Plaza Regulatory News (PLAZ)

29 March 2016

PLAZA CENTERS N.V.

Preliminary results for the year ended 31 December 2015

FOCUS ON OPERATIONAL PERFORMANCE, KiCK STARTING DEVELOPMENT PROJECTS AND DISPOSING OF NON-CORE ASSETS

Plaza Centers N.V. ("Plaza" / the "Company" / the "Group"), a leading property developer and investor with a focus on operations in Central and Eastern Europe ("CEE"), today announces its preliminary full year results for the year ended 31 December 2015.

Financial highlights:

· Reduction in total portfolio value to €392 million (31 December 2014: €466 million), following strategic disposals (mainly of Koregaon Park Plaza and the Iasi plot of land) and write-down and uplift changes at trading properties and equity accounted investees (related to assets in the Czech Republic (€6.2 million), Romania (€9.2 million), Poland (€6 million), other regions (€3.7 million) and an uplift in Serbia (€4.8 million)). Cash proceeds from disposals were used to repay liabilities from bonds issued, in line with the restructuring plan.

· While disposals resulted in an 8% decrease in Group NOI, excluding the impact of the sale of Kragujevac Plaza in 2014, the Group recorded a 10% increase in NOI (from €14.9 million to €16.4 million) from the operation of its other shopping centres including equity accounted investee.

· Net Asset Value decreased to €114 million (31 December 2014: €153 million) primarily as a result of an increased NIS against the EUR, as well as the write-down of assets, mainly in the Czech Republic, Romania and Poland.

o Net Asset Value per share of £0.12 (31 December 2014: £0.17), attributable to the abovementioned factors.

· Losses in the period reduced significantly to €46 million (31 December 2014: loss of €120 million), stemming from a non-cash €19.4 million impairment of trading properties and equity accounted investee (31 December 2014: €87.5 million of impairments), and an overall mostly non-cash net finance cost of €31 million (2014: €36 million).

o Basic and diluted loss per share of €0.07 (31 December 2014 loss per share of €0.39).

· Consolidated cash position at year end (including restricted bank deposits, short term deposits and held for trading financial assets) of €20.4 million (31 December 2014: €41.7 million) and current cash position of circa €18 million (€5.5 million restricted).

· Gearing increased to 79% (31 December 2014: 74%) as a result of write-down and finance costs incurred during the year.

Operational and Group highlights:

· On 13 May 2015, Plaza announced the agreement to sell its Indian shopping mall located in Pune, India, for c. €35 million. The net cash proceeds (after repayment of the related bank loan, other liabilities and transaction costs) from the sale were c. €7.4 million (525 million INR), which are being put towards Plaza's future investments and used for general corporate purposes.

· On 24 June 2015, Plaza reached an agreement to sell its 46,500 sqm development site in Iasi, Romania, in two separate transactions (one for the sale of 37,334 sqm and the other for the sale of 9,166 sqm), for a gross consideration of €7.3 million. There was no bank debt secured against the property. In line with the Company's stated restructuring plan, 75% of the net cash proceeds from the transactions were distributed to the Company's bondholders at the end of September 2015 as an early principal repayment.

· Plaza's subsidiary, Elbit Plaza India Real Estate Holdings Limited (in which Plaza holds a 50% stake with its joint venture partner, Elbit Imaging Ltd.) ("EPI"), on 2 December 2015 signed an agreement to sell 100% of its interest in a special purpose vehicle which holds a site in Bangalore to a local investor. The total consideration for the sale is INR 321 Crores (circa €45.4 million) which will be paid when the transaction closes. Following this closing, 50% of the proceeds will go to Plaza, of which 75% will be repaid to the Company's bondholders in line with the Company's stated restructuring plan. The transaction is subject to certain conditions precedent, and closing will take place once these conditions are met and no later than 30 September 2016. The investor is providing certain security in order to guarantee this deadline.

· A stable occupancy level was recorded across the Company's existing shopping and entertainment centres in the CEE, with the overall portfolio occupancy level at 94.96% as of 31 December 2015 (31 December 2014: 95.34%).

o At Torun Plaza, Poland, occupancy increased to 96.08% (2014: 92.5%) and turnover remained stable despite a slight decrease of 3.2% in the footfall.

o Riga Plaza in Latvia recorded an 8.6% increase in turnover along with a 2.2% increase in footfall, compared to 2014. A small decrease in the occupancy level to 97% (2014: 99.5%) was a direct result of a small number of retailers exiting the Latvian market altogether.

o Suwalki Plaza, Poland, continued to perform well, with a 2.5% increase in turnover in 2015 and 5.7% increase in footfall, compared to the same period in 2014. Occupancy decreased very slightly to 96.5% compared to the same period in 2014 (97.7%).

o Zgorzelec Plaza delivered a 2.8% increase in turnover compared to the same period in 2014, while footfall remained stable. The increase was despite a reduction in occupancy from 95.2% to 88.91% after the closure of the Stokrotka supermarket, following which successful discussions with tenants resulted in most of them agreeing to remain at the centre.

o A 10.6% turnover increase was recorded at Liberec Plaza, compared to 2014, while occupancy remained stable at 83.67% (2014: 84%).

· Considerable letting success was achieved across the portfolio and contracts were agreed with a number of significant new tenants. This improved the overall tenant strength and mix in the portfolio, and included agreements with KIK, Kinder Planeta, Pink and Cliff Sport. In the second half of the year, Adidas, Drogas, Calzedonia, Subway and other well-known brands opened stores in Latvia at Riga Plaza. Both Suwalki Plaza and Zgorzelec Plaza successfully agreed to extend their first five-year lease agreements which helped to keep a high occupancy level and will deliver a more resilient, higher quality income over the coming years.

· On 21 December 2015 Mr. Ron Hadassi was reappointed as Chairman of the Board of Directors following a meeting of the Board.

Key highlights since the period end:

· Since the year end, on 28 January 2016 Plaza announced the appointment of Dori Keren and Yitshak (Izzie) Elias to the roles of Acting Chief Executive Officer and Chief Financial Officer, respectively. Both roles will become effective on 1 April 2016 while Dori Keren will become Chief Executive Officer on 1 January 2017.

· On 4 March 2016, Plaza agreed to sell its subsidiary holding Liberec Plaza, a shopping and entertainment centre in the Czech Republic, for €9.5 million. In line with the terms of the agreement, the buyer deposited 15% of the consideration in escrow. The due diligence process, final closing and settlement is expected to conclude by the end of March. The disposal follows an agreement announced by Plaza on 29 September 2015 whereby a wholly owned subsidiary of Plaza ("PCE") won a tender to buy the loan to the holding and operating company for Liberec Plaza for €8.5 million. Upon completion of the Liberec Plaza disposal, PCE will receive €8.5 million on account of the bank loan it previously purchased. Out of the remaining proceeds, 75% will be distributed to the Company's bondholders by the end of June this year.

· On 24 March 2016 Plaza completed the sale of its 23,880 sqm site in Slatina, Romania, to a third party developer for €0.66 million, consistent with the asset's last reported book value. In line with the Company's stated restructuring plan, 75% of the cash proceeds will be distributed to the Company's bondholders by the end of June this year as an early repayment.

· Today, 29 March 2016, Plaza announces that Sarig Shalhav, a Non-Executive Director of the Company, has indicated his intention to retire from the Board in June 2016 to allow him to focus on other interests. The Board wishes to thank Mr Shalhav for his contribution over previous years, and will confirm any changes to the Board if and as required in due course.

Commenting on the results, Roy Linden, CFO and Acting CEO of Plaza Centers, said:

"Having completed the restructuring process in the prior year, 2015 was very much about delivering on our plan to create a more streamlined, better performing business. With the successful sale of non-core assets and subsequent delivery of proceeds to bondholders, together with a stronger operational performance across the shopping and entertainment centres portfolio and several development and asset management milestones achieved, in particular two new building permits in Belgrade and Timisoara, we are pleased with what we have accomplished during the year.

"There is still plenty more progress to be made, but our portfolio and underlying business is now in a stronger position and the new management team has a clear mandate for further development in 2016 and beyond."

Ron Hadasi, Chairman of Plaza Centers said: "On behalf of the Board of Directors and our shareholders, I would like to thank Roy Linden sincerely for his many years of hard work and dedication to the Company in his role as CFO, and his significant efforts during the last several months as Acting CEO. We wish him the very best of luck in the next stage of his career.

"Roy leaves the Company in good hands as we welcome the new management team of Dori Keren and Izzie Elias to Plaza. Under their guidance we look to the remainder of the year with confidence as we continue with an orderly disposal of non-core or mature assets, work hard to reduce debt levels and bring our development projects to fruition. The progress being made at Belgrade Plaza, which is currently the biggest commercial construction site in Serbia, as well as the sale of Liberec Plaza and the negotiation for the disposal of our share in Riga Plaza are all reflective of the opportunities we have to deliver the strategy and meet our objectives."

