loss for the period running from its completion date (i.e. from 2011) to its sale in 2015. This resulted in a substantial loss of value regarding that asset. Similarly, the Group was forced to lease out the Galleria Arad shopping centre at a loss for the period running from its completion date (i.e. from 2011), due to the worsening macroeconomic situation and the reduction in disposable income; this has also led to a reduction in value.

Any of these results may have a material adverse effect on the Group's business, financial condition and results of operations.

The Group may fail to implement its strategy

The Group is in the process of implementing its growth strategy pursuant to which it plans to: (i) expand its portfolio by acquiring and improving yielding properties in Poland and in capital cities of selected CEE and SEE counties where the Group operates, supplemented by selected, most attractive development projects in the Group's Property Portfolio; (ii) improve the efficiency of its asset management activities and maximise operating performance and efficiency; and (iii) sell its non-core assets which may allow the Group to reduce its financial leverage or obtain funds to be used for new investments.

As a result, certain properties and qualities of the portfolio may change in terms of geographic split, the ratio of the value of completed properties and the value of properties under construction, as well as the portfolio's split by asset classes (i.e. retail, office, residential and other properties). As a result, various metrics of the Group's business and recurring cash flows derived from rental income may change. Moreover, no assurance can be given that the Group's property portfolio or future investment strategies effected pursuant to the Group's strategy will enhance the value of its property portfolio and increase the Group's profitability. In particular, the success of the Group's business strategy relies on assumptions and contingencies that may prove to be partially or wholly incorrect and/or inaccurate. This includes assumptions with respect to the level of profitability of the acquisition targets to be completed in the future and investment criteria which have been developed by the Group for the purpose of achieving the expected level of returns on the acquired properties.

The Group may fail to achieve its major goals due to internal and external factors of a regulatory, legal, financial, social or operational nature, some of which may be beyond the Group's control. In particular, volatile market conditions, a lack of capital resources needed for expansion and the changing price of available properties for sale in the relevant markets may hinder or make it impossible for the Group to implement the core elements of its strategy. Moreover, expanding its presence in the asset management sector may be hindered or even impossible due to increasing competition from other real estate managers and investors in the real estate market.

Should the Group experience these or other challenges, the Group may be unable to implement its strategy fully or at all; it may decide to change, suspend or withdraw from its strategy or development program, and it may be unable to achieve, or it could encounter delays in achieving, the planned synergies and desired benefits from its strategy and development program. This could have a material adverse effect on the Group's business, financial condition, results of operations.

The valuation of the Group's properties is inherently uncertain, may be inaccurate and is subject to fluctuation

The Group presents the vast majority of its real estate properties at a fair value, which has been estimated by external real estate valuation experts.

The valuation of property is inherently subjective and uncertain since it is done on the basis of assumptions which may differ from actual future developments. For example, the valuation reports were prepared on the basis of certain forecasts and assumptions regarding the real estate market in geographic markets in which the Group operates.

The fair value of investment properties and the undeveloped landbank is established semi-annually (i.e. as of 30 June and 31 December of each year) by independent certified appraisers based on discounted projected cash flows from the investment properties using discount rates applicable for the relevant local real estate market or, in case of some of the real properties, using the sales comparison approach. In most instances the independent certified appraisers do not, however, prepare valuations for 31 March and 30 September of each year. Such valuations are reviewed internally and, if necessary, verified by the Company's management.

There can be no assurance that the valuations of the Group's properties (undeveloped, in progress and completed) will reflect the actual sale prices or that the estimated yield and annual rental revenue of any property will be attained, or that such valuations will not be subject to be challenged by, among others, the regulatory authorities. Forecasts may prove inaccurate as a result of the limited amount and quality of publicly available data and research regarding Poland and other markets in which the Group operates compared to mature markets. Additional factors that impact the valuation and, specifically, the planning of projects are the construction costs as estimated by the Group and established on the basis of current prices and future price forecasts, whereas the actual costs may be different. Moreover, some of the valuations are based on certain assumptions regarding future zoning decisions. Such assumptions may turn out not to be fulfilled which may result in the Group not being able to develop certain property in line with the plan. This may adversely impact the valuation of such properties in the future.

If the forecasts and assumptions on which the valuations of the projects in the Group's portfolio are based prove to be inaccurate, the actual value of the projects in the Group's portfolio may differ materially from that stated in the valuation reports. Inaccurate valuations of the Group's properties and fluctuations in valuations may have a material adverse effect on the Group's business, financial condition and results of operations.

For instance, the value of some investment properties (those generating an operational loss, e.g. Galleria Arad and Avenue Mall Osijek) and some land plots (mostly in Hungary) were adjusted to their transaction price as at 31 December 2014, which resulted in the recognition of €160,300 of net revaluation losses and the impairment of assets in terms of investment properties and €34,100 in terms of residential projects in the twelve-month period ended 31 December 2014.

The decrease in the value of the above-mentioned real properties negatively affected the Group's covenants to maintain certain levels of loan-to-value ratios established in connection with the Group's loan agreements, and led to breach of its obligations under the loan agreements.

In addition, a decrease in the value of the real estate properties of the Group may also negatively affect the Group's covenants to maintain certain levels of loan-to-value ratios established in connection with the Group's loans incurred to finance projects and the ability of the Group to raise and service its debt funding. Each such event may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's consolidated balance sheet and income statement may be significantly affected by fluctuations in the fair market value of its properties as a result of revaluations

The Group's income generating properties and properties under development are independently revalued on at least semi-annual basis in accordance with its accounting policy. Consequently, in accordance with IAS 40 "Investment Property" as adopted by the EU, any increase or decrease in the value of its properties accounted for in accordance with fair value models recorded as a revaluation gain or loss in the Company's consolidated income statement for the period during which the revaluation occurs. Moreover, projects under construction which cannot be reliably valued at fair value are valued at historical cost decreased by impairment, if any. Such properties are tested for impairment on, at least, a semi-annual basis. If the criteria for impairment are satisfied, a loss is recognized in the Group's consolidated income statement.

As a result, the Group can have significant non-cash revenue gains or losses from period to period depending on the changes in the fair value of its investment properties, whether or not such properties are sold. For instance, the Group may recognize revaluation losses and impairment of assets and residential projects as well as profits in other years.

If market conditions and the prices of comparable commercial real properties continue to be volatile, the Group may continue to experience significant revaluation gains or losses from the Group's existing properties in the future. If a substantial decrease in the fair market value of its properties occurs, over the longer term, this may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's business is dependent on its ability to actively manage its assets

A core part of the Group's operations is the active management of its assets, which includes the management of vacancy rates and rent levels and the terms of executed lease agreements in the case of all commercial properties, as well as achieving the desired tenant mix in the case of retail properties. This is particularly relevant with respect to the Group's large scale commercial properties, such as Galeria Jurajska, City Gate and Avenue Mall Zagreb. In addition to legal constraints, the Group's ability to reduce vacancies, renegotiate rents and create a

desired tenant mix is partly subject to market-related factors. Some of these factors, such as the general economic environment, consumer confidence, inflation and interest rates, and others are beyond the Group's control. During periods of recession or downturns in the economy it is more challenging for developers to attract new tenants and to retain existing ones, and the competition between developers for each tenant is much stronger. If the Group is unable to create or capture demand for its properties by, for example, improving tenant services or motivating its external sales agents, it may not be able to reduce vacancy rates or renegotiate rents as desired.

A prolonged period of higher vacancy rates could lower the rents tenants generally pay and make it more difficult to increase the average rent that the Group expects to charge. Higher vacancy rates would also increase the Group's overall operating costs, as it would have to cover expenses generated by empty properties or units. Any such decrease in rental revenue or increase in operating costs could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's growth and profitability will depend on the Group's ability to identify and acquire attractive income-generating properties, efficiently manage its portfolio and develop selected projects

In accordance with its strategy, the Group intends to expand its business through: (i) the acquisition of yielding properties; (ii) asset management focused on unlocking value from the Group's portfolio; and (iii) the development of selected projects. Accordingly, the growth and profitability of the Group and the success of its proposed business strategy depend, to a significant extent, on its continued ability to locate and acquire yielding properties at attractive prices and on favourable terms and conditions.

The ability to identify and secure accretive value-added acquisition opportunities involves uncertainties and risks, including the risk that the acquisition is not an income-generating one after the Group has carried out business, technical, environmental, accounting and legal examinations of the property or project. In addition, the Group also faces the risk that competitors may anticipate certain investment opportunities and compete for their acquisition. Additionally, any potential acquisition of properties may give rise to pre-acquisition costs which have to be paid by the Group even if the purchase of a property is not concluded. There can be no assurance that the Group will be able to: (i) identify and secure investments that satisfy its rate of return objective and realise their values; and (ii) acquire properties suitable for management in the future at attractive prices or on favourable terms and conditions.

As a part of its strategy, the Group intends to focus on maximising the operating performance and efficiency of the active management of its income-generating commercial property portfolio. In pursuing this objective, the Group may expend considerable resources (including funds and management time) on managing properties that do not generate the expected returns and maintain certain ratios at the required level due to, for example, a decrease in demand for rental units or in rental levels which are not possible to anticipate.

The failure of the Group to identify and acquire suitable properties, effectively manage its properties portfolio and develop its projects could have a material adverse effect on the Company's business, financial condition, results of operations or prospects.

The Group might not receive adequate information on risks relating to, or might make errors in judgment regarding, future acquisitions of real estate

The acquisition of real estate requires a precise analysis of the factors that create value, in particular the levels of future rental values and the potential for the improvement of the NOI. Such an analysis is subject to a wide variety of factors as well as subjective assessments and is based on various assumptions. It is possible that the Group or its service providers will misjudge individual aspects of a given project when making acquisition decisions or that assessments on which the Group bases its decision are inaccurate or based on assumptions that turn out to be incorrect. Such judgment errors may lead to an inaccurate analysis and valuation of the properties by the Group in connection with investment decisions that may only become apparent at a later stage and force us to revise the Group's valuation amounts downwards. The Group can also not guarantee that the service provider it chooses to carry out its due diligence when purchasing property will identify all the risks related to the property in question. In addition, the Group cannot guarantee that it will be able to have recourse to the seller of the property for not disclosing such risks. If the Group does not find out about these risks, this could lead the Group to economic and financial disadvantages. The Group cannot guarantee that it will be able to pursue remedies against the respective seller for the non-disclosure of such risks. The occurrence of one or several of such risks could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group cannot guarantee that it will continue to generate rental income at assumed levels

Rental levels of the Group's properties are generally affected by overall conditions in the economy as well as the conditions of the portfolio itself (including future acquisitions of properties and the performance of the existing portfolio), the development of the selected existing projects, their infrastructure condition, the specific properties, and the vacancy rates. All these elements are subject to various factors, some of which are outside the Group's control. In particular, due to increased competition and pressure on rents and the worsening of the financial condition of tenants, the Group may not be able to renew the expiring leases of its current properties on favourable terms and conditions (if at all) or find and retain tenants willing to enter into leases on terms that are at least as favourable as those on which the Group has rented its properties thus far. Moreover, the Group's portfolio has included and will continue to include numerous properties with non-fixed rents tied to the turnover of the tenants. Accordingly, if the turnover of such tenants declines, the rent payable by them will also decrease. In addition, the Group has no impact on the operations of its tenants and may not be able to monitor on an ongoing basis the tenants' turnover in order to ensure that the level of turnover reflects the best and actual performance efforts of its tenants. Consequently, the amounts of rental income generated by the Group's office and retail properties in the past cannot be used to predict future rental income and there can be no assurance that rental income will develop positively in the future.

Additionally, the Group's rental income may also decrease as a result of asset disposals (for instance, the Group estimates that the sale of Kazimierz Office Centre will reduce the Group's annual rental income by approximately EUR 3.7 million) or acquisitions of properties with no or unsatisfactory income-generating capabilities. As part of its strategy, the Group is reorienting its portfolio and intends to acquire accretive and value-added properties and sell its non-core assets. In accordance with such strategy, that newly acquired properties are intended to be integrated with the existing portfolio and rented out in order to generate rental income for the Group. If these properties are not fully rented and/or the rental rates are agreed below the estimated rental values, the Group may not be able to realise its expected rates of return on the new acquisitions.

A less positive or negative development of rental income and profits could have a material adverse effect on the Group's business, financial condition, results of operations.

The termination or expiration of lease agreements or the inability to rent out existing unoccupied space could have lasting negative effects on the Group's profitability and on the value of the Group's portfolio

For the Group to be profitable over the long term, the income-generating properties it owns and intends to acquire in the future must be rented out without interruptions to the greatest extent possible. The same applies to maintaining the valuation of the properties the Group owns and thus the valuation of the overall portfolio. To the extent that leases are terminated or expire, the Group can give no assurance that the properties in question can be rented out again immediately. An increased vacancy rate would result in lower rental income from the management of the existing portfolio and in a lower valuation of the Group's properties and overall portfolio. Expected vacancies are already reflected in the valuation reports as of 30 June 2016. The fixed costs for maintaining vacant spaces and the lack of rental income generated by such spaces could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may be unable to fully recover the costs of operating the properties from the tenants

The majority of the Group's lease contracts are structured in a way that allow to pass on certain of the costs related to the leased property to the tenant, including marketing cost, electricity cost on common space, real estate taxes, building insurance, and maintenance. However, the Group is not able to pass on all such costs to the tenants, especially in a very competitive environment, where the Company has to offer the attractive conditions to be able to compete with the other office buildings or has to improve the conditions offered to its tenants to be able to attract a new tenant to its retail project. Deteriorating market conditions, increased competition and tenants' requirements may further limit the Group's ability to transfer such costs, in full or in part, to the tenants. The service charges of the properties may increase due to a number of factors, including an increase in the electricity costs or an increase in the maintenance cost. Moreover, if vacancy rates increase, the Company has to cover the portion of the service charge that is related to the vacant space. Some lease agreements provide for the maximum value combined rental rate and service charged paid by the tenant. In such cases, if the maintenance charges increase, the Group is unable to pass on such costs to the tenants. For example, in the case of Galleria Arad and Avenue Mall Osijek, due to the worsening macroeconomic conditions and strong competition, the Group was unable to pass on all the maintenance costs to the tenants in the period running from their completion to their sale, and had to lease out those commercial properties at a loss.

