Proposed Directors of Tirupati Graphite explain why they have requisitioned an GM. Watch the video here.

Less Ads, More Data, More Tools Register for FREE

Pin to quick picksKimberly Enterprises Regulatory News (KBE)

  • There is currently no data for KBE

Watchlists are a member only feature

Login to your account

Alerts are a premium feature

Login to your account

Results for the year ended 31 December 2011

22 Mar 2012 17:44

RNS Number : 9157Z
Kimberly Enterprises N.V.
22 March 2012
 



22 March 2012

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Results for the year ended 31 December 2011

 

Kimberly Enterprises N.V.  ("Kimberly" or "the Company"), the AIM listed Eastern European property developer (KBE.L), announces its results for the year ended 31 December 2011.

 

Financial summary:

 

Year ended (figures in €'000)

31-Dec-11

31-Dec-10

Net assets (liabilities)

(6,793)

5,467

NAV/share (€)

0.08

0.06

Revenues 

4,131

14,881

Revaluation of investment property

(1,379)

3,478

Write-down of inventory

(1,958)

(976)

Gross profit (loss)

(4,309)

4,945

Operating loss

(6,623)

(788)

Net foreign exchange losses

(517)

(3,046)

Financial income 

284

3,453

Financial costs

(6,395)

(7,803)

Net finance costs

(6,628)

(7,396)

Loss before tax

(13,251)

(8,184)

Loss for the year

(12,867)

(8,768)

Loss per share (€)

(0.15)

(0.10)

 

Total revenue for the year ended 31 December 2011 was €4.1 million compared to €14.9 million in 2010, reflecting sales of housing units.

 

The negative gross margin on the sale of housing units, including management fees, was €1.0 million in 2011 compared to a positive gross margin of €2.4 million in 2010. The negative gross margin of 24 per cent for 2011 (2010: positive gross margin of 16 per cent) followed the decrease of sales in the projects compared to 2010.

 

Total gross loss for 2011 was €4.3 million (2010: €4.9 million gross profit) which reflects a negative investment property revaluation of €1.4 million for 2011 compared to a positive investment property revaluation of €3.5 million in 2010 and an increase in write down of inventory in 2011 (write down of €2 million in 2011 compared to €1 million in 2010).

 

Most of the write-down for 2011 relates to a project in Czech Republic. The negative revaluation of the investment property for 2011 reflects the changes in the Serbian market and the sale of the plot in Poland.

 

Selling, general and administrative expenses of €2.2 million (2010: €2.5 million) include a provision of €0.2 million for 2011 in respect of legal charges (2010: €0.3 million). The change is mainly caused by decreasing the staff and cutting current expenses in each country.

 

Net financing costs decreased to €6.6 million (2010: €7.4 million). This reflects a profit due to a lower rate of interest on the finance lease of €1.6 million (2010: €2.4 million) and a decrease in the foreign exchange losses to €0.5 million (2010: €3 million).

 

As a result of all the developments mentioned above, the loss before tax for the year increased to €13.3 million (2010: €8.2 million).

 

Inventories of housing units at 31 December 2011 were down to €31.0 million from €37.7 million at 31 December 2010.

 

Assets held for sale at 31 December 2011 represents the plot in Poland for which during the reporting period Engel Resources and Development Ltd ("ERD") signed a preliminary agreement to sell it for a total consideration of 4.14 million. 

 

Net bank debt (liabilities to the bank offset by restricted bank deposits, cash in escrow, cash and cash equivalents) was €11.6 million at 31 December 2011 compared to net debt of €12.8 million at 31 December 2010. 

 

General

 

As of 31 December 2011, the financial condition of the Company remains weak and it is not able to meet its obligations to its employees and service providers as they fall due. The Group is in breach of:

·; Interest bearing loans from banks - totaling €11.8 million.

·; The requirement to pay lease payments totaling € 1.9 million (relating to the lease of Marina Dorcol in Belgrade, Serbia). After the reporting date the Company breached its requirements to pay an additional amount of € 1.3 million.

At 31 December 2011 the Group has current liabilities totaling €51.3 million, which exceeds its current assets amounting to € 43.3 million.

 

In order to manage its financial situation, the Company has requested ERD, the parent company of the Company's immediate parent company, Engel General Developers Ltd. ("EGD"), to provide additional financial assistance to fund the Company's immediate liabilities.

 

During the reporting period ERD provided several bridge loans for a total amount of approximately €2.1 million. After the reporting period the Company received additional loans from ERD for a total amount of €0.3 million regarding the related guarantees granted to ERD.

 

The management is also examining other solutions to fund the Company's immediate liabilities and to resolve its financial situation.

 

New investor

 

On 7 July 2010, GBES Ltd. ("GBES") (a company incorporated in Cyprus) signed an agreement with ERD and with EGD to invest capital of approximately €9.2 million for 53% of the enlarged share capital of ERD (part of which was given as loan until the receipt of court approval) and to provide an additional credit line of approximately €10.2 million to ERD.

 

On 30 June 2011 the district court in Israel approved ERD request for the debt settlement and the investment agreement by the company with GBES. During the reporting period, the agreement between GBES and ERD has been completed, following which GBES holds 53% of the issued share capital of ERD. ERD owns 100% of the issued share capital of EGD, which in turn owns 68.35% of the issued share capital of the Company. GBES therefore has an aggregate equitable interest of 36.25% of the issued share capital in the Company.

 

During the reporting period the Company received loan from GBES in the total amount of €0.2 million, the loan was granted for a period of 6 months and carries a yearly interest of 6%.

 

After the reporting period, GBES has reached agreement with funds managed by Heitman LLC ("Heitman") to acquire all of Heitman's interests in Arces International B.V. ("Arces") and ENMAN B.V. ("ENMAN"). Arces and ENMAN are both joint venture companies currently jointly owned by Heitman and the Company. The aggregate consideration for the two acquisitions will be paid in instalments and it will include the assignment of shareholder loans provided by Heitman to the joint venture companies.

Completion of both acquisitions is subject to a number of precedent conditions, and is due to take place on or before 30 June 2012. Some of the precedent conditions will require the consent of the Company.

 

Poland

 

GDP growth in 2011 was 4.2 per cent and the rate of inflation was 4 per cent. Forecasted GDP growth for 2012 is 2.5 per cent.

 

During December 2009 the Company transferred to ERD its entire shareholding in Wilanow 1 Development sp zoo ("Wilanow 2"), the company which owns the commercial plot in Wilanow. During the reporting period ERD has signed a preliminary agreement to sell the plot of Wilanow 2 in Poland for a total consideration of € 4.14 million. The Group has recognized a loss of approximately € 0.8 million. According to the timetable determined by the agreement, the final sale agreement will be signed no later than 30 April 2012. The net proceeds of the sale will be deducted from the total debt of the Group towards ERD.

 

Serbia

 

GDP in 2011 was 2 per cent and the rate of inflation was 11.3 per cent. Forecasted GDP growth for 2012 is 1.5 per cent.

 

During 2010, the Group signed a revised lease agreement for the land in Marina Dorcol with the municipality of Belgrade. The revised agreement replaces the previously signed agreement. According to the revised agreement, a new payment schedule was determined, according to which the subsidiary will be obliged to pay an amount of approximately €1.1 million by the mid of November 2010 and the monthly fee debts in the amount of €0.65 million by September 2010.

 

As of today the Company paid the above two instalments (except of approximate amount of €0.2 million which is under dispute with the municipality). The remaining overdue debt in the amount of €9.8 million should have been paid in several instalments commencing September 2011, while the payment of the remaining debt to the municipality of approximately € 9.9 million will be postponed from the years 2010-2011 to the years 2014-2016.

 

During 2011, the Group breached its requirements to pay total amount of €1.9 million which was determined by the revised lease agreement. After the reporting date the Company breached is requirements to pay an additional amount of €1.3 million. The Group is in the process of negotiation to restructure the liability.

 

Czech Republic

 

GDP in 2011 was 2 per cent and the rate of inflation was 1.9 per cent. Forecast GDP growth for 2012 is 2.9 per cent.

There are 4 additional projects in Prague in pre-development stage with a total of 484 potential units (Phase 4 of Safranka, Phase 2 of Vokovice, Veleslavin and Troja) and during 2012 the Company expects to start Phase 1 of Veleslavin producing a total of 77 units with an estimated sales value of €17 million (25 per cent owned by the Company).

 

All projects in the Czech Republic are part of either Arces or ENMAN joint ventures.

 

Romania

 

GDP in 2011 was 2.3 per cent and the rate of inflation was 6.1 per cent. Forecast GDP growth for 2012 is 3.3 per cent.

 

Due to unstable economical conditions in the country, the Company did not start the development of the existing plots in Romania.

 

   

Hungary

 

GDP in 2011 was 1.8 per cent and the rate of inflation 3.7 per cent. Forecasted GDP growth in 2012 is 0.9 per cent.

 

During the reporting period, a liquidator was appointed following a court decision in regards to a legal procedure in Hungary in relation with the jointly controlled entity "Engel Park Kft." ("Engel Park"). As a consequence the Company has ceased to consolidate the jointly controlled entity Engel Park in its consolidated financial statements.

 

 

Enquiries:

 

Kimberly Enterprises N.V.

Assaf Vardimon

Tel: +31 20 778 4141

Libertas Capital Corporate Finance Limited

Sandy Jamieson

Tel: +44 (0) 20 7569 9650

 

Board statement

"The Board welcomes the investment by GBES in the Company's parent company group. With their continued support, the Company intends to start the development in 2012 of new residential projects mainly in Czech Republic and Poland".

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated statement of financial position

 

31 December

31 December

2011

2010

Note

Thousands Euro

ASSETS

Current assets

Cash and cash equivalents

5

959

880

Restricted bank deposits and cash in escrow

6

68

1,296

Trade receivables

7

209

143

Prepayments and other assets

8

589

751

Loans to related parties

9

6,184

5,748

Current tax assets

106

116

Inventories of housing units and land

10

31,011

37,669

Assets held for sale

35

4,153

-

Total current assets

43,279

46,603

Non-current assets

Investment property

11

21,100

26,850

Property and equipment

12

40

67

Deferred tax assets

13

1,977

1,542

Total non-current assets

23,117

28,459

Total assets

66,396

75,062

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Interest-bearing loans from banks

16

12,594

14,973

Current portion of finance lease liability

17

4,041

1,522

Loans and amounts due to related parties and joint venture partners

18

24,663

22,343

Trade payables

1,262

1,375

Other payables

19

5,441

4,372

Provisions

20

1,581

2,177

Current tax liabilities

200

231

Liabilities held for sale

35

1,505

-

Total current liabilities

51,287

46,993

Non-current liabilities

Finance lease liability

17

21,685

22,355

Deferred tax liabilities

13

217

247

Total non-current liabilities

21,902

22,602

Equity

Share capital

21

878

878

Share premium

21

39,298

39,298

Capital reserve

(340)

(340)

Accumulated losses

(47,688)

(34,934)

Accumulated translation adjustment

1,234

629

Total equity attributable to shareholders of the Company

(6,618)

5,531

Non-controlling interest

(175)

(64)

Total equity

(6,793)

5,467

Total liabilities and equity

66,396

75,062

 

 

20 March 2012

 

Terry Roydon

Chairman of the Audit Committee

 

Gad Raveh

Chief Executive Officer

Date of approval of the

financial statements

The notes are an integral part of these consolidated financial statements.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated income statement

 

 For the year ended 31 December

2011

2010

Note

Thousands Euro

Revenues

22

4,131

14,881

Change in fair value of investment property

11

(1,379)

3,478

Write down of inventory

23

(1,958)

(976)

Cost of sales

24

(5,103)

(12,438)

Gross profit (loss)

(4,309)

4,945

Other losses

25

(88)

(3,261)

Selling, general and administrative expenses

26

(2,226)

(2,472)

Results from operating activities

(6,623)

(788)

Net foreign exchange losses

(517)

(3,046)

Finance income 

284

3,453

Finance costs

(6,395)

(7,803)

Net finance costs

27

(6,628)

(7,396)

Loss before tax

(13,251)

(8,184)

Tax (expense) benefit

28

384

(584)

Loss for the year

(12,867)

(8,768)

Loss attributable to:

 Shareholders of the Company

(12,754)

(8,704)

Non-controlling interests

(113)

(64)

Loss for the year

(12,867)

(8,768)

Loss per share:

Basic loss per share (Euro)

29

(0.147)

(0.100)

Diluted loss per share (Euro)

29

(0.147)

(0.100)

 

  

 

The notes are an integral part of these consolidated financial statements.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated statement of comprehensive income

 

 

 For the year ended 31 December

2011

2010

Thousands Euro

Loss for the year

(12,867)

(8,768)

Other comprehensive income:

Foreign currency translation differences for foreign operations

607

1,628

Total comprehensive income for the year

(12,260)

(7,140)

Total comprehensive loss attributable to:

Shareholders of the Company

(12,149)

(7,076)

Non-controlling interests

(111)

(64)

Total comprehensive loss for the year

(12,260)

(7,140)

 

 

The notes are an integral part of these consolidated financial statements.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated statement of changes in equity

 

 

Attributable to shareholders of the Company

Share capital

Share premium

Capital reserve

Translation reserve

Accumulated losses

Total

Non-controlling interests

Total equity

Thousands Euro

Balance at 1 January 2010

878

39,298

(340)

(999)

(26,230)

12,607

-

12,607

Total comprehensive loss for the year

-

-

-

1,628

(8,704)

(7,076)

(64)

(7,140)

Balance at 31 December 2010

878

39,298

(340)

629

(34,934)

5,531

(64)

5,467

Balance at 1 January 2011

878

39,298

(340)

629

(34,934)

5,531

(64)

5,467

Total comprehensive loss for the year

-

-

-

605

(12,754)

(12,149)

 (111)

(12,260)

Balance at 31 December 2011

878

39,298

(340)

1,234

(47,688)

(6,618)

(175)

(6,793)

 

 

 

 

 

The notes are an integral part of these consolidated financial statements.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated statement of cash flows

 

 

For the year ended 31 December

2011

2010

Note

Thousands Euro

Cash flows from operating activities:

Loss for the year

(12,867)

(8,768)

Adjustments for:

Depreciation

19

41

Net finance costs

27

6,628

7,396

Tax expense (benefit)

28

(384)

584

Loss on subsidiaries liquidation

25

88

937

Loss from sale of investment property

25

-

630

Loss due to change in percentage of jointly held entity

25

-

1,694

Change in fair value of investment property

11

1,379

(3,478)

Change in inventories

3,576

11,065

Write down of inventories

23

1,958

976

Assets held for sale

35

(13)

-

Change in trade receivables

(76)

133

Change in provisions

20

(518)

235

Change in other prepayments and other assets

122

(186)

Change in trade payables

(9)

3

Change in other payables

773

(4,563)

Cash generated from operating activities

676

6,699

Interest received

99

283

Interest paid

(237)

(1,998)

Taxes paid

(215)

(574)

Net cash from operating activities

323

4,410

 

 

 

 

The notes are an integral part of these consolidated financial statements.

