Preliminary Results

27th Mar 2008 07:01

Plaza Centers N.V.27 March 2008 27 March 2008 PLAZA CENTERS N.V. Preliminary Results for the year ended 31 December 2007 PLAZA REPORTS RECORD PROFITS, STRONG GROWTH, THE COMPLETION AND REALIZATION OF DEVELOPMENTS AND EXCELLENT PROGRESS ACROSS ITS PORTFOLIO - First dividend payment of €57 million expected - Plaza Centers N.V. ("Plaza" / "Company" / "Group"), a leading emerging marketsproperty developer, today announces its preliminary results for the year ended31 December 2007. Financial highlights: • Profit before tax of €227 million (2006: €14.7 million) owing to thedisposal of assets in Hungary and Poland • Gross revenues and gains from sale and operations of properties of€510 million (2006: €74 million), with no revaluation gains, as per the Group'spolicy • Basic and diluted EPS of €0.78 and €0.77 (2006: both €0.27), anincrease of c. 190% • Net Asset Value up 31% to €1.06 billion (IPO at October 2006: €809million; 30 June 2007: €1.02 billion) • Net Asset Value per share £2.68 (at IPO: £1.90; 30 June 2007:£2.37) • Estimated value of portfolio on completion of €3.5 billion (30 June2007: €2.7 billion) • Increase to €298 million on balance sheet of real estate tradingproperties being developed for future sale (31 December 2006: €160 million) • Total assets of €761 million (31 December 2006: €475 million) • Gross proceeds raised of New Israeli Shekels ("NIS") 305 million(approximately €53.3 million) from an issue of unsecured non-convertible notes(series A notes) to Israeli institutional investors in July 2007 • Current cash position of circa €400 million; €93 million at the yearend (31 December 2006: €219 million) with working capital of €625 million (31December 2006: €324 million) • First dividend payment of €57 million expected, reflecting £0.14 per share expected to be paid in June 2008, with ex dividend date of 28 May 2008 and record date of 30 May, 2008. Operational highlights in the reporting period: • Since November 2006, Plaza has utilised 100% of the IPO proceeds forits active acquisitions programme and the ongoing delivery and completion of itsdevelopment schemes • Sale of Arena Plaza in Budapest, the largest shopping centre inHungary and one of the biggest in Central and Eastern Europe ("CEE"), to ActiveAsset Investment Management Plc ("aAIM") for approximately €381 million. Thecentre was 100% let on opening • Successful opening and handover of Sosnowiec Plaza, Lublin Plaza andRybnik Plaza in Poland. All shopping malls were 100% let on opening, resultingin a higher closing consideration paid to the Company than disclosed in theCompany's Prospectus • Plzen Plaza in the Czech Republic opened with 100% occupancy • Dual listing on the Warsaw Stock Exchange ("WSE"), to allow higherliquidity and fulfil local investors' demand; Plaza is the first propertycompany with a dual listing on both the London Main Board and the WSE • Acquisition of four developments in Romania: Timisoara (Gross LettableArea ("GLA") of 41,000 sqm shopping and entertainment with 30,000sqm of officespace), Miercurea Ciuc (GLA of 14,000 sqm), Iasi (41,000 sqm of shopping spaceand 30,000 sqm of office space) and Slatina (GLA of 21,000 sqm) • Joint venture partnership created with BAS Development ("BAS") todevelop seven residential and office projects in three of Romania's largestcities: Bucharest, Brasov and Ploiesti • Additional development project acquired in Poland in the city of Torunfor shopping and entertainment centre development with GLA of c. 45,000 sqm • Purchase of land for an additional housing development in the Roztokysuburb of Prague in the Czech Republic • Second and third mixed-use joint venture development projects acquiredin India in the Kharadi district of Pune and in Trivandrum, the capital city ofthe State of Kerala, with a combined Gross Built Area ("GBA") of approximately420,000 sqm • Presence firmly secured in Serbia winning a tender process run by theGovernment of Serbia for the development of a new shopping, entertainment andbusiness centre in Belgrade with a GBA of 90,000 sqm, and purchasing twoadditional plots in Belgrade and Kragujevac with a combined GLA of 65,000 sqm • First project acquired in Shumen, Bulgaria with a GLA of 18,000 sqm • A stake of 35% acquired in Uj Udvar shopping Centre in Budapest,Hungary (GLA 16,000 sqm), for renovation and future sale. Key highlights since the period end: • Gross proceeds raised of New Israeli Shekels ("NIS") 713.5 million(approximately €137 million) from the issue of unsecured non-convertible seriesB notes (series B notes) in Israel in February 2008 and their registration fortrade on the Tel Aviv Stock Exchange (TASE), along with the registration ofSeries A notes • Acquisition of a new project in Poland in the city of Kielce (GLA40,000 sqm) • Two further projects acquired in Romania, in Honedoara (GLA 20,000sqm) and in Targu Mures (GLA 30,000 sqm). Plaza's sixth and seventh projects inRomania will both be developed into western-style shopping centres. Commenting on the results, Mordechay Zisser, Chairman of Plaza Centers, said: "Plaza has become a significant force over the last twelve years in itsestablished markets in Central and Eastern Europe. We are now reaping thebenefit of this experience as we expand into new countries such as India,Serbia, Bulgaria, Slovakia, Ukraine and Russia. We continue to drive ouracquisitions programme as shown by the three projects acquired since the yearend and have built an exciting pipeline of assets, which we expect to bring tofruition during 2008 and in the following years. "As a result of our disposals we are delighted to be in a position to announceour first dividend payment, expected to be €0.14 per share, payable in June. Wecontinue to make excellent progress with our core strategy of offeringwestern-style shopping and entertainment facilities to a growing middle classand an increasingly affluent consumer base and look forward to the future withconsiderable excitement and confidence." Ran Shtarkman, the Company's President and CEO, added: "Despite the global economic slowdown, we continue to see strong demand for ourhigh quality shopping and entertainment centres, from both tenants andinvestors. This has ensured that we have successfully been able to progress ourbusiness model and drive to expand our international presence. "With current cash balances of circa. €400 million, we see excitingopportunities for Plaza to expand its portfolio and to take part in attractivenew investments in real estate, broadly unaffected by conditions in the currentcredit markets. "Our diversification into India also creates the opportunity for Plaza tocontinue to expand and enjoy high rates of return as demonstrated in the past. Amiddle class population of over 250 million can support such expansion andreturns for many years. "We also continue to examine other future emerging market opportunities, whichwe consider to offer strong potential consumer demand for Plaza's developmentprojects. We are confident that the Company will achieve its goal to complete atleast four to five developments each year and, thereby, deliver strong incomeand capital growth for our shareholders. We look forward to continued progressin 2008." For further details please contact: PlazaMordechay Zisser, Chairman +972 3 6086000Ran Shtarkman, President and CEO +36 1 462 7221Roy Linden, CFO +36 1 462 7105 Financial DynamicsStephanie Highett/Laurence Jones +44 20 7831 3113 Notes to Editors Plaza Centers N.V. (www.plazacenters.com) is a leading emerging marketsdeveloper of shopping and entertainment centres. It focuses on constructing newcentres and, where there is significant redevelopment potential, redevelopingexisting centres in both capital cities and important regional centres. TheCompany is dual listed on the Main Board of the London Stock Exchange and, as of19 October 2007, the Warsaw Stock Exchange (LSE:"PLAZ", WSE: "PLZ/PLAZACNTR").Plaza Centers N.V. is an indirect subsidiary of Elbit Imaging Ltd. ("EI"), anIsraeli public company whose shares are traded on both the Tel Aviv StockExchange in Israel and the NASDAQ Global Market in the United States. Plaza Centers is a member of the Europe Israel Group of companies which iscontrolled by its founder, Mr Mordechay Zisser. It has been active in realestate development in emerging markets for over 12 years. CHAIRMAN'S STATEMENT We are delighted to report excellent progress across all Plaza's operations inthe year ended 31 December 2007 and in the period since the Company's year end.During this time, we have not only consolidated our strong position in ourestablished markets, but also secured sites in new locations such as Serbia andBulgaria, and entering a new continent with our investments in India. All thecountries share demographic and socio-economic changes which support ourbusiness rationale for entering these promising markets. In many senses, Plaza has achieved some major milestones in the period since 1January 2007: • We extended our portfolio of projects to 30; • We have continued successfully to source exciting new opportunitiesacross all our target markets; • Through the sale and completion of assets - most notably Arena Plaza -we achieved a profit before tax of €227 million; • Through a period of challenging conditions in the financial markets,we have raised substantial support through the bond market in Israel in twoover-subscribed offerings; • The strength of the Company's performance and financial position hasenabled us to meet our strategic promise to pay our first dividend toshareholders - subject to their approval - expected in June 2008; and • In the last quarter of the year, we achieved a dual listing of ourshares on the Warsaw Stock Exchange, thereby cementing our presence in Poland. Results We ended 2007 with gross revenues of €510 million and a net profit of €227million, resulting mainly from the sales of Arena Plaza in Budapest, Hungary,the Rybnik, Sosnowiec and Lublin Plazas in Poland and the Duna Plaza offices inBudapest, Hungary. The resulting rise in basic and diluted EPS was 190% to €0.78and €0.77, respectively. In this era where many companies present profits which result mainly fromaccounting revaluations, the Group has maintained its policy of not revaluingits inventory of real estate under construction. The result is that our profitsare