Any significant increase in the property costs that cannot be compensated by increasing the level of costs incurred by the tenants may have an adverse effect on the Group's business, financial condition and results of operations.

The Group may be materially affected by the loss of attractive tenants

The presence of reputable tenants, especially anchor tenants, in the Group's retail projects is important for its commercial success. Such tenants play an important part in generating customer traffic and making a building a desirable location for other tenants. It may be more difficult for the Group to attract tenants to enter into leases during periods when market rents are increasing or when general consumer activity is decreasing, or if there is competition for such tenants from competing developments. In addition, the termination of a lease agreement by any significant tenant may adversely affect the attractiveness of a project. The failure of such tenant to abide by these agreements, or its bankruptcy or economic decline, may cause delays or result in a decrease in rental income (temporary or long-term), the effect of which the Group may not be able to off-set due to difficulties in finding a suitable replacement tenant. If the Group fails to renew the leases of important tenants, or to replace such tenants in a timely manner, the Group may incur material additional costs or loss of revenues, which may, in turn, have a material adverse effect on the Group's business, financial condition and results of operations.

The Group faces competition from other owners, real estate managers and developers of commercial real estate

The Group has faced and continues to face increased competition from other owners, local and international real estate managers and developers of commercial real estate. Such competition may affect the Group's ability to attract and retain tenants and may reduce the rents that the Group is able to charge. Such competing properties may have vacancy rates that are higher than the vacancy rates of the Group's properties, which could result in their owners being willing to make space available at lower rental rates than the Group would normally be prepared to offer but which the Group may have to match. Competition in the real estate market may also lead to increased marketing and development costs.

Given that the successful growth and profitability of the Group depend on: (i) the level of its vacancy rates; (ii) the increase and maintenance of occupancy on best achievable market terms; (iii) the level of lease rent and rent collection; (iv) optimisation of property maintenance costs; and (v) the acquisition of real estate at lowest available prices, the increased competition from other owners, real estate managers and developers of commercial real estate and surrounding factors could adversely affect the Group's business, financial condition and results of operations.

The Group may be subject to significant competition in seeking investments and may increase the purchase price of properties to be acquired

The Company competes with a number of real estate companies and developers for properties, developments, contractors and customers. Some of the Group's competitors may be larger or have greater financial, technical and marketing resources than the Group and therefore the Group may not be able to compete successfully for investments or developments.

In addition, new acquisitions of existing properties at yields that the Company considers attractive may become difficult to complete. Accordingly, the implementation of the Company's strategy to make suitable investments in prime locations may be delayed or, even, become impossible.

Competition in the real estate market may also lead to a significant increase in prices for real estate available for sale, which could be potential targets for the Group. Each of these risks could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group cannot assure profitability of its projects

The Group currently has a number of projects that are not profitable primarily due to insufficient occupancy rates and rent levels, including Galleria Pietra Neamt and Galleria Arad in Romania. The Group is currently unable to attract new tenants or increase rent levels due to factors beyond its control, in particular due to market conditions. There can be no assurance that the Group will be able to dispose of such projects in a timely manner or restructure such assets to limit its losses. It cannot be excluded that the Group will not consider the disposal or temporary suspension of such projects as more commercially justifiable; in such cases, there can be no assurance that following such actions the Group will limit its losses on a timely basis. The Group cannot exclude that it will be forced to discontinue the realisation of such projects. Moreover, the Group's other projects may also start

generating losses in the future. Any such development may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may not be able to sell its properties on a timely basis

As part of its strategy, the Group intends to sell its non-core assets. The sale of a real estate project is usually a complex and lengthy process. There may be situations, however, when it would be beneficial for the Group to be able to sell one or more of its projects quickly. For example, the Group may wish to sell on short notice if it believes that market conditions are optimal or if it is approached by a party interested in purchasing a particular property on commercially attractive terms. The Group's ability to sell its property quickly may, however, be hindered by a number of factors beyond its control.

The Group's properties may constitute collateral established in favour of entities providing external financing, which may further restrict and/or delay their transferability if the lender's consent must first be obtained. Several of the Group's projects are also held through joint ventures with third parties and may, as a result, be subject to legal and/or contractual limitations on transferability, such as first refusal and co-sale rights, or a requirement to obtain joint approval for any such sale. Such limitations could adversely affect the Group's ability to complete a transaction and to generate cash as needed through the timely sale of its projects at favourable prices or to vary its portfolio in response to economic or other conditions impacting the property value. If the Group cannot sell a particular project within a reasonable time, it may not be able to generate the cash flow it may require to service ongoing operations or invest in new projects, or it may be unable to take advantage of favourable economic conditions or mitigate the impact of unfavourable economic conditions should they arise, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's properties could suffer damage due to undiscovered defects or external influences

The Group's properties could suffer damage due to undiscovered or underestimated defects or from external influences (e.g., earthquakes, floods, landslides or mining damage). In addition to the significant health risks and related costs, the Group could also be required to pay for the removal and disposal of hazardous substances, as well as the related maintenance and restoration work, without the ability to pass those costs onto third parties. The occurrence of any such risk could have a material adverse effect on the Group's business, financial condition, results of operations.

If a given property is currently under renovation or modernisation, there can be no assurance that any space which has not been pre-leased, can be let or otherwise marketed during or following the renovation or modernisation phase on the appropriate terms and conditions. Such developments could have a material adverse effect on the Group's business, financial condition, results of operations.

Failure to obtain the required zoning or construction permits, or any other approvals in a timely manner or at all may delay or prevent the development of certain of the Group's projects

The Group cannot guarantee that any permits, consents or approvals required from various government entities in connection with existing or new development projects will be obtained by the Group in a timely manner, or that they will be obtained at all, or that any current or future permits, consents or approvals will not be withdrawn. For example, as part of its operations in Poland, the Group, as is the case with other real estate developers, may occasionally purchase land that is not zoned as commercial. Any commercial development on such properties requires either a new local spatial development plan (miejscowy plan zagospodarowania przestrzennego) ("LSDP") or planning permission (decyzja o warunkach zabudowy). The adoption of a revised LSDP or the issuance of favourable planning permission cannot be guaranteed, and the Group has encountered difficulties in the past in effecting changes to LSDPs and in obtaining such permissions. In addition, civic and environmental groups as well as owners of neighbouring properties and local residents may try to frustrate the obtainment of the necessary permits, consents or approvals.

As a general rule, the Group purchases land which it designates for a specific purpose and for a specific project. Nevertheless, there are instances when it is merely a possibility that property acquired thereby will be available for any specific development. In such circumstances, it may be necessary for a new LPZP to be adopted or to obtain the relevant planning permission. However, the Group may wish to alter certain projects in order to put them to a more profitable use but may be unable to do so as a result of not being able to obtain the required approvals and permits.

If the Group cannot obtain the required approvals and permits in a timely manner or at all, its projects will be delayed or cancelled, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may be subject to increased costs or project delays or cancellations if it is unable to hire general contractors to build its projects on commercially reasonable terms, or at all, or if the general contractors it hires fail to build the Group's projects to accepted standards, in a timely manner or within budget

The Group outsources the construction of its projects to general contractors. The successful construction of the Group's projects depends on its ability to hire general contractors to build its projects to accepted standards of quality and safety on commercially reasonable terms, within the limits of an agreed timeframe or an approved budget. The Group's failure to hire general contractors on commercially reasonable terms could result in increased costs. Failure to hire general contractors at all could result in project delays or cancellations. Failure of the general contractors to meet accepted standards of quality and safety or to complete the construction within the agreed timeframe or within an approved budget may result in increased costs, project delays or claims against the Group. In addition, it may damage the Group's reputation and affect the marketability of the completed property. If the Group is unable to enter into contracting arrangements with quality general contractors or subcontractors on commercially reasonable terms, or their performance is substandard, this could have a material adverse effect on the Group's business, financial condition, results of operations.

The financial strength and liquidity of the Group's general contractors may be insufficient in the case of a severe downturn in the real estate market, which, in turn, could lead to their insolvency. Although most of the Subsidiaries' agreements with general contractors provide for the indemnification of the Subsidiaries against any claims raised by sub-contractors engaged by such general contractors, there can be no assurance that such indemnification provisions will be fully effective, in particular if such indemnification is challenged in court. The Group endeavours to require general contractors to secure the performance of their obligations under their respective agreements, in particular by presenting bank guarantees. However, there can be no assurance that such guarantees will cover the entire costs and damages incurred by the Group in connection with the non-performance of agreements entered into with general contractors.

The Group's reliance on general contractors and subcontractors exposes it to risks associated with the poor performance of such contractors and their subcontractors and employees and construction defects. The Group may incur losses as a result of being required to engage contractors to repair defective work or pay damages to persons who have suffered losses as a result of such defective work. Furthermore, these losses and costs may not be covered by the Group's professional liability insurance, by the contractor or by any relevant subcontractor – in particular in the case of the architects engaged by the general contractors as both the scope of their liability and their financial strength is limited in comparison to the value of the Group's projects. If the performance of the Group's general contractors or subcontractors is substandard, this could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may face claims for defective construction and risks associated with adverse publicity, which could have an adverse effect on its competitive position

The construction, lease and sale of properties are subject to a risk of claims for defective construction, corrective or other works and associated adverse publicity. There can be no assurance that such claims will not be asserted against the Group in the future, or that such corrective or other works will not be necessary. Further, any claim brought against the Group, and the surrounding negative publicity concerning the quality of the Group's properties or projects, irrespective of whether the claim is successful, could also have a material adverse effect on how its business, properties and projects are perceived by target customers, tenants or investors. This could negatively affect the Group's ability to market, lease and sell its properties and projects successfully in the future, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The construction of the Group's projects may be delayed or otherwise negatively affected by factors over which the Group has limited or no control

The construction of the Group's projects may be delayed or otherwise negatively affected by, among others, the following factors over which the Group has limited or no control:

increased material, labour or other costs, which may make completion of the project uneconomical;
acts of nature, such as harsh climate conditions, earthquakes and floods, that may damage or delay the construction of properties;
industrial accidents, deterioration of ground conditions (for example, the presence of underground water) and potential liability under environmental laws and other laws related to, for example, ground contamination, archaeological findings or unexploded ordnance;
acts of terrorism, riots, strikes or social unrest;
building code violations or as yet undetected existing contamination, soil pollution, or construction materials that are determined to be harmful to health;
changes in applicable laws, regulations, rules or standards that take effect after the commencement by the Group of the planning or construction of a project that result in the incurrence of costs by the Group or delays in the development of a project; and
defective building methods or materials.

The inability to complete the construction of a project on schedule, within budget or at all for any of the above or other reasons may result in increased costs or cause the project to be delayed or cancelled, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group is subject to general development risks that may increase costs and/or delay or prevent the development of its projects

Development of certain of the Group's projects has not yet begun and these projects do not as of the date of delivery of this Report generate any revenues. The successful development of these projects is an important factor for the Group's future success, and involves a large number of highly variable factors which are complex and inherently subject to risk. Development risks to which the Group is sensitive include, among others:

additional construction costs for a development project being incurred in excess of the amount originally agreed with the general contractor;
liability to subcontractors related with bankruptcy of the general contractor;
changes in existing legislation or the interpretation or application thereof (e.g. an increase of the rate of the goods and services tax, which impacts the demand for housing);
actions of governmental and local authorities resulting in unforeseen changes in urban planning, zoning and architectural requirements;
potential defects or restrictions in the legal title to plots of land or buildings acquired by the Group, or defects, qualifications or conditions related to approvals or other authorisations relating to plots of land held by the Group;
the Group's potential inability to obtain financing on favourable terms or at all for individual projects or in the context of multiple projects being developed at the same time;
potential liabilities relating to acquired land, properties or entities owning properties with respect to which the Group may have limited or no recourse;
tenants' unwillingness to vacate a development site;
obligations regarding the development of adjacent properties;
inability to receive required zoning permissions for intended use;
discrepancies between the planned area and the post-construction area of developments; and
obligations relating to the preservation and protection of the environment and the historic and cultural heritage of Poland and other jurisdictions in which the Group conducts its operations, as well as other social obligations.

These factors, including factors over which the Group has little or no control, may increase costs, give rise to liabilities or otherwise create difficulties or obstacles to the development of the Group's projects. The inability to complete the construction of a property on schedule or at all for any of the above reasons may result in increased costs or cause the projects to be delayed or cancelled, which may have a material adverse effect on the Group's business, financial condition, results of operations.

Without sufficient local infrastructure and utilities, the construction of the Group's projects may be delayed or cancelled, or it may be unable to realize the full expected value of its completed projects

The Group's projects can only be carried out if the sites on which they are located have access to the relevant technical infrastructure required by law (e.g. internal roads, utility connections, and fire prevention equipment and procedures). In cases where such sites do not have the required infrastructure, a use permit for the project may not be issued until such infrastructure is assured. It is also possible that the relevant authorities may require the Group to develop the relevant infrastructure as a part of the works related to the project, which may have a significant impact on the costs of the construction works. The authorities may also demand that the investor develop technical infrastructure that is not required from the project's perspective, but may be expected by the authorities as a contribution by the investor to the development of the local municipality.