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

Consolidated statement of cash flows (continued)

 

 

For the year ended 31 December

2011

2010

Note

Thousands Euro

Cash flows from investing activities:

Acquisition of property and equipment

(6)

(40)

Change in holding rate of jointly controlled entity

34.e

-

(59)

Proceeds from sale of investment property

-

375

Proceeds from sale of property and equipment

14

19

Short term loans granted to related parties

(384)

(10)

Short term loans repaid by related parties

136

273

Change in restricted bank deposits and cash in escrow

1,188

1,348

Net cash from investing activities

948

1,906

Cash flows from financing activities:

Interest-bearing loans received from banks

54

1,164

Interest-bearing loans repaid to banks

(2,501)

(11,988)

Loans received from related parties and other

2,450

3,275

Loans repaid to related parties and other

(1,155)

(322)

Payment of finance lease liability

-

(1,657)

Net cash used in financing activities

(1,152)

(9,528)

Net increase (decrease) in cash and cash equivalents

119

(3,212)

Cash and cash equivalents at 1 January

880

4,919

Effect of exchange rate fluctuations on cash held

(40)

(827)

Cash and cash equivalents at 31 December

959

880

 

 

 

 

The notes are an integral part of these consolidated financial statements.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 1 - REPORTING ENTITY

 

Kimberly Enterprises N.V. (formerly Engel East Europe N.V.) (the "Company") is a Company domiciled in The Netherlands. The Company owns subsidiary companies and has jointly controlled entities mainly in Eastern Europe which purchase, develop, hold and sell real estate assets.

 

The Company has been listed on the Alternative Investment Market ("AIM") of the London Stock Exchange, United Kingdom since 15 December 2005.

The consolidated financial statements of the Company as at 31 December 2011 and for the year then ended comprise the Company and its subsidiaries and the Group's interests in associates and jointly controlled entities (collectively, the "Group").

 

As of 31 December 2011, the main shareholder of the Company is Engel General Developers Ltd. (incorporated in Israel), ("EGD") which owns, as of 31 December 2011, 68.35 % of the Company's shares.

 

On 7 July 2010, GBES Ltd. (a company incorporated in Cyprus) has signed an agreement with Engel Resources and Development Limited ("ERD"), the parent company of Engel General Developers Ltd., and with EGD, to invest capital of approximately EUR 9.2 million for 53% of the enlarged share capital of ERD (part of which will be given as loan until the receipt of court approval) and to provide an additional credit line of approximately EUR 10.2 million to ERD.

 

On 30 June 2011 the district court in Israel approved ERD request for the debt settlement and the investment agreement by the company GBES Ltd.

During the reporting period the agreement between GBES and ERD, has been completed, following which GBES holds 53% of the issued share capital of ERD.

ERD owns 100% of the issued share capital of EGD, which in turn owns 68.35% of the issued share capital of the Company. GBES therefore has an aggregate equitable interest of 36.25% of the issued share capital in the Company.

 

At the Annual General Meeting of the Company held on 7 March 2012 it was approved to change the name of the Company from Engel East Europe N.V. to Kimberly Enterprises N.V.

 

Copies of these consolidated financial statements of the Group are available on the Company's website (www.engel-ee.com) and upon request from the Company's registered office at Keizersgracht 616, 1017 ER Amsterdam, The Netherlands.

 

NOTE 2 - BASIS OF PREPARATION

 

a. Statement of compliance

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("EU IFRS").

The consolidated financial statements were authorized for issue by the Board of Directors on 20 March 2012.

 

These consolidated financial statements have been prepared by the Company. These consolidated financial statements are not intended for statutory filing purposes. The Company is required to file consolidated financial statements prepared in accordance with The Netherlands Civil Code.

 

At the date of preparing these financial statements the Company had not yet filed consolidated financial statement for the year ended 31 December 2011 in accordance with The Netherlands Civil Code.

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 2 - BASIS OF PREPARATION (continued)

 

b. Going concern

 

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to rise funding to meet its obligations to the banks, its employees and service providers as disclosed in note 4.b.

 

The financial position of the Group continued to be weak during the reporting period, the Group is in breach of:

 

·; Interest bearing loans from banks totaling EUR 11,842 thousands - see note 16.

·; The requirement to pay lease payments totaling EUR 1.9 million (relating to the lease of Marina Dorcol in Belgrade, Serbia). After the reporting date the Company breached is requirements to pay an additional amount of EUR 1.3 million - see notes 17 and 19.

 

Management considers it is unlikely that some of the projects will generate sufficient cash inflows to repay all obligations when they fall due. Management believes that the above financial position of the Group indicates the existence of material uncertainties which cast significant doubt on the Company's ability to continue as a going concern.

 

The notes to the consolidated financial statements (in particular notes 4.b., 16 and 17) disclose all the key risk factors, assumptions made and uncertainties of which the management of the Company aware that are relevant to the Company's ability to continue as a going concern, including significant conditions and events.

 

Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realized other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.

 

c. Basis of measurements

 

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statements of financial position:

·; Investment property which is measured at fair value.

 

d. Functional and presentation currency

These consolidated financial statements are presented in Euro (EUR), which is the Company's functional currency. All financial information presented in Euro has been rounded to the nearest thousands, except where otherwise indicated.

The functional currency of each subsidiary and jointly controlled entity is the local currency in the specific country in which it is located.

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 2 - BASIS OF PREPARATION (continued)

 

e. Use of estimates and judgments

 

The preparation of the consolidated financial statements in conformity with IFRSs as adopted by the EU requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

Information about accounting estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in note 37.

 

f. Operating cycle

 

The Group is involved in projects some of which may take several years to complete. The cost of inventory and loans which finance residential development projects are presented as current assets and liabilities (see note 3.f).

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies set out below have been applied consistently during the periods presented in these consolidated financial statements and have been applied consistently by all Group entities.

 

a. Basis of consolidation

 

1. Business combinations

 

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

 

The Group measures goodwill at the acquisition date as:

 

·; the fair value of the consideration transferred; plus

·; the recognized amount of any non-controlling interests in the acquire; plus

·; if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquire; less

·; the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

a. Basis of consolidation (continued)

 

2. Subsidiaries

 

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of the subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

 

3. Associates

 

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Other investments in associates are accounted for using the equity method (equity accounted investees) and are recognized initially at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses.

The consolidated financial statements include the Group's share of the profit and loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

 

4. Jointly controlled entities

 

Entities which are jointly controlled with another party or parties through the establishment of a contractual agreement ("joint ventures") are accounted for using the proportional consolidation method of accounting. In any period where there is a change of economic interest or a change in estimate of economic interest, then the corresponding adjustment is recognized in the income statement.

The financial statements of joint ventures are included in the consolidated financial statements from the date that joint control commences until the date that joint control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries, associates and joint ventures to bring the accounting policies used into line with those used by the Group in the consolidated financial statements.

 

5. Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

6. Acquisition of non-controlling interests

 

Acquisitions of non-controlling interests - (i.e. additional investments in subsidiaries) are accounted for entirely as equity transactions.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

a. Basis of consolidation (continued)

 

7. Loss of control

 

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary.

Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

 

b. Foreign currency

 

1. Foreign currency transactions

 

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

 

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction.

 

Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity investments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other comprehensive income.

 

2. Foreign operations

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to euro at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to euro at exchange rates at the dates of the transactions.

 

Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only a part of its investment in an associate that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

b. Foreign currency (continued)

 

2. Foreign operations (continued)

 

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

The functional currencies of the Group entities are: Hungarian Forint ("HUF"), Czech Crown ("CZK"), Polish Zloty ("PLN"), Canadian Dollar ("CAD"), Romanian Lei ("RON"), Bulgarian Lev ("LEV"), New Israeli Shekel (NIS) and Serbian Dinar ("CSD").

 

c. Financial instruments

 

1. Non-derivative financial assets

 

The Group initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

 

The Group classifies non-derivative financial assets into the following categories: cash and cash equivalents, restricted bank deposits, cash in escrow and loans and receivables.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

 

Restricted bank deposits and cash in escrow

Restricted bank deposits comprise of deposits in banks that are pledged to secure banking facilities for the Group and to which the Group does not have access.

Cash in escrow represents cash paid into an escrow account for security of future interest bank payments.

 

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents and trade and other receivables.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

c. Financial instruments (continued)

 

2. Non-derivative financial liabilities

 

The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

 

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the following categories: loans and borrowing, bank overdrafts, and trade and other payables. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.

 

Trade payables

Trade payables are not interest bearing and are recognized initially at fair value, subsequent to which they are stated at amortized cost.

 

Interest-bearing loans from banks

Interest-bearing loans from banks are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis.

 

d. Property and equipment

 

Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:

·; the cost of materials and direct labor;

·; any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located;

·; capitalized borrowing costs.

Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

 

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

d. Property and equipment (continued)

 

Depreciation

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

 

Furniture, office equipment and other assets

3-15 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

e. Investment property

 

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognized in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalized borrowing costs.

 

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount if the item) is recognized in profit and loss. When an investment property that was previously classified as property, plants and equipment is sold, any related amount included in the revaluation reserve is transferred to retain earnings.

 

An external, independent valuation companies, having appropriate recognized professional qualifications and recent experience in the location and category of property being valued, value the Group's investment properties. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably.

 

In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A market yield is applied to the estimated rental value to arrive the gross property valuation. When actual rents differ materiality from the estimated rental value, adjustments are being made to reflect actual rents.

 

Any gain or loss arising from a change in fair value is recognized in the profit or loss in the period in which it arises. Rental income from investment property is accounted for as described in note 3.l.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

f. Inventories of housing units

 

Inventories are measured at the lower of cost and net realizable value. Cost comprises direct materials, direct labor costs, subcontracting costs and those direct overheads which have been incurred in bringing the inventories to their present condition.

 

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of a qualifying asset (see note 3.m).

 

The Group is involved in projects some of which may take several years to complete. The cost of inventory and loans which finance residential development projects are presented as current assets and liabilities.

 

g. Impairment

 

The carrying amounts of the Group's assets, other than inventories (see note 3.f), investment property (see note 3.e) and deferred tax assets (see note 3.n) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

 

For goodwill, that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

 

Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement.

 

Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

 

Calculation of recoverable amount

 

The recoverable amount of the Group's receivables carried at amortized cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specified to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

g. Impairment (continued)

 

Reversal of impairment

An impairment loss in respect of a receivable carried at amortized cost is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. Such reversal is recognized in the income statement.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

h. Assets held for sale or distribution

 

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group's accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognized in profit or loss. Gains are not recognized in excess of any cumulative impairment loss.

Once classified as held for sale or distribution, intangible assets and property and equipment are no longer amortized or depreciated, and any equity-accounted investee is no longer equity accounted.

 

i. Employee benefits

 

Short-term employee benefit

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

 

j. Provisions and warranties

 

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

Provision for warranty costs are recognized at the date of sale of housing units, at the Company's best estimate of the expenditure required to settle the Group's liability. Such estimates take into consideration warranties given to the Group by subcontractors.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

k. Leased assets

 

1. Operating leases

 

The Group's leases of assets in which substantially all the risks and rewards of ownership are retained by the other party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are added to inventory where these costs will be recovered in future sales.

 

2. Finance leases

 

The Group's leases of assets in which the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Investment properties held under finance leases are carried at their fair value.

 

l. Revenue

 

Revenue from the sale of housing units is recognized when the risks and rewards of ownership have been transferred to the buyer provided that the Group has no further substantial acts to complete under the contract.

Rental income from investment property is recognized in the income statement on a straight- line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income.

 

Other revenues, including project management fees, are recognized in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided, and are measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of VAT and other sales related taxes.

No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs or continuing management involvement with the assets.

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

m. Finance income and finance costs

 

Finance income comprises interest income on funds invested. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and impairment losses recognized on financial assets.

Borrowing costs are capitalized if they are directly attributable to the acquisition or construction of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalization of borrowing costs may continue until the assets are substantially ready for their intended use. If the resulting carrying amount exceeds its recoverable amount, an impairment loss is recognized. The capitalization rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.