derived from pure cash gains that constitute real value to shareholders. During the year, we invested heavily in existing assets under construction aswell as continuing to acquire sites to build a substantial future pipeline. Ourtotal investment in real estate inventories under construction ("tradingproperties") at year end 2007 amounted to €298 million and we expect to presentsignificant revenues out of these inventories in 2009 and onwards. Plaza has a current cash position of €400 million as at today's date, arisingmainly from the gross proceeds of approximately €137 million from the recentbond issue in Israel and the receipt of €265 million from the sale of ArenaPlaza, net of investments in current projects and new pipeline projects. It isgratifying that, in the face of tightening conditions in the world's financialmarkets, the Company continues to be very strongly placed to develop out itsexisting portfolio of projects and acquire new sites, thereby ensuring itsability to create and deliver value to its shareholders. NAV The Company's portfolio as at December 31, 2007 was valued by King Sturge LLPand their summary valuation is shown below. The Company saw a significant increase in the value of some of its assets,especially in regard to the Arena Plaza in Budapest which was valued at €333million at IPO and was sold to aAIM for circa €381 million. The three shoppingand entertainment centres sold in Poland were also handed over at a price higherthan their value estimated at IPO. All shopping malls were 100% let on opening,resulting in a higher closing consideration paid to the Company than disclosedin the Company's Prospectus and a combined total market value for the threeproperties of €129.1 million (Plaza's share), an increase of €26.6 millioncompared to the estimated value at the time of the Company's IPO. In addition,nine new assets were acquired and valued post the prior valuation which was doneas at June 30, 2007 and by December 31, 2007, which resulted in a substantialincrease in the Company's Net Asset Value. The Company's NAV was calculated as follows: Use EUR (Thousand)Market value of land and projects by King Sturge LLP (1) 802,530Assets minus liabilities as at December 31, 2007 (2) 260,058Total 1,062,588 (1) per valuation attached below(2) excluding book value of assets which were valued by King Sturge LLP The resulting NAV per share is £2.68 (30 June 2007: £2.37), a 41%increase compared to the IPO value and a 13% increase compared to 30 June 2007. Strategic direction The Company has been active in emerging markets in the CEE since 1996, when itpioneered and opened the first western-style shopping and entertainment centrein the CEE in Hungary and began to implement its vision of offeringwestern-style shopping and entertainment facilities to a growing middle classand an increasingly affluent consumer base. The strategy set out in the Company's Admission Document remains unchanged. Weaim to: • develop four to five modern western-style shopping and entertainmentcentres per year in the capital and regional cities of selected countries,primarily in CEE (focusing on the medium term in Poland, Czech Republic,Romania, Serbia, Bulgaria, Slovakia and Greece) and mixed use developments inUkraine, Russia and India for the medium and long term; • acquire operating shopping centres that show significant redevelopmentpotential (either as individual assets or as portfolios) for refurbishment andsubsequent re-sale; • pre-sell, where prevailing market and economic conditions arefavourable, the centres prior to, or after, commencement of construction orredevelopment; and • where the opportunity exists in CEE and India, extend its developmentsbeyond shopping and entertainment centres by leveraging its strengths anddrawing upon the experience and skills of the Company's executive managementteam and the Europe Israel Group to participate in residential, hotel, officesand other development schemes where such developments form part of integratedlarge scale business and leisure developments. Examples include Dream Island,with 350,000 sqm GBA which will be developed as a major hotel, recreationfacilities, casino, business and leisure complex and is located on the southernend of Obuda Island in the Danube River in central Budapest. Unlike the rest of the world, which has several substantial gambling led leisureand entertainment resorts such as Las Vegas and Macau, Europe still lacks thesetypes of destinations, mainly due to bureaucratic issues which prevent permitsbeing granted. Our Dream Island development is in a prime location in the middleof Continental Europe, which over 350 million people can access within two hoursflying time. During 2008, we are tendering for the casino permits from theHungarian state for the development. As soon as those are received, we willproceed with our development in a highly focused manner and will thereby createa leading resort which will have a high impact throughout Continental Europe. Apart from this, our next priority is the Casa Radio mixed use project whichcomprises a total of 360,000 sqm GBA in Bucharest's city centre and will includeone of the largest and most prestigious shopping centres in the CEE. We look forward with confidence to building upon our proven and successfulbusiness model to expand the Company's activities both within the CEE region andin new territories such as India and thereby driving income and capital growthon behalf of our shareholders. Key events Since its Admission to the LSE in November 2006, Plaza has invested all of thegross proceeds from its IPO, totalling £166 million, through the acquisition of19 projects and from capital expenditure on the construction and delivery of ourexisting schemes. In October, Plaza shares were listed in Poland, becoming the first propertycompany to achieve a dual listing on the Main Board of the London Stock Exchangeand The Warsaw Stock Exchange. This dual listing is aimed to generate increasedliquidity in the shares, and to enable the growing investor appetite both inPoland and the wider CEE region, to invest in the Company through a local stockexchange. Earlier in the year, Maalot, The Israeli affiliate of Standard & Poor's RatingServices, approved a rating of "A+/positive", for Plaza to raise new debt up tothe amount of US$400 million. This enabled the company to raise €53.3 million,via the private issuance of unsecured non-convertible Notes to institutionalinvestors in Israel. Since the year end, the Company has raised a further €137million, via a public offering of Notes to Israeli investors. This raising of debt, in increasingly uncertain credit markets shows theconfidence from investors in our ability to deliver on our goals, and providesus with substantial additional financial flexibility and firepower to continuewith our acquisition and development programme. Plaza today, equipped with high cash balances and ability to raise additionaldebt, is extremely well positioned in these times of liquidity shortage in thefinancial markets in Europe. We forecast that the current financial crises willpresent significant opportunities to acquire real estates assets in attractiveterms, and Plaza is highly positioned to enjoy such opportunities. Portfolio progress The Company is currently engaged in 30 assets and projects under developmentlocated across the Central and Eastern European region and in India. Thelocation of the assets under development, as well as office buildings, issummarised as follows: Number of assetsLocation Under development OfficesRomania 7 1Poland 5 -Czech Republic 5 (*) 1Hungary 4 1Serbia 3 -India 3 -Greece 1 -Latvia 1 -Bulgaria 1 -Total 30 3 (*) including Pilzen which was completed and is pre-sold to Klepierre, handoveris anticipated soon. The Company invested a total of €152 million in 13 acquisitions and jointventures during the year. These were a shopping & entertainment developmentscheme in Torun in Poland; two joint venture projects in India; an existingshopping centre in Budapest, Hungary which shows significant redevelopmentpotential for refurbishment and subsequent sale; a residential project inRoztoky in the Czech Republic; and the acquisition of four sites in Romania atTimisoara, Miercurea Ciuc, Slatina and Iasi for shopping and retail-led mixeduse developments. In addition, Plaza has penetrated into two new countries,Serbia and Bulgaria with four new developments. The Serbian projects include twoin Belgrade (totalling GLA of 130,000 sqm) and one in Kragujevac (24,500 sqm),while the Bulgarian project comprising GLA of 18,000 sqm is located in Shumen. In addition, the Company created the Plaza-BAS joint venture with 50.1% stake toconstruct residential units and office space in Romania, currently the ventureholds stakes in seven developments in three major cities in Romania. Subsequent to the year end, we have acquired additional three plots for shopping& entertainment developments: one in Kielce, Poland and two in Romania- inHonedoara and in Targu Mures. We are extremely enthusiastic about our entry into the dynamic Indian marketwith three large-scale retail led mixed used developments, and we expect tocontinue to significantly expand our portfolio there over the next coming years.In general, the scale of our developments in India is larger than that in theCEE, due to the country's enormous population. In India, there are approximately250 million middle class people and it is our belief that this serves as a soundbase for many years of Plaza operating profitably in that emerging market. In addition, in a busy period of disposals, Plaza has undertaken a number ofsignificant transactions. The most important of these was the sale of ArenaPlaza in Budapest, the largest shopping centre in Hungary and amongst thelargest in Central and Eastern Europe, to Active Asset Investment Management Plc("aAIM"). The transaction price amounted to €381 million compared to theestimated value at the time of the Company's London IPO of €333 million. In addition, we have sold our 50% stake in Lublin Plaza, as well as our stakesin Rybnik Plaza and Sosnowiec Plaza in Poland to Klepierre SA. All three were100% let on opening in 2007 and had a market value of €129.1 million (Plaza'sshare) compared to the estimated value of approximately €102.5 million at thetime of the Company's IPO. Since November 