In addition to the necessity of having adequate infrastructure during the construction process, the viability of the Group's projects, once completed, depends on the availability and sufficiency of the local infrastructure and utilities. In some cases, utilities, communications and logistics networks have not been adequately funded or maintained in recent decades and may be non-existent, obsolete or experience failures. To be sufficient, the existing local infrastructure and utilities may need to be improved, upgraded or replaced. As a consequence of this lack of maintenance, for example, the Group may from time to time experience shortages in the availability of energy and other utilities. There can be no assurance that improvements to the infrastructure in and around the Group's projects, or the infrastructure integrated into its projects, will be completed prior to the completion of the projects or that any such improvement will be sufficient to support the Group's completed projects. This may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group is reliant on partners and co-investment agreements for a portion of its developments and faces counterparty risks

The Group sometimes acquires and/or develops properties in partnership with other investors, in particular, with local and international developers, banks, landowners and other partners. In these investments, the Group may not have exclusive control over the identification or acquisition of property or the development, financing, leasing, management and other aspects of these investments, nor can it control the conduct of its joint venture partners nor guarantee that they will be able to secure the optimum realisation of such projects. In addition, the partner may have interests or aims that are inconsistent with, and which may impede, the Group's interests or aims. In these investments, the Group may rely on the resources of its partners and any disagreement with a partner could lead to a significant disruption of a project or result in litigation, even if the Group is able to assume control of the project. These circumstances may have an adverse effect on the Group's business, financial condition, results of operations.

Furthermore, a Subsidiary may be a party to a shareholders agreement imposing some restrictions on it, including, inter alia, in relation to the disposal of its interest, and its income and capital distribution entitlements. Such a shareholders agreement, other than a joint arrangement in the meaning of IFRS 11, may entitle the other shareholders to preferential income or capital returns on, or other rights in relation to, the investment in certain circumstances and/or pre-emption rights on the sale of the Subsidiary's interest. Any such shareholders agreement may also impose obligations on the Subsidiary that is party thereto. Any of these matters may affect the value of the Group company's investment in such properties. In addition, the Group company may be jointly and severally liable for costs, taxes or liabilities with its co-investors and, in the event of their default, the Group company may be exposed to more than its proportionate share of the cost, tax or liability in question. This could have an adverse effect on the Group's business, financial condition and results of operations.

The Group is also exposed to the credit risk of its counterparties in such partnership or co-investment agreements and their ability to satisfy the terms of contracts Group Companies have with them. The relevant Group company could experience delays in liquidating its position and suffer significant losses, including declines in the value of its investment during the period in which it seeks to enforce its rights or an inability to realise any gains on its investment during such period and may incur fees and expenses in enforcing its rights. There is a risk that control cannot be exercised efficiently and quickly, especially in the event of the bankruptcy or insolvency of the partner. The relevant Group company may have to continue financing the project even if the partner is in breach of its agreement with the relevant Group company. This may have an adverse effect on the Group's business, financial condition, results of operations.

The Group may be subject to liability following the disposal of investments

When the Group disposes of its projects, it may be required to give certain representations, warranties and undertakings which, if breached, could result in liability to pay damages. As a consequence, the Group may become involved in disputes or litigation concerning such provisions and may be required to make payments to third parties, which may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may be exposed to certain environmental liabilities and compliance costs

The environmental laws in CEE and SEE impose existing and potential requirements to conduct remedial action on sites contaminated with hazardous or toxic substances. Such laws often impose liability without regard to whether the owner of such site knew of, or was responsible for, the presence of such contaminating substances. In such circumstances, the owner's liability is generally not limited under such laws, and the costs of any required removal, investigation or remediation can be substantial. The presence of such substances on any of the Group's properties, or the liability for the failure to remedy contamination from such substances, could adversely affect the Group's ability to sell or let such property or to borrow funds using such property as collateral. In addition, the presence of hazardous or toxic substances on a property may prevent, delay or restrict the development or redevelopment of such property, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may be subject to legal disputes and risks

The Group's business involves the acquisition, rental, sale and administration of properties, including under cooperation agreements that, as a matter of ordinary course of business, expose the Group to a certain amount of small-scale litigation and other legal proceedings. Legal disputes which, taken individually, are relatively immaterial, may be joined with disputes based on similar facts such that the aggregate exposure of the Group might become material to its business. Furthermore, the Group may face claims and may be held liable in connection with incidents occurring on its construction sites such as accidents, injuries or fatalities of its employees, employees of its contractors or other visitors on the sites. It is standard practice in real estate transactions for the seller to make representations and warranties in the purchase agreement concerning certain features of the property. Typically, the assurances the seller gives regarding the property in the purchase agreement do not cover all of the risks or potential problems that can arise for the Group in connection with the purchase of property by the Group. In addition, the Group may be unable, for a variety of reasons, including, in particular, the seller's insolvency, to enforce its claims under these assurances. If this were to occur, the Group may suffer a financial loss.

Moreover, if the Group's properties are subjected to legal claims by third parties and no resolution or agreement is reached, these claims can delay, for significant periods of time, planned actions of the Group. Such situations may include, for example, claims from third parties relating to plots of land where the Group has developed and completed a real estate asset which it then intends to sell, as well as claims from third parties relating to specific land plots the Group needs to acquire in order to complete a particular project (for example plots adjoining plots it owned as of the date of the delivery of this Report), which could delay the acquisition by the Group of such plots.

The occurrence of one or several of the aforementioned risks could have a material adverse effect on the Group's business, financial condition, results of operations.

When leasing or selling real estate, the Group could be faced with claims for guarantees for which it does not have adequate recourse

The Group provides different types of guarantees when it leases real estate, especially with regard to legal title and the absence of defects in quality, as well as existing contamination and the portfolio of leases. The same applies to the sale of real estate. Claims could be brought against the Group for breach of these guarantees. Defects of which the Group was not aware, but of which it should have been aware, when it concluded the transaction pose a particular risk. The Group's possible rights of recourse towards the sellers of properties could fail due to the inability of the persons in question to demonstrate that they knew or should have known about the defects, due to the expiration of the statute of limitations, due to the insolvency of the parties opposing the claim, or for other reasons. The occurrence of one or several of the aforementioned risks could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's insurance may be inadequate

The Group's insurance policies may not cover it for all losses that may be incurred by the Group in the conduct of its business, and certain types of insurance are not available on commercially reasonable terms or at all. As a result, the Group's insurance may not fully compensate it for losses associated with damage to its real estate properties. In addition, there are certain types of risks, generally of a catastrophic nature, such as floods, hurricanes, terrorism or acts of war that may be uninsurable or that are not economically insurable. Other factors may also result in insurance proceeds being insufficient to repair or replace a property if it is damaged or destroyed, such as inflation, changes in building codes and ordinances and environmental considerations. The Group may incur significant losses or damage to its properties or business for which it may not be compensated fully or at all. As a result, the Group may not have sufficient coverage against all losses that it may experience. Should an uninsured loss or a loss in excess of insured limits occur, the Group could lose capital invested in the affected developments as well as anticipated future revenues from such project. In addition, the Group could be liable to repair damage caused by uninsured risks. The Group could also remain liable for any debt or other financial obligation related to such damaged property. No assurance can be given that material losses in excess of insurance coverage limits will not occur in the future. Any uninsured losses or losses in excess of insured limits could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group is dependent on a limited number of key members of its management

The Group's success depends on the activities and expertise of the members of its management. If the Group is unable to retain the key members of its management, this could result in a significant loss of expertise and could have a material adverse effect on the Group's business, financial condition, results of operations.

Shortages of qualified employees and other skilled professionals could delay the completion of the projects of the Group or increase its costs

The Group relies on a skilled team of professionals, including its key management and project managers, mid-level managers, accountants and other financial professionals, in the development of its projects. If the Group is unable to hire the necessary employees, staffing shortages may adversely affect its ability to adequately manage the completion of its projects and efficiently manage its assets or force it to pay increased salaries to attract skilled professionals or the necessary employees. Furthermore, the future success of the Group depends on its ability to hire senior personnel such as managers with extensive experience in the identification, acquisition, financing, construction, marketing and management of development projects and investment properties. The failure by the Group to recruit and retain appropriate personnel may have a material adverse effect on the Group's business, financial condition, results of operations.

Risk Factors Relating to the Group's financial condition

The Group's substantial leverage and debt service obligations are significant and could increase, adversely affecting its business, financial condition or results of operations

As of the date of the delivery of this Report the Group is highly leveraged and have significant debt service obligations. The Group had approximately €938,348 and €1,001,431 of total non-current and current consolidated liabilities (including hedging instruments) as of 30 December 2015 and 30 June 2016, respectively.

The Group anticipates that its high leverage could continue for the foreseeable future.

The Group's high leverage could have material consequences for investors, including, but not limited to, could lead to the following:

increasing vulnerability to and simultaneously reducing flexibility to respond to downturns in the Group's business or general adverse economic and industry conditions, including adverse economic conditions in the jurisdictions in which the Group operates;
limiting the Group's ability to obtain additional financing to fund future operations, capital expenditures, business opportunities, acquisitions and other general corporate purposes and increasing the cost of any future borrowings;
forcing the Group to dispose of its properties in order to enable it to meet its financing obligations, including compliance with certain covenants under loan agreements;
requiring the dedication of a substantial portion of the Group's cash flows from operations to the payment of the principal of and interest on its indebtedness, meaning that these cash flows will not be available to fund its operations, capital expenditures, acquisitions or other corporate purposes;
limiting the Group's flexibility in planning for, or reacting to, changes in its business, the competitive environment and the real estate market; and
placing the Group at a competitive disadvantage compared to its competitors that are not as highly leveraged.

Any of these or other consequences or events could have a material adverse effect on the Group's ability to satisfy its obligations.

In addition, the Group may incur additional indebtedness in the future. The incurrence of additional indebtedness would increase the leverage-related risks described in this Report and may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group may incur substantial losses if it fails to meet the obligations and requirements of its debt financing and, furthermore, the restrictions imposed by its debt financing may prevent it from selling its projects

In order to secure its loans, the Group has in the past and/or may in the future mortgage its assets, pledge participation interests in its subsidiaries, enter into guarantees and covenant to its creditors that it would not establish any further mortgages or pledges on its present and/or future assets without their consent (negative pledges provisions). In addition, the Group's loans contain restrictions on its ability to dispose of certain key assets, which in turn may be required in order to satisfy certain financial covenants. The Group could fail to make principal and/or interest payments due under the Group's loans or breach any of the covenants included in the loan agreements to which the Group has entered. In some cases, the Group may breach these covenants due to circumstances which may be beyond the control of the Group. These may include requirements to meet certain loan-to-value ratio, debt service coverage and working capital requirements. A breach of such covenants by the Group could result in the forfeiture of its mortgaged assets, the acceleration of its payment obligations, the acceleration of payment guarantees, trigger cross-default clauses or make future borrowing difficult or impossible. In these circumstances, the Group could also be forced in the long term to sell some of its assets to meet its loan obligations or the completion of its affected projects could be delayed or curtailed.

In the past the Group breached certain covenants relating to the maintenance of the LTV ratios imposed by loan agreements. Consequently, the Company was forced, inter alia, to: (i) reclassify its obligations under the loan agreements from long-term liabilities to current liabilities because their recovery period was shorter than 12 months (in the case of the Galleria Arad and Galleria Stara Zagora projects); (ii) renegotiate loan agreements and sign restructuring agreements (in the case of the Galleria Piatra Neamt, Galleria Arad and Galleria Stara Zagora projects); or (iii) dispose of real properties or projects (in the case of the Galleria Varna project). There can be no assurance that such breaches will not repeat in the future or that the Group will be able to cure them promptly or at all.

Any of the events described above could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group might be unable to renew or refinance loans as they mature, or might be able to renew or refinance such loans only on less favourable terms

All of the Group's real estate developments have been financed through loans, which have been provided for a limited term. The Group might not be able to renew or refinance the remaining obligations in part or at all or might have to accept less favourable terms in respect of such refinancing. If the Group is unable to renew a loan or secure refinancing, the Group could be forced to sell one or more of its office properties in order to procure the necessary liquidity. Additionally, if the Group is not able to renew certain loans, those properties which are financed through loans will become low leveraged and, as a consequence, will not be able to generate the expected returns on equity. Any combination of the above would have material adverse effects on the Group's business, cash flows, financial condition and results of operations.

The Group is exposed to changes in foreign currency exchange rates

The Group's financial statements are expressed in Euro and the Company's functional currency is the Euro. Moreover, the majority of the Group's revenues, specifically rent revenues, are expressed in Euro. However, certain of the Group's costs, such as certain construction costs, labour costs and remuneration for certain general contractors, are incurred in the currencies of the respective geographical markets, including Polish złoty, Bulgarian leva, Czech korunas, Croatian kunas, Hungarian forints, Romanian lei or Serbian dinars.

In making the assumptions regarding the level of equity required to implement its strategic objectives, the Group used Euro as the reference currency. Additionally the majority of the investments that the Group plans to make as part of its business strategy will be expressed in Euro. Therefore, no assurance can be given that the proceeds derived and expressed in Polish zloty will suffice to meet the investment requirements of the Group's contemplated acquisition pipeline. Whilst the companies of the Group may engage in currency hedging in an attempt to reduce the impact of currency fluctuations and the volatility of returns that may result from their currency exposure by, inter alia, entering into derivatives transactions, obtaining debt financing denominated in Euro, as well as concluding agreements with contractors specifying remuneration expressed in Euro, there can be no assurance that such hedging will be fully effective or beneficial. Moreover, given the fact that certain contractors of the Group engage in hedging arrangements with respect to their remuneration on the basis of, inter alia, construction contracts, their flexibility to postpone certain phases of construction may be limited and may result in their financial distress. In addition, given that payments under most of the Group's commercial leases are expressed as the local currency equivalent of a euro-denominated amount, some of the Group's tenants, specifically those leasing retail space, may face difficulties in meeting their payment obligations under such leases as they derive revenues in their respective local currencies. Consequently, any future material appreciation of the local currencies against the Euro could significantly decrease the Group's income in terms of the local currencies and could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group is subject to interest rate risk

The Group currently has and intends to incur certain indebtedness under existing debt facilities which is subject to variable interest rates. Interest rates are highly sensitive to many factors, including government monetary policies and domestic and international economic and political conditions, as well as other factors beyond the Group's control. The Group's exposure to interest risk and the extent to which the Group attempts to hedge such exposure vary significantly between the geographical markets in which the Group operates, but any changes in the relevant

interest rates may increase the Group's costs of borrowing in relation to existing loans, thus impacting its profitability. The need to hedge interest rate risk is reviewed by the Group on a case by case basis, except for those projects in which the lenders require it to hedge the relevant interest rate risk. Changes in interest rates may have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's business is capital intensive, and additional financing may not be available on favourable terms, on a timely basis or at all

The Group requires substantial up-front expenditures for land acquisition, development construction and design costs. As a result, the Group requires substantial amounts of cash and construction financing from banks for its operations. The Group's capital needs depend on many factors, in particular on market conditions, which are beyond the Group's control. Should its capital needs differ significantly from those currently planned, the Group might require additional financing. In the case of difficulties in obtaining additional financing, the scale of the Group's growth and the pace of achievement of certain strategic objectives can be slower than originally assumed. It is not certain whether the Group will be able to obtain the required financing if needed or if such funds will be provided on conditions favourable to the Group.