Borrowing costs that are not directly attributable to the acquisition or construction of a qualifying asset are recognized in profit or loss using the effective interest method.

 

n. Tax

 

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that these relate to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

·; temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

·; temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

·; Taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment in estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

o. Earnings per share

 

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

 

p. Segment reporting

 

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. All operating segments' operating results are reviewed regularly by the Group's CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

 

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company's headquarters), head office expenses, and tax assets and liabilities.

 

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

 

 

NOTE 4 - FINANCIAL RISK MANAGEMENT

 

Overview

 

The Group has exposure to the following risks from its use of financial instruments:

 

·; Credit risk

·; Liquidity risk

·; Market risk

 

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Group's risk management policies are established to identify and analyses the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 4 - FINANCIAL RISK MANAGEMENT (continued)

 

a. Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.

There are no significant concentrations of credit risk. The Group exposure to credit risk in most of the countries of activity is minimized by the requirement for customers to pay most of the amount due on purchased housing units prior to handover.

The Group limits its exposure to credit risk arising from bank deposits by transacting only with reputable bank counterparties that have a credit rating higher than that of the Group. Additionally, the Group reduces its exposure to credit risk by depositing its financial funds in different and independent bank institutions.

The carrying amount of financial assets represents the maximum credit exposure of the Group at the reporting date.

 

b. Liquidity risk

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

 

The Group relies on external funding to finance its current and future development projects. Future acquisitions of investment properties and land designated for residential projects and the ability of the Group to expand its operations is partly dependant on its ability to obtain future bank financing. The Group intends to repay its existing bank loans from its operating activity (mainly sales of housing units and undeveloped plots). Despite the tightening of the availability of credit, the Group has so far been able to secure additional project funding when needed largely because the Group's bank financing is project-specific and generally secured by the physical assets of the relevant project company. However, there is no assurance that banks will provide funding for new projects or prolong overdue loans.

 

At 31 December 2011 the Group has current liabilities totaling EUR 51,287 thousands, which exceeds its current assets amounting to EUR 43,279 thousands.

 

As of 31 December 2011, the financial condition of the Company remains weak and it is not able to meet its obligations to its employees and service providers as they fall due. The Group is in breach of:

·; Interest bearing loans from banks - totaling EUR 11,842 thousands - see note 16.

·; The requirement to pay lease payments totaling EUR 1.9 million (relating to the lease of Marina Dorcol in Belgrade, Serbia). After the reporting date the Company breached is requirements to pay an additional amount of EUR 1.3 million - see notes 17 and 19.

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 4 - FINANCIAL RISK MANAGEMENT (continued)

 

b. Liquidity risk (continued)

 

1. Interest bearing loans from banks

 

In respect of a breached project loans totaling EUR 10,553 thousands see also note 16) management considers it is unlikely that the projects will generate sufficient cash inflows to repay all obligations which fall due within one year. The Group is discussing possible solutions with the financing banks, including extension of the loans, as well as potential sales of the projects.

Subsequent to the reporting date the Group is in breach of additional bank loan agreement totaling EUR 752 thousands.

 

Whilst in the past financing banks have agreed to prolong existing loan facilities, there is no assurance that these banks will be prepared to extend existing loan facilities beyond currently committed maturity dates. In the event that a bank is not willing to extend a project loan, it has the option to call in its security. In most cases these loans are secured by the underlying project company's assets only. Loans granted by the financing banks to the projects are non-recourse loans, except for:

·; The bank loans which finance the project in Gyor Hungary (an Arces International B.V subsidiary, which is in liquidation process) in the amount of EUR 12,648 thousands (the Company's share is EUR 6,324 thousands), are additionally guaranteed by Arces International B.V., a jointly controlled entity. The company has disputed the validity of this guarantee with the bank and there is legal dispute between the Company and Heitman regarding the responsibility of this guarantee, however, no official legal claim has been filed by any of the parties.

·; ENMAN B.V, a jointly controlled entity, has provided guarantees for interest payments and costs overruns, to the bank which finances the Ingatlan project in Budapest, Hungary.

In all other cases, the exposure is limited to the value of the specific securities pledged in each project.

Management considers it is unlikely that some of the projects will generate sufficient cash inflows to repay all obligations when they fall due. Management believes that the above mentioned conditions indicate the existence of material uncertainties which cast significant doubt on the Company's ability to continue as a going concern.

 

2. Lease agreement

 

Since January 2011, the Group has been in breach of the requirement to pay the monthly lease payments. As of 31 December 2011 the total breach was EUR 1.9 million.

The company is exposed to the following sanctions:

·; Termination of the lease contracts which will cause the loss of the right to use of land;

·; In the case of termination the final result of termination would be restitution of the amounts paid by Marina Dorcol based on the agreements with the municipality, decreased for the amount of compensation for usage of such land for the period of duration of lease and for compensation of damages which occurred for the municipality, if any.

Should any party commence bankruptcy procedure against Marina Dorcol, the Company would lose control of Marina Dorcol and would be exposed to uncertainty with respect to compensation from the bankruptcy estate, since the Company will be in the "last row of creditors".

The management of the Company estimate, inter alia, based on its legal advisor that it is not likely the Serbian municipality will act to terminate the agreement between the parties and that bankruptcy procedure against Marina Dorcol will commence.

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 4 - FINANCIAL RISK MANAGEMENT (continued)

 

b. Liquidity risk (continued)

 

In order to manage its financial situation the Company has requested Engel Resources and Development Ltd., the parent company of the Company's immediate parent company, Engel General Developers Ltd., ("ERD") to provide additional financial assistance to fund the Company's immediate liabilities.

During the reporting period ERD provided several bridge loans in the total amount of approximately EUR 2.1 million. After the reporting period the Company received additional loans from ERD in the total amount of EUR 0.3 million (see also note 33(3) regarding the related guarantees granted to ERD).

During the reporting period the Company received loan from GBES in the total amount of EUR 0.2 million, the loan was granted for a period of 6 months and carries a yearly interest of 6%.

 

The management is also examining other solutions to fund the Company's immediate liabilities and to resolve its financial situation.

 

Should the going concern assumption not be appropriate, adjustments would have to be made to reflect a situation where the assets may need to be realized other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the consolidated financial statements.

 

c. Market risk

 

Market risk is the risk that changes in market prices, (such as foreign exchange rates and interest rates) will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable local economic parameters, while optimizing the return.

Currency and inflation risk

The Group presents its financial statements in Euro. However, the Group's operations are based locally in a number of different countries including Hungary, Romania, the Czech Republic, Serbia and Poland, and therefore the Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Euro. The Group's financial results could, therefore, be adversely affected by fluctuations in the exchange rates between Euro and local currencies. The Group mitigates its foreign exchange risk by financing development projects through financial liabilities that are denominated in the currency of the country the project is located in and in which revenues from the projects will be generated. The Group does not currently engage in hedging or use any other financial arrangement to minimize currency exchange risk or the translation risk related to foreign operations.

The Group is exposed also to the changes in future lease payments arising from changes in the retail prices index in Belgrade, Serbia, related to its finance lease of investment property in Belgrade, Serbia.

 

Interest rate risk

The Group's interest rate risk arises mainly from short-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group does not currently engage in hedging or use any other financial arrangement to minimize the exposure to these risks.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 4 - FINANCIAL RISK MANAGEMENT (continued)

 

d. Capital management

 

The Group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stockholders and to maintain an optimal capital structure to reduce the cost of capital.

Due to current financial position of the Group, the aim of the management is to enable the Group to continue and to operate as a going concern. Currently no specific target of return on capital was determined.

There are no externally imposed capital requirements on the Company.

There were no changes in the Group's approach to capital management during the year.

 

31 December

2011

2010

Thousands Euro

Total liabilities

73,189

69,595

Less cash and cash equivalents

(959)

(880)

Less restricted bank deposits and cash in escrow

(68)

(1,296)

Net debt

72,162

67,419

Total equity (deficient)

(6,793)

5,467

Debt to capital ratio at 31 December

(10.62)

12.33

 

 

NOTE 5 - CASH AND CASH EQUIVALENTS

 

31 December

2011

2010

Thousands Euro

Bank balances

952

868

Petty cash

7

12

Total

959

880

 

The balance as of 31 December 2011 includes an amount of EUR 166 thousands (2010: EUR 289 thousands) which is related to the project Safranka in the Czech Republic. This balance is available only for use in this project and cannot be used for any other purpose prior to the repayment of the bank loan which finances this project.

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 6 - RESTRICTED BANK DEPOSITS AND CASH IN ESCROW

 

31 December

2011

2010

Thousands Euro

Restricted bank deposits:

In Hungarian Forint

53

20

In Polish Zloty

-

622

Total restricted bank deposits

53

642

Cash in escrow:

In Euro

10

643

In Hungarian Forint

5

-

In Romania Lei

-

11

Total cash in escrow

15

654

Total

68

1,296

 

The Group pledged all restricted bank deposits to secure credit facilities granted to the Group by the banks.

 

Cash in escrow in Euro as of 31 December 2010 represents cash which has a lien issued against by one of the project's previous contractors. The lien was removed during the reporting date.

 

 

NOTE 7 - TRADE RECEIVABLES

31 December

2011

2010

Thousands Euro

Denominated in:

In Hungarian Forint

50

66

In Polish Zloty

-

11

In Czech Crown

159

66

Total

209

143

 

The balances represent mainly receivables from customers for the sale of housing units.

As of 31 December 2011 EUR 50 thousands (2010: EUR 55 thousands) were overdue, the management of the Company believes that this amount can be collectable.

 

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 8 - PREPAYMENTS AND OTHER ASSETS

31 December

2011

2010

Thousands Euro

Advances to suppliers

196

278

VAT recoverable

359

401

Prepaid expenses

25

43

Other

9

29

Total

589

751

 

 

NOTE 9 - LOANS TO RELATED PARTIES

31 December

Interest rate

2011

2010

Currency

%

Thousands Euro

Fixed rate loan

EUR

15%

1,304

1,327

Fixed rate loan

EUR

8%

1,588

1,490

Non -interest bearing loans

CAD

-

2,938

2,896

Floating rate loans

 

EUR

Mainly:

3m Euribor+1%

388

413

6,218

6,126

Impairment (*)

(34)

(378)

Total

6,184

5,748

 

No repayment date has been set. Repayment is expected from the proceeds of the sale of the related projects financed by the loans.

 

(*) Impairment - represents loans granted by the Company to jointly controlled entities and the Management of the Company estimates that these loans will not be recoverable.

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 10 - INVENTORIES OF HOUSING UNITS AND LAND

31 December

2011

2010

Thousands Euro

Completed housing units for sale and housing units under construction

9,777

13,917

Land designated for residential projects and for sale

28,551

29,147

38,328

43,064

Write-down of inventory (*)

(7,317)

(5,395)

Total

31,011

37,669

Including capitalization of borrowing costs in the amount of:

-

553

 

 

The Group has pledged inventories having a carrying amount of EUR 19,730 thousands to secure credit facilities granted to the Group by the banks (2010: EUR 25,833 thousands).

As of 31 December 2011 the amount of inventory that is carried at net realizable value is EUR 13,659 thousands (2010: EUR 8,345 thousands).

The net realizable value of the inventory is based on the Company's best estimation of the expected selling price and costs of completion less selling expenses. In determining the expected selling price of housing units the Company based its estimations on actual selling prices during the period. For determining the net realizable value of empty land, in most cases, the Company uses the services of an external, independent valuation companies, having appropriate, recognized professional qualifications and recent experience in the location and category of the inventory being valued (see also note 37(3)).

 

Inventories includes an amount of EUR 9,875 thousands which relates to the part of the plot in Serbia and planned for developing of residential units, this part of plot, was valued by an independent valuer ("CBRE") which estimated its fair value at the amount of EUR 25,100 thousands as of December 31, 2011.

 

(*)Write-down of inventory - mainly represents the adjustment of the inventories to its net realizable value when estimated lower than booked cost. For determining the net realizable value, the Company used the services of an external independent company or its estimations for the project future results.

 

NOTE 11 - INVESTMENT PROPERTY

 

The movements of the investment property balances were as follows:

 

2011

2010

Land

Buildings

Total

Land

Buildings

Total

Thousands Euro

Balance at 1 January

26,850

-

26,850

25,131

1,015

26,146

Sale of investment property

-

-

-

-

(1,005)

(1,005)

Classifications for held for sale

(4,139)

-

(4,139)

-

-

-

Currency translation adjustments

(232)

-

(232)

(1,759)

(10)

(1,769)

Change in fair value

(1,379)

-

(1,379)

3,478

-

3,478

Balance at 31 December

21,100

-

21,100

26,850

-

26,850

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 11 - INVESTMENT PROPERTY (continued)

 

a. Investment property comprises a number of properties as follow:

31 December

2011

2010

Thousands Euro

Investment property located in Serbia under finance lease

21,100

21,500

Investment property located in Poland

-

5,350

Total investment property

21,100

26,850

 

 

During the reporting period the Group was holding two plots for purposes of commercial development (in Serbia and in Poland). The Group decided to treat these assets as investment property because the Group's intention was to hold the properties for long term, for capital appreciation or rental.

In estimating the property value in Serbia using the residual method, the appraiser estimated an expected selling price of the completed development based on external evidence such as current prices for similar developed properties in a similar location and condition adjusted for future price changes. The cost of development was also estimated based on construction projections by the Group and market estimates of construction costs taking into consideration a developer's profit of 21.72%. Under the residual method the fair value of the land is calculated as the difference between the estimated selling price of the development and the estimated cost of construction of the commercial structures less the developer's profit.