For further details please contact:

Notes to Editors

Plaza Centers N.V. (www.plazacenters.com) is a leading property developer and investor with a significant presence across Central and Eastern Europe. It focuses on constructing new shopping and entertainment centres and, where there is significant potential, redeveloping existing centres in both capital cities and important regional centres. The Company is listed on the Main Board of the London Stock Exchange, the Warsaw Stock Exchange and, as of 27 November 2014, the Tel Aviv Stock Exchange (LSE: "PLAZ", WSE: "PLZ/PLAZACNTR"; TASE: "PLAZ"). Plaza Centers N.V. is an indirect subsidiary of Elbit Imaging Ltd. ("EIL"), an Israeli public company whose shares are traded on both the Tel Aviv Stock Exchange in Israel and the NASDAQ Global Market in the United States. It has been active in real estate development in emerging markets for over 20 years.

Forward-looking statements

This press release may contain forward-looking statements with respect to Plaza Centers N.V. future (financial) performance and position. Such statements are based on current expectations, estimates and projections of Plaza Centers N.V. and information currently available to the company. Plaza Centers N.V. cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. Plaza Centers N.V. has no obligation to update the statements contained in this press release, unless required by law.

EXECUTIVE OFFICER'S STATEMENT

2015 was an important year for Plaza as we progressed our plans to create a more streamlined, better performing business. Our focus on the disposal of non-core assets continued as we reduced total assets to €392 (31 December 2014: €466). This approach has been allowing us to concentrate on superior assets in our prime areas of focus within Central and Eastern Europe, whilst at the same time delivering proceeds to bondholders and creating a stronger business for our shareholders.

Performance across our shopping centres has been stable during the year, with an overall portfolio occupancy level of 94.96% as of 31 December 2015 (31 December 2014: 95.34%)

Rental income fell during the year to €18.7 million compared with €22.1 million at the end of December 2014. This reduction reflects the fewer properties managed by Plaza (reduction of €3.1 million) however, importantly, the quality of the income is now higher and more resilient, reflecting the superior portfolio of assets. To that end, taken on a like for like basis, rental income of the assets Plaza increased during the period.

Our total loss for the year reduced significantly to €46 million, compared with €120 million at the end of December 2014. This was helped by a reduction in our net finance costs, a decrease in the operating costs of our shopping centres, as well as lower central administration costs. Crucially, it was also supported by considerably reduced property write-down costs compared with the previous year.

Over the course of 2015, in line with the restructuring plan agreed in 2014, we repaid 75% of proceeds from disposals to bondholders, totalling €19.3 million. Since the restructuring plan was approved, Plaza has now returned €47 million (of which €19 milion is principal and the remainder interest) to bondholders, in addition to 13.21% of shares in the Company. Pleasingly, at the start of 2015, Plaza's credit rating by Standard & Poor's also improved from "D" to "BBB-" on a local Israeli scale with a stable outlook.

More generally, we have been seeing economic improvement across our core geographies but the Board remains vigilant to wider macro economic factors. Without a doubt, 2015 was a year of significant progress and we look ahead towards further improving performance across our assets in 2016, with construction starting on key developments, and taking action to reduce leverage and provide proceeds to bondholders through the ongoing disposal of non-core and matured assets.

Key Events

Plaza undertook the disposal of the following non-core assets during the year:

· On 13 May 2015, Plaza announced the agreement to sell its Indian shopping mall located in Pune, India, for c. €35 million. The net cash proceeds (after repayment of the related bank loan, other liabilities and transaction costs) from the sale were c. €7.4 million (525 million INR).

· On 24 June 2015, Plaza reached an agreement to sell its 46,500 sqm development site in Iasi, Romania, in two separate transactions (one for the sale of 37,334 sqm and the other for the sale of 9,166 sqm), for a gross consideration of €7.3 million. There was no bank debt secured against the property. In line with the Company's stated restructuring plan, 75% of the net cash proceeds from the transactions were distributed to the Company's bondholders at the end of September 2015 as an early principal repayment.

· On 10 September 2015, Plaza announced that it has reached an agreement to sell Palazzo Ducale, an office building of 823 sqm GLA in the centre of Bucharest, Romania, for €1.085 million, consistent with the asset's reported book value. In line with the Company's stated restructuring plan, 75% of the net cash proceeds from the transaction were distributed to the Company's bondholders at the end of September 2015 as an early principal repayment.

· Plaza's subsidiary, Elbit Plaza India Real Estate Holdings Limited (in which Plaza holds a 50% stake with its joint venture partner, Elbit Imaging Ltd.) ("EPI"), on 2 December 2015 signed an agreement to sell 100% of its interest in a special purpose vehicle which holds a site in Bangalore to a local investor. The total consideration for the sale is INR 321 Crores (circa €45.4 million) which will be paid when the transaction closes. Following this closing, 50% of the proceeds will go to Plaza, of which 75% will be repaid to the Company's bondholders in line with the Company's stated restructuring plan. The transaction is subject to certain conditions precedent, and closing will take place once these conditions are met and no later than 30 September 2016. The investor is providing certain security in order to guarantee this deadline.

· On 14 December 2015, Plaza provided an update on the sale of the Cina property in Bucharest as its Romanian subsidiary concluded the transaction to waive its leasing rights in the asset which has been sold by the owner. The expected gross cash proceeds due to Plaza's subsidiary is circa €2.7 million (out of a total consideration of €4 million) and the expected net proceeds, after related taxes and transaction costs, are circa €2.26 million. In line with the Company's stated restructuring plan, 75% of the net cash proceeds from the transaction will be distributed to the Company's bondholders by the end of March 2016 as an early principal repayment.

· During 2015 Plaza took the strategic decision to dispose of the Chennai, India asset, rather than to proceed with the development project. On 16 September 2015, EPI (an Indian joint venture of Plaza) obtained a backstop commitment for the purchase of the Chennai scheme. EPI, which had been in discussions regarding the sale of the Chennai Project SPV, obtained a commitment that, subject to the fulfilment of certain conditions precedent, the sale transaction would be completed by 15 January 2016 (the "Long Stop Date") for the consideration of approximately €21.6 million (INR 1,617 millions), net of all transaction related costs. However, it was agreed that, should completion not take place by the Long Stop Date, then EPI's stake in the Chennai Project SPV would be increased to 100%. In line with the Sale Transaction agreement, since the local Indian partner (the "Partner") failed to complete the transaction by the Long Stop Date, EPI has exercised its right to the Partner's 20% holding in the Indian company, Kadavanthara Builders Private Limited.

Plaza also achieved a number of development milestones during year:

· On 29 September 2015, Plaza announced that a wholly owned subsidiary of the Company won a tender to buy the loan to the wholly owned holding and operating company for Liberec Plaza shopping and entertainment centre in the Czech Republic. The €20.4 million bank loan was provided by two commercial banks and which Plaza has agreed to buy for €8.5 million, reflecting a discount of 58%. Subsequently, the Company [recorded] a profit on the discount (circa €12 million) in its financial statements for the second half of 2015. Liberec Plaza also recorded a net operating income of circa €850,000 in 2015, which reflects a yield of approximately 10% on the loan purchase price. On 4 March 2016, after the reporting date, Plaza sold the shares of the SPV holding the shopping and entertainment centre to a local investment group for a consideration of €9.5 million.

· The Company is in negotiations to sell its 50% share in its Riga Plaza (Latvia) project to a third party. The sale price is expected to be close at the asset's book value. More information will be provided upon the closing of the transaction.

· On 21 July 2015, Plaza announced that it had received the building permit to develop Timisoara Plaza, a circa 40,000 sqm GLA shopping and entertainment centre in Timisoara, western Romania. A binding financing offer was also agreed with the Hungarian Export-Import Bank Plc (Exim bank) for circa 65% of the project cost. A tender process is now underway to select a general constructor for the project, which is expected to complete during the second half of 2017.

· On 9 July 2015, Plaza announced that it had received the building permit to develop Belgrade (Visnjicka) Plaza, a 32,000 sqm GLA shopping and entertainment centre. Located on Visnjicka Street, adjacent to the Danube River in old Belgrade, the new development will include approximately 110 retail units, a supermarket and a multi-screen cinema complex. Construction began in 2015, with demolition works and pile works completed and skeleton construction underway, the completion is targeted for the first half of 2017. To date, the Company has agreed pre-let terms for circa 45% of the lettable area demonstrating the significant tenant demand that exists for space in the new centre. The Company has received a bank financing offer for approximately 55% of the construction cost and expects to finalise in the next quarter.