In addition, construction loan agreements generally permit the drawdown of the loan funds against the achievement of predetermined construction and space leasing milestones or the sale of a specific number of flats. If the Group fails to achieve these milestones, the availability of the loan funds may be delayed, thereby causing a further delay in the construction schedule. Restrictions of or delays in the access to sources of external financing and conditions of such financing that are less favourable than assumed can have a material adverse effect on the Group's business, financial condition, results of operations.

Risk Factors Relating to the Macroeconomic, Political and Legal Environment in the Markets where the Group Operates

Political, economic and legal risks associated with countries in emerging markets, including CEE and SEE countries

All of the Group's revenues are attributable to operations in CEE and SEE countries, particularly Poland, Romania and Hungary. These markets are subject to greater risk than more developed markets. CEE and SEE countries still present various risks to investors, such as instability or changes in national or local government authorities, land expropriation, changes in taxation legislation or regulation, changes to business practices or customs, changes to laws and regulations relating to currency repatriation and limitations on the level of foreign investment or development. In particular, the Group is affected by rules and regulations regarding foreign ownership of real estate and personal property. Such rules may change quickly and significantly and, as a result, impact the Group's ownership and may cause it to lose property or assets without legal recourse.

Furthermore, some countries may regulate or require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. Any such restrictions may adversely affect the Group's ability to repatriate investment loans or to remit dividends. Some CEE and SEE countries, have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain emerging countries.

In addition, adverse political or economic developments in neighbouring countries could have a significant negative impact on, among other things, gross domestic product, foreign trade or economies in general of individual countries. The countries and the region in which the Group operates have experienced and may still be subject to potential political instability caused by changes in governments, political deadlock in the legislative process, tension and conflict between federal and regional authorities, corruption among government officials and social and ethnic unrest. In particular, the armed conflict in the territory of Ukraine and uncertainties regarding the relationship with Russia may affect the attitude of investors towards the regional real estate market and their willingness to invest in the countries neighbouring with Ukraine and Russia, where the Group operates.

The Group may not be able to realise its expected rates of return if the real estate markets in CEE and SEE countries in which the Group operates become saturated and competition increases. Real estate markets may reach saturation if the supply of properties exceeds demand. Saturation in these markets would result in an increase in vacancy rates and/or a decrease in market rental rates and sale prices. As the commercial real estate markets in CEE and SEE are characterised predominantly by short-term leases, the Group expects that rental rates will decrease promptly in response to a perceived oversupply of lettable commercial space in those markets. If vacancy rates rise and/or market rental rates decrease, the Group may not be able to realise its expected rates of return on its projects or may be unable to let or sell its properties at all, which could have a material adverse effect on the Group's business, financial condition, results of operations.

The materialisation of any of the foregoing risks would have a material adverse effect on the Group's business, financial condition, results of operations.

The real estate market is cyclical

The real estate market is cyclical. Consequently, the number of projects completed by the Group has varied from year to year, depending on, among other things, general macro-economic factors, changes in the demographics of specific metropolitan areas, availability of financing and market prices of existing and new projects. Typically, growing demand results in greater expectations regarding the achieved profits and an increase in the number of new projects, as well as increased activity on the part of the Group's competitors. Because of the significant lag time between the moment a decision is taken to construct a project and its actual delivery, due in part to the protracted process of obtaining the required governmental consents and construction time, there is a risk that once a project is completed, the market will be saturated and the developer will not be able to lease or sell the project with the anticipated level of profits. An upturn in the market is typically followed by a downturn as new developers are deterred from commencing new projects due to reduced profit margins. There can be no assurance that during a downturn in the market the Group will be able to select projects which will fill actual demand during an upturn in the market. Additionally, the corporate bodies of the respective Group Companies that are expected to make certain investment decisions may not be able to properly asses the cycle of the real estate market and, consequently, accurately define the most favourable stage for completing the given investments.

All such events may have a material adverse effect on the Group's business, financial condition, results of operations.

The locations of the Group's properties are exposed to regional risks and could lose some of their appeal

The locations of each of the properties are influenced by macro-economic developments in the regions in which the Group operates, as well as being subject to specific local conditions in a given regional market. The Group's real estate portfolio focuses on commercial premises, which significantly exposes the Group to negative developments in those segments of the real estate market in the countries where the Group operates, including intensified competition or increased saturation.

Insolvencies, close-downs or moves of large companies or companies from individual or several sectors as a consequence of adverse developments or for other reasons could have a negative effect on the economic development of the location in question and, consequently, on the Group's portfolio as a whole. The Group has no control over such factors. Negative economic developments at one or more of the locations could reduce the Group's rental income or result in a loss of rent, which stem from a number of tenants being unable to pay their rent in full or in part, as well as cause a decline in the market value of the Group's properties, which may have a material adverse effect on the Group's business, financial condition, results of operations.

Changes in tax laws or their interpretation could affect the Group's financial condition and the cash flows available to the Group

Tax regulations in number of countries the Group operates in, including Poland, are complex and they are subject to frequent changes. The tax law practice of the tax authorities is not homogenous and there are rather significant discrepancies between the judicial decisions issued by administrative courts in tax law matters. No assurance may be given by the Company that the tax authorities will not employ a different interpretation of the tax laws which apply to the Group Companies, which may prove unfavourable to the Group. One may not exclude the risk that the specific individual tax interpretations already obtained and applied by the Group Companies will not be changed or questioned. There is also a risk that once new tax law regulations are introduced, the Group Companies will need to take actions to adjust thereto, which may result in greater costs forced by circumstances related with complying with the changed or new regulations.

In light of the foregoing, there can be no assurance given that the tax authorities will not question the accuracy of tax reporting and tax payments made by the Group Companies, in the scope of tax liabilities not barred by the statute of limitations, and that they will not determine the tax arrears of the Group Companies, which may have a material adverse effect on the Group Companies' business, financial standing, growth prospects or results of the Group.

Moreover, in relation to the cross-border nature of the Group's business, the international agreements, including the double tax treaties, to which the Republic of Poland is a party, also have an effect on the Group Companies' business. Different interpretations of the double tax treaties by the tax authorities as well as any changes to these treaties may have a material adverse effect on the business, financial standing or results of the Group Companies.

The related-party transactions carried out by the Group Companies could be questioned by the tax authorities

The Group Companies have carried out transactions with related parties. When concluding and performing relatedparty transactions, the Group Companies endeavour to take special care to ensure that such transactions comply with the applicable transfer pricing regulations. However, due to the specific nature of related-party transactions, the complexity and ambiguity of legal regulations governing the methods of examining the prices applied, as well as the difficulties in identifying comparable transactions for reference purposes, no assurance can be given that specific Group Companies will not be subject to inspections or other investigative activities undertaken by tax authorities or fiscal control authorities. Should the methods of determining arm's-length terms for the purpose of the above transactions be challenged, this may have a material adverse effect on the business, financial standing, growth prospects, results of the Group Companies.

Changes in laws could adversely affect the Group

The Group's operations are subject to various regulations in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, Slovakia and other jurisdictions in which the Group conducts business activities, such as fire and safety requirements, environmental regulations, labour laws, and land use restrictions. If the Group's projects and properties do not comply with these requirements, the Group may incur regulatory fines or damages.

Moreover, there can be no assurance that if perpetual usufruct fees in Poland are increased, the Group will be able to pass such costs onto its tenants in the form of increased service charges as such increase might lead to a given property becoming less competitive as compared to properties not situated on land subject to perpetual usufruct fees.

Furthermore, the imposition of more strict environmental, health and safety laws or enforcement policies in CEE and SEE could result in substantial costs and liabilities for the Group and could subject the properties that the Group owns or operates (or those formerly owned or operated by the Group) to more rigorous scrutiny than is currently applied. Consequently, compliance with these laws could result in substantial costs resulting from any required removal, investigation or remediation, and the presence of such substances on the Group's properties may restrict its ability to sell the property or use the property as collateral.

New, or amendments to existing, laws, rules, regulations, or ordinances could require significant unanticipated expenditures or impose restrictions on the use of the properties and could have a material adverse effect on the Group's business, financial condition, results of operations.

Unlawful, selective or arbitrary government actions may impact the Group's ability to secure the agreements, contracts and permits required for it to develop its projects

Government authorities in the geographical markets in which the Group operates have a high degree of discretion and may not be subject to supervision by other authorities, requirements to provide a hearing or prior notice or public scrutiny. Therefore, government authorities may exercise their discretion arbitrarily or selectively or in an unlawful manner and may be influenced by political or commercial considerations. The Group has faced administrative decisions in the past which forced it to unexpectedly change its investment plans (including limiting the scale of a project). Such discretion may have a material adverse effect on the Group's business, financial condition, results of operations.

The land and mortgage registry systems in certain of the CEE and SEE jurisdictions are non-transparent and inefficient, and the Group's properties may be subject to restitution claims

The land and mortgage registry systems in certain of the CEE and SEE jurisdictions are non-transparent and inefficient, which may, inter alia, result in delays in the land acquisition process and the registration of many plots into one consolidated plot, which is a requirement before certain projects can be developed. This inefficiency could have a material adverse effect on the business, cash flows, financial condition, results of operations of the Group.

Moreover, the Group may be exposed to the inherent risk related to investing in real estate situated in CEE and SEE countries resulting from the unregulated legal status of some of such real properties. Following the introduction of nationalization in certain CEE and SEE jurisdictions, including Poland, Hungary and Czech Republic, during the post-war years, many privately-owned properties and businesses were taken over by such states. In many cases, the requisition of the property took place in contravention of prevailing laws. After the CEE and SEE countries moved to a market economy system in 1989-1990, many former property owners or their legal successors took steps to recover the properties or businesses lost after the war or to obtain compensation. For many years efforts have been made to regulate the issue of restitution claims in Poland. Despite several attempts, no act regulating the restitution process has been passed in Poland. Under the current law, former owners of properties or their legal successors may file applications with the authorities for the administrative decisions under which the properties were taken away from them to be revoked. As at the date of the delivery of this Report, there are no proceedings underway seeking the invalidation of administrative decisions issued by the authorities concerning properties held by the Group. There is no guarantee, however, that restitution claims may not be brought against the Group in the future, and this could have a material adverse effect on the Group's business, financial condition, results of operations.

The Group's claims to the titles to investment and development properties may be subject to challenge in certain cases, and permits in relation to such properties may have been obtained in breach of applicable laws

It may be difficult or, in certain cases, impossible for the Group to establish with certainty that the title to a property has been vested in a relevant Group company due to the fact that real estate laws in Poland and other jurisdictions in which the Group operates are complicated and often ambiguous and/or contradictory and the relevant registries may not be reliable. For example, under the laws of Poland, transactions involving real estate may be challenged on many grounds, including where the seller or assignor to a given property did not have the right to dispose of such property, for a breach of the corporate approval requirements by a counterparty or a failure to register the transfer of a title in an official register, when required. Also, even if a title to real property is registered, it may still be contested. Therefore, there can be no assurance that the Group's claim to a title would be upheld if challenged. Further, it is possible that permits, authorisations, re-zoning approvals or other similar decisions may have been obtained in breach of applicable laws or regulations. Such matters would be susceptible to subsequent challenge. Similar issues may arise in the context of compliance with privatisation procedures and auctions related to the acquisition of land leases and development rights. It may be difficult, or impossible, to monitor, assess or verify these concerns. If any of these permits, authorisations, re-zoning approvals or other similar requirements were to be challenged, this may have a material adverse effect on the Group's business, financial condition, results of operations.

Risk Factors Relating to the Shareholding Structure of the Company and Corporate Governance

There may be potential conflicts of interest between the Group and the Group's controlling shareholder

LSREF III GTC Investments B.V. ("LSREF"), which is fully controlled by Lone Star Real Estate Fund III LP (with its registered office in the United States of America) and Lone Star Real Estate Fund III LP (with its registered office in Bermuda) (jointly, "Lone Star Real Estate Fund III"), is the Group's controlling shareholder as of the date of the delivery of this Report. Lone Star Real Estate Fund III, a fund specialising in real property investments, is managed by Lone Star Funds. Lone Star Funds ("Lone Star"), is a leading private equity firm that invests globally in real estate, equity, credit and other financial assets.

Lone Star's representatives constitute the majority of the Supervisory Board and may thus control the appointment of the Management Board. Consequently, Lone Star may influence the decision making process in the Company. Accordingly, in considering any investment, business and operational matters of the Company and the most appropriate uses for the Company's available cash, the interests of Lone Star and of Lone Star Real Estate Fund III may not be aligned with the interests of the Company or of its other stakeholders.

Moreover, Lone Star and Lone Star Real Estate Fund III operate in the same market as the Group and they may compete over investments that the Group may be interested in.