The fair value of the property in Poland was determined based on the preliminary agreement which was signed during the reporting period, see also note 32.d. Due to the above preliminary agreement the assets and it relative liabilities were classified as assets and liabilities held for sale, see also note 35.

 

b. Information regarding ownership rights for investment property:

 

31 December

End of lease

2011

2010

period (in years)

Thousands Euro

Owned properties

-

-

5,350

Leased properties

94

21,100

21,500

Total

21,100

26,850

 

 

 

 

 

c. Amounts recognised in the profit or loss:

 

For the year ended 31 December

2011

2010

Thousands Euro

Rental income

8

40

Operating expenses

513

68

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 12 - PROPERTY AND EQUIPMENT

 

Furniture, office equipment and other assets

Thousands Euro

Cost

Balance at 1 January 2010

366

Additions

40

Disposals

(19)

Disposal of subsidiaries (a)

(26)

Change in holding rate of jointly controlled entity (b)

(2)

Balance at 31 December 2010

359

Additions

6

Disposals

(36)

Disposal of subsidiary (c)

(10)

Balance at 31 December 2011

319

Accumulated depreciation

Balance at 1 January 2010

257

Depreciation for the year

41

Disposal of subsidiaries (a)

(5)

Change in holding rate of jointly controlled entity (b)

(1)

Balance at 31 December 2010

292

Depreciation for the year

19

Disposals

(22)

Disposal of subsidiary (c)

(10)

Balance at 31 December 2011

279

Carrying amounts at 31 December 2011

40

Carrying amounts at 31 December 2010

67

 

 

 

(a) See note 34.a

(b) See note 34.e

(c) See note 34.b

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 13 - DEFERRED TAX ASSETS AND LIABILITIES

 

The following are the deferred tax assets and liabilities recognized by the Group before off- sets, and the movements thereon, during the current and prior reporting periods:

 

Balance 1 January 2010

 Recognized in profit or loss

 Translation adjustments

 Change in holding rate of jointly controlled entity (a)

Balance 31 December 2010

Thousands Euro

Losses carry forward

890

526

(78)

(42)

1,296

Inventory

139

(570)

2

85

(344)

Loans and borrowings

52

(40)

(5)

-

7

Investment property

(1,795)

(560)

205

-

(2,150)

Accounts receivable

(24)

12

(2)

-

(14)

Other payable

323

(317)

18

(1)

23

Finance lease liability

2,287

320

(219)

-

2,388

Provisions and other payables

18

70

1

-

89

Total

1,890

(559)

(78)

42

1,295

Balance 1 January 2011

 Recognized in profit or loss

 Translation adjustments

Disposal of subsidiaries (b)

Balance 31 December 2011

Thousands Euro

Losses carry forward

1,296

142

4

-

1,442

Inventory

(344)

(52)

(20)

8

(408)

Loans and borrowings

7

22

(2)

-

27

Investment property

(2,150)

59

(19)

-

(2,110)

Accounts receivable

(14)

(6)

2

-

(18)

Other payable

23

1

1

-

25

Finance lease liability

2,388

170

15

-

2,573

Provisions and other payables

89

148

(8)

-

229

Total

1,295

484

(27)

8

1,760

 

The following table sets out the Group's deferred tax assets and liabilities, net of off-sets:

 

31 December

2011

2010

Thousands Euro

Deferred tax assets (non-current assets)

1,977

1,542

Deferred tax liabilities (non-current liabilities)

(217)

(247)

Net deferred taxes

1,760

1,295

 

(a) See note 34.e

(b) See note 34.b

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 13 - DEFERRED TAX ASSETS AND LIABILITIES (continued)

 

The Group recognized deferred tax assets in the amount of EUR 1,442 thousands over losses totalling to EUR 14,305 thousands, which will expire in the following years:

 

2014

2015

2016

2017

2018

2019

Total

3

4,288

3,219

803

1,791

4,201

14,305

 

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of tax losses amounting to EUR 13,026 thousands as of 31 December 2011 (2010: EUR 12,082 thousands).

 

Deferred tax assets have not been recognised in respect of losses where it is not probable that future taxable profit will be available against which the Group can utilise the benefits from the losses.

 

 

NOTE 14 - SUBSIDIARIES AND JOINT VENTURES

 

As at 31 December 2011 the Company holds interests in the following companies:

 

Jointly controlled entities:

 

a. Arces International B.V. ("Arces") - holding company, Amsterdam, The Netherlands. The Company and HCEPP II Luxembourg Master S.à r.l ("Heitman") each hold 50% of Arces' shares.

Arces is considered a jointly controlled entity.

After the reporting period Heitman has signed with related party agreement of selling it rights in Arces, see also note 33(3).

Arces holds the following subsidiaries, each of which is wholly owned by Arces:

 

1.Engel Sun Palace Kft. ("Sun Palace") - built a mix-use project with a majority of residential in Budapest, Hungary (see note 32.f).

2.Palace Engel Dejvice s.r.o. ("Dejvice") - through its wholly owned subsidiary Palace Engel Safranka s.r.o. ("Safranka") - built a residential project in Prague, Czech Republic.

3. Palace Engel Estate s.r.o. ("Vokovice") - built a residential project in Prague, Czech Republic.

4.Palace Engel Vokovice s.r.o. - is planning to build the third building in the project Vokovice in Prague, Czech Republic.

5. Palace Engel I S.p. Z.o.o. ("Zabky") - built a residential project in Warsaw, Poland.

6.Engel Apartmenty Emilii Plater S.p. Z.o.o. ("Emilii Plater") - built a residential project in Warsaw, Poland.

7.Engel HÁZ Ingatlanfejlesztő Kft. ("Haz") - inactive, see also note 32.e.

8.Engel Iroda Haz Kft. - inactive (voluntary liquidation in progress, which started during the reporting period).

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 14 - SUBSIDIARIES AND JOINT VENTURES (continued)

 

a. continued

 

The following amounts are net amounts included in the Group's financial statements as a result of the proportionate consolidation of Arces:

31 December

2011

2010

Thousands Euro

Current assets

6,903

11,847

Non-current assets

322

367

Current liabilities

(5,448)

(9,361)

For the year ended 31 December

2011

2010

Thousands Euro

Income

4,027

14,663

Expenses

(5,256)

(15,636)

 

The Group's proportionate share of non-current assets of Arces includes the relevant proportion of an investment in equity accounted investees (see note 15).

 

b. ENMAN B.V. ("ENMAN") - holding company, Amsterdam, The Netherlands. The Company and HEPP III Luxembourg Master S.à r.l. ("Heitman") each hold 50% of ENMAN's shares.

During 2010 the Company signed an amendment to the investment agreement as per the profits distributions from ENMAN, see also note 32.i.

ENMAN is considered a jointly controlled entity:

After the reporting period Heitman has signed with related party agreement of selling it rights in Arces, see also note 33(3).

 

ENMAN holds the following subsidiaries, each of which is wholly owned by ENMAN:

 

1.E.G. Panorama EOOD. ("Panorama") - inactive (voluntary liquidation in progress, which started during the reporting period), see also note 32.b.

2.Palace Engel Wilanow 1 Sp.z o.o. ("Wilanow") - plans to build a residential project in Warsaw, Poland.

3.Engel Ingatlan Kft. ("Ingatlan") - built a residential project in Budapest, Hungary.

4.Palace Engel Veleslavin a.s. ("Veleslavin") and Palace Engel Villa s.r.o. ("Villa") - plan to build a residential project in Prague, Czech Republic.

5.Engel Lylia s.r.l ("Lylia") - plans to build a residential project in Bucharest, Romania.

6.Engel Crizantema s.r.l ("Crizantema") - through its wholly owned subsidiary, Engel Tulip s.r.l ("Tulip") plans to build a residential project in Bucharest, Romania.

7.Troja Gardens s.r.o ("Koncern") - plans to build a residential project in Prague, Czech Republic.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 14 - SUBSIDIARIES AND JOINT VENTURES (continued)

 

b. continued

 

The following amounts are net amounts included in the Group's financial statements as a result of the proportionate consolidation of ENMAN:

31 December

2011

2010

Thousands Euro

Current assets

7,570

9,709

Non-current assets

192

196

Current liabilities

(5,406)

(5,156)

For the year ended 31 December

2011

2010

Thousands Euro

Income

75

265

Expenses

(2,814)

(961)

 

 

c. ECG Trust Canada Holding Trust ("ECG") - 95% interest subsidiary - a holding trust.

ECG holds 20% interest in future distributions of a jointly controlled entity: Montreal Residential Holdings Master Limited Partnership ("MLP").

The remaining 80% in future distributions is owned by Lehman Brothers Real Estate Partners II ("Lehman Brothers") represented by Silverpeak Real Estate Partners ("Silverpeak").

The above mentioned shares of each investor are relevant till the initial investment returned and after that the future distributions will be 50% to each party.

 

MLP holds the following subsidiaries:

 

1. Le Quartier Quebec LP - 99.99% in the partnership rights - owns land in Montreal, Canada.

2. Trianon Sur Le Golf Quebec LP - 99.99% in the partnership rights - owns land in Montreal, Canada.

3. Le Chagall Quebec LP - 99.99% in the partnership rights - owns land in Montreal, Canada.

4. Le Quartier-Parisien Inc. - 99.99% in the share capital - beneficial title holder company, Canada

5. Trianon Sur Le Golf Inc. - 99.99% in the share capital - beneficial title holder company, Canada.

6. Le Chagall Inc. - 99.99% in the share capital - beneficial title holder company, Canada.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 14 - SUBSIDIARIES AND JOINT VENTURES (continued)

 

c. continued

 

The following amounts are net amounts included in the Group's financial statements as a result of the proportionate consolidation of MLP:

 

31 December

2011

2010

Thousands Euro

Current assets

2,010

1,997

Non-current assets

-

5

Current liabilities

(2,966)

(2,875)

For the year ended 31 December

2011

2010

Thousands Euro

Income

-

-

Expenses

(145)

(79)

 

 

Subsidiaries:

 

d. Palace Engel s.r.o. ("Prokopsky") - 64% interest subsidiary - built a residential project in Prague, Czech Republic (see also note 32.k).

 

e. Palace Engel Development s.r.o. ("Barandov") - 64% interest subsidiary- built a residential project in Prague, Czech Republic (see also note 32.k).

 

f. Engel Management s.r.o. ("Management") - a wholly owned subsidiary - management company, Czech Republic.

 

g. Burlington Hungary Kft. ("Burlington") - a wholly owned subsidiary - management company, Hungary.

 

h. Turlington Kft. ("Turlington") - a wholly owned subsidiary - management company, Hungary.

 

i. Engel Management S.p. Z.o.o - wholly owned subsidiary - management company, Poland.

 

j. Marina Dorcol doo. ("Marina Dorcol") - 95% interest subsidiary - plans to build mix-use project with a majority of residential in Belgrade, Serbia.

 

k. Engel Orchidea s.r.l ("Orchidea") - a wholly owned subsidiary - inactive (voluntary liquidation in progress, which started during the reporting period).

 

l. Engel Iris s.r.l ("Iris") - a wholly owned subsidiary - inactive (voluntary liquidation in progress, which started during the reporting period).

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 14 - SUBSIDIARIES AND JOINT VENTURES (continued)

 

Subsidiaries: (continued)

 

m. Engel Rose s.r.l ("Rose") - a wholly owned subsidiary - plans to build a residential project in Bucharest, Romania.

 

n. Davero Invest s.r.l ("Davero") - a wholly owned subsidiary - management company, Romania.

 

o. Eurobul Ltd. ("Eurobul") - a wholly owned subsidiary - administration services company, Israel.

 

p. Engel Yzum Bnia Vebizua Shnaym (94) Ltd. - 77.3% interest subsidiary - inactive.

 

q. Palace Engel Troja a. s. ("Troja") - a wholly owned subsidiary, Czech Republic.

 

r. 6212-964 Canada Inc. ("Canada Inc.") - a wholly owned subsidiary - inactive management company, Canada.

 

s. 9152-8372 Quebec Inc. ("Quebec Inc.") - a wholly owned subsidiary - management company, Canada.

 

t. Palace Engel III Sp z.o.o ("Krakow ") - a wholly owned subsidiary - plans to build a residential project in Krakow, Poland.

 

u. Wilanow 1 Developments sp.zoo which holds Wilanow 2 sp.zoo ("Wilanow 2") - a wholly owned subsidiary - Warsaw, Poland (during 2009 the shares were transferred to ERD, see also note 32.d), during selling process, the company is classified as held for sale, see also note 35.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 15 - INVESTMENT IN EQUITY ACCOUNTED INVESTEES

 

a. Arces, a jointly-controlled entity, owns a 40% associate interest in the share capital of Palace Engel Vrsovice s.r.o. ("Vrsovice"). The additional 45% and 15% are held by a former manager in the Group and a company owned by the Company's former CEO, respectively. Vrsovice, through its wholly owned subsidiary (Agentura Novy Domov 2000, spol s.r.o) built and sold units in a residential project in Prague, Czech Republic.