Plaza has also continued to make operational and asset management progress across its shopping centre portfolio.

Group management update

· Since the year-end, on 28 January 2016, the Board of Plaza took the decision to appoint Dori Keren and Yitshak (Izzie) Elias to the roles of Acting Chief Executive Officer and Chief Financial Officer, respectively. Both roles will become effective on 1 April 2016 while Dori Keren will become Chief Executive Officer on 1 January 2017.

· On 21 December 2015, Plaza announced the reappointment of Mr. Ron Hadassi as Chairman of the Board of Directors following a meeting of the Board.

Results

As stated, Plaza's total comprehensive loss for the year narrowed to €37 million compared with €116 million at the end of December 2014 or a €46 million loss attributable to the owners of the Company (€120 million: 2014). The most significant factor in this was a large reduction in property net write-down costs of €19 million compared to €89 million in 2014. These write-down costs are ascribed mainly to the revaluation of Liberec Plaza, Czech Republic (€6 million) and Casa Radio in Romania, while the remaining write-down and loss from disposals is mainly due to the sale of Koregaon Plaza in India (realisation on foreign currency translation adjustments).

Plaza successfully reduced net finance costs, shopping centre operating costs and central administration costs during the period. As at 31 December 2015, Plaza had cash and cash equivalents of €20.4 million, including €4.8 million of cash held as restricted cash deposits.

Debt restructuring plan

In line with the debt restructuring plan agreed in 2014, Plaza repays 75% of proceeds from disposals to bondholders. In 2015, Plaza paid €19.3m to bondholders and, since the restructuring plan was approved in 2014, a total of €47m (of which €19 million for principal and rest for interest) has been distributed as well as 13.21% of shares in the Company. For background on this restructuring, please refer to the Company announcement of 10 July 2014.

Cash flow projection

Following the closing of the Company's restructuring plan, the Company's consolidated financial statements include liabilities to bondholders for the aggregate principal amount of €203 million.

The following table sets out the cash flow forecast of the Company until mid-2017 in order to achieve the abovementioned repayments, as they fall due.

According to the Plan, if by 1 December 2016 the Company manages to repay the principal debentures of NIS 434 million (€102 million), then the remaining principal payments shall be deferred for an additional year ("the Deferral"). Since the Plan came into effect, up until 31 December 2015, the Company has repaid circa NIS 89 million (€19 million) of the debentures.

The remaining NIS 345 million (€81 million) of debentures (achieved through the sale of assets), together with the interest of approximately €13 million, are still to be paid by 31 December 2016, if the Company strives to achieve the abovementioned condition in the Plan.

Since parts of series B debentures are held in treasury, the total required net principal repayment in 2016 is NIS 338 million (€79 million) and has reclassified accordingly this amount as an amount payable within the next 12 months.

The Company regards the below scenario as the most probable, although these repayments are not falling due, unless the below mentioned assets in this scenario are disposed of.

(1) Opening balance - as appeared in the consolidated statement of financial position, including restricted cash (which will be released upon the disposal of the operating shopping centres).

(2) 2016 - Expected net payment from the sale of four shopping centres (Riga, Liberec, Suwalki and Torun).

(3) 2016 - The Company expects extensive disposals of plots held in CEE and in India. The main 2016 disposals are expected in India and Serbia. In 2017, themain disposals are due in India.

(4) As the operating shopping and entertainment centres are to be disposed of in 2016, in 2017 Net Operating Income is generated from the Belgrade Plaza (Visnjicka) shopping centre to be opened in the first half of 2017.

(5) 2016 - Due to be paid by 1 December 2016. The gross amount is expected at €110 million, less the expected repayment due to treasury series B bonds held in the amount of €2 million.

(6) 2016 - Main investment in Belgrade Plaza (Visnjicka project) and in Timisoara project (Romania).

(7) 2016 - Immaterial restricted cash amounts. 2017 - Including restricted cash in Visnjicka of €3 million.

NAV

The Company's property portfolio (CEE and India) was valued by Cushman and Wakefield as at 31 December 2015 and a summary valuation is shown below.

Net Asset Value per share decreased to 0.17 €/share from 0.22 €/share at the year-end in 2014 .

The Company's NAV was calculated as follows:

* - Based on Cushman and Wakefield valuation

** - Including 100% of Casa Radio due to the material owners loan

Portfolio progress

The Company currently has a land bank of 15 plots, which are under development or awaiting planning decisions, and owns five operational shopping and entertainment centre assets and one office scheme across the CEE and in India. The location of the projects, as at 29 March 2016, is summarised as follows:

Liquidity & Financing

For a detailed liquidity analysis refer to the debt restructuring section above. Plaza ended the year with a consolidated cash position (including restricted bank deposits) of approximately €20.4 million, of which circa €4.8 million of cash is held as restricted cash on a consolidated basis. Working capital as at 31 December 2015 totalled negative €98 million chiefly due to the reclassification of €80 million mentioned above and as trading properties were classified as non-current assets in the Financial Statements, The Company's current cash position is circa €18 million (of which €5.5 million is restricted).

Plaza continued to focus on deleveraging its balance sheet during the period but, as a result of impairment losses recorded in the period and finance costs incurred, the gearing level increased to 79% in 2015.

At the start of 2016, Plaza's credit rating by Standard & Poor's was maintained on "BBB-" on a local Israeli scale with a negative outlook.

Strategy and Outlook

In 2016, Plaza will continue to focus on improving the performance of the shopping centre portfolio, applying the Company's strong asset management capabilities.

There will be additional emphasis on reducing leverage as well as the further rationalisation and strengthening of the portfolio by disposing of non-core properties.

Focus on Central and Eastern Europe will continue, creating a strong-performing portfolio. Plaza will also look to make progress on its developments, including Timisoara Plaza and Belgrade (Visnjicka) Plaza, and will explore partnership and financing opportunities for the Casa Radio project as well as to advance permits for the Belgrade Plaza (MUP) and Lodz projects.

While the markets in which Plaza operates showed positive economic signs during 2015, the Company remains vigilant towards wider macro-economic impacts.

Plaza's focus remains on building a strong portfolio, unlocking the value of land through developments where possible, reducing debt levels and delivering on behalf of bondholders and shareholders.

Roy Linden

CFO and Acting CEO

29 March 2016

OPERATIONAL REVIEW

Plaza recorded a number of important operational and strategic achievements during 2015 and took action to improve the performance of its portfolio as well as the wider business.

Highlights for the financial year included:

§ Operations: Improving performance of its operating shopping and entertainment centres focused on Central and Eastern Europe, and achieving key development milestones at Timisoara Plaza and Belgrade (Visnjicka) Plaza.

§ Disposals: Focus remained on disposing of non-core assets to reduce leverage and provide payments to bondholders in line with the restructuring plan. Since the approval of the restructuring plan, circa €47 million has now been paid to bondholders.

§ Financial position: As at 31 December 2015, Plaza had cash and cash equivalents of €20.4 million including €4.8 million of cash held as restricted cash deposits.

As of the reporting date, Plaza has 21 assets in nine countries, of which 15 are under various stages of development or under feasibility study across the CEE region as well as India. Of these developments, five are located in Romania, two in India, four in Poland, two in Serbia, and single assets in Bulgaria, Greece and Hungary. In addition to these developments, Plaza retains the ownership of and operates five shopping and entertainment centres in Poland, Czech Republic (agreed to be sold) and Latvia, as well as an office building in Hungary.

The development projects are at various stages of the development cycle, from landholdings through to those with planning and permits.

The Company's current assets and pipeline projects are summarised in the table below:

(*) all completion dates of the projects are subject to securing external financing and securing sufficient tenant's demand.

Projects that are classified as "Under planning and feasibility examination" also have potential to be sold as land.

(**) Following year-end, effective ownership increased to 50%

Details of these activities by country are as follows:

Poland

Plaza owns and operates three completed shopping and entertainment centres across Poland, with an average occupancy of 93.8%.

Torun Plaza, which was completed and opened in late 2011, comprises approximately 40,000 sqm of GLA and is Plaza's tenth completed centre in Poland. Occupancy level increased to 96.08% at year end. The centre reported a slight decrease in footfall (3.2%), while the turnover remained stable compared to 2014.

Suwalki Plaza, comprising approximately 20,000 sqm of GLA with tenants such as H&M, Rossmann, New Yorker, Reserved and Cinema Lumiere, continues to perform well. Occupancy slightly decreased to 96.5% (2014: 97.7%) and turnover increased by 2.5% during the year. New stores KIK, Kinderplaneta and Pink opened during 2015 and most existing tenants have signed lease renewals, with the fifth anniversary of the opening of the centre having taken place in May.