2006, Plaza has utilised 100% of the IPO proceeds for its activeacquisitions programme and the ongoing delivery and completion of itsdevelopment schemes. During 2007, Plaza invested gross sums as follows: Use EUR (m)Finance of current developments 265Acquisition of pipeline projects in the CEE 130Expansion of operations in India 30Total 425 Dividend Policy The basis of the Company's stated dividend policy is to reflect the long-termearnings and cash flow potential of the Group, taking into account the Group'scapital requirements, while at the same time maintaining an appropriate level ofdividend cover. In Plaza's Interim Results announcement in September 2007, the Directorsoutlined their intention to make distributions based on the annual net profitsof the Group starting with the 2007 financial year. In light of the Company's strong performance, owing to the highly profitabledisposal of assets, the Board of Directors will seek shareholders' approval atthe annual general meeting on 27 May, 2008 for a maiden dividend of €57 million,representing circa £0.14 per share. If approved, the first dividend is expected to be paid in June 2008, with an exdividend date of May 28, 2008 for shareholders on the register at May 30, 2008. Outlook Plaza has become a significant force over the last twelve years in ourestablished markets in Central and Eastern Europe, where we were the firstcompany to develop western style shopping and entertainment centres. We are nowreaping the benefit of this experience as we expand into new countries such asIndia, Serbia, Bulgaria, Slovakia, Ukraine and Russia and are delighted to bereporting excellent profits for the year to 31 December 2007. Although theCompany's exact financial performance will vary, according to our developmentcycle which is on average between two to four years per project, we are pleasedwith the current diversity and timescale of our pipeline. We also continue to drive our acquisitions programme, as shown by the threeprojects acquired since the year end, and have built an exciting pipeline ofassets, which we expect to bring to fruition during 2008 and in the followingyears. The diversification of our portfolio into India places Plaza in a strongposition to maintain its rapid growth over the past years. Our activity in boththe CEE and India establishes Plaza, in my opinion, as having one of the mostcompelling development portfolios of any European property company. As a result of our disposals we are delighted to be in a position to announceour first dividend payment, expected to be £0.14 per share, payable in June. On an ongoing basis, we expect to continue our completion programme whichwe anticipate, in line with our stated goals, which we anticipate will result instrong income and capital growth for our shareholders. We look forward to the future with considerable excitement and confidence. Mordechay ZisserChairman27 March 2008 CHIEF EXECUTIVE'S REVIEW Over the last year Plaza has maintained its exemplary track record and deliveredstrong returns for its shareholders. In line with our strategy for the year, wehave opened five shopping and entertainment centres; three in Poland, one inHungary and one in the Czech Republic, all of which were 100% occupied uponopening. We also successfully sold our landmark Arena Plaza scheme in Budapestat a fantastic 5.9% gross yield and totalling circa. €381 million, €48 millionmore than the project's value at our Admission, reflecting the highest volumetransaction and circa 20% of all real estate transactions done in Hungary in2007. For 2007 we are presenting record profits of circa 227 million, resulting mainlyfrom pure cash gains from our exits, with no accounting (IFRS) revaluationgains. Our understanding of local markets and the requirements and aspirations ofpotential tenants and visitors is key to our success. Plaza as a brand continuesto grow in repute and plays a major role in our ability to source opportunitiesand work closely with local authorities and communities. Through applying thesesame principles and our business model consistently, we have been able toachieve considerable international expansion, not least in the months since ourIPO in London in November 2006. 2007 and the period since the year end have been highly active for Plaza acrossall areas of its business. Particular highlights include: • Completion of developments: successful openings of Rybnik, Sosnowiecand Lublin shopping and entertainment centres in Poland, Arena Plaza in Hungaryand Plzen Plaza in the Czech Republic, all 100% let upon opening; • Exits: Handover of the interests in the above mentioned Polish centresto Klepierre and the sale of Arena Plaza at terms more favourable than thosereflected in our Prospectus; • Acquisition of pipeline: 16 new developments acquired (19 since IPO)including first acquisitions in Serbia and Bulgaria; • Local presence: further expanded with commencement of operations inUkraine and Russia; • Investments: Total gross investment in current projects and newpipeline in 2007 of €425 million; • Financial strength and flexibility: High cash balances and an A+/positive rating granted by the Israeli affiliate of Standard & Poor's for theraising of up to $400 million notes at favourable interest rates, followed by anupdated rating of Aa3 by the Israeli affiliate of Moody's. Approximately €53million was raised in July 2007 and an additional €137 million was raised inFebruary 2008. Current cash balances stand at circa €400 million; • Stock Exchange listing: Achieving dual listing on the main market ofthe Warsaw Stock Exchange ("WSE"). Plaza is the first property company toachieve a dual listing on both the London Main Board and the WSE. Plaza's shareswere the best performing real estate company on the London main market during2007, recording an 18% increase and outperforming all real estate indices (EPRAGlobal, Europe, UK). To date, Plaza has been involved in the development of 30 schemes in ninecountries, of which seven are located in Romania, five in Poland, five in theCzech Republic (including Pilzen Plaza which was completed and will be handedover soon to Klepierre), four in Hungary, three in Serbia, three in India, onein Latvia, one in Greece and one in Bulgaria. In addition, Plaza holds threeadditional office buildings in Budapest, Prague and Bucharest. The projects are at various stages of the development cycle, from the purchaseof land through to the planning and completion of construction. In addition,Plaza is negotiating to purchase sites for the development of several additionalschemes throughout the CEE region and India. The Company's current assets and pipeline projects are summarised in the tablebelow: Asset/Project Location Nature of asset Planned size Plaza ownership Status sqm (GLA) % 1 Arena Plaza Budapest, Hungary Mixed use shopping and 32,500 (for 100 Under planning extension office scheme rent and sale) 2 Dream Island Budapest, Hungary Major business and 350,000 (GBA) 30 initial leisure resort (for rent and excavation (Obuda) sale) works commenced completion scheduled for 2012 3 David House Budapest, Hungary Headquarters/Office 2,000 100 Operational 4 Duna Plaza Budapest, Hungary Shopping and 15,000 Dev. Under planning extension entertainment scheme rights 5 Uj Udvar Budapest, Hungary Shopping and 16,000 35 Under planning entertainment scheme 6 Suwalki Plaza Suwalki, Poland Shopping and 20,000 100 Under planning entertainment scheme 7 Lodz Lodz, Poland Residential, retail 130,000 100 Under planning and offices 8 Zgorzelec Plaza Zgorzelec, Poland Shopping and 15,000 100 Construction entertainment scheme will start in 2008; completion scheduled for 2009 / 2010 9 Torun Plaza Torun, Poland Shopping and 45,000 100 Planning and entertainment scheme permits phase 10 Kielce Plaza Kielce, Poland Shopping and 40,000 100 Under planning entertainment scheme 11 Plzen Plaza Plzen, Czech Rep. Shopping and 20,000 100 Completed, entertainment scheme pre-sold to Klepierre 12-13 Prague 3 Prague, Czech Rep. Office, for future use 61,600 100 Currently for residential (residential operational as for sale) an office building, Re-zoning for residential use has been received 14 Opava Plaza Opava, Czech Rep. Shopping and 14,000 100 Construction entertainment scheme will start in late 2008; completion scheduled for 2010 15 Liberec Plaza Liberec, Czech Rep. Shopping and 17,000 100 Construction entertainment scheme started in 2007; completion scheduled for 2008 16 Roztoky Prague, Czech Rep. Residential units 14,000 100 Construction will start in 2008; completion scheduled for 2009 / 2010 17 Casa Radio Bucharest, Romania Mixed-use shopping and 360,000 (GBA) 75 Construction leisure plus commenced in residential/office 2007; scheme completion scheduled during 2010-2012 18 Timisoara Plaza Timisoara, Romania Shopping entertainment 71,000 100 Under planning and office scheme 19 Miercurea Ciuc Miercurea Ciuc, Shopping and 14,000 100 Construction Plaza Romania entertainment scheme started in 2007; completion scheduled for 2009 20 Iasi Plaza Iasi, Romania Shopping, 71,000 100 Under planning entertainment and office scheme 21 Slatina Slatina, Romania Shopping and 21,000 100 Under planning entertainment scheme 22 Honedoara Plaza Honedoara, Romania Shopping and 20,000 100 Under planning entertainment scheme 23 Targu Mures Plaza Targu Mures, Shopping and 30,000 100 Under planning Romania entertainment scheme 24 Palazzo Ducale Bucharest office 700 100 Operational 25 Belgrade Plaza Belgrade, Serbia Shopping, office and 90,000 90 Under planning Hotel scheme (GBA) 26 Sport Star Plaza Belgrade, Serbia Shopping and 40,000 97.5 Under planning entertainment scheme 27 Kragujevac Plaza Kragujevac,Serbia Shopping and 24,500 95 Under planning entertainment scheme 28 Shumen Plaza Shumen, Bulgaria Shopping and 18,000 100 Under planning entertainment scheme 29 Riga Plaza Riga, Latvia Shopping and 49,000 50 Construction entertainment scheme started in 2007; completion scheduled for 2009 30 Helios Plaza Athens, Greece Shopping and 35,000 100 Under planning entertainment or and permits office scheme stage 31 Koregaon Park Pune, India Shopping, 107,500 (GBA) 50 Construction entertainment and Started in office scheme 2007, expected completion in 2009 - 2010 32 Kharadi Pune, India Shopping, 225,000 (GBA) 50 Under planning entertainment, office and apart-hotel