 

b. Composition of investment in equity accounted investee:

 

31 December

2011

2010

Thousands Euro

Cost of investment

2

2

Share of profits since date of acquisition

162

162

Dividend received since date of acquisition

(164)

(164)

Carrying value of interest in investment in

equity accounted investee

-

-

 

c. Summarised financial information in respect of the associate is set out below:

 

31 December

2011

2010

Thousands Euro

Total assets

27

28

Total liabilities

(27)

(28)

Net assets

-

-

Group's proportionate share of the interest in investment in equity accounted investee net assets

-

-

For the year ended 31 December

2011

2010

Thousands Euro

Results for the year

-

-

Group's proportionate share of the interest in investment in equity accounted investee net profit for the year

-

-

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 16 - INTEREST-BEARING LOANS FROM BANKS

31 December

Year of

2011

2010

Comment

Currency

Interest rate

Maturity (a)

Thousands Euro

Secured loan

2

HUF

AKK (b) 110 % + 9%

2010

1,236

1,223

Secured loan

2

HUF

1m Bubor + 9%

2010

135

145

Secured loan

5

CZK

3m Pribor + 3.3%

2011

1,289

2,350

Secured loan

4

Euro

1m Euribor + 11%

2011

691

658

Secured loan

3

Euro

3m Euribor + 5%

2011

752

680

Secured loan (c)

-

Euro

3m Euribor + 7.5%

2009

2,558

2,342

Secured loan

1

PLN

3m Wibor + 2.48%

2009

5,933

6,224

Secured loan

-

-

-

-

-

1,351

Total interest-bearing loans from banks

12,594

14,973

 

(a) Represents the latest possible year of maturity.

(b) AKK - the appropriate latest 3 months' average yield for the one year Hungarian Treasury bill.

(c) The loan is secured by guarantees provided by the indirect parent company of the Company (see also note 33(3)).

 

The Group finances its projects primarily with commercial bank lines of credit. The loans are expected to be settled in the Group's normal operating cycle and therefore are classified as current liabilities. In the case of all loans repayment dates need to be extended, see note 4.b

 

All of the secured bank loans have been provided to individual entities and each loan has been granted in respect of a specific project. In each case, the security for the loan is a first ranking lien on the assets of the project company. The first ranking liens include: liens on rights for the land and the projects for which the loans were received and liens on rights, including by way of assignment of rights, pursuant to the agreements to which the company is a party (including establishment contracts and lease, operating and management agreements). Further, loans that these companies have received from their shareholders and/or every existing or future right of the holders of the rights in those companies are subordinated to the loans received from the banks. In addition, in most cases payments to the shareholders from and the entities (including dividend payments but excluding amounts in respect of project management) are not allowed, until the bank loan has been repaid.

 

The Company has not provided any securities in respect of the bank loans granted to its subsidiaries and jointly controlled entities, except the following cases:

·; The bank loans which finance the project in Gyor Hungary (an Arces International B.V subsidiary, which is in liquidation process) in the amount of EUR 12,648 thousands (the Company's share is EUR 6,324 thousands), are additionally guaranteed by Arces International B.V., a jointly controlled entity. The company has disputed the validity of this guarantee with the bank and there is legal dispute between the Company and Heitman regarding the responsibility of this guarantee, however, no official legal claim has been filed by any of the parties.

·; ENMAN B.V, jointly controlled entity, has provided guarantees for interest payments and costs overrun, to the bank which finance the project in Ingatlan, Hungary (Engel Ingatlan Kft.).

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 16 - INTEREST-BEARING LOANS FROM BANKS (continued)

 

Comments in respect of several interest-bearing loans from banks:

 

1. During the fourth quarter of 2009, the subsidiary, Palace Engel III Sp. z.o.o, breached its requirement to repay the bank loan, which finances the project "Krakow" in Poland, (as of the reporting period in the amount of EUR 5,933 thousands). The Group is in negotiation with the financing bank in order to restructure this loan.

As of the reporting period the value of the plot is presented according to its net realizable value which is lower by EUR 1,549 thousands compared to the above non-recourse bank loan. The Company estimates that in case the bank will take possession over the asset this amount will be recognized as a profit in the income statement.

 

2. During 2010 the jointly controlled entity, Engel Ingatlan Kft. ("Ingatlan") breached its requirement to repay a bank loan totaling EUR 5,484 thousands (the Company's share is EUR 1,371 thousands).

The Group is in negotiation with the financing bank in order to restructure this loan.

 

3. After the reporting period, the jointly controlled entity, Engel Lylia s.r.l. ("Pipera") breached its requirement to repay a bank loan totaling EUR 3,008 thousands (the Company's share is EUR 752 thousands).

The Group is in negotiation with the financing bank in order to restructure this loan.

 

4. During the reporting period the jointly controlled entity, Engel Crizantema s.r.l. ("Sisest") breached its requirement to repay a bank loan totaling EUR 2,764 thousands (the Company's share is EUR 691 thousands).

The Group is in negotiation with the financing bank in order to restructure this loan.

 

5. During the reporting period the jointly controlled entity, Palace Engel Dejvice s.r.o. ("Dejvice") breached its requirement to repay a bank loan totaling EUR 2,578 thousands (the Company's share is EUR 1,289 thousands).

The Group is in negotiation with the financing bank in order to restructure this loan.

 

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 17 - FINANCE LEASE LIABILITY

31 December

2011

2010

Thousands Euro

Non-current liabilities

Finance lease liability

21,685

22,355

Current liabilities

Current portion of finance lease liability

4,041

1,522

 

Terms and conditions of outstanding financial lease liabilities were as follows:

 

 

31 December

2011

2010

Thousands Euro

Nominal

Year of

Face

Carrying

Face

Carrying

Currency

interest rate

maturity

value

amount

value

amount

Finance lease

liability

Serbian Dinar

6.34%

2012-2105

67,287

25,726

63,716

23,877

 

The financial lease liability relates to the project in Serbia where the Group is obliged to pay monthly rent for land for 99 years.

Following the adoption of the changes in IAS 17, the Group classifies the entire lease agreement as finance lease.

 

Repayments under the term of the finance lease as follows:

 

31 December

2011

2010

Minimum lease

payments

Interest

Principal

Minimum lease

payments

Interest

Principal

Thousands Euro

Less than one year

4,158

117

4,041

1,590

68

1,522

Between one and five years

18,728

2,911

15,817

21,157

3,867

17,290

More than five years

44,401

38,533

5,868

40,969

35,904

5,065

Total

67,287

41,561

25,726

63,716

39,839

23,877

 

The value of the finance lease and its payments are adjusted on a monthly basis by the local index of retail prices in Belgrade, Serbia.

The increases of the local index of retail prices in Belgrade, Serbia in 2011 and 2010 were 7.5% and 10.4% respectively.

During 2010, the Group signed a revised lease agreement with the municipality of Belgrade for the land in Marina Dorcol. The new agreement replaces the previously signed agreement, see also note 32.a.

During 2011, the Group breached its requirements to pay total amount of EUR 1.9 million which were determine by the new lease agreement, see also note 19.

After the reporting date the Company breached is requirements to pay an additional amount of EUR 1.3 million.

The Group is in the process of negotiation to restructure the liability.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 18 - LOANS AND AMOUNTS DUE TO RELATED PARTIES AND JOINT VENTURE PARTNERS

 

31 December

2011

2010

Currency

Thousands Euro

Payable to related parties:

Engel Resources and Development Ltd.(1)

NIS

18,924

17,000

GBES Ltd.(2)

Euro

262

-

Jointly controlled entities (3)

Euro

263

209

Payable to joint venture partners and other:

Heitman Fund (4)

Euro

2,445

2,428

Lehman Brothers (5)

CAD

2,769

2,706

Total

24,663

22,343

 

No repayment dates have been set with regard to the above loans and advances, except for the loans from Engel Resources and Development Ltd. which are due till 31 March 2012 and the loan due to GBES Ltd. which is due till 16 May 2012.

All the loans are expected to be settled by proceeds generated from sales of the development projects to which these related to. As such, these are classified as current liabilities.

(1) The loans were received from Engel Resources and Development Ltd.

The amount of EUR 17,447 thousands bears interest of 6% per annum and linked to an annual change in Israeli CPI and the amount of EUR 1,477 thousands bears interest of 6.5% per annum.

The loans are secured by the following guarantees:

- The shares of Wilanow 1 Development sp.zoo. (which controls Willanow 2 - a project in Poland, see also note 33(3) ), and;

- Pledge over the shares of Marina Dorcol D.o.o in the total value of EUR 20.3 million.

(2) The loan bears interest of 6% per annum.

(3) The loans bear mainly interest of 3 month Euribor + 1% per annum.

(4) The balance is comprised of two loans:

- EUR 857 thousands - bears interest of 15% per annum.

- EUR 1,588 thousands - bears interest of 8% per annum.

(5) The loans bear no interest.

 

 

NOTE 19 - OTHER PAYABLES

31 December

2011

2010

Thousands Euro

Advances from customers

574

866

VAT payable

136

148

Provision for expected costs of completion of housing units

511

766

Retention from constructors

314

418

Accruals

168

87

Payroll and related expenses

179

164

Amounts due to a municipality in Serbia (*)

1,910

278

Exposure of jointly controlled entity to liquidated company

1,622

1,622

Other

27

23

Total

5,441

4,372

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 19 - OTHER PAYABLES (continued)

 

(*) As of 31 December 2011, the amount represents several overdue installments to the municipality in Serbia according to the lease agreement (see also note 17). The balance consists mainly of: overdue monthly installments, an amount which is under disagreement with the municipality and two overdue installments according to the lease agreements.

 

 

NOTE 20 - PROVISIONS

 

2011

2010

 

Thousands Euro

Balance at 1 January

2,177

2,384

Provisions made during the year

285

558

Provisions used during the year

(766)

(41)

Disposal of subsidiary (a)

-

(334)

Change in holding rate of jointly controlled entity (b)

-

(57)

Provisions reversed during the year

(37)

(282)

Translation adjustment

(78)

(51)

Balance at 31 December

1,581

2,177

 

(a) See note 34.a

(b) See note 34.e

 

 

a. During 2007, two legal claims were filed against Engel Sun Palace Kft. , a 100% owned subsidiary of Arces:

1. On 3 April 2007 the subsidiary was sued by a former constructor. The constructor sued for return of the entire bank guarantee which was forfeited by the subsidiary, in amount of HUF 1,475 million (approximately EUR 5.6 million).

2. On 27 July 2007 the subsidiary received a notice from the bank claiming an amount of HUF 145 million (approximately EUR 549 thousands). The claim relates to an alleged breach of the original bank loan agreement.

In 2007 the management of the Company, based also on its legal advisers, has recognized a provision which was updated during the years 2008-2010.

As a result of series of financial transactions initiated by the management, the Company has succeeded to reduce the total amount of the above two claims to EUR 1.2 million to be paid in several instalments.

 

b. The jointly controlled entities in Canada and its parent company are in the legal proceeding with a minority shareholder who was employed as technical manager for the Canadian projects and was dismissed by the Company. The amount of the claim is CAD 13 million (approximately EUR 7.6 million).

According to the court decision, disposal of assets in Canada will require the approval of the court. Provision for this claim was initially recognised by the Group in its 2007 financial statements.

 

c. By the end of 2008, the Company and the parent company were sued for brokerage fee and legal services in the amount of NIS 10 million (approximately EUR 1.9 million) in relation with the plot in Gyor, Hungary.

Provision for this claim was initially recognised by the Group in its 2008 and 2009 financial statements.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 20 - PROVISIONS (continued)

 

d. During 2009 the main constructor of Panorama project ("Panorama"), a 100% owned subsidiary of ENMAN, has filed a claim for amount of EUR 436 thousands for damages and additional work and in October 2009 he has issued an injunction over the property preventing the Company from any disposal of the property.

Provision for this claim was recognised by the Group in its 2009 financial statements.

 

e. During 2010 the Company recognized a provision for future expected defects in the project Zabki in Poland in the amount of EUR 751 thousands (the Company part EUR 376 thousands).

During 2010 and 2011, part of the residents in the project appealed to the local court.

 

f. During the reporting period a former main constructor of Zabki project ("Zabki"), a 100% owned subsidiary of Arces, has filed a claim for amount of EUR 0.2 million for returning bank guarantees.

The Company has reached a settlement with the plaintiff and as a result a provision for this claim was recognised by the Group in its financial statements.

After the reporting period, the Company breached the agreed settlement; as a result the plaintiff put a lien on Zabki's bank accounts.

 

The Company estimated provisions in respect of these legal claims, based on the management's estimations following consulting its legal advisors.

 

 

NOTE 21 - EQUITY

 

31 December

 

2011 and 2010

 

Thousands Euro

Authorised:

120,000,000 ordinary shares of par value EUR 0.01 each

1,200

Issued and fully paid:

At the beginning of the year (87,777,777 ordinary shares)

878

At the end of the year (87,777,777 ordinary shares)

878

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

On 15 December 2005 the Company initially offered its shares in the AIM stock exchange market in London ("the IPO"). The proceeds from the IPO were 30,000,000 British Pounds and 27,777,778 shares were issued, accordingly EUR 39,298 thousands were recorded as share premium.

 

Dividends

 

Dividends are declarable based on the retained earnings presented in the Company's consolidated financial statements prepared in accordance with The Netherlands Civil Code and not from the retained earnings presented in these consolidated financial statements.