In Zgorzelec Plaza, the 13,000 sqm shopping and entertainment centre has experienced an occupancy decrease, reaching 88.91% (2014: 95.2%), attributable mainly to the closing of the supermarket unit (Stokrotka). Despite that, after successful discussions with tenants, most of them chose to stay in the centre. Positively, turnover has increased by 2.8% compared to 2014 while footfall remained stable.

Feasibility and planning studies were also progressed at Lodz Plaza (comprising approximately 35,000 sqm of GLA) and amendment of the local master plan is underway.

Plaza also owns a residential plot in Lodz, Poland, which is being sold in stages: 3,340 sqm were sold in 2015 and another 5,200 sqm have been sold since the end of the period, at the beginning of 2016. The rest of the plot (approximately 24,700 sqm) is expected to be sold in 2016.

Hungary

Plaza has a transferable land use right to a site adjacent to the Arena Plaza, on which it plans to develop a 40,000 sqm office complex extension to the existing shopping centre. In line with Plaza's cautious approach to development, the Company will hold off on the commencement of any construction until it is satisfied that a recovery in the Budapest office market and a general rise in both occupancy rates and rental levels is underway.

David House, an office building on Andrassy Boulevard, in Budapest, remains under the Company's ownership.

Czech Republic

Turnover at Liberec Plaza shopping and entertainment centre (approximately 17,000 sqm GLA), owned and managed by the Company, improved by 10.6% compared to 2014, while occupancy slightly decreased to 83.7% (2014: 84%).

In September 2015, one of Plaza's wholly owned subsidiaries won a tender to buy the bank loan to the wholly owned SPV of Liberec Plaza. The €20.4 million bank facility was provided by two commercial banks to which the Company agreed to pay and paid an amount of €8.5 million, reflecting a discount of 58%. The Company recorded a €11.9 million profit on the discount in these consolidated financial statements, included as finance income.

In March 2016, Plaza agreed to sell its subsidiary holding in Liberec Plaza for €9.5 million. In line with the terms of the agreement, the buyer has deposited 15% of the consideration in escrow. The due diligence process, final closing and settlement is expected to conclude by the end of March 2016. Upon completion of the Liberec Plaza disposal, Plaza will receive €8.5 million on account of the bank loan it previously purchased. Out of the remaining proceeds, at least 75% will be distributed to the Company's bondholders by the end of June this year, in line with the Company's stated restructuring plan.

Romania

Plaza holds a 75% interest in a joint venture with the Government of Romania to develop Casa Radio (Dambovita), the largest development plot in central Bucharest. The 467,000 sqm complex, including a 90,000 sqm GLA shopping mall and leisure centre, offices, a hotel and a convention and conference hall, is planned for the site. The Company has obtained the PUD (Detailed Urban Permit) and the PUZ (Zonal Urban Plan) for the Dambovita Centre Multifunctional Complex.

In light of the financial crisis, and in order to ensure a construction process that is aligned to current market conditions, the Company initiated preliminary discussions with the Authorities (which are shareholders in the SPV and a party to the Public Private Partnership) regarding the future of the project. The Company has also officially notified the Authorities that it will be seeking to redefine some of the terms in the existing PPP contract, including the timetable, structure and project milestones. Please see note 8 (d) of the Financial Statements for further information on the project.

In July 2015, the Company received the building permit to develop Timisoara Plaza, a circa 40,000 sqm GLA shopping and entertainment centre in Timisoara, western Romania. A binding financing offer has also been agreed with a commercial bank for circa 65% of the project cost. The construction is expected to commence in 2016, and completion is expected in late 2017.

Latvia

In Riga Plaza, which is 50% owned by Plaza, occupancy decreased to 97.02% (2014: 99.5%). Turnover has increased by 8.6% compared to the previous year, and footfall has increased by 7.2%. The Company is in negotiations for the sale of its share in the project. The transaction is expected to be executed close to book value of the asset.

Serbia

In July 2015, the Company received the building permit to develop Belgrade Plaza (Visnjicka) (previously known by the project name Sport Star Plaza), a 32,000 sqm of GLA shopping and entertainment centre. Construction commenced in 2015 and completion is anticipated in 2017. The demolition, excavation and piling works has been completed. Reflecting a strong demand for modern retail space, 45% of the centre's available retail space was pre-let as of the reporting date. Based on the successful letting progress the Company has received a financing offer for 55% of the construction cost.

Plaza owns a building in the central administrative district of Belgrade, which housed the former Yugoslavian Government's Federal Ministry of Internal Affairs. Development plans for the building comprise a shopping gallery, an apartment-hotel and a business centre, totalling circa 72,000 sqm of gross building area. Processes to secure the relevant local planning and permitting approvals are underway.

On 1 March 2013, Serbia was granted candidate status to the European Union. The Company believes this will significantly increase the flow of international capital into the country, enabling its carefully selected Serbian development pipeline, completing and operating the assets to benefit from an anticipated growth in investor interest. In March 2016, a joint venture between two international investors bought the two biggest shopping centres in Belgrade, demonstrating strong interest in the investment market there.

India

In May 2015, the Company signed an agreement to sell the SPV holding Koregaon Park Plaza, the retail, entertainment and office scheme located in Pune, India, for circa €35 million (2,500 million INR). The net cash proceeds received (after repayment of the related bank loan which was reclassified to short term other liabilities and transaction costs) from the sale totalled €7.4 million (525 million INR). In line with the Company's stated restructuring plan, all the net cash proceeds from the transaction were retained within the Company.

In 2008, Plaza formed a 50:50 joint venture with Elbit Imaging (the "JV") to develop mega mixed-use projects in Bangalore, Chennai and Kochi. Under the terms of the agreement, Plaza acquired a 47.5% stake in Elbit India Real Estate Holdings Limited, which had existing stakes in mixed-use projects in India, in conjunction with local Indian partners.

The JV projects are as follows:

Bangalore - This residential project, owned in an equal share between the JV and a prominent local developer, is located on the eastern side of Bangalore, India's fifth largest city with a population of more than eight million inhabitants.

In March 2008 the JV entered into an amended and reinstated share subscription and framework agreement, with a third party, and a wholly owned Indian subsidiary of the JV which was designated for this purpose ("SPV"), to acquire, through the SPV, up to 440 acres of the plot in certain phases as set forth in the Amended Framework Agreement.

As of 31 December 2015, the SPV holds joint development rights in approximately 54 acres of the plot for a total aggregate consideration of approximately INR 2,843 million (€40 million). In addition, the SPV has paid to the Partner advances of approximately INR 2,536 million (€35 million) on account of future acquisitions by the SPV of a further 51.6 acres.

In December 2015, the JV signed an agreement to sell 100% of its interest in the SPV to the Partner. The total consideration for the sale upon completion of the transaction is INR 321 Crores (approximately €45.4 million) which will be paid at transaction closing.

The transaction is subject to certain conditions precedent, and closing will take place once these conditions are met and no later than 30 September 2016. The Investor has provided certain security in order to guarantee the aforementioned deadline.

Chennai - A residential development, which is 80% owned by the JV and 20% by a prominent local developer. The Chennai Project was designated at the end of 2014 as a project for development. During 2015, due to changes in the Group's activities and objectives, the Company decided not to develop the Chennai project but rather to dispose it in its current situation. In this respect, on 16 September 2015, the JV obtained a backstop commitment for the purchase of Chennai, India Scheme.

The JV, which has been in discussions regarding the sale of Chennai Project, has obtained a commitment that, subject to the fulfilment of certain conditions precedent, the sale transaction will be completed by 15 January 2016 (the "Long Stop Date") for the consideration of approximately €21.6 million (INR 1,617 millions), net of all transaction related costs. If completion does not take place by the Long Stop Date, then JV's stake in the Chennai Project will be increased to 100%. In line with the Sale Transaction agreement, since the local Indian partner (the "Partner") failed to complete the transaction by the Long Stop Date, the JV had exercised its right to get the Partner's 20% holdings in the Indian company.

FINANCIAL REVIEW

Results

During 2015, Plaza remained focused on the execution of its strategy to dispose of the non-core and matured assets in its portfolio to reallocate capital to its core yielding assets and to reduce debt levels.

The Company has designated its properties into three types:

· Completed trading properties projects;

· Projects scheduled for construction; and

· Plots in the planning phase.

In respect of its completed trading property projects, the Company still faces material uncertainties in respect of the time required to sell the properties. However, the Company has not changed its business model and it is actively seeking buyers at appropriate pricing. Therefore, it is clear from the Company's perspective that these completed properties are trading properties, rather than investment properties.