scheme 33 Trivandrum Kerala, India Shopping, 195,000 (GBA) 50 Under planning entertainment, office and apart-hotel scheme Details of these activities by country are as follows: Hungary During 1996-2004, Plaza built, managed and eventually sold 16 shopping centresthroughout Hungary. During 2007, Plaza continued to develop and completed theArena Plaza, its landmark shopping centre scheme in central Budapest, comprisingapproximately 66,000 sqm GLA, making it one of the biggest in CEE. The mall waspre-sold to aAIM in August 2007. The mall was opened to the public in November2007 with 100% occupancy on opening and has been successfully handed over toaAim. In addition, Plaza holds a 30% stake in Dream Island, a prestigious developmenton the Obuda Island in central Budapest, with a land area of 320,000 sqm, whichis intended to be developed as a major resort area including hotels, recreationfacilities, a casino and a business and leisure complex with a developmentbudget of over €1.2 billion and 350,000 sqm GBA. Preliminary design andexcavation works are already underway. Two further projects are in feasibility and planning stages, namely theextension of the Duna Plaza and the Arena Plaza, both of which are located incentral Budapest. In accordance with its strategy to acquire operating shopping centres that showsignificant redevelopment potential for refurbishment and subsequent sale, inSeptember 2007, the Company bought a 35% stake in the Uj Udvar shopping centrein Budapest, Hungary. The Group continues to own its office building in Budapest, David House onAndrassy Boulevard. Poland Between 2001 and 2005, Plaza built, managed and, in 2005, sold four shoppingcentres located across Poland. In 2007, the Company completed the constructionof three shopping centres in Rybnik (approximately 18,000 sqm GLA), Sosnowiec(approximately 13,000 sqm GLA) and Lublin (50% held, approximately 26,000 sqmGLA). All three were 100% let upon opening and have all been handed over toKlepierre on better terms than those mentioned in our Prospectus. In addition, Plaza continued the feasibility and planning of its developmentsscheme in Lodz (designated for residential use) and Suwalki (designated forretail use), as well as an acquisition of an additional plot of land for aplanned shopping centre in Torun (comprising approximately 45,000 sqm of GLA)and in Zgorzelec (comprising approximately 15,000 sqm of GLA). Since the year end, Plaza has acquired another development in the city of Kielce(comprising approximately 40,000 sqm of GLA) Czech Republic Construction of the Plzen Plaza (approximately 20,000 sqm GLA) commenced in 2006and was completed in Q4 2007. Plaza has purchased 39,000 sqm of private land in Roztoky, a town close toPrague, which includes a valid planning permit for 81 family homes. It isintended to commence construction in 2008. The Company continues to own an income-yielding office building in Prague whichis being re-zoned for a scheme of 61,600 sqm of residential units. Romania In November 2006, Plaza acquired a 75% interest in a company which has enteredinto a public-private partnership agreement with the Government of Romania todevelop the approximately US$1 billion budget Casa Radio (Dambovica) scheme inBucharest, the largest development plot available in the city centre. TheRomanian Government will remain a 15% partner in the scheme. The development ofCasa Radio comprises approximately 360,000 sqm of GBA, including a 120,000 sqmGLA shopping mall and leisure centre (one of the largest in Europe), residentialunits, offices, hotel, casino, hypermarket and convention and a conference hall. The Group continued its rapid expansion in Romania, with the purchase of fourstrategically important sites in 2007 and two more in 2008. It has acquired aplot in Timisoara for the development of a mixed use project comprisingapproximately 41,000 sqm GLA of shopping space and 30,000 sqm GLA of officespace; a plot in Iasi for the development of a mixed use project providingapproximately 41,000 sqm GLA and 30,000 sqm of office space; a site in MiercureaCiuc which will be developed into a shopping centre with approximately 14,000sqm of GLA; a site of 20,000 sqm and another site in Slatina for the developmentof a shopping and entertainment centre of GLA 21,000 sqm. In addition, Plaza has a 50.1% stake in the Plaza-BAS joint venture. Currentlythe joint company holds seven projects in Bucharest, Brasov and Ploiest with abudget of €290.4 million and expected sales value of €410.6 million: Fountain Park Acacia Carino Tower Green Poiana Brasov Primavera Tower Pinetree Total Park Land Glade Location Bucharest Ploiest Ploieast Ploieast Brasov Brasov Brasov -Plaza-Bas 25% 50% 50% 50% 50% 50% 50% - ShareNature Residential Residential Offices Residential Residential Offices Residential -Size (sqm) 18,000 30,000 9,600 24,000 130,000 10,000 35,000 256,600Budget (MEUR) 17.7 27.4 18.4 20.7 155 17.6 33.6 290.4Sales value 19.9 34.1 29.1 27.7 236 22 41.8 410.6 (MEUR) Any additional value above book value of the Plaza-BAS venture assets has notbeen included in the NAV and was not valued by King Sturge. In light of this,we believe they offer a future potential uplift in value for shareholders. Since the year end, Plaza has acquired its sixth and seventh developments inHonedoara (comprising approximately 20,000 sqm of GLA) and Targu Mures(comprising approximately 30,000 sqm of GLA). Latvia Construction works started in March 2007 on the Riga Plaza project comprisingapproximately 49,000 sqm of GLA in Riga, Latvia (a 50% holding). The scheme islocated on the western bank of the river Daugava by the Sala Bridge and Plazaexpects this project to be completed during 2009. Serbia Serbia is one of the Eastern European nations where Plaza sees strong potentialfor future investment opportunities. During 2007, Plaza successfully established its presence in Serbia with theacquisition of three new plots. The first of these was a state-owned plot andbuilding in Belgrade, Serbia, which Plaza secured in a competitive tender. Thebuilding was formerly occupied by the federal ministry of internal affairs inthe former Yugoslavia, and is located in the centre of Belgrade in aneighbourhood of government offices and foreign embassies. Plaza believes that the Belgrade market offers particular potential, with acatchment area of approximately 2.5 million people. Additionally, as Belgradehas not to date benefited from institutional grade investment in retail orcommercial real estate, this development will have particular significance interms of providing a new commercial and cultural destination for both domesticand international visitors. Plaza has partnered a local Serbian developer for the project who will beentitled to participate in up to 10% of the project, subject to certainconditions, with project management handled solely by Plaza. The development will comprise a shopping gallery, offices and hotel totallingcirca 90,000 sqm of GBA. In December 2007, the Company won a second competitive public auction announcedby the Government of Serbia for the development of a new shopping andentertainment centre with a total GLA of approximately 40,000 sqm in Belgrade,Serbia. The site is located on one of the main roads leading into the centre ofBelgrade. The site also has the potential for additional residential and officedevelopment as part of the shopping and entertainment centre. An additional development in Serbia is located in Kragujevac, a city of 180,000inhabitants. Kragujevac is the administrative centre of the Sumadija districtand the fourth largest city in Serbia. The planned shopping and entertainmentcentre will comprise approximately 24,500 sqm GLA and will include a cinemacomplex, fashion retailers, a food court, restaurants and parking places forapproximately 900 cars. Greece Plaza owns a 15,000 sqm plot of land centrally located in Piraeus Avenue,Athens. Plaza is currently working on securing building permits for theconstruction of a shopping centre, or alternatively an office complex, totallingapproximately 35,000 sqm of GLA. Russia and Ukraine New country directors have been appointed to these countries to focus onpossible investments and to gain deeper understanding of the local market.Negotiations are currently underway to purchase plots in the major cities ofthese countries. India As outlined in its Prospectus, Plaza has identified strong potential in Indiaand, during the reporting period, acquired two development projects in 50-50Joint Venture in the Kharadi district of Pune, totalling approximately 225,000sqm of GBA and in Trivandrum, the capital city of the State of Kerala, ofapproximately 195,000 sqm GBA. Both projects are for mixed use development(shopping centre, offices, hotel and serviced apartments), with Kharadifeaturing 120,000 sqm of shopping space, office space of approximately 81,000sqm and 24,000 sqm of serviced apartments. The project in Trivandrum willprovide shopping space of some 67,000 sqm, an office complex of 90,500 sqm and37,500 sqm of serviced apartments. Prospects Despite the global economic slowdown, we continue to see strong demand for ourhigh quality shopping and entertainment centres, from both tenants andinvestors. This has ensured that we have successfully been able to progress ourbusiness model and drive to expand our international presence. With current cash balances of circa. €400 million, we see exciting opportunitiesfor Plaza to expand its portfolio and to take part in attractive new investmentsin real estate, broadly unaffected by conditions in the current credit markets. Our diversification into India also creates the opportunity for Plaza tocontinue to expand and enjoy high rates of return as demonstrated in the past. Amiddle class population of over 250 million can support such expansion andreturns for many years. We also continue to examine other future emerging market opportunities, which weconsider to offer strong potential consumer demand for Plaza's developmentprojects. We are confident that the Company will achieve its goal to complete atleast four to five developments each year and, thereby, deliver strong incomeand capital growth for our shareholders. We look forward to continued progressin 2008. Ran ShtarkmanPresident and CEO27 March 2008 FINANCIAL REVIEW Results The 2007 financial statements reflects the