 

 

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 22 - REVENUES

 

For the year ended 31 December

2011

2010

Thousands Euro

Sale of housing units

4,047

14,679

Project management fees

29

113

Rent

12

40

Other

43

49

Total

4,131

14,881

 

 

NOTE 23 - WRITE-DOWN OF INVENTORY

 

For the year ended 31 December

2011

2010

Thousands Euro

Poland

236

30

Hungary

408

933

Romania

308

-

Czech Republic

1,006

13

Total

1,958

976

 

 

NOTE 24 - COST OF SALES

 

For the year ended 31 December

2011

2010

Thousands Euro

Cost of housing units

3,739

11,447

Payroll and related expenses

366

365

Depreciation and amortization

167

240

Professional services

60

87

Maintenance

638

184

Other

133

115

Total

5,103

12,438

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 25 - OTHER LOSSES

 

 

For the year ended 31 December

2011

2010

Thousands Euro

Loss due to de-recognition of jointly controlled entities (see note 34)

88

937

Loss from investment property disposal (see note 32.e)

-

630

Loss due to change in percentage of jointly held entity (see note 34.e)

-

1,694

Total

88

3,261

 

 

NOTE 26 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

For the year ended 31 December

2011

2010

Thousands Euro

Selling

70

132

Payroll and related expenses

652

425

Professional services

838

1,165

Travel and accommodation

77

133

Provisions for legal claims (see note 20)

248

276

Maintenance

252

247

Other

89

94

Total

2,226

2,472

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 27 - NET FINANCE COSTS

For the year ended 31 December

2011

2010

Thousands Euro

Finance income:

Interest earned on restricted bank deposits

(8)

(92)

Interest on loans to related parties

(276)

(307)

Profit due to change of terms in lease agreement

-

(3,054)

Total

(284)

(3,453)

Finance costs:

Interest on interest bearing loans from banks

1,169

1,686

Interest on loans from related parties

1,681

1,376

Interest on loans from others

5

4

Adjustment of finance lease for inflation

1,986

2,344

Interest on finance lease

1,554

2,393

Total

6,395

7,803

Net foreign exchange losses

517

3,046

Net finance costs recognized in profit or loss

6,628

7,396

 

 

 

 

 

NOTE 28 - TAXES

For the year ended 31 December

2011

2010

Thousands Euro

Current year

116

317

Deferred tax

(484)

559

Adjustment for prior years

(16)

(292)

Total tax (benefit) expense

(384)

584

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 28 - TAXES (continued)

 

Reconciliation of statutory to effective tax rate:

For the year ended 31 December

2011

2010

Thousands Euro

Loss before tax

(13,251)

(8,184)

Statutory income tax rate in the Netherlands

25.5%

25.5%

Total theoretical tax benefits

(3,379)

(2,087)

Changes in tax burden as a result of:

Effect of tax rates in foreign jurisdictions

1,260

115

Current year losses for which no deferred tax asset is recognized

1,257

2,182

De-recognition of previously recognized deferred tax assets

297

465

Over provided in prior years

(16)

(292)

Other differences, net

197

201

Total tax (benefit) expense

(384)

584

The main tax laws to which the Group companies are subject in their countries of residence are as follows:

 

a. The Netherlands

 

Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25.5% (25% prior to the year 2011). The first EUR 200,000 of profits is taxed at a rate of 20%. Tax losses may be carried back for one year and carried forward for nine years. As part of the measures to combat the consequences of the economic crisis, taxpayers can elect for an extension of the loss carry back period to three years (instead of one year). The election is only available for losses suffered in the taxable years 2009, 2010 and 2011. If a taxpayer makes use of the election, two additional limitations apply:

(i) the loss carry forward period for the taxable years 2009, 2010 and/or 2011 will be limited to a maximum of six years (instead of nine years); and

(ii) the maximum amount of loss that can be carried back to the second and third year preceding the taxable year will be limited to EUR 10 million per year.

The amount of loss that can be carried back to the year directly preceding the taxable year for which the election is made will remain unrestricted.

Under the participation exemption rules, income (including dividends and capital gains) derived by Netherlands companies in respect of qualifying investments in the nominal paid up share capital of resident or non resident investee companies, is exempt from Netherlands corporate income tax provided the conditions as set under these rules have been satisfied. Such conditions require, among others, a minimum percentage ownership interest in the investee company and require the investee company to satisfy at least one of the following tests:

·; Motive Test, the investee company is not held as passive investment;

·; Tax Test, the investee company is taxed locally at an effective rate of at least 10% (calculated based on Dutch tax accounting standards);

·; Asset Test, the investee company owns (directly and indirectly) less than 50% low taxed passive assets.

 

Dividend distributions from a Netherlands company to qualifying Israeli corporate shareholders holding at least 25% of the shares of such Netherlands company is subject to withholding tax at a rate of 5% provided certain compliance related formalities have been satisfied.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 28 - TAXES (continued)

 

b. Hungary

 

The corporation tax rate in Hungary is 10/19% in 2011 (the first HUF 500 million is taxed at 10%). (2010: 10/19%). Since 2007 capital gains can be considered exempted income provided that certain criteria are fulfilled. Losses can be carried forward indefinitely. As of 2012 the losses carry forward rules changed significantly (e.g.: transformation, change in ownership, limitation implemented). Losses incurred before 2005 can be carried forward for five years, subject to certain limitations.

 

c. Czech Republic

 

The corporation tax rate in the Czech Republic is 19 % in 2011. Capital gain could be tax exempted under certain circumstances. Tax losses can be carried forward up to five years to offset future taxable income (previously seven years), under certain circumstance (e.g. no significant change in the business). Dividends paid out of net income are subject to a withholding tax of 15%, subject to the relevant double taxation treaty or EU regulations.

d. Poland

 

The corporation tax in Poland (including capital gains) is 19% in 2011 (2010: 19%).Tax losses can be carried forward for five years and only 50% of a loss can be offset in any one year. Dividends paid out of net income are subject to a withholding tax of 19%, subject to the relevant double taxation treaty or EU regulations.

 

e. Canada

 

The federal corporate tax rate of the subsidiaries incorporated in Canada (including capital gains) is 16.5% in 2011 (2010: 18%). The combined corporate and provincial tax rate is 28.4%. Non-capital tax losses can be carried back three years and carried forward up to 20 years for losses arising in 2006 and later, 10 years for losses arising in taxation years ending after 22 March, 2004 and before 2006, 7 years for losses arising in taxation years ending before 23 March, 2004. Capital tax losses can be carried back three years and carried forward indefinitely against other capital gains. Dividends paid out of net income are subject to a withholding tax of 25%, subject to the relevant double taxation treaty.

f. Bulgaria

 

The corporation tax rate in Bulgaria (including capital gains) is 10% in 2011 (2010: 10%). Tax losses can be carried forward up to five years to offset future taxable income. Dividends paid out of net income are subject to a withholding tax of 5 %, subject to the relevant double taxation treaty and EU regulations.

 

g. Romania

 

The corporation tax in Romania (including capital gains) is 16% in 2011 (2010: 16%). Dividends paid out of net income are subject to a withholding tax of 16%, subject to the relevant double taxation treaty or EU regulations. Tax losses can be carried forward and deducted from taxable profits in the following 7-year period (the carry forward period for losses recorded up to 31 December 2008 is 5 years), on a first-in-first-out basis.

 

h. Serbia

 

Corporate income tax is levied at a rate of 10% in 2011 (2010: 10%). Capital gains are taxable at the rate of 10 %. Losses may be carried forward for 5 years (excluding capital loss) losses generated in the period 2003-2009 may be carried forward for 10 years. No carry-back of losses is permitted. Dividends paid outside the country are subject to a withholding tax of 20 % subject to the relevant double taxation treaty.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 29 - LOSS PER SHARE

 

The calculation of basic loss per share attributable to the ordinary shareholders of the Company is based on the following data:

For the year ended 31 December

2011

2010

Thousands Euro

Loss attributable to ordinary shareholders

Loss for the purposes of basic and diluted losses per share for the year, attributable to shareholders of the Company

 

(12,867)

 

(8,768)

 

31 December

2011 and 2010

Weighted average number of ordinary shares (in thousands of shares)

Issued ordinary shares at 1 January

87,778

Changes during the year

-

Weighted average number of ordinary and diluted shares at 31 December

87,778

 

There are no dilutive factors.

 

 

NOTE 30 - FINANCIAL INSTRUMENTS

 

a. Liquidity risk

 

The table below summarizes the maturity profile of the Group's financial liabilities at 31 December 2011 and 2010 based on contractual undiscounted payments.

Year ended 31 December 2011

Less than 1

1-2

3-5

Above 5

Total

Carrying

year

years

years

years

amount

amount

Thousands Euro

Interest-bearing loans from banks

13,043

-

-

-

13,043

12,594

Loans and amounts due to related parties and others

24,663

-

-

-

24,663

24,663

Trade payables

1,262

-

-

-

1,262

1,262

Other payables

4,356

-

-

-

4,356

4,356

Finance lease liability

4,158

4,971

13,757

44,401

67,287

25,726

Total

47,482

4,971

13,757

44,401

110,611

68,601

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 30 - FINANCIAL INSTRUMENTS (continued)

 

a. Liquidity risk (continued)

 

Year ended 31 December 2010

Less than 1

1-2

3-5

Above 5

Total

Carrying

year

years

years

years

amount

amount

Thousands Euro

Interest-bearing loans from banks

13,835

-

-

-

13,835

14,973

Loans and amounts due to related parties and others

22,343

-

-

-

22,343

22,343

Trade payables

1,375

-

-

-

1,375

1,375

Other payables

2,740

-

-

-

2,740

2,740

Finance lease liability

1,590

8,433

12,724

40,969

63,716

23,877

Total

41,883

8,433

12,724

40,969

104,009

65,308

 

b. Currency and inflation risk

 

The tables below summarise the foreign exchange exposure on the net monetary position of each currency that is denominated in a currency other than the functional currency, expressed in the Group's presentation currency:

 Functional currency

 Serbian Dinar

Hungarian Forint

 Polish Zloty

 Czech Crown

 Romanian

Lei

New Israeli Shekel

 Year ended 31 December 2011

 Thousands Euro

Euro - net exposure

(17,989)

(2,377)

(6,329)

(4,426)

(8,109)

(18,857)

 

 Year ended 31 December 2010

 Thousands Euro

Euro - net exposure

(17,181)

(233)

(3,391)

(3,192)

(7,593)

(16,944)

 

 

Additionally the Company has exposure to the changes in the local retail index in Belgrade, Serbia on a finance lease liability amounted to EUR 25,726 thousands as at 31 December 2011 (2010: EUR 23,877 thousands) and other payables amounted to EUR 1,910 thousands as at 31 December 2011 (2010: EUR 278 thousands)

 

Sensitivity analysis:

The following table demonstrates the post-tax impact of:

·; 9% strengthening of the Euro compared with Serbian Dinar (CSD) (2010:15%)

·; 11% strengthening of the Euro compared with Hungarian Forint (HUF) (2010:15%)

·; 9% strengthening of the Euro compared with Polish Zloty (PLN) (2010:15%)

·; 6% strengthening of the Euro compared with Czech Crown (CZK) (2010: 10%)

·; 5% strengthening of the Euro compared with Romanian Lei (RON) (2010:10%)

·; 10% strengthening of the Euro compared with New Israeli Shekel (NIS) (2010:10%)

·; 5% strengthening of the Serbian index (2010:5%)

With all other variables held constant (the impact on the Group's equity is the same).

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 30 - FINANCIAL INSTRUMENTS (continued)

 

b. Currency and inflation risk (continued)

 For the year ended 31 December

2011

2010

 Increase in currency rate/Serbian Index

 Effect on post-tax profit

 Increase in currency rate/Serbian Index

 Effect on post-tax profit

 Euro vs. CSD

9%

(1,457)

15%

(2,319)

 Euro vs. HUF

11%

(209)

15%

(28)

 Euro vs. PLN

9%

(461)

15%

(412)

 Euro vs. CZK

6%

(212)

10%

(255)

 Euro vs. RON

5%

(341)

10%

(638)

 Euro vs. NIS

10%

(1,414)

10%

(1,271)

 Euro vs. Serbian index

5%

(1,244)

5%

(1,074)

 

At 31 December 2011, a 5% - 11% weakening of the Euro and/or 5% weakening of the Serbian index would have had the equal, but opposite effect on the post-tax profit to the amount shown above on the basis that all other variables remain constant.

 

c. Interest rate risk

 

The following table sets out the carrying amount of the Group's financial instruments that are exposed to interest rate risk:

31 December

2011

2010

Thousands Euro

Fixed rate instruments

Financial assets

Cash and cash equivalents

959

880

Loans to related parties and other

5,830

5,713

Total

6,789

6,593

Financial liabilities

Loans and amounts due to related parties and other

6,953

6,493

Finance lease liability

25,726

23,877

Total

32,679

30,370

Variable rate instruments

Financial assets

Restricted bank deposits

53

642

Loans to related parties and other

354

35

Total

407

677

Financial liabilities

Interest-bearing loans from banks

12,594

14,973

Loans and amounts due to related parties and other

17,710

15,850

Total

30,304

30,823

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 30 - FINANCIAL INSTRUMENTS (continued)

 

c. Interest rate risk (continued)

 

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's results before tax (through the impact on floating rate borrowings). There is no impact on the Group's equity, except of the profit and loss.

 For the year ended 31 December

2011

2010

 Increase in basis points

 Effect on post-tax profit

 Increase in basis points

 Effect on post-tax profit

 Variable rate interest of HUF

53

(6)

100

(11)

 Variable rate interest of CZK

10

(1)

15

(3)

 Variable rate interest of PLN

33

(16)

15

(8)

 Variable rate interest of EUR

20

(6)

15

(5)

 Variable rate interest of NIS

48

(63)

15

(18)

 

At 31 December 2011, a decrease in 10 till 53 basis points would have had the equal but opposite effect to the amount shown above on the basis that all other variables remain constant.