In respect of the sites held, which are not intended to be developed in the near future, the Company is actively looking for buyers and does not hold the land passively with the intention to gain from a potential value increase. Sites scheduled for construction are intended to be developed and sold in the normal course of business once circumstances allow. For this reason we also believe that these are appropriately classified as trading properties. As at 31 December 2015, as in previous years, the trading properties were classified as non-current assets in the Statement of Financial Position.

Income comprised rental income from operating shopping centres. In 2015, Plaza generated €18.7 million of income compared to €22.1 million in 2014. This includes rental income and service charges collected from the tenants. The rental income in 2015 was €13.1 million while in 2014 it was €15.4 million. The decrease is a result of the strategic sale of Kragujevac Plaza in mid-2014 (c. €2.3 million of income recorded in 2014) and also by the sale of other undeveloped projects. A 10% increase in NOI was recorded across the shopping centre portfolio (from €14.9 million to €16.4 million), including company share in NOI from the commercial centre of Riga, Latvia, but excluding the impact of the 2014 sale of Kragujevac Plaza. Income from the Group's Fantasy Park operation, which provides gaming and entertainment services in Plaza's active shopping centres, decreased to €0.7 million (from €1.7 million in 2014) following the operational closure of some units in the Group's shopping centres. Before the reporting date the last unit was sold as part of the non-core business disposal process.

The disposal of Kragujevac Plaza also led to a reduction in operating costs from €8.5 million in 2014 to €6.5 million in 2015, while the Fantasy Park operating costs decreased from €2.2 million in 2014 to €1 million in 2015 following the closures.

A write down of trading properties amounted to €20 million in 2015 (€87 million in 2014), comprising projects in Romania (€9.2 million); India (€1.5 million); Poland (€6 million); the Czech Republic (€6.2 million); Hungary (€1 million) and others. This was partly offset by an uplift in the value of Belgrade Plaza of (€6 million).

The uplift in relation to joint ventures classified as equity accounted investments amounted to €0.9 million in 2015, related to Riga Plaza (Latvia), compared to a net €1.7 million write down in 2014 (related to Plaza's Indian project (Chennai) slightly offset by the €0.4 million increase in the value of Riga Plaza (Latvia).

The Company's active efforts to further reduce costs resulted in administrative costs decreasing by 6% to €7 million (2014: €7.4 million), comprising a lower scale expense for professional service providers and a lower head count. With the elimination of circa €0.5 million severance payments for the two resigning CEOs during the year, the administrative cost amounted to €6.5 million. The planed expenses for 2016 are €6 million.

Other net income saw a net increase to €5.5 million from Nil in 2014, chiefly as a result of a one-time gain recognised due to the Kochi project in India (€4.7 million) and settlement with potential buyer of Koregaon Park (€0.7 million) (2014 - €2.3 million insurance pay out received in connection with the Koregaon Park fire incident, offset mainly by expenses resulting from the impairment of other assets (mainly Palazzo Du Calle office in Romania €0.7 million) and a loss on the disposal of other assets (€1.5 million)).

Restructuring costs were incurred in connection with the Company's debt restructuring process in 2014.

A net finance loss of €31 million was recorded in 2015, compared to a net finance cost of €35.6 million in 2014.

Finance income increased to €14.3 million (2014 €2 million), largely attributable to the settlement of bank loan debt at a discount (€13.5 million) related to projects in the Czech Republic and Romania.

Finance expenses increased from €36.8 million to €45.2 million, mainly comprising:

· Interest expense on debentures (€13.9 million compared to €4.6 million in 2014 where most debentures were presented at Fair Value Through Profit or Loss), and non-cash amortisation of the discount (the difference between fair value and adjusted par value) of €10.6 million (€0.8 million in 2014)

· €5.1 million interest expense on bank borrowings compared to €9.6 million in 2014

· Foreign exchange losses on debentures €14.8 million (€0.5 million in 2014)

A tax expense of €1 million recorded in the consolidated income statement against the tax benefit of €1.3 million in 2014 that largely represented the creation of deferred tax assets attributed to the Polish operations.

As a result of the above, the loss for the year amounted to c. €46 million in 2015, compared to €120 million in 2014. Basic and diluted loss per share for 2015 was €0.07 (2014: €0.39).

Balance sheet

The balance sheet as at 31 December 2015 showed total assets of €392 million, compared to total assets of €466 million at the end of 2014. The decrease was mainly driven by the write down of trading properties and equity accounted investees, as well as the disposal of assets and cash used for repayment of debt.

The Company's consolidated cash position (including restricted bank deposits, short term deposits and held for trading financial assets) decreased to €20.4 million (31 December 2014: €41.7 million) after the repayment of bond principal and interest, and buy out of the bank loan. Gearing increased to 79% (31 December 2014: 74%) as a result of impairment losses and finance costs incurred during the year.

Trading property values decreased from €371 million in 2014 to €318 million in 2015 as result of selling of assets (mainly Koregaon Park India) and the write downs booked in the period. At the end of the year, trading properties were classified as non-current assets due to uncertainties around the development and commencement dates.

Plaza has on its balance sheet a €45 million investment in equity accounted investees which includes joint venture projects. The only operating asset currently classified under this heading is Riga Plaza. The remainder are the two development sites in India (Bangalore and Chennai). The value has increased by €2.7 million since 2014, comprising a €1 million uplift value and by €1.7 million due to exchange rate movements.

Total bank borrowings (long and short term) amounted to €102.5 million (31 December 2014: €150.8 million). This decrease is the result of loans repaid during the year, hair cuts achieved in the Czech Republic and Romania and the disposal of the Koregaon Park Plaza shopping centre.

Apart from bank financing, Plaza has a balance sheet liability of €181.6 million (with an adjusted par value of circa €203 million) from issuing debentures on the Tel Aviv Stock Exchange and to Polish institutional investors. These debentures are presented at amortised cost.

Provisions are booked in connection with the Company's Casa Radio project in Bucharest Romania.

Other current liabilities have decreased from €13.2 million to €7 million in 2015. The decrease is mainly attributable to the execution of sale of Koregaon Park in India.

The total equity decreased from €120 million in 2014 to €83 million in 2015 due to a €46 million loss suffered mainly from write downs, NIS strengthening against the EUR, bonds discount amortisation and from a net €9 million increase in the translation reserve connected to the Indian operations of the Company, stemming from the strengthening of the Indian Rupee against the Euro.

Cash flow (including cash flow disclosures as required by Israeli Securites Regulations)

Cash flow provided from (used in) operational activities in 2015 was negative at €2.6 million (2014: positive cash flow of €8.3 million) mainly due to repayment of other liabilities associated with the Koregaon Park shopping centre, and the sale of a shopping centre in Serbia.

Cash flow provided from investment activities in 2015 remained low and totalled €2.6 million (2014 negative €1.4 million) owing to the disposal of the office building in Romania and net sale of held for trading marketable debt securities.

Cash flow used in financing activities in 2015 totalled €17.9 million (2014: €2.4 million) owing to the payment of €8.5 million and obtaining the discount of 58% over the bank loan purchased in the Czech Republic. In addition,2014 activities included right issuance net proceeds of €18.8 million.

Disclosure in accordance with Regulation 10(B)14 of the Israeli Securities Regulations (periodic and immediate reports), 5730-1970

1. General Background

According to the abovementioned regulation, upon existence of warning signs as defined in the regulation, the Company is obliged to attach to its reports projected cash flow for a period of two years, commencing with the date of approval of the reports ("Projected Cash Flow").

One of the warning signs emphasise is a matter included in the audit opinion issued by the auditor. The emphasis of matter was included in view of management plans for asset disposals and also in respect of the Casa Radio project, as described in Notes 2(c), 16 and 27(c) to the Financial Statements in this press release.

Upon having such warning signs, the Company is required to provide projected cash flow for the period of 24 months since the reporting period, and also provide explanations on differences between previously disclosed estimated projected cash flows with actual cash flows.

2. Projected cash flow

According to the Restructuring Plan, a three and a half year period deferral of payment was granted. If until 1 December 2016 the Company manages to repay NIS 434 (circa €102 million) of debentures, then the remaining principal payments shall be deferred for an additional one year. Since the Plan entered into effect, until 31 December 2015, the Company has repaid circa NIS 89 million (€19 million) out of the debentures. The remaining NIS 345 million (circa €81 million) of the principal bonds (through the sale of assets), together with the interest of approximately €13 million are still to be paid up to 1 December 2016, if the Company strives to achieve the abovementioned condition in the Plan.

The Company regards this scenario as the most probable, and has accordingly reclassified €79.6 million of its debentures as short term, although these repayments are not falling due, unless the below mentioned assets in this scenario are disposed.