completion of five shopping andentertainment centres, the realization of four shopping and entertainmentcentres and one office building, as well as substantial investment in currentprojects and in new pipeline of additional 13 projects acquired during the year. In line with the Group's commercial decision to focus its business more on thedevelopment and sale of shopping and entertainment centres, the Group isclassifying its current projects under development as trading properties ratherthan investment properties. Accordingly, revenues from the sale of tradingproperties are presented at gross amounts. The Group is not revaluating itstrading properties and therefore profits from these assets represent actualcash-based profits due to realizations. Revenues for the year ended 31 December 2007 increased to €510 million (2006:€74 million), mainly due to the sale of Arena Plaza in Budapest, Rybnik Plaza,Sosnowiec Plaza and Lublin Plaza in Poland. Gains from the sale of investment property decreased to €2.1 million (2006:€13.7 million), mainly due to the policy of the Group to classify properties astrading properties. The gain in 2007 represents the net result from the sale ofthe Duna Plaza Offices in Budapest, while the 2006 gain was mainly from thePoznan Plaza price adjustment. The cost of operations is attributable to the cost of projects sold mentionedabove (Arena, Rybnik, Sosnowiec and Lublin) which were classified as tradingproperties (inventories). Administrative expenses increased to €23 million (2006: €8 million), mainly dueto an increase in the Company's volume of activities, including moving into newmarkets, and to non-cash share-based payments (€7.6 million) (2006: €1.2million) which were not in place for most of 2006 (most options were granted atthe IPO date, in late October 2006). In addition, the options are amortized inthe profit and loss statement using the conservative graded vesting method asrequired by IFRS. Using this method, the majority of the expense (approximately60%) is recognized during the first year of vesting, i.e most of the expensesfor the options granted at IPO are reflected in the 2007 financials statements. Additional reasons for the increase of the administrative expenses are the costsfor the registration of the company's shares in the Polish Stock Exchange (circa€800,000) and the costs of the openings of the five shopping and entertainmentcentres which were opened to the public in 2007 (approximately €2.5 million).These costs are included as administrative expenses under IFRS and are not partof the construction of the relevant asset. Net finance was positive in 2007 at €9.3 million (2006: €0.6 million) due tohigher cash balances and more favourable lending terms achieved. Tax expenses continue to remain very low at €90,000 (2006: €1.6 million),reflecting less than 1% (2006: 11%) of profits before tax and resulting from theGroup's favourable tax structure. Profit for the period amounted to €227 million in 2007, above marketexpectations, compared to €14.7 million in 2006 and again reflects the sale offive assets as mentioned above in comparison with the one asset sold in 2006(Novo Plaza in Prague). Basic and diluted earnings per share for 2007 were €0.78 and €0.77, respectively(2006: both €0.27). The increase is not proportional to the increase in Profits,as the public share offering that took place only in late 2006 when the numberof outstanding shares was increased significantly. Balance sheet and cash flow The balance sheet as at 31 December 2007 showed current assets of €721 millioncompared to current assets of €414 million at the end of 2006. This riseprimarily results from Plaza's realization of five assets and investment in oursubstantial pipeline of development projects. The cash position of cash and short term deposits decreased to €93 million(2006: €219 million), mainly due to acquiring 13 pipeline projects during theperiod and completion of construction of current projects, net of receipts fromthe five trading properties and one investment property sold. As of today andfollowing the collection of the Arena sale proceeds and the Notes issuanceaffected in February 2008, the Company has cash balances of approximately €400million. Investment properties decreased to €13 million (2006: €26.6 million), due to thesale of Duna Plaza Offices. Currently only the Prague 3 logistic building isclassified as an investment property. Total bank borrowings (long and short term) decreased to €6 million (2006: €57million) reflecting the repayment of the loans used to construct the fivetrading properties subsequent their sale. Long term debentures reflects bonds issued in July 2007 in Israel, hedged to theEUR and bear an effective interest rate of Euribor+1.69%. Trade payables and other liabilities increased to €19 million and €52 million,respectively (2006: €16 million and €3 million, respectively), due to theincrease in the volume of construction activities. Related Party balances are presented gross (both in the assets and in theliabilities sections of the balance sheet) as the balances are with differentPlaza group subsidiaries and therefore netting was not possible under IFRS.However, the net balance of the Plaza Group with its controlling shareholders isapproximately €5.4 million (liability), from which €1.9 million is due to aprovision in respect of project management fees charged by the Control Centersgroup, relating to project supervision services granted in respect of theextensive development of projects within the Group. In addition, the balancealso includes re-charge of expenses paid on behalf of Plaza by its parentcompany, mainly in India. In conclusion, Plaza's balance sheet reflects significant strength. Ourincreasing balance of inventories under construction will result in successfulyield in the near future and will generate substantial revenues in the upcomingyears. Plaza has proven to be able to generate substantial profits, which arisefrom actual cash realization of assets and not from revaluations. Our high levelof liquid balances, supported by the ability to raise additional Notes and bankfinancing, will enable us to bring the current portfolio into fruition and toexpand our portfolio with additional exciting developments in current and futureadditional markets and to generate substantial added value to our shareholders. Roy LindenChief Financial Officer27 March 2008 Valuation Summary by King Sturge LLP as at December 31, 2007 (in EUR) Country Project name Market Value upon Market Value upon Market Value of the land and Market Value completion 31 December, completion 30 June, 2007 project 31 December, 2007 of the land 2007 and project 30 June, 2007Hungary Arena Plaza - 382,600,000 - 300,000,000 Arena Plaza 71,500,000 71,300,000 28,000,000 27,000,000 extension Dream Island 462,100,000 462,100,000 81,200,000 81,160,000 David House 5,320,000 5,275,000 5,320,000 5,275,000 Duna Plaza 49,600,000 47,100,000 25,000,000 25,000,000 extension Uj Udvar 7,800,000 - 4,113,000 - Shopping CenterPoland Torun Plaza 132,100,000 89,150,000 18,700,000 18,000,000 Suwalki Plaza 57,500,000 60,900,000 11,500,000 11,300,000 Lodz Plaza 251,000,000 128,105,000 21,400,000 16,500,000 Zgorzelec 41,800,000 41,800,000 6,000,000 6,500,000 Plaza Lublin Plaza - 39,000,000 - 39,000,000Czech Plzen Plaza 60,382,000 61,800,000 60,382,000 29,010,000Republic Prague 3 116,500,000 116,575,000 25,475,000 24,600,000 Opava Plaza 43,800,000 41,600,000 14,100,000 11,900,000 Liberec Plaza 78,600,000 63,500,000 51,860,000 25,330,000 Roztoky 23,806,000 - 3,910,000 -Romania Miercurea Ciuc 41,300,000 19,200,000 4,800,000 4,400,000 Plaza Timisoara 227,100,000 104,600,000 30,100,000 24,000,000 Plaza Casa Radio 761,000,000 646,900,000 191,300,000 164,000,000 Plaza Iasi Plaza 239,600,000 - 35,200,000 - Slatina Plaza 53,300,000 - 5,500,000 - Palazzo Ducale 2,600,000 - 2,600,000 -Latvia Riga Plaza 79,000,000 75,000,000 25,250,000 23,000,000Greece Helios Plaza 105,860,000 95,625,000 30,220,000 30,210,000India Koregaon Park 40,000,000 51,650,000 12,500,000 12,750,000 Kharadi Plaza 60,000,000 76,600,000 16,700,000 17,000,000 Trivandrum 43,400,000 78,900,000 10,600,000 10,650,000 PlazaBulgaria Plaza Shumen 52,500,000 - 12,700,000 -Serbia Belgrade Plaze 147,800,000 - 33,600,000 - Sport Star 180,300,000 - 25,200,000 - Plaza Kragujevac 99,000,000 - 9,300,000 - Plaza TOTAL 3,534,568,000 2,757,380,000 802,530,000 906,585,000 Notes • Torun and Zgorzelec are owned by third party, non Plaza Centersrelated companies, albeit with preliminary purchase or pre-agreements in place.Our valuations reflect the potential value of the projects if available fordevelopment today. • Plaza Centers has a 50% interest in the Riga Plaza shopping centredevelopment. • Plaza Centers has a 35% interest in the Uj Udvar Shopping Centredevelopment • All values of land and project assume full planning consent for theproposed use. • Plaza Centers has a 50% interest in Koreagon Park, Kharadi Plaza andTrivandrum Plaza. • Plaza Centers has a 30% share in Dream Island. • Plaza Centers has a 75% share of Casa Radio. • All the figures reflect Plaza share. Consolidated Income Statements For the year ended December 31, 2007 2006 Note • '000 • '000 Revenues 12 507,843 60,219 Gain from the sale of investment property, net 13 2,071 13,715 Changes in fair value of investment property - 257 509,914 74,191 Cost of operations 14 268,730 50,034 Gross profit 241,184 24,157 Administrative expenses 15 23,117 8,173 Operating profit 218,067 15,984 Finance income 12,407 4,000Finance expenses (3,060) (3,336)Finance income, net 16 9,347 664 Other income 85 287Other expenses (423) (457) Share in loss of associate (19) (150) Profit before tax 227,057 16,328 Income tax expenses 17 90 1,608 Profit for the year 226,967 14,720 Basic earnings per share (in EURO) 11 0.78 0.27 Diluted earnings per share (in EURO) 11 0.77 0.27 Consolidated Balance Sheets December 31, 2007 2006 Note • '000 • '000ASSETS Current assets Cash and cash equivalents 2 66,381 212,683Restricted bank deposits 25,155 616Short-term deposits 1,033 6,154Trade accounts receivables, net 262,595 5,342Other accounts receivable and prepayments 3 48,102 29,222Other debtors and related parties 4 19,525 -Trading properties 5 298,339 159,961 721,130 413,978 Non Current assets Investment in associate 1,129 1,148Derivative 2,228 -Long-term balances and deposits 1,987 2,257Other debtors and related parties 4 - 22,027Property, plant and equipment 16,465 7,550Investment property 6 12,970 26,654Restricted bank deposits 5,302 350Other non-current assets - 933 40,081 60,919 Total assets 761,211 474,897 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilitiesInterest bearing loans from banks 7 409 51,201Trade payables 19,432 15,703Other liabilities 23,103 3,088Amounts due to related parties 8 786 17,771Other Liabilities 8 51,950 2,418 95,680 90,181Non-current liabilitiesInterest bearing loans from banks 7 5,461 5,875Long term debentures at fair value through profit or loss 9 53,821 -Amounts due to related parties 8 1,871 8,474Other long term liabilities 355 1,551Deferred tax liabilities 552 4,139 62,060 20,039 Share capital 2,924 2,923Translation reserve (1,727) (1,895)Other reserves 13,498 1,840Share premium 248,860 248,860Retained earnings 339,916 112,949Shareholders' equity 10 603,471 364,677 Total shareholders' equity and liabilities 761,211 474,897 Consolidated Cash Flow Statements For the year ended December 31, 2007 2006 • '000 • '000Cash flows from operating activitiesProfit for the year 226,967 14,720Adjustments necessary to reflect cash flows used in operating activities:Depreciation 907 773Change in fair value of investment property - (257) (52,358) -Finance income, net (2,983) (595)Loss on sale of property plant and equipment 40 18Company's share in loss of associate 19 150Gain on sale of investment property subsidiaries (2,071) (13,630)Gain on sale of trading property subsidiaries (235,499) (7,008)Income tax expenses 83 1,009Increase in trade accounts receivable (5,807) (786)Increase in other accounts receivable (18,816) (6,087)Change in restricted cash for projects to be acquired (24,540) (19,401)Increase in trading properties (302,996) (92,201)Purchase of trading property companies (see appendix A, note 18) (16,244) 1Increase in trade accounts payable 38,822 14,241Increase in other liabilities 20,423 3,187Net proceeds from selling of trading property subsidiaries (see appendix B, Note 63,718 6,01618)Share based payment 7,644 1,186Net cash used in operating activities (302,691) (98,664) Cash from investing activitiesPurchase and development of investment property (2006 - other assets) (9,880) (1,422)Proceeds from sale of plant, property and equipment 19 167Investment in associate - (115)Short term deposits, net (5,121) 2,393Long term deposits decreased 152 1,047Long term deposits increased (5,582) (2,374)Net proceeds from disposal of other subsidiaries (see appendix B, Note 18) 11,526 17,297Long term loans granted to partners in Joint controlled company - (21)Net cash from (used in) investing activities (8,886) 16,972Cash from financing activitiesShort term loans from banks, net 124,747 21,001Issuance of ordinary shares, net - 234,501Debentures raised 53,003 -Long term loans repaid to banks (7,115) (8,604)Loans granted from (repaid to) related parties (5,349) 778Net cash from financing activities 165,286 247,676 Increase in cash and cash equivalents during the year (146,302) 165,984Cash and cash equivalents at the beginning of the year 212,683 46,699Cash and cash equivalents at the end of the year 66,381 212,683 Selective Notes to the consolidated financial information: NOTE 1 - Basis of Accounting and Presentation of Financial Information The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS") and its interpretationsadopted by the European Union ("EU"). The auditors have reported on those accounts; their report was (i) unqualified,(ii) did not include references to any matters to which the auditors drewattention by way of emphasis without qualifying their reports. A full set of theconsolidated Financial Statements will follow. The financial information contained in this announcement does not constituteDutch statutory accounts which will be submitted in due course. NOTE 2 - CASH AND CASH EQUIVALENTS Interest rate as of December 31, December 31, 2007 2007 2006 • '000 • '000 Bank deposits - in EUR Mainly 4.89%, and EONIA 61,917 209,292 - 0.02%Bank deposits - in Hungarian Forints 5.2% 143 2,782Bank deposits - in Polish Zlotys 4%-4.4% 1,586 416Bank deposits - in Czech Crowns 1%-1.6% 1,174 64Bank current accounts - in U.S.Dollar 4% 263 129Bank deposits - in other currencies 0%-5.1% 1,298 110Balance at 31 December 66,381 212,683 NOTE 3 - OTHER ACCOUNTS RECEIVABLE AND PREPAYMENTS December 31, 2007 2006 • '000 • '000 Advance in respect of plot purchase (*) 36,340 19,401Advance to suppliers 4,984 -Prepaid expenses 230 1,314VAT authorities 5,848 7,561Partners in companies under joint venture 117 199Accrued interest receivable 199 -Companies in the EMI Group and other related parties - 168Others 384 579Balance at 31 December 48,102 29,222 (*) 2007 - Mainly advance payment for a purchase of plots of land in Serbia -EUR 19.8 million and Romania EUR 13 million. 2006 - Advance payment for apurchase of plot of land in Bucharest in the amount of EUR 19.4 million. NOTE 4 - OTHER DEBTORS AND RELATED PARTIES December 31, 2007 2006 • '000 • '000Short term Debtor balances with:Related party - EI 19,310 -Companies in the EI Group and other related parties 215 - Balance at 31 December 19,525 - Long term Debtor balances with:Related party - EI - 18,226Partners in companies under joint venture - 3,801Balance at 31 December - 22,027 The above EI mentioned balances are linked to the EUR and bears interest ofthree months Libor plus a margin of 1.65%), with no scheduled repayment date.For EI and EUL loans in credit, refer to note 8. NOTE 5 - TRADING PROPERTIES December 31, 2007 2006 • '000 • '000Balance at 1 January 159,961 104,717Additions during the period 395,670 98,819Trading property sold (257,292) (43,575)Balance at 31 December 298,339 159,961 As of the balance sheet date, The Company has trading properties in Hungary,Poland, Romania, Czech Republic, Serbia, Latvia, Greece, Bulgaria and India. NOTE 6 - INVESTMENT PROPERTY December 31, 2007 2006 • '000 • '000 Balance at 1 January 26,654 26,354Additions - 43Fair value adjustments (13,684) 257Balance at 31 December 12,970 26,654 Investment property at year end comprises from logistic center leased to thirdparties. Generally leases contain an initial period of 5 to 10 years.Subsequent renewals are negotiated with the lessee. The contracts aredenominated in, or linked, to the EUR. NOTE 7 - INTEREST BEARING LOANS FROM BANKS Interest rate December 31, December 31, Maturity date 2007 2006 2007 • '000 • '000 • '000 Current maturities of long term loansIn PLN - 3,361 N/AIn EUR 409 47,840 EURIBOR + 1.75%Total 409 51,201Long term Credit In EUR 2015 5,461 5,875 EURIBOR + 1.75% 5,461 5,875 Total loans from banks 5,870 57,076 Effective interest rate on the loan as of December 31, 2007, and December 31,2006 is 6.3% p.a and 5.5% p.a respectively. Below is the repayment schedule of outstanding bank loans for each period: December 31, 2007 2006 • '000 • '000 First year - Current Maturity 409 51,201 Second year 409 459Third year 409 459Fourth year 409 459Fifth year 409 459Sixth year and thereafter 3,825 4,039 Total long term 5,461 5,875 Total 5,870 57,076 NOTE 8 - LOANS AND AMOUNTS DUE TO RELATED PARTIES AND OTHERS December 31, 2007 2006 Currency • '000 • '000Short termEI Group- ultimate parent Company - charges EUR 5,309 7,655Other related parties (2) Mainly Indian Rupee - 1,202Other related parties (3) 1,985 -Director of EI 762 -EUL (parent Company) (1) EUR 15,047 8,914EI Group- ultimate parent Company - charges 23,103 17,771Other related parties (2) EUR 786 2,418Total 23,889 20,189 Long term EUL- parent Company (4) EUR 1,871 7,975Other related parties (3) EUR - 499 1,871 8,474 (1) The loans received from Elbit Ultrasound B.V. (the main shareholder)("EUL"), bear interest at 3 months USD Libor (or 3 months EURIBOR) plus a marginof between 1.5% and 2.0% (effective interest rate as of December 31, 2007, andDecember 31, 2006 is 6.5% p.a and 5.7% p.a respectively). Loans are financingtrading properties of the Group. (2) Other related parties in the short term in 2006 include the liability tothe Company's Indian partner in the joint venture company in India. (3) Other related parties in the long term included in 2006 liability to theControl Centres group, a group of companies which provides project managementservices, controlled by the ultimate parent company controlling shareholder. Thebalances were reclassified to short term in 2007, as they relate to tradingproperty construction activity. (4) The loans received from Elbit Ultrasound B.V. (the main shareholder)("EUL"), bear an interest of 3 month USD Libor (or 3 months EURIBOR) plus amargin of between 1.5% and 2.0% (effective interest rate as of December 31,2007, and December 31, 2006 is 6.5% p.a and 5.7% p.a respectively). Loans areexpected to be repaid in the long term, as EUL has declared its intention not todemand earlier repayment. OTHER LIABILITIES December 31, 2007 2006Short term • '000 • '000Obligation in respect of plot purchase (1) 38,163 -Income in advance - short term (2) EUR 1,914 269Accrued expenses and commissions (3) EUR 6,923 1,689Accrued bank interest EUR 44 195Government institutions and fees HUF, PLN, CZK 508 490Salaries and related expenses (4) EUR, HUF, PLN, CZK, USD 3,123 336Partner in joint controlled company 1,170 -Other HUF, PLN, CZK 105 109Total 51,950 3,088 NOTE 9 - LONG TERM DEBENTURES AT FAIR VALUE THROUGH PROFIT OR LOSS On 5 July 2007, the Company agreed with Israeli institutional investors to issuean aggregate principal amount of NIS 305 million (approximately EUR 53.0million) Par Value of series one of unsecured non-convertible debentures toinstitutional investors in Israel. The debentures are rated by Standard & Poor'sMaalot Ltd. ("Maalot") - at a local rating of A+/Positive. The debentures arerepayable in eight equal annual instalments, on December 31 of each of the years2010 to 2017, inclusive. The debentures bear an annual interest rate of 4.5%.Interest is payable semi-annually in arrears on December 31 and July 1 of eachof the years 2007 to 2017 (the first instalment to be effected on 31 December2007 and the last instalment to be effected on December 31, 2017). Thedebentures are linked to the increase in the Israeli Consumer Price Index. As the Company's functional currency is the Euro, the Company has