Any such conflicts of interest may have an adverse effect on the Group's business, financial condition, results of operations.

Because the Company is a holding company, its ability to pay dividends depends upon the ability of its subsidiaries to pay dividends and advance funds

The Company does not intend to pay out any dividends for at least the next four years; instead, its strategy focuses on significantly improving its level of funds for operations. The dividend policy is strictly connected with the general business strategy of the Group. Nonetheless, upon reaching the targeted level of funds necessary for the Group's operations, the Company may consider paying dividend. Moreover, the amount which may be distributed by the Company in accordance with the Polish law depends on the net profit and certain other figures reflected in the Company's stand-alone financial statements. Such figures may differ from the figures included in the Group's consolidated financial statements which are prepared in accordance with the IFRS.

As a holding company, the Company's ability to pay dividends depends upon the ability of its subsidiaries to pay dividends and advance funds to the Company. Therefore, there can be no assurance that the Company will declare or pay any dividends to its shareholders in the future. The payment and amount of any future dividends will depend on the Management Board's assessment of factors such as long-term growth and earnings trends, the need for sufficient liquidity, the need for investment in the Company's existing project portfolio, the existence of alternative investment opportunities and the Company's financial position in general. This may have a material adverse effect on the Group's business, financial condition, results of operations.

Future offerings of debt or equity securities offered by the Company may adversely affect the market price of the Shares and dilute the shareholders' interests

To finance future acquisitions, the Company may raise additional capital by offering debt or additional equity securities, including convertible notes, medium-term notes, senior or subordinated notes and ordinary shares. The issuance of equity or debt securities with conversion rights may dilute the economic and voting rights of existing shareholders, if made without granting pre-emptive or other subscription rights, or reduce the price of the Company's shares, or both. The exercise of conversion rights or options by the holders of convertible or warrantlinked bonds that the Company may issue in the future may also dilute the shareholders' interests. Holders of the Company's ordinary shares have statutory pre-emptive rights entitling them to purchase a percentage of every issuance of the Company's ordinary shares. As a result, holders of the Company's ordinary shares may, in certain circumstances, have the right to purchase ordinary shares that the Company may issue in the future in order to preserve their percentage ownership interest in the Company, thereby reducing the percentage ownership interest of other investors. Because any decision by the Company to issue additional securities depends on market conditions and other factors beyond the Company's control, the Company cannot predict or estimate the amount, timing or nature of any such future issuances. Thus, prospective investors bear the risk of the Company's future offerings reducing the market price of the Shares and diluting their interest in the Company.

GLOBE TRADE CENTRE S.A.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2016 TOGETHER WITH INDEPENDENT AUDITORS` REVIEW REPORT

Globe Trade Centre S.A. Interim Condensed Consolidated Statement of Financial Position as of 30 June 2016 (in thousands of Euro)

	Note	30 June 2016 (unaudited)	31 December 2015 (audited)
ASSETS
Non-current assets
Investment property	9	1,415,475	1,288,529
Residential landbank	10	24,284	26,773
Investment in associates and joint ventures	8	17,772	23,067
Property, plant and equipment		3,768	1,070
Deferred tax asset		1,072	647
Other non-current assets		176	386
		1,462,547	1,340,472
Assets held for sale	12	11,709	5,950
Current assets
Residential inventory	10	3,235	3,161
Accounts receivables		5,577	5,505
Accrued income		278	1,655
VAT and other tax receivable		7,463	4,985
Income tax receivable		372	316
Prepayments and deferred expenses		2,860	1,323
Escrow accounts for purchase of assets	11	70,107	-
Short-term deposits		24,998	26,711
Cash and cash equivalents		73,892	169,472
		188,782	213,128
TOTAL ASSETS		1,663,038	1,559,550

Globe Trade Centre S.A. Interim Condensed Consolidated Statement of Financial Position as of 30 June 2016 (in thousands of Euro)

	Note	30 June 2016 (unaudited)	31 December 2015 (audited)
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital		10,410	10,410
Share premium		499,288	499,288
Capital reserve		(20,624)	(20,646)
Hedge reserve		(5,312)	(4,563)
Foreign currency translation reserve		1,138	1,405
Accumulated profit		191,911	156,647
		676,811	642,541
Non-controlling interest		(15,204)	(21,339)
Total Equity		661,607	621,202
Non-current liabilities
Long-term portion of long-term loans and bonds	13	698,734	658,744
Deposits from tenants		6,950	6,242
Long term payable		2,631	4,621
Provision for share based payment		1,034	1,152
Derivatives		3,741	2,755
Provision for deferred tax liability	14	143,079	133,455
		856,169	806,969
Current liabilities
Trade and other payables and provisions		22,066	28,774
Payables related to purchase of non-controlling interest		-	18,108
Current portion of long-term loans and bonds	13	115,333	80,368
VAT and other taxes payable		1,097	1,572
Income tax payable		300	363
Derivatives		2,536	2,194
Advances received from buyers		3,930	-
		145,262	131,379
TOTAL EQUITY AND LIABILITIES		1,663,038	1,559,550

Globe Trade Centre S.A. Interim Condensed Consolidated Income Statement for the six-month period ended 30 June 2016 (in thousands of Euro)

	Note	Six-month period ended 30 June 2016 (unaudited)	Three-month period ended 30 June 2016 (unaudited)	Six-month period ended 30 June 2015 (unaudited)	Three-month period ended 30 June 2015 (unaudited)
Revenues from rental activity	5, 6	55,050	27,940	52,816	26,209
Residential revenue	5, 6	3,776	76	7,215	4,226
Cost of rental activity	6	(13,273)	(6,742)	(13,078)	(6,086)
Residential costs	6	(2,953)	(75)	(6,799)	(4,205)
Gross margin from operations		42,600	21,199	40,154	20,144
Selling expenses		(1,397)	(770)	(1,230)	(706)
Administration expenses	7	(4,997)	(2,303)	(4,939)	(2,529)
Profit (Loss) from revaluation/
impairment of assets	9	24,067	16,631	(446)	(64)
Impairment of residential projects		-	-	(1,380)	(1,380)
Other income		769	353	1,400	138
Other expenses		(1,588)	(767)	(1,128)	(288)
Profit (loss) from continuing operations before tax and finance income / (expense)		59,454	34,343	32,431	15,315
Foreign exchange differences gain/
(loss), net		3,136	2,843	(1,634)	1,819
Finance income		1,161	591	1,917	940
Finance cost		(13,887)	(7,036)	(17,892)	(8,656)
Share of profit (loss) of associates and joint ventures		(3,803)	(3,320)	(3,581)	(1,975)
Profit before tax		46,061	27,421	11,241	7,443
Taxation	14	(10,854)	(8,553)	(5,177)	(9,246)
Profit (loss) for the period		35,207	18,868	6,064	(1,803)
Attributable to:
Equity holders of the Company		35,264	18,824	6,385	(1,868)
Non-controlling interest		(57)	44	(321)	65
Basic earnings per share (in Euro)	16	0.08	0.04	0.02	(0.01)

Globe Trade Centre S.A. Interim Condensed Consolidated Statement of Comprehensive Income for the six-month period ended 30 June 2016 (in thousands of Euro)

	Six-month period ended 30 June 2016 (unaudited)	Three-month period ended 30 June 2016 (unaudited)	Six-month period ended 30 June 2015 (unaudited)	Three-month period ended 30 June 2015 (unaudited)
Profit (loss) for the period	35,207	18,868	6,064	(1,803)
Gain (loss) on hedge transactions	(892)	152	2,071	1,789
Income tax	143	(24)	(446)	(339)
Net gain (loss) on hedge transactions	(749)	128	1,625	1,450
Foreign currency translation	(248)	(393)	315	(2,329)
Total comprehensive income (loss) for the period, net of tax, to be reclassified to profit or loss in subsequent periods	34,210	18,603	8,004	(2,682)
Attributable to:
Equity holders of the Company	34,248	18,540	8,038	(2,919)
Non-controlling interest	(38)	63	(34)	237

Globe Trade Centre S.A. Interim Condensed Consolidated Statement of Changes in Equity for the six-month period ended 30 June 2016 (in thousands of Euro)

	Share Capital	Share premium	Capital reserve	Hedge reserve	Foreign currency translation reserve	Accumulated profit	Total	Non-controlling interest	Total
Balance as of 1 January 2016	10,410	499,288	(20,646)	(4,563)	1,405	156,647	642,541	(21,339)	621,202
Other comprehensive income Profit / (loss) for the period	-	-	-	(749)	(267)		(1,016)	19	(997)
ended 30 June 2016	-	-	-	-	-	35,264	35,264	(57)	35,207
Total comprehensive income / (loss) for the period	-	-	-	(749)	(267)	35,264	34,248	(38)	34,210
Purchase of NCI shares	-	-	794	-	-	-	794	6,173	6,967
Other	-	-	(772)	-	-	-	(772)	-	(772)
Balance as of 30 June 2016 (unaudited)	10,410	499,288	(20,624)	(5,312)	1,138	191,911	676,811	(15,204)	661,607
Balance as of
1 January 2015	7,849	364,228	8,392	(3,839)	1,128	111,455	489,213	(62,032)	427,181
Other comprehensive income	-	-	-	1,338	315	-	1,653	287	1,940
Profit / (loss) for the period ended 30 June 2015	-	-	-	-	-	6,385	6,385	(321)	6,064
Total comprehensive income / (loss) for the period	-	-	-	1,338	315	6,385	8,038	(34)	8,004
Purchase of NCI shares	-	-	(35,768)	-	-	-	(35,768)	44,645	8,877
Balance as of 30 June 2015 (unaudited)	7,849	364,228	(27,376)	(2,501)	1,443	117,840	461,483	(17,421)	444,062

Globe Trade Centre S.A. Interim Condensed Consolidated Statement of Cash Flows for the six-month period ended 30 June 2016 (in thousands of Euro)

		Six-month period ended 30 June 2016	Six-month period ended 30 June 2015
		(unaudited)	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:	Note
Profit before tax		46,061	11,241
Adjustments for:
Loss/(profit) from revaluation/impairment of assets		(24,067)	1,826
Share of loss (profit) of associates and joint ventures		3,803	3,581
Profit on disposal of assets		(9)	(1,039)
Foreign exchange differences loss/(gain), net		(3,136)	1,634
Finance income		(1,161)	(1,917)
Finance cost		13,887	17,892
Share based payment (income) / expenses		(118)	105
Depreciation and amortization		216	252
Operating cash before working capital changes		35,476	33,575
Increase in accounts receivables, prepayments and other current assets		(114)	(2,595)
Decrease in inventory and residential land bank		2,424	6,135
Increase/(decrease) in advances received		-	(208)
Increase in deposits from tenants		942	-
Increase/(decrease) in trade and other payables		(879)	(304)
Cash generated from operations		37,849	36,603
Tax paid in the period		(1,437)	(1,442)
Net cash flows from operating activities		36,412	35,161
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on investment property		(49,432)	(11,683)
Purchase of completed assets and land	9	(76,387)	-
Increase in Escrow accounts for purchase of assets	11	(70,107)	-
Sale of investment property		2,729	51,279
Advances received for sale of subsidiaries/assets		3,930	-
Liquidation of joint venture		-	3,890
Purchase of minority		(18,121)	(800)
Sale of shares in associate	8	2,009	-
VAT/tax on purchase/sale of investment property		-	5,001
Interest received		275	419
Loans granted		(123)	-
Loans repayments		-	23
Net cash flows from/(used in) investing activities		(205,227)	48,129
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings		129,190	17,658
Repayment of long-term borrowings		(43,507)	(88,599)
Repayment of hedge		-	(1,489)
Interest paid		(12,386)	(14,335)
Loans origination cost		(317)	-
Decrease/(increase) in blocked deposits		1,611	2,936
Net cash from/(used in) financing activities		74,591	(83,829)
Effect of foreign currency translation		(1,356)	665
Net increase / (decrease) in cash and cash equivalents		(95,580)	126
Cash and cash equivalents at the beginning of the period		169,472	81,063
Cash classified as part of assets held for sale		-	(377)
Cash and cash equivalents at the end of the period		73,892	80,812

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

1. Principal activities

Globe Trade Centre S.A. (the "Company" or "GTC") and its subsidiaries ("GTC Group" or the "Group") are an international real-estate corporation. The Company was registered in Warsaw on 19 December 1996. The Company's registered office is in Warsaw, Poland at 17 Stycznia 45A. The Company owns through subsidiaries, joint ventures and associates commercial and residential real estate companies in Poland, Hungary, Romania, Serbia, Croatia, Ukraine, Slovakia, Bulgaria and Russia. There is no seasonality in the business of the Group companies.

The major shareholder of the Company is LSREF III GTC Investments B.V. ("LSREF III"), controlled by Lone Star, a global private equity firm, which held 278,849,657 shares 60.59% of total shares as of 30 June 2016.

Events in the period

Acquisition of Pixel Office Building in Poznan

In January 2016, the Group purchased Pixel office building in Poznan, Poland for EUR 32.2 million. The office building is entirely leased to renowned tenants. The Group intends to hold the office building as part of the income-producing portfolio of the GTC Group. The purchase of the Property was financed by the Group's own sources and a bank loan from PKO BP in the amount of EUR 22.5 million.

Acquisition of Premium office Buildings in Bucharest

In April 2016, the Group purchased two office buildings in Bucharest, Romania (Premium Plaza and Premium Point) for EUR 32 million, consisting of approximately 15,000 sq. m. NRA. Property acquisition was financed by the Group's own sources.

Completion of the second phase of University Business Park ("UBP II") in Lodz In April 2016, the second phase of University Business Park in Łódź received occupancy permit, marking the completion of the investment. The UBP complex comprises two A-class office buildings and the total leasable area of the complex is 39 200 sq. m.