 

Fair values versus carrying amounts

 

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

31 December

2011

2010

Carrying

Fair

Carrying

Fair

amount

value

amount

value

Thousands Euro

Financial assets

Cash and cash equivalents

959

959

880

880

Restricted bank deposits and cash in escrow

68

68

1,296

1,296

Trade receivables

209

209

143

143

Fixed rate loans to related parties and other

5,830

5,830

5,713

5,713

Floating rate loans to related parties and other

354

354

35

35

Total financial assets

7,420

7,420

8,067

8,067

Financial liabilities

Floating rate interest-bearing loans from banks

12,594

13,043

14,973

13,835

Trade payables

1,262

1,262

1,375

1,375

Other payables

1,910

1,910

278

278

Fixed rate loans due to related parties and other

6,953

6,953

6,493

6,493

Floating rate loans due to related parties and other

17,710

18,026

15,850

15,850

Finance lease liability

25,726

22,930

23,877

21,231

Total financial liabilities

66,155

64,124

62,846

59,062

 

The fair value floating rate interest-bearing loans from banks notes has been calculated using market interest rate 4.5% to 9.5% depending on the specific loan conditions (securities provided, currency, etc). The fair value of short term receivables and payables expected to be settled within 12 months was based on their carrying amounts. The fair value of the finance lease liability has been calculated using market interest rate of 8.5%.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 31- CONTINGENT LIABILITIES AND COMMITMENTS

 

Warranties and guarantees

 

Most of the Group entities are engaged in the construction and sale of residential housing units. The entities provide and/or will provide their customers with performance and quality guarantees in accordance with the Czech, Polish, Romanian, Serbian, and Hungarian civil codes. The entities require from the sub-contractors building the housing units, performance and quality guarantees in the form of bank guarantees and of funds held in retention.

 

NOTE 32 - SIGNIFICANT EVENTS DURING THE PERIOD

 

Serbia

 

a. During 2010, the Group signed a revised lease agreement for the land in Marina Dorcol with the municipality of Belgrade. The revised agreement replaces the previously signed agreement.

According to the revised agreement, a new payment schedule was determined, according to which the subsidiary will be obliged to pay an amount of approximately EUR 1.1 million by the mid of November 2010 and the monthly fee debts in the amount of EUR 0.65 million by September 2010.

As of today the Company paid the above two instalments (except of approximate amount of EUR 0.2 million which is under disagreements with the municipality).

The remaining overdue debt in the amount of EUR 9.8 million should have been paid in several instalments commencing September 2011, while the payment of the remaining debt to the municipality of approximately EUR 9.9 million will be postponed from the years 2010-2011 to the years 2014-2016.

During 2011, the Group breached its requirements to pay total amount of EUR 1.9 million which was determined by the revised lease agreement, see also note 19.

After the reporting date the Company breached is requirements to pay an additional amount of EUR 1.3 million.

The Group is in the process of negotiation to restructure the liability.

 

Bulgaria

 

b. During 2010 the lending bank to E.G. Panorama EOOD ("E.G. Panorama"), a 100% owned subsidiary of ENMAN, has appointed a liquidator to take possession of the Panorama project in Bulgaria.

The loan to E.G. Panorama is non- recourse to the rest of the Company.

 

c. During 2010 the Company started the liquidation of four Bulgarian companies (EG Company EOOD, EG Project EOOD, EG Malinova Dolina EOOD and EG Gorna Banya EOOD).

The Company recognized a loss in the amount of EUR 10 thousands (see also note 34.c).

 

Poland

 

d. During December 2009 the Company transferred to ERD its entire shareholding in Wilanow 1 Development sp zoo ("Wilanow 2"), the company which owns the commercial plot in Wilanow (see also note 33(3) ).

During the reporting period ERD has signed a preliminary agreement to sell the plot of Wilanow 2 in Poland for a total consideration of EUR 4.14 million, see also note 35.

The Group has recognized a loss of approximately EUR 0.8 million.

According to the time table determined by the agreement, the final sale agreement will be signed no later than 30 April 2012.

The net proceeds of the sale will be deducted from the total debt of the Group towards ERD.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 32 - SIGNIFICANT EVENTS DURING THE PERIOD (continued)

 

Hungary

 

e. During 2010, Engel Haz Kft., a 100% owned subsidiary of Arces, sold its gym and pool asset for EUR 750 thousands. The Company recognized a loss on the sale totaling EUR 1.3 million (the Company's share is EUR 0.63 million) in the consolidated income statement under "other losses".

 

f. During 2010, Engel Sun Palace Kft., a 100% owned subsidiary of Arces, agreed to sign several agreements to sell most of the remaining units in the project, for the total amount of EUR 1.28 million. Engel Sun Palace Kft .recognized a loss on the sales in the amount of EUR 1.9 million (the Company's share is EUR 0.93 million). During the reporting period the Company cancelled those agreements. The Company did not cancel the related provision for loss.

 

g. During 2010 the liquidator that was appointed following the court decision in regards to the legal procedure as described in note 20.d, of 2010 financial statements started a liquidation process of the subsidiary Engel Project Kft., see also note 34.a.

 

h. During the reporting period, a liquidator was appointed following a court decision in regards to a legal procedure in Hungary in relation with the jointly controlled entity "Engel Park Kft." ("Engel Park").

As a consequence the Company has ceased to consolidate the jointly controlled entity Engel Park in its consolidated financial statements, see also note 34.b.

 

The Netherlands

 

i. During 2010 the Company signed an amendment to its joint venture agreement with HEPP III in respect of the investment in ENMAN B.V., the entity that holds interests in several of the Group's projects in Eastern Europe.

The main terms of the amendment to the agreement include, inter alia, a reduction of the Company's share in profit distributions from ENMAN from 40% to 25% and an increase in the Company's share in profit distributions from Troya, a subsidiary of ENMAN, which holds the 100% of the project in Czech Republic, from 40% to 50%.

The Company recognized a loss of EUR 1.7 million on the book value of its investment in ENMAN as a result of this amendment, see also note 34.e.

 

Romania

 

j. During the reporting period, the court in Israel accepted the plaintiff's request and instructed the Company to prevent any further dispositions of the plot Bragadiro located in Bucharest, Romania or of the subsidiary Engel Rose s.r.l (a wholly owned subsidiary) in regards to the legal claim of a former service provider of the Company.

Provision on behalf of this claim was initially recognized by the Group in its 2010 financial statements.

During the reporting period the Company signed a compensation agreement with the former service provider and the provision was updated respectively.

 

Czech Republic

 

k. During the reporting period, the Group started a process of purchasing the shares held by the minority (Immoconsult Leasinggeselschaft m.b.H) of its two subsidiaries: Palace Engel S.r.o (Prokopsky) and Palace Engel Development S.r.o (Barandov) for the total amount of EUR 7.5 thousands, following this purchase the Group will increase its holding in the above mentioned subsidiaries to 95%.

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 33 - RELATED PARTIES

 

1. General

 

As of 31 December 2011, the main shareholder of the Company is Engel General Developers Ltd. (incorporated in Israel), ("EGD") which owns, as of 31 December 2011, 68.35 % of the Company's shares.

 

On 7 July 2010, GBES Ltd. (a company incorporated in Cyprus) has signed an agreement with Engel Resources and Development Limited ("ERD"), the parent company of Engel General Developers Ltd., and with EGD, to invest capital of approximately EUR 9.2 million for 53% of the enlarged share capital of ERD (part of which will be given as loan until the receipt of court approval) and to provide an additional credit line of approximately EUR 10.2 million to ERD.

The agreement was approved by the bond holders of ERD and is subject to the approval of bond holders in Engel Europe Limited ("EEL"), which is the parent company of ERD and to the approval of the district Court of Tel Aviv.

On 30 June 2011 the district court in Israel approved ERD request for the debt settlement and the investment agreement by the company GBES Ltd.

During the reporting period the agreement between GBES and ERD, has been completed, following which GBES holds 53% of the issued share capital of ERD.

ERD owns 100% of the issued share capital of EGD, which in turn owns 68.35% of the issued share capital of the Company. GBES therefore has an aggregate equitable interest of 36.25% of the issued share capital in the Company.

 

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

 

2. Directors

 

As of 31 December 2011, the Company has 3 directors (31 December 2010: 3 directors).

After the reporting period the Company appointed additional 2 directors.

 

The annual salary cost and expenses return of the directors is as follow:

 

For the year ended 31 December

2011

2010

 Name

Position

Thousands Euro

Samuel Hibel (a,b)

CFO and Acting CEO

-

71

Terry Roydon

Non executive director

25

43

Marius van Eibergen Santhagens (c)

Non executive director

31

52

Micha Shkedi

Non executive director

24

24

Total

80

190

 

(a) Resigned during 2010.

(b) The fees above include payments as CFO and Acting CEO in the Group.

(c) The cost above includes VAT.

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 33 - RELATED PARTIES (continued)

 

3. Related party transactions

 

Securities provided by parent company and related parties

 

(a) During the years 2007 and 2008 ERD provided securities for two bank loans granted to Eurobul Ltd. (a subsidiary of the Company) by Bank Leumi Le Israel (totaling EUR 11.3 million) for the purchase of the investment in Wilanow 2 and to pay the municipality of Belgrade installments due to the lease agreement.

During 2009 the Group received loans in a total amount of EUR 2,016 thousands from ERD (see also note 16) in order to repay part of the principal of a bank loan granted to Eurobul Ltd. by Bank Leumi Le Israel.

At 31 December 2009 Bank Leumi Le Israel called the security provided by ERD in exchange for the loan that was due from Eurobul of EUR 7,505 thousands.

Consequently, the Group cancelled its liability towards the bank and recorded a liability towards ERD totaling EUR 7,505 thousands.

As of 31 December 2011, bank loans in the amount of EUR 2,558 thousands (2010: EUR 2,342 thousands) are secured by guarantees provided by ERD.

 

(b) As part of the agreement with ERD, the Company agreed to pledge two assets (a plot in Wilanow district in Warsaw, Poland designated for commercial purposes and Marina Dorcol in Serbia) in favor of ERD. The Company has not been able to provide the pledge over the Wilanow commercial project in Poland as security within the required time scale, and therefore agreed in December 2009 to transfer to ERD its entire shareholding in Wilanow 1 Development s.p z.o.o ("Wilanow"), the company which owns the Wilanow plot.

According to the share transfer agreement ERD will act to sell Wilanow within 12 months and the proceeds from the sale will be offset against any obligations of the Company towards ERD. If such sale does not occur within 12 months then an agreed appraiser will determine the value of Wilanow for the purpose of calculating the amount which will be offset against obligations of the company towards ERD. During the reporting period the Company and ERD agreed to extend the settlement by an additional 6 months period.

As of 31 December 2011 the Company included Wilanow in its consolidated financial statements, as significant risks and rewards related to the ownership of the investment property held by Wilanow were not yet transferred to ERD.

 

(c) As part of the agreement with ERD, the Company agreed to pledge the shares of Marina Dorcol D.o.o in the value of EUR 20.3 million to ERD and EUR 1.2 million to GBES.

After the reporting period the Company removed the pledge of the EUR 1.2 million which granted to GBES.

 

Support due to the Company's financial situation

 

In order to manage its financial situation the Company requested ERD to provide additional financial support to assist the Company to settle its immediate liabilities.

During the reporting period ERD provided several bridge loans in the total amount of approximately EUR 2.1 million. After the reporting period the Company received additional loans from ERD in the total amount of EUR 0.3 million.

During the reporting period the Company received loan from GBES in the total amount of EUR 0.2 million, the loan was granted for a period of 6 months and carries a yearly interest of 6%.

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 33 - RELATED PARTIES (continued)

 

3. Related party transactions (continued)

 

Support due to the Company's financial situation (continued)

 

On March 2011 the Company and its subsidiary Eurobul Ltd. had signed an agreement with ERD according to which the funds transferred to the Company and its subsidiaries through Eurobul in amount of approximately EUR 10.2 million will be converted to debt of the Company to ERD due to the fact that Eurobul was used as a pipe company for transferring the funds to the Company and its subsidiaries for its financial needs and two assets of the Company were pledged to secure the funds mentioned above. The agreement is valid from 1 January 2010.

 

Transactions of related party in regards to joint venture companies

 

After the reporting period, GBES Limited has reached agreement with funds managed by Heitman LLC ("Heitman") to acquire all of Heitman's interests in Arces International B.V. ("Arces") and ENMAN B.V. ("ENMAN"). Arces and ENMAN are both joint venture companies currently jointly owned by Heitman and the Company.

The aggregate consideration for the two acquisitions will be paid in instalments and it will include the assignment of shareholder loans provided by Heitman to the joint venture companies.

Completion of both acquisitions is subject to a number of precedent conditions, and is due to take place on or before 30 June 2012. Some of the precedent conditions will require the consent of the Company.

 

4. Trading transactions

 

The following trading transactions and balances with related parties are included in the financial statements:

For the year ended 31 December

2011

2010

Thousands Euro

Income statement

Interest payable to ERD

1,462

1,135

Interest payable to GBES

2

-

Interest payable on loans from jointly controlled entities

217

241

Interest due on loans to jointly controlled entities

(276)

(307)

Total

1,405

1,069

31 December

2011

2010

Thousands Euro

Statement of financial position

Loans to jointly controlled entities (see note 9)

6,184

5,748

Due to ERD (see note 18)

(18,924)

(17,000)

Due to GBES (see note 18)

(262)

-

Loans from jointly controlled entities (see note 18)

(263)

(209)

Total

(13,265)

(11,461)

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

NOTE 34 - DISPOSAL OF SUBSIDIARIES

 

During the reporting periods the Company started to liquidate, sell and transfer several subsidiaries:

 

Hungary

 

a. During 2010, the liquidator that was appointed following the court decision started the liquidation of Engel Project Kft. (the Gyor project, Hungary). As a consequence the Company has ceased to consolidate the subsidiary in its consolidated financial statements.