hedged thefuture expected payments in NIS (principal and interest) to correlate with theEuro using a Cross currency interest rate swap. The debentures will be repaid by the Company, inter alia, at the option of thetrustee or the holders of the debentures if the Company delays the publicationof its financial reports for more than 60 days from the dates provided byapplicable law or if the debentures cease to be rated for a period of more than60 days. The debentures were listed for trade on the Institutional Retzef System, whichis a trading system for institutional investors in Israel. The Company may also,in its sole discretion register the debentures for trade on the TASE. So long asthe Debentures were not registered for trade on the TASE, the Company hasundertaken (i) to pay an additional interest at an annual rate of 0.5% (namely5%) until a prospectus is published for the registration of the debentures fortrade on the TASE; (ii) to pay an additional interest rate at an annual rate of0.25% in the event the rating of the debentures decreases to (BBB+) rating on alocal scale by Maalot or an equivalent rating by another Rating Company and(iii) to repay the debentures at the option of the trustee or the holders of thedebentures if made a special resolution on their general meeting upon theoccurrence of each of the following events: (A) Should the rating of thedebentures in Israel decrease below the BBB+ investment level rating of Maalot -or other equivalent rating by another rating company; (B) if the Company isrequired to repay another series of debentures issued by the Company; or (C) ifthe holdings of EI, the indirect parent of the Company, fall below 25% of theCompany's issued and outstanding share capital. Such undertakings would beterminated upon the registration for trade of the debentures on the TASE. Following the balance sheet date the Company registered the debentures for tradeon the TASE in February 2008 NOTE 10 - EQUITY December 31, 2007 2006 Remarks Number of sharesAuthorised:Ordinary shares of par value EUR 0.01 each See (1) below 1,000,000,000 1,000,000,000Issued and fully paid:At the beginning of the period 292,346,087 1,815,120Options exercised to shares 57,700 -Issued for forgiveness of loan to parent Company See (2) below - 2,684,880Issued for forgiveness of loan to parent Company See (2) below - 195,500,000Issued for cash to the Public See (2) below - 92,346,087At the end of the period 292,403,787 292,346,087 1) The number of shares authorized as of 31.12.05 was 40 (of 453.8 EUR parvalue). In September 2006 the authorized share capital was revised as follows: a) 40 shares of EUR 453.8 were subdivided into 1,815,120 shares of 0.01EUR. b) The authorized share capital was increased to 1 milliard shares of 0.01EUR. 2) In the course of the last quarter of 2006 the following share capitalincreases occurred: a) 2,684,880 shares of EUR 0.01 were issued to Elbit Ultrasound B.V, theparent company of the Company, on October 2006, upon the change of the Companyfrom B.V status to N.V status. The capital increase was effected in exchange forthe forgiveness of a loan, and the shares were issued at no share premium. b) 195.5 million Shares of EUR 0.01 were issued to Elbit Ultrasound B.V inOctober 2006, in order to create a share capital structure which will allow theCompany to initiate the IPO. The capital increase was effected through thecontribution of loans, and the shares were issued with a share premium ofapproximately EUR 15.3 million. c) 92,346,087 shares of EUR 0.01 were issued to the Public, in October andNovember 2006 (including the "Green Shoe" option exercised), as a result of theIPO which took place in the London Stock Exchange ("LSE") (see also note 30).The share premium recorded in the flotation (net of IPO costs) was EUR 233.6million. The holders of ordinary shares are entitled to receive dividends as declaredfrom time to time and are entitled to one vote per share at meetings of theCompany. All shares rank equally with regard to the Company's residual assets. 3) In the course of the last quarter of 2007, 303,471 vested options wereexercised into 57,700 shares of EUR 0.01. Capital reserve due to share option plan Capital reserve created as a result of the Employee Share Option Plan which wasintroduced in October 2006 (see also note 22) was recorded and totalled EUR13,679 as of December 31, 2007 (2006 - EUR 2,021). Translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of foreign operations. NOTE 11 - EARNINGS PER SHARE Profit attributable to ordinary shareholders December 31, 2007 2006 • '000 • '000 Profit for the year 226,907 14,720 Profit attributable to ordinary shareholders 226,907 14,720 Weighted average number of ordinary sharesIn thousands of shares with a EUR 0.01 par value December 31, 2007 2006 Issued ordinary shares at 1 January 292,346 1,815Effect of shares issued in October 6th, 2006 - 633Effect of shares issued in October 24th, 2006 - 36,422Effect of shares issued in November 1st, 2006 - 14,090Effect of shares issued in November 24th, 2006 - 672Share base payment - exercise of options 9Weighted average number of ordinary shares at 31 December 292,355 53,632 The calculation of diluted earnings per share at 31 December 2007 was based onprofit attributable to ordinary shareholders of EUR 226,967 thousand and aweighted average number of ordinary shares outstanding after adjustment for theeffects of all dilutive potential ordinary shares of EUR 1,129 thousands. In2006 the diluted earning per share is the same as basic earnings per share sinceoptions or securities had no dilutive effect. NOTE 12 - REVENUES For the year ended December 31, 2007 2006 • '000 • '000Revenue from selling trading properties (*) 495,565 51,276Rental income from tenants 2,153 3,766Management fees 1,395 284Operation of entertainment centres 6,608 3,980Other 2,122 913Total 507,843 60,219 (*)Revenue from selling trading properties consist of asset value of commercialcentres, as determined between the company and the buyer of the property. In2007 the revenue includes the agreed asset value of the following shoppingcenters: Arena Plaza Hungary - 365,541, Rybnik and Sosnowiec Plaza in Poland -89,323, Lublin Plaza in Poland - 38,994, and Novo shopping center in Prague, theCzech Republic (additional proceeds) - 1,707. In 2006 - Includes mainly EUR50.3 million revenues from selling Novo shopping centre in Prague. NOTE 13 - GAIN FROM SALE OF INVESTMENT PROPERTY In 2007, the gain recorded was mainly from the sale of Duna Plaza officesinvestment property. In 2006, the gain from the sale of investment property, as reflected in theconsolidated income statement (EUR 13.7 million) is comprised mainly of thefollowing: • Part of the proceeds in the amount of EUR 5.4 million was subject toobtaining utilities licenses by the Company in respect of the sold centres andaccordingly has been deferred for recognition in the financial statement for theyear ended December 31, 2005. Within the framework of a settlement agreementsigned between the Company and Klepierre on November 16, 2006 it was agreed thatthe Company shall be unconditionally and irrecoverably released from itsobligations to obtain such utilities licenses and that Klepierre will assumefull and sole responsibility for the obtaining of these utilities permits.Accordingly the Company recorded in these financial statements an additionalgain of EUR 5.4 million. • Furthermore, the Company and Klepierre agreed to conclude a finalpurchase price adjustment in respect of the sold centres in accordance with theprovisions set forth in the sale agreement and accordingly the Company recordedin these financial statements an additional gain of EUR 8.2 million which ismainly due to the Poznan shopping centre on account of the price adjustment,based on the updated gross rentals. NOTE 14 - COST OF OPERATIONS For the year ended December 31, 2007 2006 • '000 • '000 Direct expenses:Cost of sold trading properties (*) 258,510 44,804Salaries and related expenses 1,216 736Initiation costs 786 244Municipality taxes 24 8Property taxes 206 195Property operations and maintenance 5,909 2,968 266,651 48,955Other operating expenses 1,538 915 268,189 49,870 Depreciation and amortization 541 164 268,730 50,034 (*)Costs of sold trading properties include the cost of purchasing and buildingthe trading properties which were sold in 2007, consist mainly of cost ofselling of the following trading properties: Arena Plaza Hungary - 161,818,Rybnik and Sosnowiec Plaza in Poland - 66,270, Lublin Plaza in Poland - 29,908,others - 514. 2006 - Includes mainly cost of asset from selling the Asset inPrague (Novo shopping center - see also note 34) - EUR 43.9 million. NOTE 15 - ADMINISTRATIVE EXPENSES For the year ended December 31, 2007 2006 • '000 • '000Selling and marketing expenses Advertising and marketing 2,649 889Salaries and relating expenses 761 757Doubtful debts 18 4Amortization of deferred charges 5 1 3,433 1,651 General and administrative expenses Salaries and related expenses (*) 12,167 2,661Depreciation and amortization 366 260Management fees 500 706Professional services 4,206 1,611Travelling 1,071 591Offices 508 281Others 866 412 19,684 6,522 Total 23,117 8,173 Selling and marketing (1) As a result of opening five new shopping and entertainment centers in2007 (comparing one opened in 2006), these costs significantly increased. General and administrative (2) Including non-cash expenses due to the share option plan in the amountof EUR 7.6 million (2006- EUR 1.2 million) see also note 25 for more details onshare based payments. Main increase is attributable to the high volume of activities of the Companydue to its listing in the London stock exchange, and expanding the Company'sactivity into new countries. Also attributable to expenses in respect ofregistration of the Company's shares for trade in Warsaw - approximately EUR 0.8million NOTE 16 - FINANCE INCOME (EXPENSES) For the year ended December 31, 2007 2006 • '000 • '000 Interest received on bank deposits and loans to 7,552 2,595related partiesChanges in fair value of derivative 2,228 -Foreign exchange gains - related parties 1,101 1,405Other interest income - mainly from receivables 1,526 -arising from sale of shopping centersTotal finance income 12,407 4,000 Interest expenses on bank loans and debentures (6,216) (3,542)Interest on