Galleria - Stara Zagora AD

In June 2016, GTC RH B.V. in its capacity as creditor, filed a petition in the Bulgarian Court to determine whether Galleria - Stara Zagora AD ("GSZ") is over indebted and allow for conversion of both shareholders' loans into equity. GTC RH B.V. holds 75% of GSZ and such conversion may dilute the minority shareholder as presented in the NCI balance as of 30 June 2016. The NCI net of NCI loans to GSZ as of 30 June 2016, amounted to EUR 14.4 million and would be reclassified to Capital Reserve to the extent the minority stake will decrease.

Purchase of non-controlling interest

In January 2016, GTC Group acquired the remaining 10% in GTC Ukraine B.V, and the minority shareholder's loans granted to the project, for a consideration of Euro 1. Following the transaction GTC remained the sole owner of the subsidiary. As a result of the transaction, the negative NCI increased by Euro 2.2 million, the capital reserve increased by Euro 0.4 million and the NCI loans decreased by Euro 2.6 million. Consequently, the total equity increased by Euro 2.6 million.

1. Principal activities (continued)

In April 2016, GTC Group acquired the remaining 49.9% in Complexul Residential Colentina S.R.L, (Rose Garden) and the minority shareholder's loans granted to the project, for a consideration of Euro 12.5 thousand. Following the transaction GTC remained the sole owner of the subsidiary. As a result of the transaction, the negative NCI increased by Euro 3.9 million, the capital reserve increased by Euro 0.4 million, and the NCI loans decrease by Euro 4.3 million.

Consequently, the total equity increased by Euro 4.3 million.

2. Basis of preparation

The Interim Condensed Consolidated Financial Statements for the six months period ended 30 June 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by EU.

At the date of authorisation of these Interim Condensed Consolidated Financial Statements, taking into account the EU's ongoing process of IFRS endorsement and the nature of the Group's activities, there is a difference between International Financial Reporting Standards and International Financial Reporting Standards endorsed by the European Union.

The Interim Condensed Consolidated Financial Statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's consolidated financial statements and the notes thereto for the year ended 31 December 2015, which were authorized for issue on 16 March 2016. The interim financial results are not necessarily indicative of the full year results.

The Group's Interim Condensed Consolidated Financial Statements are presented in Euro, which is also GTC S.A. functional currency. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using the functional currency.

The financial statements of those entities prepared in their functional currencies are included in the Interim Condensed Consolidated Financial Statements by translation into Euro using appropriate exchange rates 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 period. All resulting exchange differences are classified in equity as "Foreign currency translation" without affecting earnings for the period.

These Interim Condensed Consolidated Financial statements have been prepared on the assumption that the Group will continue as a going concern in the foreseeable future. As at the date of approval of these financial statements, no circumstances were identified which would indicate any threat to the Group' continuing as a going concern.

3. Significant accounting policies, estimates and judgments

The accounting policies and calculation methods applied in the preparation of these Interim condensed consolidated financial statements are the same as those used in the preparation of the consolidated financial statements for 2015 (see Note 6 to the consolidated financial statements for 2015), and no changes to comparative data or error corrections were made.

Standards issued but not yet effective

The following new standards, amendments to standards and interpretations have been issued but are not yet effective.

· IFRS 9 Financial Instruments, issued on 24 July 2014 (effective for annual periods beginning on or after 1 January 2018);

· IFRS 14 Regulatory Deferral Accounts, issued on 30 January 2014 (effective for annual periods beginning on or after 1 January 2016);

· IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014), including amendments to IFRS 15 Effective Date of IFRS 15, issued on 11 September 2015 − effective for annual periods beginning on or after 1 January 2018;

· IFRS 16 Leases (issued on 13 January 2016) − effective for annual periods beginning on or after 1 January 2019;

· Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; issued on 11 September 2014 (effective for annual periods beginning on or after 1 January 2016);

· Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses, issued on 19 January 2016 (effective for annual periods beginning on or after 1 January 2017);

· Amendments to IAS 7 Disclosure Initiative, issued on 29 January 2016 (effective for annual periods beginning on or after 1 January 2017);

· Amendments to IFRS 2: Share-based Payment (issued on 20 June 2016) − effective for annual periods beginning on or after 1 January 2018.

The Group has not elected to early adopt any of the standards, interpretations, or amendments which have not yet become effective. The Company's Management Board is analysing and assessing the effect of the new standards and interpretations on the accounting policies applied by the Group and on the Group's future financial statements.

4. Investment in Subsidiaries, Associates and Joint Ventures

The interim condensed consolidated financial statements include the financial statements of the Company and its subsidiaries listed below together with direct and indirect ownership of these entities as at the end of each period (the table presents the effective stake):

Subsidiaries

Name	Holding Company	Country of incorporation	30 June 2016	31 December 2015

GTC Konstancja Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Korona S.A.	GTC S.A.	Poland	100%	100%
Globis Poznań Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Aeropark Sp. z o.o.	GTC S.A.	Poland	100%	100%
Globis Wrocław Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Satellite Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Neptune Gdansk Sp. z o.o. (formerly GTC Ogrody Galileo Sp. z o.o.)	GTC S.A.	Poland	100%	100%
GTC GK Office Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Sterlinga Sp. z o.o. (formerly GTC Com 1 Sp. z o.o.)	GTC S.A.	Poland	100%	100%
GTC Karkonoska Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Ortal Sp. z o.o.	GTC S.A.	Poland	100%	100%
Diego Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Francuska Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC UBP Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Pixel Sp. z o.o. (formerly GTC Wilson Park)	GTC S.A.	Poland	100%	100%
GTC Moderna Sp. z o.o.	GTC S.A.	Poland	100%	100%
CH Wilanow Sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Management sp. z o.o.	GTC S.A.	Poland	100%	100%
GTC Corius sp. z o.o.	GTC S.A.	Poland	100%	100%
Centrum Światowida sp. z o.o.	GTC S.A.	Poland	100%	100%
Glorine investments sp. z o.o.	GTC S.A.	Poland	100%	100%
Glorine investments Sp. z o.o. s.k.a.	GTC S.A.	Poland	100%	100%
GTC Galeria CTWA Sp. z o.o.	GTC S.A.	Poland	100%	100%

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

4. Investment in Subsidiaries, Associates and Joint Ventures (continued)

Name	Holding Company	Country of incorporation	30 June 2016	31 December 2015
GTC Hungary Real Estate Development Company Ltd. ("GTC Hungary")	GTC S.A.	Hungary	100%	100%
Commercial Properties B.V. (formerly Budapest Offices B.V.)	GTC Hungary	Netherland	100%	100%
GTC Duna Kft.	GTC Hungary	Hungary	100%	100%
Vaci Ut 81-85 Kft.	GTC Hungary	Hungary	100%	100%
Riverside Apartments Kft. ("Riverside")	GTC Hungary	Hungary	100%	100%
Centre Point I. Kft. ("Centre Point I")	GTC Hungary	Hungary	100%	100%
Centre Point II. Kft.	GTC Hungary	Hungary	100%	100%
Spiral Holding Kft.	GTC Hungary	Hungary	100%	100%
Spiral I.Kft.	GTC Hungary	Hungary	100%	100%
Spiral II. Kft.	GTC Hungary	Hungary	100%	100%
River Loft Ltd.	GTC Hungary	Hungary	100%	100%
SASAD Resort Kft. ("Sasad")	GTC Hungary	Hungary	100%	100%
Albertfalva Kft. ("formerly Szeremi Gate")	GTC Hungary	Hungary	100%	100%
GTC Metro Kft.	GTC Hungary	Hungary	100%	100%
SASAD Resort Offices Kft.	GTC Hungary	Hungary	100%	100%
Mastix Champion Kft.	GTC Hungary	Hungary	100%	100%
GTC White House Kft.	GTC Hungary	Hungary	100%	100%
VRK Tower Kft (***)	GTC Hungary	Hungary	100%	-
SASAD II Kft.	GTC Hungary	Hungary	100%	100%
Amarantan Ltd.	GTC Hungary	Hungary	100%	100%
Abritus Kft.	GTC Hungary	Hungary	100%	100%
Immo Buda Kft. (*)	GTC Hungary	Hungary	-	100%
Szemi Ingatlan Ltd.(*)	GTC Hungary	Hungary	-	100%
Preston Park Kft.	GTC Hungary	Hungary	100%	100%
GTC Real Estate Investments Ukraine B.V. ("GTC Ukraine") (**)	GTC S.A.	Netherlands	100%	90%
GTC Slovakia Real Estate s.r.o.	GTC RH B.V.	Slovakia	100%	100%
GTC Real Estate Vinohrady s.r.o.	GTC RH B.V.	Slovakia	100%	100%

(*) Merged into Albertfalva Kft

(**) NCI was purchased in January 2016

(***) Established

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

4. Investment in Subsidiaries, Associates and Joint Ventures (continued)

Name	Holding Company	Country of incorporation	30 June 2016	31 December 2015
GTC Nekretnine Zagreb d.o.o.("GTC Zagreb")	GTC RH B.V.	Croatia	100%	100%
Euro Structor d.o.o.	GTC RH B.V.	Croatia	70%	70%
Marlera Golf LD d.o.o.	GTC RH B.V.	Croatia	80%	80%
Nova Istra Idaeus d.o.o.	Marlera Golf LD d.o.o	Croatia	80%	80%
GTC Nekretnine Jug. d.o.o. (under liquidation)	GTC RH B.V.	Croatia	100%	100%
GTC Sredisnja tocka d.o.o.	GTC RH B.V.	Croatia	100%	100%
GTC Nekretnine Zapad d.o.o. (under liquidation)	GTC RH B.V.	Croatia	100%	100%
Towers International Property S.R.L.	GTC RH B.V.	Romania	100%	100%
Galleria Shopping Center S.R.L. (formerly "International Hotel and Tourism S.R.L.")	GTC RH B.V.	Romania	100%	100%
BCG Investment B.V.	GTC RH B.V.	Netherlands	100%	100%
Green Dream S.R.L.	GTC RH B.V.	Romania	100%	100%
Aurora Business Complex S.R.L	GTC RH B.V.	Romania	71.5%	71.5%
Bucharest City Gate B.V. ("BCG")	GTC RH B.V.	Netherlands	100%	100%
City Gate Bucharest S.R.L.	BCG	Romania	100%	100%
Mablethompe Investitii S.R.L.	GTC RH B.V.	Romania	100%	100%
Mercury Commercial Center S.R.L. ("Galeria Arad")	GTC RH B.V.	Romania	100%	100%
Venus Commercial Center S.R.L.	GTC RH B.V.	Romania	100%	100%
Mars Commercial Center S.R.L. ("Galeria Piatra Neamt")	GTC RH B.V.	Romania	100%	100%
Beaufort Invest S.R.L.	GTC RH B.V.	Romania	100%	100%
Fajos S.R.L.	GTC RH B.V.	Romania	100%	100%
City Gate S.R.L.	BCG	Romania	100%	100%
Brightpoint Investments Limited	GTC RH B.V.	Cyprus	50.1%	50.1%
Complexul Residential Colentina S.R.L.	GTC RH B.V.	Romania	100%	50.1%
Operetico Enterprises Ltd.	GTC RH B.V.	Cyprus	66.7%	66.7%
Deco Intermed S.R.L.	Operetico Enterprises Ltd.	Romania	66.7%	66.7%
GML American Regency Pipera S.R.L.	GTC RH B.V.	Romania	66.7%	66.7%

4. Investment in Subsidiaries, Associates and Joint Ventures (continued)

Name	Holding Company	Country of incorporation	30 June 2016	31 December 2015
GTC RH B.V.	GTC S.A.	Netherlands	100%	100%
Galeria Stara Zagora AD ("Stara Zagora")	GTC RH B.V.	Bulgaria	75%	75%
Galeria Burgas AD	GTC RH B.V.	Bulgaria	80%	80%
GTC Business Park EAD	GTC RH B.V.	Bulgaria	100%	100%
NRL EAD	GTC RH B.V.	Bulgaria	100%	100%
Galeria Ikonomov GmbH (**)	GTC RH B.V.	Austria	-	100%
GTC Yuzhen Park EAD ("GTC Yuzhen")	GTC RH B.V.	Bulgaria	100%	100%
GTC Medj Razvoj Nekretnina d.o.o.	GTC RH B.V.	Serbia	100%	100%
GTC Business Park d.o.o.	GTC RH B.V.	Serbia	100%	100%
GTC Commercial and Residential Ventures d.o.o.	GTC RH B.V.	Serbia	100%	100%
GTC Real Estate Developments d.o.o.	GTC Commercial Development d.o.o.	Serbia	95%	95%
Demo Invest d.o.o.	GTC RH B.V.	Serbia	100%	100%
Atlas Centar d.o.o.	GTC RH B.V.	Serbia	100%	100%
GTC Commercial Development d.o.o.	GTC RH B.V.	Serbia	100%	100%
Europort Investment (Cyprus) 1 Limited (*)	GTC RH B.V.	Cyprus	100%	95%
Black Sea Management LLC (*)	Europort Investment (Cyprus) 1 Limited	Ukraine	100%	95%
Europort Ukraine Holdings 1 LLC (*)	Europort Investment (Cyprus) 1 Limited	Ukraine	100%	95%
Europort Ukraine Holdings 2 LLC (*)	Europort Investment (Cyprus) 1 Limited	Ukraine	100%	95%
Europort Ukraine LL (*)	Europort Investment (Cyprus) 1 Limited	Ukraine	100%	95%
Europort Project Ukraine 1 LLC (*)	Europort Investment (Cyprus) 1 Limited	Ukraine	100%	95%

(*) NCI was purchased in January 2016 (**) Liquidated

Investment in Associates and Joint Ventures

Name	Holding Company	Country of incorporation	30 June 2016	31 December 2015
Havern Investments sp. z o.o.	GTC S.A.	Poland	50%	50%
Yatelsis Viborgskaya Limited of Nicosia ("YVL")	GTC RH B.V.	Cyprus	50%	50%
Ana Tower Offices S.R.L.	GTC RH B.V.	Romania	50%	50%
Lighthouse Holdings Limited S.A. ("Lighthouse")	GTC S.A.	Luxembourg	35%	35%
CID Holding S.A. ("CID")	GTC S.A.	Luxembourg	35%	35%
Europort LTD (*)	GTC RH B.V.	Israel	-	9.9%

(*) Sold

5. Revenue from operations

	Six-month period ended 30 June 2016	Three-month period ended 30 June 2016	Six-month period ended 30 June 2015	Three-month period ended 30 June 2015
	(unaudited)	(unaudited)	(unaudited)	(unaudited )
Rental revenue	41,717	21,124	40,198	20,192
Service revenue	13,333	6,816	12,618	6,017
Residential revenue	3,776	76	7,215	4,226
	58,826	28,016	60,031	30,435

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 euro.