The materialisation, occurrence consummation and execution of the events and transactions and of the Assumptions on which the projected cash flow is based, including with respect to the proceeds and timing thereof, although probable, are not certain and are subject to factors beyond the Company's control as well as to the consents and approvals of third parties and certain risks factors. Therefore, delays in the realisation of the Company's assets and investments or realisation at lower price than expected by the Company, as well as any other deviation from the Company's Assumptions, could have an adverse effect on the Company's cash flow and the Company's ability to service its indebtedness in a timely manner.

1. Consolidated cash position, without restricted cash in subsidiaries in a total amount of €8 million, due to bank facilities restrictions. The Company is expected to be able to collect all remaining cash in subsidiaries upon exit.

2. 2016: Comprised from the exercise of four out of the five shopping centres in CEE the Company owns, and also plots, mainly in Serbia and India. 2017: Mainly from plot disposals in India and Poland.

3. Based on expected Net Operating Income ("NOI") from subsidiaries, less expected payment to bank financing in subsidiaries. The Company expects to retrieve the funds through repayment of existing intercompany loans. The vast amount of the retrieve is from Polish operating shopping malls.

4. Management estimation based on last year's actual cash restriction balances.

5. 2016: Comprised mainly from investment in the schemes of Visnjicka Belgarde (Serbia) and Timisoara (Romania)

6. Assuming EUR/NIS rate of 4.40 and EUR/PLN rate of 4.20. The repayment schedule takes into consideration also that in case of disposal of a subsidiary, 75% of the proceeds are used for the early prepayment of the Unsecured Debt in accordance with the terms of the Restructuring Plan.

7. Refer to remark 6 in respect of exchange rates.

3. Projected solo cash flow

In its prospectus dated 27 May 2014, the Company published its expected cash flow for the following 24 months. Below is a summary table of comparison between forecasted and actual cash flow, with explanations on the differences on cash flow published for the 18 months period ending December 31, 2015

The below explains the main reasons for deviation between expected cash flow projections and actual cash flows:

1. Opening balance was calculated assuming repayment of interest on bonds before 30 June 2014, while actual payment was performed in December 2014 (of €12.1 million).

2. Disposal of the CEE shopping centres did not materialized, and the Company instead has improved the tenant mix and the overall performance of the shopping malls, in order to benefit from it upon sale.

3. Lower due to tenant improvements cost incurred in operating shopping centres in the period.

4. Actual right issuance - net of total restructuring plan costs of circa €4.5 million.

5. Main investment slowed down as a result of low level of sales, and mainly in projects in Serbia and Romania.

6. Decreased as a result of low level of sales.

7. Refer to remark 1 above.

8. Actual amount includes repayment of Liberec loan (€8.5) million with a discount of €12 million.

Roy Linden

Chief Financial Officer

29 March 2016

Valuation Summary by Cushman and Wakefield as at 31 December 2015 (in EUR)

(*) Asset were valued with the comparative sales price method; no value at completion was estimated

(**) Rounded to nearest thousand

Notes

· All values of land and project assume full planning consent for the proposed use.

· Plaza Centers has a 50% interest in the Riga Plaza shopping centre development.

· Plaza Centers has a 75% share of Casa Radio Plaza.

· Plaza Centers has a 25% share of Bangalore.

· Plaza Centers has a 40% share of Chennai.

· All the figures reflect Plaza's share.

PLAZA CENTERS N.V.

CONSOLIDATED FINANCIAL STATEMENTS

AUDITED

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015

PLAZA CENTERS N.V.

CONSOLIDATED FINANCIAL STATEMENTS

AUDITED

CONTENTS

- - - - - - - - - - - - - - - - - - - - - -

Independent Auditors' Report

The Board of Directors and Stockholders

Plaza Centers N.V.

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Plaza Centers N.V. ("the Company"), which comprise the consolidated statement of financial position as at December 31, 2015, the consolidated statement of profit or loss and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion 

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2015 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards adopted by the EU.

Emphasis of matter

Without qualifying our opinion, we draw attention to Notes 2(c), 16 and 27(c) in the consolidated financial statements which disclose, among other matters, important information regarding the Company's cash flow projections for 18 months from the end of the reporting period.

Without qualifying our opinion, we draw attention to Note 8(5) (d) which discloses that the Board and Management have become aware of potential irregularities concerning the Casaradio Project in Romania and Note 8(5) (f) which discloses possible outcomes also related to the Casaradio Project.

Budapest, Hungary

March 29, 2016

KPMG Hungária Kft.

Michael Carlson

Partner

NOTE 1 - PRINCIPAL ACTIVITIES AND OWNERSHIP

Plaza Centers N.V. ("the Group" or "the Company") was incorporated and is registered in the Netherlands. The Company's registered office is at Prins Hendrikkade 48-S, 1012 AC, Amsterdam, the Netherlands. The Company conducts its activities in the field of establishing, operating and selling of shopping and entertainment centers, as well as other mixed-use projects (retail, office, residential) in Central and Eastern Europe (starting 1996) and India (from 2006).

The consolidated financial statements for each of the periods presented comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates and jointly controlled entities.

The Company is listed on the Main Board of the London Stock Exchange ("LSE"), the Warsaw Stock Exchange ("WSE") and, starting November 2014, on the Tel Aviv Stock Exchange ("TASE").

The Company's immediate parent company is Elbit Ultrasound (Luxembourg) B.V. / S.à r.l. ("EUL"), which holds 44.9% of the Company's shares, as at the end of the reporting period (December 31, 2014 - 44.9%). The Company regards Elbit Imaging Limited ("EI") as the ultimate parent company (refer to note 30 for more details). For the list of the Group entities, refer to note 35.

NOTE 2 - BASIS OF PREPARATION

a. Statement of compliance

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

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 approving these financial statements the Company had not yet prepared consolidated financial statements for the year ended December 31, 2015 in accordance with the Netherlands Civil Code.

The consolidated financial statements were authorized for issue by the Board of Directors on March 23, 2016.

b. 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 EUR has been rounded to the nearest thousand, unless otherwise indicated.

c. Financial position of the Company

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet the mandatory repayment terms of the banking facilities and debentures, as disclosed in notes 12 and 16.

Following the closing of the Company's restructuring plan (as mentioned in note 29(e), "the Plan" in this note), the Company's consolidated financial statements include liabilities to bondholder's in the aggregate principal amount of EUR 203 million.

The following table sets forth the cash flow forecast of the Company until mid-2017 in order to achieve the abovementioned repayments, as they fall due.

NOTE 2 - BASIS OF PREPARATION (Cont.)

c. Financial position of the Company (cont.)

According to the Plan, if until December 1, 2016 the Company manages to repay its principal of debentures in the amount of NIS 434 million (EUR 102 million), then the remaining principal payments shall be deferred for an additional year ("the Deferral"). Since the Plan entered into effect, until December 31, 2015, the Company has repaid circa NIS 89 million (EUR 19 million) out of the debentures. The remaining NIS 345 million (EUR 81 million) of the bonds principal (through selling of its assets), together with the interest of approximately EUR 13 million are still to be paid up to December 1, 2016, if the Company is to achieve the abovementioned condition in the Plan.

Since parts of series B debentures are held in treasury (refer to note 29(l)), the total required net principal repayment in 2016 in order to achieve the Deferral, is NIS 338 million (EUR 80 million). As the Company's primary objective is to obtain the Deferral, it has therefore reclassified this minimum net amount to current.

The scenario below reflects the Company's approved business plan until June 30, 2017:

(1) Opening balance - as appeared in this consolidated statement of financial position, including restricted cash (which will be released upon the disposal of the operating shopping centers).

(2) 2016 - Expected net payment from the selling of four shopping centers (Riga, Liberec, Suwalki and Torun).

(3) 2016 - The Company expects extensive disposal of it plots held in CEE and in India. Main 2016 disposal are expected in India and Serbia. 2017 - Main disposal is due to India.

(4) As the operating shopping centers are to be disposed of in 2016, in 2017 Net Operating Income is generated from the Belgrade Plaza (Visnijcka) shopping center to be opened in the first half of 2017.

(5) 2016 - This reflects the gross amount of EUR 110 million to be paid based on forecast disposal proceeds, net of the expected repayment on treasury bonds held in the amount of EUR 2 million.

(6) 2016 - Main investment in Belgrade Plaza (Visnijcka project) and in Timisoara project (Romania).

(7) 2016 - Immaterial restricted cash amounts. 2017 - Including restricted cash in Visnjicka of EUR 3 million.

NOTE 2 - BASIS OF PREPARATION (Cont.)

c. Financial position of the Company (cont.)