The Group recognized a loss on the disposal in the amount of EUR 944 thousands in the consolidated income statement under "other losses".

The disposal due to loss of control in the subsidiary had the following effect on the Group's assets and liabilities:

Thousands Euro

Trade receivables

12

Prepayments and other accounts

97

Inventories of housing units

6,765

Income tax payable

(11)

Property and equipment

21

Interest-bearing loans from banks

(5,855)

Provisions

(334)

Trade payables

(821)

Other payable

1,070

Net identifiable assets and liabilities disposed

944

Loss on disposal

(944)

Net cash (outflow) inflow

-

 

 

 

 

 

 

b. During the reporting period, a liquidator was appointed following a court decision in regard to a legal procedure in Hungary in relation with the jointly controlled entity "Engel Park Kft." ("Engel Park").

As a consequence the Company has ceased to consolidate the jointly controlled entity Engel Park in its consolidated financial statements.

The Group recognized a loss on the disposal in the amount of EUR 75 thousands in the consolidated income statement under "other losses".

The disposal due to loss of control in the jointly controlled entity had the following effect on the Group's assets and liabilities:

Thousands Euro

Prepayments and other assets

1

Short term loans to related parties

3

Inventories of housing units

86

Short term loans from related parties

(1)

Trade accounts payable

(5)

Deferred tax liabilities

(8)

Other payables

(1)

Net identifiable assets and liabilities disposed

75

Loss on disposal

(75)

Net cash (outflow) inflow

-

 

 

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 34 - DISPOSAL OF SUBSIDIARIES (continued)

 

Bulgaria

 

c. During 2010 the Company started the process of liquidation of four Bulgarian companies (EG Company EOOD, EG Project EOOD, EG Malinova Dolina EOOD and EG Gorna Banya EOOD).

The Group recognized a loss on the disposal in the amount of EUR 10 thousands in the consolidated income statement under "other losses".

 

The disposal had the following effect on the Group's assets and liabilities:

EG Company EOOD

EG Project EOOD

EG Malinova Dolina EOOD

EG Gorna Banya EOOD

Total

Thousands Euro

Current tax assets

-

3

3

-

6

Loans to related parties

1

1

4

22

28

Income tax payable

-

-

-

(24)

(24)

Net identifiable assets and liabilities disposed

1

4

7

(2)

10

Profit (loss) on disposal

(1)

(4)

(7)

2

(10)

Net cash (outflow) inflow

-

-

-

-

-

 

The Netherlands

 

d. During 2010 the Company liquidated the companies Engel Marina Dorcol B.V. and Marina Dorcol C.V.

The Group recognized a profit on the disposal in the amount of EUR 17 thousands in the consolidated income statement under "other losses".

 

The disposal had the following effect on the Group's assets and liabilities:

Thousands Euro

Trade payables

(17)

Net identifiable assets and liabilities disposed

(17)

Profit on disposal

17

Net cash (outflow) inflow

-

 

 

 

 

e. On July 2010 the Company signed an amendment to its joint venture agreement with HEPP III in respect of the investment in ENMAN B.V., the entity that holds interests in several of the Group's projects in Eastern Europe.

The main terms of the amendment to the agreement include, inter alia, a reduction of the Company's share in profit distributions from ENMAN from 40% to 25% and an increase in the Company's share in profit distributions from Troya, a subsidiary of ENMAN, which holds the 100% of the project in Czech Republic, from 40% to 50%.

The Group recognized a loss on the book value of its investment in ENMAN as a result of this amendment, in the amount of EUR 1.7 million in the consolidated income statement under "other losses".

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 34 - DISPOSAL OF SUBSIDIARIES (continued)

 

The Netherlands (continued)

 

e. The change in the holding rates in ENMAN had the following effect on the Group's assets and liabilities:

 

 

Thousands Euro

Cash and cash equivalents

59

Restricted bank deposits and cash in escrow

11

Trade receivables

4

Prepayments and other accounts

91

Loans to related parties

287

Inventories of housing units

3,139

Property and equipment

1

Deferred tax assets

83

Loans and amounts due to related parties

278

Income tax payable

(14)

Interest-bearing loans from banks

(1,657)

Provisions

(57)

Trade payables

(87)

Deferred tax liabilities

(125)

Other payables

(319)

Net identifiable assets and liabilities disposed

1,694

Loss on disposal

(1,694)

Received consideration satisfied in cash

-

Cash and cash equivalents disposal

(59)

Cash and cash equivalents disposal

(59)

 

 

 

 

  

 

Poland

 

f. During the reporting period the Company liquidated the companies Palace Engel Mokotow sp. zoo and Palace Engel II sp.zoo.

The Group recognized a loss on the disposal in the amount of EUR 13 thousands in the consolidated income statement under "other losses".

 

The disposal had the following effect on the Group's assets and liabilities:

Thousands Euro

Loans to related parties

13

Net identifiable assets and liabilities disposed

13

Loss on disposal

(13)

Net cash (outflow) inflow

-

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 35 - ASSET HELD FOR SALE

 

During the reporting period ERD has signed a preliminary agreement to sell the plot of Wilanow 2 in Poland for a total consideration of EUR 4.14 million.

The Group has recognized a loss of approximately EUR 0.8 million.

According to the time table determined by the agreement, the final sale agreement should be signed no later than 30 April 2012.

The net proceeds of the sale will be deducted from the total debt of the Group towards ERD.

 

As of 31 December 2011 the disposed company comprised the following assets and liabilities:

 

31 December 2011

Thousands Euro

Cash and cash equivalents

13

Trade receivables

1

Investment property

4,139

Total assets held for sale

4,153

Trade payables

26

Other payables

1,479

Total liabilities held for sale

1,505

 

 

NOTE 36 - OPERATING SEGMENTS

 

The Group has two reportable segments, as described below, which are the Group's strategic business units. The strategic business units offer different products and services, and are managed separately because they require different financial and marketing strategies. For each of the strategic business units, the Group's CEO of the Group reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group's reportable segments:

 

1. Residential- the residential segment includes purchasing, developing and selling real estate assets mainly in Eastern Europe.

2. Commercial - The commercial segment includes the activities related to investment property in Serbia and Poland).

 

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 36 - OPERATING SEGMENTS (continued)

 

Information about reportable segments

Residential

Commercial

Total

2011

2010

2011

2010

2011

2010

Thousands Euro

External revenues

4,123

14,841

8

40

4,131

14,881

Inter-segment revenues

-

-

-

-

-

-

Interest revenue

284

398

-

1

284

399

Interest expense

(4,134)

(6,659)

(2,261)

(1,144)

(6,395)

(7,803)

Depreciation

168

245

-

-

168

245

Segment (loss) profit before income tax

(9,090)

(9,814)

(4,161)

1,630

(13,251)

(8,184)

Other material non-cash items:

Change in fair value of investment property

-

-

(1,379)

3,478

(1,379)

3,478

Write down of inventory

(1,958)

(976)

-

-

(1,958)

(976)

Other information:

Reportable segment assets

32,876

40,657

25,253

26,999

58,129

67,656

Capital expenditure

6

40

-

-

6

40

Reportable segment liabilities

28,925

30,505

19,184

16,269

48,109

46,774

 

 

Reconciliation of reportable segment assets and liabilities:

31 December

 2011

2010

Thousands Euro

Assets

Total assets for reportable segments

58,129

67,656

Income tax receivable

106

116

Deferred tax assets

1,977

1,542

Loans to related parties

6,184

5,748

Consolidated total assets

66,396

75,062

Liabilities

Total liabilities for reportable segments

48,109

46,774

Income tax payable

200

231

Deferred tax liabilities

217

247

Loans and amounts due to related parties and joint venture partners

24,663

22,343

Consolidated total liabilities

73,189

69,595

 

 

 

 

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 36 - OPERATING SEGMENTS (continued)

 

Geographical information

 

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

 

31 December

 

2011

2010

 

Non- current

Non- current

 

Revenues

assets

Revenues

assets

 

Thousands Euro

Hungary

693

13

435

17

Czech Republic

2,382

3

9,011

8

Poland

1,056

-

5,435

5,351

Serbia

-

21,122

-

21,525

Canada

-

-

-

5

Romania

-

2

-

10

Israel

-

-

-

1

 

Total

4,131

21,140

14,881

26,917

 

NOTE 37 - ACCOUNTING ESTIMATES

 

1. Tax expenses

 

The Group is subject to taxes in numerous jurisdictions. Significant judgement is required in determining the provision for income taxes. Where estimates are revised or the final tax outcome of these matters is different from the amounts that were previously recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

 

2. Investment property

 

The values attributed to investment properties are subject to considerable estimation uncertainty: the risk that an investment property will not be appropriately evaluated exists, since factors not known to the valuator or to the Company might affect the value of the asset (see also note 11).

 

3. Inventory

 

The determination of net realisable values of inventory is subject to considerable estimation uncertainty: the risk that inventory net realisable value will not be appropriately evaluated exists, since factors not known to the valuator or to the Company might affect the net realisable value of the inventory (see also note 10).

 

 

 

 

 

.

 

 

Kimberly Enterprises N.V.

(Formerly Engel East Europe N.V.)

 

Notes to the consolidated financial statements

 

For the year ended 31 December 2011

 

 

NOTE 38 - NEW IFRS PRONOUNCEMENTS

 

The below amendment to existing standard have been published that are not yet effective for the Group's accounting period ended 31 December 2011, and have not been early adopted in preparing these consolidated financial statements:

 

1. Amendments to IFRS 7 Disclosures - Transfers of Financial Assets (Effective for annual periods beginning on or after 1 July 2011; to be applied prospectively. Earlier application is permitted.)

 

The Amendments require disclosure of information that enables users of financial statements:

·; to understand the relationship between transferred financial assets that are not derecognised in their entirety and the associated liabilities; and

·; to evaluate the nature of, and risks associated with, the entity's continuing involvement in derecognised financial assets.

The Amendments define "continuing involvement" for the purposes of applying the disclosure requirements.

The Group does not expect the amendments to IFRS 7 to have material impact on the financial statements, because of the nature of the Group's operations and the types of financial assets that it holds.

 

 

***

 

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR SEIFWEFESESD
Date   Source Headline
25th Jan 201811:30 amRNSResult of EGM
9th Jan 20189:47 amRNSProposed Cancellation of Admission to AIM
9th Jan 20189:47 amRNSProposed Cancellation of Admission to AIM
28th Dec 20174:35 pmRNSFurther update re Marina Dorcol
29th Nov 201712:04 pmRNSThird Quarter Trading Update
20th Nov 201711:48 amRNSUpdate re Controlling Shareholder
24th Oct 201710:59 amRNSFreezing of bank account
22nd Aug 201711:10 amRNSUpdate re Controlling Shareholder
10th Aug 20171:31 pmRNSHalf-year Report
29th Mar 201711:00 amRNSDisposal
7th Mar 201711:33 amRNSFinal Results
24th Jan 20179:05 amRNSDirectorate Change
3rd Jan 201712:18 pmRNSNotice of AGM
24th Nov 20164:52 pmRNSThird Quarter Trading Update
29th Sep 201612:13 pmRNSChange of Director and Marina Dorcol Update
15th Aug 20163:01 pmRNSHalf-year Report
27th Jul 20161:04 pmRNSFurther update re Marina Dorcol
19th Jul 201612:28 pmRNSDisposal
28th Jun 201611:41 amRNSAnnual Financial Report
10th Jun 201610:05 amRNSUpdate re Change of Control
7th Jun 20169:54 amRNSFurther Update re Marina Dorcol
6th Jun 20161:11 pmRNSUpdate re Marina Dorcol
25th May 201611:53 amRNS1st Quarter Results
12th Apr 20164:50 pmRNSUpdate re Change of Control
24th Mar 20169:09 amRNSFinal Results
22nd Mar 201611:27 amRNSChange of Control and Senior Management Change
15th Mar 201612:02 pmRNSUpdate re Change of Controlling Shareholder
14th Mar 20163:34 pmRNSShort Term Loan and Disposal
24th Feb 20168:30 amRNSResult of AGM
5th Feb 20167:00 amRNSNotice of AGM
3rd Feb 20163:11 pmRNSHolding(s) in Company
13th Jan 20167:58 amRNSDisposal
8th Jan 20161:30 pmRNSUpdate re Disposal
20th Nov 20157:00 amRNS3rd Quarter Results
12th Nov 20151:33 pmRNSUpdate re Disposal
5th Nov 20157:00 amRNSUpdate re Change of Control
2nd Nov 20157:00 amRNSPotential Change of Controlling Shareholder
8th Oct 201512:55 pmRNSDirectorate Change
1st Oct 20153:37 pmRNSReplacement - Directorate Change
1st Oct 201511:49 amRNSDirectorate Change
21st Sep 201512:44 pmRNSDisposal
17th Aug 20157:00 amRNSHalf Yearly Report
6th Aug 20157:00 amRNSRe Agreement
29th Jul 20152:53 pmRNSDisposal
25th Jun 201511:33 amRNSAnnual Financial Report
10th Jun 20159:43 amRNSStmnt re Share Price Movement
28th May 20155:22 pmRNS1st Quarter Results
20th May 20152:43 pmRNSPotential Change of Controlling Shareholder
30th Mar 201511:03 amRNSFinal Results
17th Mar 20157:00 amRNSDisposal

Due to London Stock Exchange licensing terms, we stipulate that you must be a private investor. We apologise for the inconvenience.

To access our Live RNS you must confirm you are a private investor by using the button below.

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.