Profit Warning for Second Quarter of 2012

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AFI DEVELOPMENT PLC

("AFI DEVELOPMENT" OR "THE COMPANY")

PROFIT WARNING FOR SECOND QUARTER OF 2012

London, 13 August 2012 - AFI Development, a leading real estate company focused on developing property in Russia, today provides the following profit warning.

Based on preliminary indications of valuation results received from an independent appraiser (Jones Lang LaSalle) and information about a claim relating to the Company's rights in inventory of real estate (as described below), the Company is expecting to record a net valuation loss on investment properties under development and impairment loss on inventory of real estate during the second quarter 2012 of circa US$240 million before taxes.

The valuation loss on investment properties under development reflects a decrease in the value of the Company's four projects, which are classified as investment property under development - Pochtovaya, Kossinskaya, Tverskaya Plaza Ib and Tverskaya Plaza II. The projects are currently being valued by the independent appraiser. The valuation loss results from changes in master planning and development policies of the Moscow government: the Company received information/confirmation of these changes and made revisions in its relevant projects during the period June - August 2012. The valuations of Tverskaya Plaza Ic, Tverskaya Plaza IIa and Tverskaya Plaza IV, the three projects forming part of the non-binding agreement with the Moscow government, remain unchanged and the Company is progressing in securing development rights and leasehold rights to respective land plots.

The impairment loss on inventory of real estate reflects the Company's decision to write-off its Botanic Garden project. A subsidiary of the Company is a "co-investor" in the project together with a company fully owned by the City of Moscow, which is the main investor and beneficiary of land lease rights for Botanic Garden project. A claim filed with a Moscow court on 2 August 2012 by a third party creditor is seeking to declare the main investor bankrupt, while its assets were previously arrested for the benefit of the same creditor. The Company asked for a third party legal opinion on this matter. As of today, the Company considers, based on preliminary opinion of its internal legal advisers, that any recovery of the Company's costs relating to its investments in the project is unlikely. Given the current circumstances, the Company has decided to write-off its rights in the project in Q2 2012 Financial Statements. Notwithstanding, the Company will continue its efforts to recover its costs and/or receive the development rights to the project.

The Company is expecting that the Gross Value of the portfolio of properties will be reduced from circa US$2.8 billion to circa US$2.4 billion due to the valuation loss on investment properties under development and impairment loss on inventory of real estate as well as depreciation of the Russian rouble versus the US dollar in Q2 2012.

The estimated impairment and the loss figures are preliminary and remain subject to a review by KPMG, the Company auditor.

- ENDS -

For further information, please contact:

AFI Development, +7 495 796 9988

Ilya Kutnov

Citigate Dewe Rogerson, London+44 20 7638 9571

David Westover

Sandra Novakov

Reena Mavjee

About AFI Development

AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction, and quality and customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets across Russia, with Moscow being its main market. The Company's existing portfolio comprises commercial projects focused on offices, shopping centers, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favorable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighborhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.