It should be noted, that the projected cash flow is based on the Company's forward-looking plans, assumptions, estimations, predictions and evaluations which rely on the information known to the Company at the time of the approval of these financial statements (collectively, the "Assumptions").

The materialization, occurrence consummation and execution of the events and transactions and of the Assumptions on which the projected cash flow is based, including with respect to the proceeds and timing thereof, although probable, are not certain and are subject to factors beyond the Company's control as well as to the consents and approvals of third parties and certain risks factors. Therefore, delays in the realization of the Company's assets and investments or realization at lower price than expected by the Company's, as well as any other deviation from the Company's Assumptions, could have an adverse effect on the Company's cash flow and the Company's ability to service its indebtedness in a timely manner.

If the Company is unable to repay cumulative NIS 434 million (EUR 108 million) by December 1, 2016, then the minimum required principal repayment due December 31, 2016 is NIS 57 million (EUR 13.5 million) (refer to Note 16), plus 75% of the net proceeds from sales of trading properties, which will be paid through the net cash generated out of the disposal program summarized above

d. Investment property vs. trading property classification

The Company has designated its properties into three types (completed trading property projects, plots scheduled for construction and plots under planning stage). In respect of its completed trading property projects, and as written above, the Group has not changed its business model and is actively seeking buyers. Therefore it is clear from the Company's perspective that these completed properties are trading properties, rather than investment properties.

In respect of plots under planning stage held, which are not intended to be constructed in the near future, the Company is actively looking for buyers and does not hold the plots passively with the intention to gain from a potential value increase. Plots scheduled for construction are intended to be developed and sold as a completed project in the normal course of business once circumstances allow. Therefore management also believe that these are appropriately classified as trading properties.

e. Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS 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 and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. 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 estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Information about other critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

NOTE 2 - BASIS OF PREPARATION (cont.)

· Note 8 - Suspension of borrowing costs capitalization

· Note 8 - Classification of trading properties as current vs. non-current

· Note 2(d) - Trading property vs. Investment property

· Note 10 - Classification of the joint arrangement

· Note 16 - Measurement of fair value of new debentures series

e. Use of estimates and judgments (cont.)

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

· Notes 8 - key assumptions used in determining the net realisable value of trading properties

· Note 8, 28 - provisions and contingencies

· Note 20 - measurement of share-based payments

· Note 26 - recognition of deferred tax assets and availability of future taxable profits against which carry-forward tax loss can be used.

Functional currency

The EUR is the functional currency for Group companies (with the exception of Indian companies - in which the functional currency is the Indian Rupee - INR) since it is the currency of the economic environment in which the Group operates. This is because the EUR (and in India the INR) is the main currency in which management, determines its pricing with tenants, potential buyers and suppliers, determine its financing activities and budgets and assesses its currency exposures.

Operating cycle determination

The Normal Operating Cycle ("NOC") of the Group is driven by its business model to buy, develop and sell, primarily shopping centers, and comprises the estimated amount of time required to complete the process from the acquisition of undeveloped land through its development, preparation for sale and ultimate disposal. Based on the Group's experience, mainly from the period from 1996-2008, this period of time was three to five years (and in respect of large scale, multi-phase/mixed-use projects, up to eight years). For example, for completed shopping centres, these steps include achieving a stabilized tenants list, improving the tenant mix, increasing occupancy rates, completion of certain tenant improvements and finding the qualified buyers. For plots, this includes obtaining permits, finance and construction.

The Company maintains its existing business model; however following the financial crisis, the level of uncertainty of the actual amount of time needed to complete all steps in the process has become much longer than what the Company believes is a normal level. Over the period 2009 - 2012, the Company has had difficulty selling completed properties at prices reflecting management's view of reasonable estimated values, as well as experienced a lack of available finance for development of plots. The return to what management considers more normal conditions, primarily in the CEE markets where it has properties, have been longer than expected.

In view of the above uncertainties and abnormalities, the Company has taken in 2013 (and reassured this position in both 2014 and 2015) a position of reclassifying its entire trading properties to long term.

Despite of the above, where a sale and purchase agreement exists as of the end of the reporting period, the asset and related liabilities will be reclassified as short term.

NOTE 3 - MEASUREMENT OF FAIR VALUES

A number of the Group's accounting policies and disclosures require the measurement of fair value, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. The Company's finance department reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes, is used to measure fair values, then the finance department assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

· Note 11 - Derivatives

· Note 20 - Employee share option plan

· Note 27 - Financial instruments

NOTE 4 - CASH AND CASH EQUIVALENTS

The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 27.

NOTE 5 - RESTRICTED BANK DEPOSITS

(1) As of December 31, 2015, EUR 4.5 million is restricted mainly in respect of bank facilities agreements signed to finance Projects in Poland. These amounts carry an annual interest rate of mainly Overnight rates.

The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 27.

NOTE 6 - TRADE RECEIVABLES

NOTE 7 - OTHER ACCOUNTS RECEIVABLE, PREPAYMENTS AND ADVANCES

a. Other receivables

b. Prepayments and advances

NOTE 8 - TRADING PROPERTIES

(1) 2015 - Including EUR 6 million due to construction activities in Serbia and Romania.

(2) Regarding accounting policy of capitalizing borrowing costs refer to note 34 (e). The Company temporarily suspended capitalization of borrowing costs starting July 1, 2013, following temporary suspension of active development of the majority of its trading properties due to the Group's liquidity position.

NOTE 8 - TRADING PROPERTIES (Cont.)

(3) Breakdown of write -down (uplift) of trading properties:

The 2015 write downs were caused mainly by the following factors:

There were significant decreases in Net Realizable Values of certain projects below the carrying amount due to deteriorating market condition in certain countries in which the Group operates.

Moreover, affecting the valuations (in respect of plots under planning stage) are delays in the execution and commencement of construction of projects by the Company, increase in the risks inherent in the Company's developments projects which cause an increase in the discounts rate and the exit yields of the undeveloped projects. In certain cases, changes were performed according to schemes of projects (e.g Casa radio, below mentioned) which triggered additional significant impairments.

Koregaon Park write-down (refer to note 29(a)) was performed due to delays in executing a sale transaction of the shopping center.

In case of Liberec Plaza in Czech Republic, write-down was recorded as a result of a decrease in the NOI of the shopping center (mainly due to an increase of the non-recoverable expenses) and an increase of 0.5% in the exit yield compared to last year.

In the case of Belgrade Plaza (Visnjicka) project an appreciation was performed as the development of the project has already started, and the project is expected to start generating income within 15 months following year-end.

In the case of Casa radio project in Romania write-down was performed due to a significant change in the estimated date of construction commencement of the project (now scheduled to mid-2018), triggered mainly by permitting issues as described in the note below.

(4) Including carrying amount of Casa radio and Timisoara projects in Romania, and also the Belgrade Plaza (Visnjicka) and Belgrade Plaza (both in Serbia).

NOTE 8 - TRADING PROPERTIES (Cont.)

(5) Casa radio note

a. General

In 2006 the Company entered into an agreement according to which it acquired 75% interest in a company ("Project SPV") which under a Public-Private Partnership agreement ("PPP") with the Government of Romania is to develop the Casa radio site in central Bucharest ("Project"). After signing the PPP agreement, the Company holds indirectly 75% of the shares in the Project SPV, the remaining 25% are held by the Romanian authorities (15%) and another third party (10%).

As part of the PPP, the Project SPV was granted with development and exploitation rights in relation to the site for a period of 49 years, starting December 2006. As part of its obligations under the PPP, the Project SPV has committed to construct a Public Authority Building ("PAB") measuring approximately 11.000 square meters for the Romanian Government at its own cost.

Large scale demolition, design and foundation works were performed on the construction site which amounted to circa EUR 85 million until 2010, when current construction and development were put on hold due to lack of progress in the renegotiation of the PPP Contract with the Authorities (refer to point c below) and the Global financial crisis. These circumstances (and mainly the avoidance of the Romanian Authorities to deal with the issues specified below) caused the Project SPV to not meet the development timeline of the Project, as specified in the PPP. However, the Company is in the opinion that it has sufficient justifications for the delays in this timeline, as generally described below.

b. Obtaining of the Detailed Urban Plan ("PUD") permit

The Project SPV obtained the PUD related to this project in September 2012. Furthermore, on 13 December 2012, the Court took note of the waiver of the claim submitted by certain plaintiffs and rejected the litigation aiming to cancel the approval of the Zonal Urban Plan ("PUZ") related to the Project. The court decision is irrevocable.

As the PUD is based on the PUZ, the risk that the PUD would be cancelled as a result of the cancellation of the PUZ was removed following the date when the PUZ was cleared in court on December 13, 2012.

c. Discussions with Authorities on construction time table deferral

As a result of point b above, following the Court decision, the Project SPV was required to submit a request for building permits within 60 days from the approval date of the PUZ/PUD and commence development of its project within 60 days after obtaining the building permit.