loans from related parties (642) (1,133)Changes in fair value of debentures (818) -Foreign exchange losses (105) -Other finance expenses (972) (508) (8,753) (5,183)Less-Finance expenses capitalized to properties under 5,693 1,847developmentTotal finance expenses (3,060) (3,336) Total 9,347 664 NOTE 17 - INCOME TAXES For the year ended December 31, 2007 2006 • '000 • '000 Current tax 106 170Deferred tax (16) 1,009Prior year's taxes - 429Total 90 1,608 The main tax laws imposed on the Group companies in their countries ofresidence: a. The Netherlands a. Companies resident in the Netherlands are subject to corporate income taxat the general rate of 29.6% for the fiscal year of 2006. Commencing 2007 thegeneral corporate income tax rate has been reduced to 25.5%. Under the amendedrules effective January 1 2007 tax losses may be carried forward and set ofagainst income of the immediately preceding tax year and the 9 subsequent taxyears. Transitional rules apply for tax losses on account of tax years upthrough 2002 which may be carried forward and set of against income up through2011. b. Under the participation exemption rules, income including dividends andcapital gains derived by Netherlands companies in respect of qualifyinginvestments in the nominal paid up share capital of resident or non residentinvestee companies, are exempt from Netherlands corporate income tax providedthe conditions as set under these rules have been satisfied. The participationexemption rules and more particularly the statutory conditions thereunder havebeen amended with effect of January 1, 2007. Such amended conditions require,among others, a minimum percentage ownership interest in the investee companyand require the investee company to satisfy either of, or both the newlyintroduced 'assets' - test and the amended 'subject to tax' - test. c. Dividend distributions from a Netherlands company to a Dutch corporateshareholders holding at least 25% of the shares of such Netherlands company issubject to withholding tax at a rate of 5% provided certain compliance relatedformalities have been satisfied. In other situations, dividend distributions toshareholders are subject to withholding tax at a rate of 15%. b. Hungary The corporate income tax rate imposed on the income of the subsidiariesincorporated in Hungary is 16%. Commencing 2007, capital gains are exempted fromcorporate income tax provided that certain criteria are fulfilled. A specialsolidarity tax is levied on companies as from September 1, 2006, being 4% of themodified accounting profit as determined by law. Dividends, interest, royaltypaid out to companies are not subject to withholding tax. Losses in the firstthree years of operation can be carried forward without limitation. Lossesincurred until 2004 can be carried forward for the period of five years, subjectto certain limitations. Losses incurred in 2005 and thereafter, may be carriedforward indefinitely, subject to certain limitations. c. Czech Republic Corporate income tax rate imposed on the income of the subsidiariesincorporated in the Czech Republic (including capital gains) in 2007 is 24%which will gradually decrease from 21% in 2008 to 19% in 2010. Tax losses canbe carried forward up to seven years to offset future taxable income. Dividendspaid out of net income are subject to a withholding tax of 15%, subject to therelevant double taxation treaty. The Czech Republic exempts domestic dividendspaid to EU parent companies that hold a participation of 20% or more for atleast two years. d. Poland The corporate tax applicable to income of Polish subsidiaries (including capitalgains) is 19%. Dividends paid out of these profits are subject to an additional(final) tax rate of 19%, subject to the relevant double taxation treaty.Distribution of dividend of Polish subsidiary to Dutch parent company, holdingat least 15% (commencing 2009 - 10%) of shares for a period of at least 2 years,is exempt from withholding tax. Losses may be offset against taxable income overa 5 year period, subject to a maximum annual utilization of up to 50% of theaccumulated loss from each particular tax year. e. Romania Corporate income tax rate for resident companies and non-resident entities witha permanent establishment in Romania is 16% (including capital gains). Dividendspaid to resident and non-resident corporations are subject to a finalwithholding tax of 16%, unless lower double taxation treaty rates apply. Lossesmay be offset against taxable income for a period of five years from theincurrence year-end. f. Latvia The corporate income tax rate imposed on the income of the subsidiariesincorporated in Latvia (including capital gains) is currently 15% (2006 - 15%).Tax losses can be carried forward and be offset against taxable income of thefive years following the accounting year in which they were incurred. Dividendspaid out of net income to non-resident are subject to a withholding tax of 10%,subject to the relevant double taxation treaty or 0 % tax could be applied ifthe recipient is resident in another EU country or resident in country includedin European Economic region. g. Greece The corporate income tax rate imposed on the income of the subsidiaryincorporated in Greece (including capital gains) is currently 25% (2006- 29%,).Tax losses can be carried forward and offset against taxable income of the fiveyears following the accounting year in which they were incurred. h. India The corporate income tax applicable to the income of Indian subsidiaries is33.99%. Minimum alternate tax (MAT) of 11.33% is applying to the book profits(i.e. profits shown in the financial statements), if the company's corporate taxliability is less than 10% of it's book profits. The paid amount will becredited if the company has taxable profits in the following five years. Capitalgains on sale of fixed assets and real estate assets are taxed at the rate of22.66% provided that they were held at least 36 month immediately preceding thedate of the transfer or 33.99% if they were held for not more than 36 month.Dividends paid out of the profits are subject to Dividend Distribution Tax atthe rate of 16.99%. .There is no withholding tax on dividends distributed byIndian company. Losses can be offset against taxable income for a period ofeight years from the incurrence year's end. i. Cyprus The taxation of companies incorporated in Cyprus is based on tax residence andall companies are taxed at the rate of 10%. A special levy of 10% is imposed oninterest received and deemed interest income in certain cases. Dividend incomeand profits from the sale of shares and other titles of companies are taxexempt. There is no withholding tax on payments of dividends to non-residentshareholders or shareholders that are companies resident in Cyprus. Payments ofdividend to shareholders that are physical persons resident in Cyprus aresubject to a 15% withholding tax. Companies, which do not distribute 70% oftheir profits after tax, as defined by the relevant tax law within two yearsafter the end of the relevant tax year, will be deemed to have distributed asdividends 70% of these profits. A special levy at 15% will be payable on suchdeemed dividends to the extent that the shareholders (companies and individuals)are Cyprus tax residents. The amount of deemed distribution is reduced by anyactual dividends paid out of the profits of the relevant year during thefollowing two years. This special levy is payable for the account of theshareholders. j. Serbia Corporate income tax ('CIT') rate applicable to income of Serbian subsidiariesis 10%. Losses stated in the tax balance (i.e. losses adjusted according to theCIT Law rules) may be carried forward for the period of ten years and offsetagainst taxable income from the tax balance. Withholding tax at the rate of 20%is due on the payment by residents companies to non-resident companies ofdividends and share in the profit of a legal entity, and on royalties, interest,capital gains and proceeds from leasing real estate. Withholding tax may bereduced if such possibility is provided by the respective double taxationavoidance treaty . k. Bulgaria Corporate income tax rate for resident companies and non-resident entities witha permanent establishment in Bulgaria is 10% (including capital gains).Dividends paid to resident individuals and non-resident corporations andindividuals are subject to a final withholding tax of 5%, unless lower doubletaxation treaty rates apply. Such final tax is not levied on dividends payableto EU-member entity, provided that certain criteria are met. Losses may beoffset against taxable income for a period of five years from the incurrenceyear-end. NOTE 18 - CASH FLOW APPENDICES For the year For the year ended ended December December 31, 31, 2007 2006 • '000 • '000Appendix A - Acquisition of subsidiariesCash and cash equivalents of subsidiaries acquired 14 -Short term deposits (12,021) 22Trade receivables and other receivables 98 5Trading property 53,848 6,786Trade payables (176) -Related parties - (6,814)Other accounts payable (25,506) -Less- Cash and cash equivalents of subsidiaries acquired (14)Acquisitions of subsidiaries, net of cash held 16,243 (1) Appendix B - Disposal of SubsidiariesCash and cash equivalents of subsidiaries disposed 28,693 463Short term deposits 3,130 -Trade receivables (251,426) 365Other receivables 51,005 (145)Trading properties 257,292 43,575Investment properties 13,684 -Long term balances and deposits 748 1,401Interest bearing loan from banks (168,838) (31,293)Trade payables (54,700) (1,631)Other accounts payables (11,942) 216Related parties 2,251 -Deferred taxes and long term balances (4,167) (10,013)Foreign currency translation adjustment 637 115 Net identifiable assets and liabilities disposed (133,633) 3,053 Cash from sale of subsidiaries 103,937 23,776Less- Cash and cash equivalents of subsidiaries disposed (28,693) (463) 75,244 23,313Non cash activitiesForgiveness of loans in consideration for issuance of ordinary shares - 17,264(see note 23(b))Suppliers and creditors for trading properties 34,020 -Share based options capitalized to trading properties 4,806 835 Interest paid 5,338 2,867Interest received 6,468 1,857Income taxes paid 11 13 END This information is provided by RNS The company news service from the London Stock Exchange

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