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

6. Segmental analysis

The operating segments are aggregated into reportable segments, taking into consideration the nature of the business, operating markets and other factors. Reportable segments are divided into two main segments:

1. Development and rental of office space and shopping malls ("rental activity") and
1. Development and sale of houses and apartment units ("residential activity").

Operating segments are divided into geographical zones, which have common characteristics and reflect the nature of management reporting structure:

a. Poland and Hungary
b. Capital cities in SEE countries (Romania, Serbia, Croatia)
c. Secondary cities in Bulgaria
d. Secondary cities in Croatia
e. Secondary cities in Romania

Segment analysis for the six-month periods ended 30 June 2016 (unaudited) and 30 June 2015 (unaudited) is presented below:

		Poland and Hungary		Capital cities in SEE countries		Bulgaria-secondary cities		Croatia-secondary cities		Romania-secondary cities		Consolidated
	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015
Rental and service income	31,802	29,547	18,281	17,310	3,964	3,655	-	705	1,003	1,599	55,050	52,816
Contract income	-	2,175	3,776	5,040	-	-	-	-	-	-	3,776	7,215
Total income	31,802	31,722	22,057	22,350	3,964	3,655	-	705	1,003	1,599	58,826	60,031
Rental and service costs	7,123	6,093	4,367	4,133	1,087	879	-	695	696	1,278	13,273	13,078
Contract costs	-	1,825	2,953	4,974	-	-	-	-	-	-	2,953	6,799
Total costs	7,123	7,918	7,320	9,107	1,087	879	-	695	696	1,278	16,226	19,877
Rental result	24,679	23,454	13,914	13,177	2,877	2,776	-	10	307	321	41,777	39,738
Contract result	-	350	823	66	-	-	-	-	-	-	823	416
Segment result	24,679	23,804	14,737	13,243	2,877	2,776	-	10	307	321	42,600	40,154

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

Segment analysis for the three-month periods ended 30 June 2016 (unaudited) and 30 June 2015 (unaudited) is presented below:

		Poland and Hungary		Capital cities in SEE countries	Bulgaria-secondary cities			Croatia-secondary cities	Romania-secondary cities		Consolidated
	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015	30 June 2016	30 June 2015
Rental and service income	16,014	14,380	9,345	8,905	2,077	1,904	-	267	504	753	27,940	26,209
Contract income	-	1,398	76	2,828	-	-	-	-	-	-	76	4,226
Total income	16,014	15,778	9,420	11,733	2,077	1,904	-	267	504	753	28,016	30,435

Rental and service costs	3,769	2,931	2,145	2,042	517	394	-	309	311	410	6,742	6,086
Contract costs	-	1,255	75	2,950	-	-	-	-	-	-	75	4,205
Total costs	3,769	4,186	2,220	4,992	517	394	-	309	311	410	6,817	10,291

Rental result	12,245	11,449	7,200	6,863	1,560	1,510	-	(42)	193	343	21,198	20,123
Contract result	-	143	1	(122)	-	-	-	-	-	-	1	21
Segment result	12,245	11,592	7,201	6,741	1,560	1,510	-	(42)	193	343	21,199	20,144

7. Administrative expenses

	Six-month period ended 30 June 2016	Three-month period ended 30 June 2016	Six-month period ended 30 June 2015	Three-month period ended 30 June 2015
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Administration expenses	5,115	2,474	4,834	2,499
Expenses (income) arising from shares base payments	(118)	(171)	105	30
	4,997	2,303	4,939	2,529

8. Investment in associates and joint ventures

The investment in associates and joint ventures comprises the following:

	(audited)
12,927	15,489
3,850	4,598
995	2,980
17,772	23,067
	(unaudited)

(*) Decrease in book value was due to impairments of investments

(**) In April 2016, shares of Europort LTD were sold

In June 2016, CID sold the Harfa shopping centre in Prague. In July 2016, it repaid GTC's loan in the amount of Euro 11.3 million.

In August 2016, the Company sold its shares in Lighthouse for Euro 1.3 million.

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

9. Investment Property

The investment properties that are owned by the Group are office and commercial space, including property under construction:

Investment property can be split up as follows:

	30 June 2016	31 December 2015
	(unaudited)	(audited)
Completed investment property	1,146,196	1,055,732
Investment property under construction	146,966	108,000
Commercial landplots	122,313	124,797
Total	1,415,475	1,288,529

The movement in investment property for the periods ended 30 June 2016 (unaudited) was as follows:

	Level 2	Level 3	Total
Carrying amount as of 1 January 2016	771,232	517,297	1,288,529
Capitalised expenditure	3,484	33,643	37,127
Reclassification after completion (*)	23,844	(23,844)	-
Purchase of assets (**)	65,087	11,300	76,387
Adjustment to fair value / impairment	3,073	22,129	25,202
Reclassified to assets held for sale (***)	-	(9,609)	(9,609)
Reclassified to fixed assets (****)	(2,161)	-	(2,161)
Carrying amount as of 30 June 2016	864,559	550,916	1,415,475

* Completion of second phase of UBP office building in Lodz

** Relates to purchase of Pixel office building in Poznan, Premium offices in Romania, and land plot in Hungary

*** Relates to Piatra shopping centre in Romania and part of commercial land plot in Konstancin, Poland **** Relates to part of an office building used by the Group

The movement in investment property for the periods ended 30 June 2015 (unaudited) was as follows:

	Level 2	Level 3	Total
Carrying amount as of 1 January 2015	753,576	467,743	1,221,319
Capitalised subsequent expenditure	2,562	8,855	11,417
Adjustment to fair value / impairment	57	(1,407)	(1,350)
Disposals	(41,575)	-	(41,575)
Translation differences	(49)	61	12
Carrying amount as of 30 June 2015	714,571	475,252	1,189,823

9. Investment Property (continued)

Fair value and impairment adjustment consists of the following:

	Six-month period ended 30 June 2016	Three-month period ended 30 June 2016	Six-month period ended 30 June 2015	Three-month period ended 30 June 2015
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Adjustment to fair value of properties completed assets	1,722	4,532	(495)	(117)
Adjustment to fair value of properties under construction	21,733	11,301	-	-
Assets held for sale	(1,128)	(952)	904	904
Reversal of impairment/(Impairment) adjustment	1,740	1,750	(855)	(851)
Total	24,067	16,631	(446)	(64)

Assumptions used in the valuations of completed assets as of 30 June 2016 (unaudited) are presented below:

Potfolio	Book value	NRA thousand	Ocupancy	Actual rent	ERV	Fair Value Hierarchy Level
	'000 Euro	sqm	%	Euro/ sqm	Euro/ sqm
Poland retail	152,900	49	92%	19.7	19.7	2
Poland office	322,693	169	86%	13.7	13.8	2
Serbia office capital city	124,000	64	93%	16.6	15.0	3
Croatia retail capital city Hungary office	102,100	36	97%	20.0	21.0	3
capital city	209,013	117	95%	12.4	12.3	2
Romania office capital city	179,890	63	91%	17.9	16.9	2
Bulgaria retail secondary cities	55,600	58	91%	10.0	9.4	3
Total	1,146,196	556	91%	14.8	14.5

9. Investment Property (continued)

Assumptions used in the valuations of completed assets as of 31 December 2015 are presented below:

		NRA				Fair Value Hierarchy
Potfolio	Book value	thousand	Ocupancy	Actual rent	ERV	Level
	'000 Euro	sqm	%	Euro/ sqm	Euro/ sqm
Poland retail	150,200	49	90%	19.3	19.7	2
Poland office	266,436	135	92%	14.3	14.0	2
Serbia office
capital city	123,600	64	92%	14.7	15.0	3
Croatia retail
capital city	102,100	36	97%	20.0	21.3	3
Hungary office
capital city	208,496	117	95%	12.4	12.0	2
Romania retail
secondary cities	3,900	13	95%	5.7	5.6	3
Romania office
capital city	146,100	48	93%	19.0	17.4	2
Bulgaria retail secondary cities
	54,900	61	82%	9.4	9.3	3
Total	1,055,732	524	92%	14.4	14.2

Information regarding to investment properties under construction as of 30 June 2016 is presented below:

	Book value	Estimated area (NRA)	Average Book value/sqm
	'000 Euro	thousand sqm	Euro/sqm
Poland	121,900	64	1,905
Serbia	19,600	18	1,089
Hungary	5,466	23	238
Total	146,966	105	1,400

Information regarding to commercial landbank as of 30 June 2016 is presented below:

	Book value	Estimated building rights (NRA)	Average Book value/sqm of building rights
	'000 Euro	thousand sqm	Euro/sqm
Poland	49,535	271	183
Serbia	25,299	31	816
Croatia	2,440	21	116
Hungary	25,718	303	85b
Romania	13,103	66	199
Bulgaria	3,790	88	43
Ukraine	2,428	90	27
Total	122,313	870	141

9. Investment Property (continued)

Information regarding investment properties under construction valued at fair value and commercial landbank valued at the lower of cost or fair value as of 31 December 2015 is presented below:

	Book value	Estimated building rights (GLA)	Average Book value/sqm
	'000 Euro	thousand sqm	Euro/sqm
Poland	155,344	353	440
Serbia	36,369	48	758
Croatia	2,440	21	116
Hungary	19,010	286	66
Romania	13,367	66	203
Bulgaria	3,800	88	43
Ukraine	2,467	90	27
Total	232,797	952	245

10. Inventory and residential landbank

The movement in residential landbank and inventory for the periods ended 30 June 2016 (unaudited) and 31 December 2015 was as follows:

	Six-month period ended 30 June 2016 (unaudited)	Year ended 31 December 2015 (audited)
Carrying amount at the beginning of the period	29,934	64,983
Construction and foreign exchange differences	538	635
Impairment to net realisable value	-	(1,389)
Sale of subsidiary	-	(728)
Cost of units sold	(2,953)	(10,871)
Disposal of assets	-	(22,696)
Carrying amount at the end of the period	27,519	29,934

11. Escrow accounts for purchase of assets

On 1 July 2016, the Group acquired two office buildings: Neptun Office Center and Sterlinga Business Center, located in Gdansk and Lodz respectively. Additionally, the Group has signed a loan agreements for financing of these projects with Pekao S.A. in the amount of EUR 22.1 million and EUR 17.5 million respectively, and loan agreements for financing the VAT of these projects in the amount of EUR 13.1 million. The loans were received on 30 June 2016 and the related funds (including long term bank loans, VAT loans, and GTC's own sources in the amount of EUR 17.4 million) are presented as deposits in Escrow accounts for purchase of assets as of 30 June 2016.

12. Assets held for sale

The movement in assets held for sale for the six months periods ended 30 June 2016 (unaudited) was as follows:

	Total
Carrying amount as of 1 January 2016	5,950
Disposal (*)	(2,722)
Adjustment to fair value less cost to sell	(1,128)
Reclassified from investment property	9,609
Carrying amount as of 30 June 2016 (**)	11,709

* Land plot in Lodz, Poland, and Sobutica land plot in Serbia

** Relates to Piatra (see note 17) and Arad shopping centres in Romania and part of commercial land plot in Konstancin, Poland

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

13. Long-term loans and bonds

	30 June 2016 31 December 2015
	(unaudited)	(audited)
Bonds series 2018-2019	46,066	47,847
Bonds series 2017-2018	67,127	69,717
Loan from OTP (GTC)	9,435	11,008
Loan from WBK (Globis Poznan)	16,317	14,407
Loan from WBK (Korona Business Park)	41,736	42,319
Loan from PKO BP (Pixel)	22,269	-
Loan from Pekao (Globis Wroclaw)	24,313	24,692
Loan from ING (Nothus)	11,197	11,570
Loan from ING (Zephirus)	11,197	11,570
Loan from Berlin Hyp (Corius)	11,647	11,874
Loan from Pekao (Sterlinga) (note 11)	17,500	-
Loan from Pekao (Neptun) (note 11)	22,067	-
Loan from Pekao (Sterlinga VAT) (note 11)	5,785	-
Loan from Pekao (Neptun VAT) (note 11)	7,299	-
Loan from Pekao (Galeria Polnocna)	25,276	4,519
Loan from Pekao (Galeria Jurajska)	96,320	98,010
Loan from Berlin Hyp (UBP 1)	18,359	18,639
Loan from Berlin Hyp (UBP 2)	4,461	-
Loan from ING (Francuska)	23,467	23,737
Loan from MKB (Centre Point I)	17,551	18,401
Loan from MKB (Centre Point II)	21,386	22,199
Loan from CIB (Metro)	18,143	18,630
Loan from Erste (Spiral)	26,271	27,146
Loan from Erste (White House)	2,359	2,859
Loan from MKB (Sasad) (note 17)	8,327	8,327
Loan from Erste (GTC House)	13,671	-
Loan from EBRD and Raiffeisen Bank (GTC House)	-	9,400
Loan from Erste (19 Avenue)	21,423	21,707
Loan from EBRD and Raiffeisen Bank (GTC Square)	12,747	13,760
Loan from Raiffeisen Bank (Forty one)	14,848	9,500
Loan from Erste (Citygate)	85,390	86,544
Loan from EBRD and Raiffeisen Bank (Galeria Piatra)	3,736	5,042
Loan from EBRD and Raiffeisen Bank (Arad)	17,999	24,293
Loan from MKB and Zagrabecka Banka (AMZ)	18,993	21,220
Loan from EBRD and Unicredit (Galeria Stara Zagora)	12,078	15,799
Loan from EBRD (Burgas)	22,322	23,006
Loans from minorities in subsidiaries and from joint ventures	20,424	27,047
Deferred issuance debt expenses	(5,439)	(5,677)
	814,067	739,112

13. Long-term loans and bonds (continued)

Long-term loans and bonds have been separated into the current portion and the long-term portion as disclosed below:

	30 June 2016	31 December 2015
	(unaudited)	(audited)
Current portion of long term loans and bonds:
Bonds series 2018-2019	873	915
Bonds series 2017-2018	22,808	680
Loan from OTP (GTC)	3,145	3,145
Loan from WBK (Globis Poznan)	493	14,407
Loan from WBK (Korona Business Park)	1,166	1,166
Loan from PKO BP (Pixel)	677	-
Loan from Berlin Hyp (UBP 1)	559	397
Loan from Berlin Hyp (UBP 2)	248	-
Loan from Pekao (Galeria Jurajska)	3,416	3,388
Loan from Pekao (Globis Wroclaw)	792	769
Loan from ING (Nothus)	746	746
Loan from ING (Zephirus)	746	746
Loan from Berlin Hyp (Corius)	11,647	469
Loan from Pekao (Sterlinga)	525	-
Loan from Pekao (Neptun)	662	-
Loan from Pekao (Sterlinga VAT)	5,785	-
Loan from Pekao (Neptun VAT)	7,299	-
Loan from ING (Francuska)	540	540
Loan from MKB (Centre Point I)	1,725	1,700
Loan from MKB (Centre Point II)	1,626	1,626
Loan from Erste (White House)	1,000	1,000
Loan from MKB (Sasad)	8,327	8,327
Loan from CIB (Metro)	1,003	983
Loan from Erste (Spiral)	1,265	1,254
Loan from Erste (GTC House)	781	-
Loan from EBRD and Raiffeisen Bank (GTC House)	-	750
Loan from Erste (19 Avenue)	569	569
Loan from EBRD and Raiffeisen Bank (GTC Square)	2,130	2,060
Loan from Raiffeisen Bank (Forty one 1)	366	264
Loan from EBRD and Unicredit (Galeria Stara Zagora)	8,625	8,900
Loan from EBRD (Galeria Burgas)	1,561	1,424
Loan from MKB and Zagrabecka Banka (Avenue Mall Zagreb)	4,454	4,454
Loan from EBRD and Raiffeisen Bank (Galeria Piatra)	2,613	2,613
Loan from EBRD and Raiffeisen Bank (Galeria Arad)	12,587	12,587
Loan from Erste (City Gate)	2,358	2,306
Loans from minorities in subsidiaries	2,216	2,183
	115,333	80,368

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

13. Long-term loans and bonds (continued)

	30 June 2016	31 December 2015
	(unaudited)	(audited)
Long term portion of long term loans and bonds:
Bonds series 2018-2019	45,196	46,932
Bonds series 2017-2018	44,319	69,037
Loan from OTP (GTC)	6,290	7,863
Loan from WBK (Globis Poznan)	15,824	-
Loan from WBK (Korona Business Park)	40,570	41,153
Loan from PKO BP (Pixel)	21,592	-
Loan from Pekao (Globis Wroclaw)	23,521	23,923
Loan from ING (Nothus)	10,451	10,824
Loan from ING (Zephirus)	10,451	10,824
Loan from Pekao (Sterlinga)	16,975	-
Loan from Pekao (Neptun)	21,405	-
Loan from Berlin Hyp (Corius)	-	11,405
Loan from Pekao (Galeria Polnocna)	25,276	4,519
Loan from Pekao (Galeria Jurajska)	92,904	94,622
Loan from Berlin Hyp (UBP 1)	17,800	18,242
Loan from Berlin Hyp (UBP 2)	4,213	-
Loan from ING (Francuska)	22,927	23,197
Loan from MKB (Centre Point I)	15,826	16,701
Loan from MKB (Centre Point II)	19,760	20,573
Loan from CIB (Metro)	17,140	17,647
Loan from Erste (Spiral)	25,006	25,892
Loan from Erste (White House)	1,359	1,859
Loan from Erste (GTC House)	12,890	-
Loan from EBRD and Raiffeisen Bank (GTC House)	-	8,650
Loan from Erste (19 Avenue)	20,854	21,138
Loan from EBRD and Raiffeisen Bank (GTC Square)	10,617	11,700
Loan from Raiffeisen Bank (Forty one)	14,482	9,236
Loan from Erste (City Gate)	83,032	84,238
Loan from EBRD and Raiffeisen Bank (Galeria Piatra)	1,123	2,429
Loan from EBRD and Raiffeisen Bank (Galeria Arad)	5,412	11,706
Loan from MKB and Zagrabecka Banka (Avenue Mall Zagreb)	14,539	16,766
Loan from EBRD (Galeria Burgas)	20,761	21,582
Loan from EBRD and Unicredit (Galeria Stara Zagora)	3,449	6,899
Loans from minorities in subsidiaries and from joint ventures	18,209	24,864
Deferred issuance debt expenses	(5,439)	(5,677)
	698,734	658,744

As securities for the bank loans, the banks have mortgage over the assets and security deposits together with assignment of the associated receivables and insurance rights.

13. Long-term loans and bonds (continued)

In its financing agreements with banks, the Group undertakes to comply with certain financial covenants that are listed in those agreements; the main covenants are: maintaining a Loan-to-Value and Debt Service Coverage ratios in the company that holds the project.

All bank loans except of loan granted to Spiral, Sterlinga VAT, and Neptun VAT are nominated in Euro and bonds are nominated in PLN.

In addition, substantially, all investment properties and IPUC that were financed by a lender have been pledged to secure the long-term loans from banks.

Repayments of long-term debt and interest are scheduled as follows (Euro million):

	30 June 2016	31 December 2015
	(unaudited)	(audited)
First year	135	100
Second year	161	165
Third year	214	119
Fourth year	142	176
Fifth year	92	150
Thereafter	127	87
	871	797

14. Deferred tax liability

Tax expenses during the three months period ended 30 June 2016 amounted to Euro 8.6 million.

In the three months period ended 30 June 2016, the Polish currency devaluated versus the Euro. As intercompany loans granted by GTC S.A to its foreign subsidiaries are Euro denominated, the devaluation created an unrealized taxable profit when measuring these loans in PLN. Such profits may be taxed if and when the loans will be repaid. Accordingly, the Euro devaluation resulted in a tax expense in the amount of Euro 7 million and an equivalent increase in deferred tax provision. The deferred tax liability on the temporary differences related to the Euro denominated loans granted by GTC S.A. to GTC RH B.V. amounted to approximately Euro 48 million as of 30 June 2016 in these condensed consolidated statements.

In May 2016, the shareholders of GTC S.A. approved a cross-border merger of GTC S.A., as the acquiring company, with its 100% subsidiaries GTC Real Estate Investments Ukraine B.V. and GTC RH B.V.

The merger once executed might impact these temporary differences related to the above Euro denominated loans. Any such changes to DTL are recognized through profit or loss, and consequently any decrease in deferred tax liability related to the above mentioned loans is booked as profit.

The management of GTC S.A. plans to finalize the merger by 30 September 2016.

Globe Trade Centre S.A. Notes to the Interim Condensed Consolidated Financial Statements for the six-month period ended 30 June 2016 (in thousands of Euro)

15. Capital and Reserves

Shareholders who as at 30 June 2016 held above 5% of the Company shares were as follows:

LSREF III
PZU OFE
AVIVA OFE BZ WBK

Phantom shares

Certain key management personnel of the Company are entitled to specific payments resulting from phantom shares in the Company (the "Phantom Shares").

The Phantom shares (as presented in below mentioned table) have been accounted for based on future cash settlement.

As at 30 June 2016, phantom shares issued were as follows:

Last exercise date	Strike (in PLN)	Blocked	Vested	Number of phantom shares
31/05/2018	7.09	1,024,000	512,000	1,536,000
30/06/2019	7.09	2,764,800	1,382,400	4,147,200
Total		3,788,800	1,894,400	5,683,200

The Phantom shares (as presented in above mentioned table) have been provided for assuming cash payments will be effected, as the Company assesses that it is more likely to be settled in cash.

16. Earnings per share

Basic and diluted earnings per share were calculated as follows:

	Six-month period ended 30 June 2016	Three-month period ended 30 June 2016	Six-month period ended 30 June 2015	Three-month period ended 30 June 2015
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Profit for the period attributable to equity holders (euro)	35,264,000	18,824,000	6,385,000	(1,868,000)
Weighted average number of shares for calculating basic earnings per share	460,216,478	460,216,478	351,310,288	351,310,288
Basic earnings per share (euro)	0.08	0.04	0.02	(0.01)

There have been no potentially dilutive instruments as at 30 June 2016, 30 June 2015 and 31 December 2015.

17. Subsequent events

Acquisition and financing of two Office Buildings in Poland

On 1 July 2016, the Group acquired two office buildings: Neptun Office Center and Sterlinga Business Center, located in Gdansk and Lodz respectively. These two Class A office buildings, featuring modern design and a total of 30,000 sq. m GLA of office space and 364 parking places, will enrich the Group's Polish investment portfolio (see note 11)

Financing of Duna Tower and refinancing of Center Point projects in Budapest

In July 2016, the Group signed a loan agreement for financing of the Duna Tower office project in Budapest with OTP Bank Nyrt (the "Bank"). The total nominal amount of the new loan is EUR 28 million. Furthermore, the Group and the Bank undertook to refinance the EUR 38.9 million Center Point loans currently financed by MKB Bank Zrt. with a new EUR 47 million loan facility.

Sell of Konstancja land

In July 2016, the Group sold a major part of the land known as Konstancja Commercial land consisting of 9 hectare for EUR 6.9 million (PLN 30.5 million).

Acquisition of Artico Office Project

In July 2016, the Group has acquired an SPV Artico Sp. z o.o. that develops an office building in Warsaw. The building will consist of aprox. 7,775 sq.m. of leasable area and is almost fully pre-leased. The building is scheduled to be completed in 2017.

Listing on Johannesburg Stock Exchange

In July 2016, Johannesburg Stock Exchange ("JSE") has approved the Company's inward listing on the stock exchange main board. Listing was commenced in August 2016.

Sale of Piatra shopping Centre

In August 2016, the Group sold Piatra shopping Centre in Romania for Euro 2.7 million. The asset is classified as asset held for sale as of 30 June 2016.

Extension of Sasad II Loan

On 12 August 2016, Sasad II Kft. signed an extension of the loan agreement with MKB (SZKK) regarding Sasad project. According to the agreement the loan were extended by three years until 30 June 2019, and will be amortized in 4 equal annual payments starting upon signing.

18. Release date

The interim condensed consolidated financial statements were authorised for the issue by the Management Board on 23 August 2016.

AI assistant

GTC - Globe Trade Centre S.A. — Interim / Quarterly Report 2016

5627_rns_2016-08-24_79fd5d07-c0de-4ea8-9328-3ea253d8a86e.pdf

Table of content

Item 1. Introduction

Presentation of financial information

Forward-looking statements

Item 2. Selected financial data

Consolidated statement of financial position

Item 3. Presentation of the Group

Item 3.1. General information about the Group

Item 3.2. Structure of the Group

Item 3.3. Changes to the principal rules of the management of the Company and the Group

Item 4. Main events

Events that took place after 30 June 2016:

Item 5. Operating and financial review

Item 5.1. General factors affecting operating and financial results

General factors affecting operating and financial results

Economic conditions in CEE and SEE

Real estate market in CEE and SEE

Real estate valuation

Impact of interest rate movements

Impact of foreign exchange rate movements

Availability of financing

Item 5.2. Specific factors affecting financial and operating results

Item 5.3.Presentation of differences between achieved financial results and published forecasts

Item 5. 4. Statement of financial position

Item 5.4.1. Key items of the statement of financial position

Investment property

Residential landbank

Investment in associates and joint ventures

Assets held for sale

Inventory

Short-term deposits

Derivatives

Item 5.4.2. Financial position as of 30 June 2016 compared to 31 December 2015

Assets

Liabilities

Equity

Item 5.5. Consolidated income statement

Item 5.5.1. Key items of the consolidated income statement

Revenues from operations

Cost of operations

Gross margin from operations

Selling expenses

Administrative expenses

Profit/(loss) from the revaluation/impairment of assets

Financial income/(expense), net

Taxation

Item 5.5.2. Comparison of financial results for the six-month period ended 30 June 2016 with the result for the corresponding period of 2015

Revenues from operations

Cost of operations

Gross margin from operations

Selling expenses

Administrative expenses

Profit/(loss) from the revaluation/impairment of assets and impairment of residential projects

Other income/(expense), net

Foreign exchange gain/(loss)

Financial income/(cost), net

Share of loss of associates

Taxation

Net profit/ (loss)

Item 5.5.3. Comparison of financial results for the three-month period ended 30 June 2016 with the result for the corresponding period of 2015

Revenues from operations

Cost of operations

Gross margin from operations

Selling expenses

Administrative expenses

Profit/(loss) from the revaluation/impairment of assets and impairment of residential projects

Other income/(expense), net

Foreign exchange gain/(loss)

Financial income/(cost), net

Share of loss of associates

Taxation

Net profit/ (loss)

Item 5. 6. Consolidated cash flow statement

Item 5.6.1. Key items from consolidated cash flow statement

Net cash from (used in) operating activities

Net cash used in investing activities

Net cash from (used in) financing activities

GTC - Globe Trade Centre S.A. Interim / Quarterly Report 2016