However, due to substantial differences between the approved PUD and stipulations in the PPP Contract as well as changes in the EU directives concerning buildings used by Public Authorities, and in order to ensure a construction process that will be adjusted to current market conditions, the Project SPV started preliminary discussions with the Romanian Authorities (which are both shareholders of the Project SPV and a party to the PPP) regarding the future development of the project.

The Project SPV also officially notified the Romanian Authorities its wish to renegotiate the existing PPP contract on items such as time table, structure and milestones (e.g., the construction of the Public Authority Building ("PAB"), whose' estimated costs are provisioned for in these financial statement - refer to paragraph e below). The Company estimates that although there is no formal obligation from the Romanian Authorities to renegotiate the PPP agreement, such obligation is expressly provided for the situation when extraordinary economic circumstances arise.

NOTE 8 - TRADING PROPERTIES (Cont.)

d. Co-operation with the Romanian Authorities re potential irregularities

The Board and Management have become aware of certain issues with respect to certain agreements that were executed in the past in connection with the Project. In order to address this matter, the Board has appointed the chairman of the Audit Committee to investigate the matters internally and have also appointed independent law firms to perform an independent review of the matters raised.

The Company has approached and is co-operating fully with the relevant Romanian Authorities regarding the matters that have come to its attention and it has submitted its findings to the Romanian Authorities. As this process is still on-going, the Company in unable to comment on any details related to this matter. At the current stage the Company, based on a legal advice received, cannot determined the consequences of such matter. As for the fair value of the Project as of December 31, 2015 refer to the summary table below.

e. Provision in respect of PAB

As mentioned in point a above, when the Company entered into an agreement to acquire 75% interest in the Project SPV it assumed a commitment to construct the PAB at its own costs for the benefit of the Romanian Government. Consequently, the Company had recorded a provision in the amount of EUR 17.1 million in respect of the construction of the PAB.

The Company utilized the amount of EUR 1.5 million out of this provision, and in 2015 a reduction in the provision in the amount of EUR 0.6 million (recorded as other income) was performed in order to reflect updated budget changes in respect of the PAB.

Management believes that the current level of provision is an appropriate estimation in the current circumstances. Upon reaching concrete agreements with Authorities, the Company will be able to further update the provision.

f. The circumstances described in subsection a through e above might lead to future claims, penalties, sanctions and/or, in extreme circumstances, termination of the PPP and annulment of the Company's rights in the Project by the Authorities.

(6) Security over trading properties

As of December 31, 2015, a total carrying amount of EUR 123 million (December 31, 2014 - EUR 170 million) which represents mainly operating shopping centres is pledged against secured bank loans of approximately EUR 103 million.

(7) Write-down of trading properties

Trading properties are measured at the lower of cost and net realizable value. Determining net realizable value is inherently subjective as it requires estimates of future events and takes into account special assumptions in the valuations, many of which are difficult to predict.

Actual results could be significantly different than the Company's estimates and could have a material effect on the Company's financial results. Trading Properties accumulated write-downs from cost as of December 31, 2015, amounted to EUR 230 million or 42% percent of outstanding trading properties original cost (December 31, 2014 - EUR 274 million or 42% of gross trading property balance). These valuations become increasingly difficult as they relate to estimates and assumptions for projects in the preliminary stage of development.

Management is responsible for determining the net realizable value of the Group's Trading Properties. In determining net realizable value of the vast majority of Trading Properties, management utilizes the services of an independent third party recognized as a specialist in valuation of properties (As at December 31, 2015, 98% of the value of trading properties was based on valuations done by the independent third party valuation service (2014 - 98%).

NOTE 8 - TRADING PROPERTIES (Cont.)

The remaining properties were valued internally. On an annual basis (and in certain cases during the year), the Company reviews the valuation methodologies utilized by the independent third party valuator service for each property.

The main features included in each valuation are:

a. Completed trading properties (operating shopping centers)

The Net Realizable Value of operating shopping centers reflects rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

The Net Realizable Value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. The Group uses professional appraisers for determining the Net Realizable Value of the operating shopping centers.

Independent valuation reports are prepared by Cushman & Wakefield by using discounted cash flow valuation techniques. The Group uses assumptions that are mainly based on market conditions existing at the reporting date.

The principal assumptions underlying management's estimation of Net Realizable Values are those related to the receipt of contractual rentals, expected future market rentals, void periods, maintenance requirements and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions made by the Group and those reported by the market, if available. Expected future rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

b. Incomplete trading properties (undeveloped plots of lands)

The net realizable value in case of an undeveloped project is determined by either:

· comparison with the sale price of land for comparable development ; or 

· assessment of the value of the project as completed and deduction of the costs of development (including developer's profit and financing costs), and applying an estimated discount rate, to arrive at the underlying land value. This is known as the residual method.

b1 - Comparable method

Valuation by comparison is essentially objective in that it is based on an analysis of the price achieved for sites with broadly similar development characteristics. Valuation by comparison is generally used if evidence of actual sales can be found and analysed on a common unit basis, such as site area, developable area or habitable room.

Where comparable development cannot be identified in the immediate area of the subject site or when sales information is not clearly available through common channels of information (internet, newspapers, trade journals, periodic market research) it is necessary to look further out for suitable comparable and to make necessary adjustments to the price in order to account for dissimilarities between the comparable development and the subject site. Such adjustments include, but not limited to:

· Adjustment due to the time of the transaction. Market conditions at the time of the sales transaction of a comparable property may differ from those on the valuation date of the property being valued. Factors that impact market conditions include rapidly appreciating or depreciating property values, changes in tax laws, building restrictions or moratoriums, fluctuations in supply and demand, or any combination or forces working in concert to alter market conditions from one date to another.

· Adjustment due to asking price and condition of payment. The special motivations of the parties to the transaction in many situations can affect the prices paid and even render some transactions as non-market. Examples of special conditions of sale include a higher price paid

NOTE 8 - TRADING PROPERTIES (Cont.)

by a buyer because the parcel has synergistic, or marriage value; a lower price paid because a seller was in a hurry to conclude the sale; a financial, business, or family relationship betweenthe parties involved in the transaction, unusual tax considerations; lack of exposure of the property in the (open) market; or the prospect of lengthy litigation proceedings.

· Adjustment because of size, shape and surface area. Where the physical characteristics of a comparable property vary from those of the subject property, each of the differences is considered, and the adjustment is made for the impact of each of these differences on value.

· Adjustment because of location. The locations of the comparable sale properties and the subject property are compared to ascertain whether location and the immediate environment are influencing the prices paid. The better location a property is located in the more it is worth per square meter; and conversely the worse location a property is in the less it is worth per square meter. An adjustment is made to reflect such differences based on the valuers' professional experience. Extreme location differences may indicate that a transaction is not truly comparable and are disqualified.

b2 - Residual method

The residual method, in contrast, relies on an approach that is a combination of comparison and cost and it requires making a number of assumptions - any of which can affect the outcome in varying degrees. Having established the development potential a residual valuation can be expressed as a simple equation: (value of completed development) - (development costs + developers profit + financing costs) = land value. Each element of this equation is discussed in the following paragraphs.

(8) Value of completed development

The value of the completed development is the market value of the proposed development assessed on the special assumption that the development is complete as at the date of valuation in the market conditions prevailing at that date.

(9) Development costs

The development costs include planning and design costs, construction costs, site related costs, holding costs, finance costs and contingencies.

Some larger schemes such as Casa radio in Romania and Bangalore in India are phased over time. Is such case the phasing is reflected in the cash flows as deferral of some of costs to a date when it might be reasonable to expect them to be incurred. Similarly, not all proceeds occur simultaneously.

(10) Developer's profit

The nature of the development determines the selection of the profit margin, or rate of return and the percentage to be adopted varies for each case. The developers profit is expressed as a percentage of the cost of the completed development.

All of the trading properties were valued using the Residual technique (or the Discounted Cash Flows technique for operating shopping centres) except the one project in a value of EUR 10.7 million. In 2014: the same with the exception of one project with a total amount of EUR 0.8 million using the comparative method.

All the trading properties carrying amounts equals their net realizable values with the exception of Torun and Suwalki in Poland (2014: Torun and Suwalki in Poland and Arena extension in Hungary), where the carrying amount reflects the cost.

NOTE 8 - TRADING PROPERTIES (Cont.)

(11) Significant estimates

The following table shows the valuation techniques used in measuring the net realizable values of trading properties, including those held by joint ventures which are recorded as equity accounted investees: