Platzer Fastigheter Annual Report 2014

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FY2014 Annual Report · Platzer Fastigheter

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PLAZA CENTERS 2014

ANNUAL

REPORT

PLAZA CENTERS

Who we

Contents

Overview

Who we are . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2014 highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Our strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Feature developments . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Debt restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Competitive strengths . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Our markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Our portfolio at a glance . . . . . . . . . . . . . . . . . . . . . . . . 15

Development focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Current portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Business review

President and Chief Executive Ofﬁ cer’s statement . . . . . 28

Operational review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Valuation summary by Cushman and Wakeﬁ eld . . . . . . . 38

Management and governance

Management structure . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Board of Directors and Senior management . . . . . . . . . 40

Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Remuneration report . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Statement of the directors . . . . . . . . . . . . . . . . . . . . . . . 65

Financial statements

Independent auditors’ report . . . . . . . . . . . . . . . . . . . . . 66

Consolidated statement of ﬁ nancial position . . . . . . . . . 67

Consolidated statement of proﬁ t or loss . . . . . . . . . . . . 68

Consolidated statement of comprehensive income . . . . 69

Consolidated statement of changes in equity . . . . . . . . . 70

Consolidated statement of cash ﬂ ows . . . . . . . . . . . . . . 71

Notes to the consolidated ﬁ nancial statements . . . . . . . 73

Additional information

Company’s ofﬁ ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

This annual report is not intended for Dutch

statutory ﬁ ling purposes.

The Company is required to ﬁ le an annual

report containing consolidated and Company

ﬁ nancial statements prepared in accordance

with the Netherlands Civil Code – such a report

will be submitted in due course to the Dutch

authorities and will be available for

shareholders’ inspection at the Company’s

ofﬁ ces in Amsterdam.

Who we are

are

We are a leading Central and Eastern European
property developer focusing on western-style
shopping and entertainment centers, with a
diversiﬁ ed platform of operations in India.

The Plaza Centers Group is a leading emerging markets developer

Market in the United States. (For more information visit

of shopping and entertainment centers, focusing on developing new

www.elbitimaging.com.)

centers and, where there is signiﬁ cant redevelopment potential,

redeveloping existing centers, in both capital cities and important

The Group has been present in real estate development in emerging

regional centers. The Group has been present in the Central and

markets for more than 19 years, initially pursuing shopping

Eastern Europe region (“CEE”) since 1996 and was the ﬁ rst to

and entertainment center development projects in Hungary and

develop western-style shopping and entertainment centers in Hungary.

subsequently expanding into Poland, the Czech Republic, Romania,

The Group has pioneered this concept throughout the CEE whilst

Latvia, Greece, Serbia, Bulgaria and India. To date, the Group has

building a strong track record of successfully developing, letting and

developed and let 33 shopping and entertainment centers in the

selling shopping and entertainment centers. Since 2006, the Group

CEE region and India, of which 27 were sold with an aggregate

has extended its area of operations beyond the CEE into India. In

gross value of circa €1.2 billion. 21 of these centers were acquired

2012, Plaza identiﬁ ed, with its joint venture partners, a window of

by Klepierre, a leading player in the continental European shopping

opportunity for investment in the US as a result of the dislocation

center property market, which owns circa 180 shopping centers in

of the property market, speciﬁ cally within the retail sector. In 2010,

16 countries in continental Europe, with a property portfolio value

taking advantage of its qualities and experience in identifying

of €21 billion as of year end 2014. Four additional shopping and

opportunities, managing and exiting assets, gained over the years,

entertainment centers were sold to the Dawnay Day Group, one

the Group completed another signiﬁ cant sale of 49 US-based assets,

of the UK’s leading institutional property investors at that time.

mainly to a joint venture between Blackstone Real Estate and DDR

One shopping center was sold in 2007 to Active Asset Investment

Corp. in a transaction valued at US$1.47 billion, which reﬂ ects a

Management (“AAIM”), a UK commercial property investment group.

ROE for the Group of nearly 50% in a period of little over 18 months.

The transaction had a completion value totaling approximately

During 2014, Plaza successfully completed the restructuring process

completed in Hungary in 2007. Kragujevac Plaza was sold in 2014

midway through the year, with resounding support from its creditors.

to New Europe Property Investments plc (“NEPI”), a publicly traded

This was followed by the completion of a successful rights offering,

commercial property investor and developer in Eastern Europe,

which provided Plaza with a €20 million capital injection and marked

holding 26 income producing assets.

€387 million, representing circa 20% of all real estate transactions

an important ﬁ nal step in the restructuring process. A third listing

on the Tel Aviv Stock Exchange and the recent upgrade in Plaza’s

credit rating from the Israeli division of Standard & Poor’s (from

“D” to “BBB-”, on a local Israeli scale, with a stable outlook), have

further underlined the achievements of the year and strengthens the

Company’s position.

Throughout 2014, Plaza continued operational improvement

and portfolio repositioning. These are clearly expressed by

signiﬁ cant headway made with the disposal of Kragujevac Plaza

for €38.6 million and successful disposal of non-core sites in

Romania (Targu Mures and Hunedoara) for €4.7 million in line with

the Company’s strategy to pay down debt and shed the portfolio of

non-core assets. At the same time Plaza improved occupancy and

turnover were recorded across the Company’s existing shopping and

Serbia

entertainment centers in CEE, with the overall portfolio occupancy

Since 1 November 2006, Plaza Centers N.V.’s shares have been

level increasing to 94% as of year-end, reﬂ ecting successful asset

traded on the main board of the London Stock Exchange under the

management initiatives at Torun Plaza, Riga Plaza, Suwalki Plaza

ticker “PLAZ”. From 19 October 2007, Plaza Centers N.V.’s shares

and Zgorzelec Plaza. During 2014 NOI increased by 3.5%.

are also traded on the main list of the Warsaw Stock Exchange under

The Company is an indirect subsidiary of Elbit Imaging Ltd. (“EI”), an

this dual listing, and as of 27 November 2014, Plaza Centers N.V.’s

Israeli public company whose shares are registered for trade on the

shares are also traded on the Tel Aviv Stock Exchange under the

Tel Aviv Stock Exchange in Israel and on the NASDAQ Global Select

ticker “PLAZ”.

the ticker “PLZ”, making it the ﬁ rst property company to achieve

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

2014 highlights

Signiﬁ cant headway in the repositioning of

portfolio, disposing of a number of non-core
assets and successful completion of the

restructuring process.

Asset and operational highlights

• During the period, Plaza made signiﬁ cant headway in the

repositioning of its portfolio, disposing of a number of

non-core assets:

- In the fourth quarter of 2014, 18 months ahead of schedule,

Plaza successfully completed the disposal of Kragujevac Plaza

in Serbia for €38.6 million, in line with the asset’s last reported

book value. Following the repayment of related bank debt of

c. €28.2 million, 75% of the net cash proceeds (c. €12.4 million,

including the released restricted cash deposit of c. €2 million)

were distributed to the Company’s bondholders as an early

repayment of the bonds, in line with the Company’s stated

restructuring plan.

- Successful disposals of non-core sites in Romania, at Targu

Mures (September 2014) and Hunedoara (December 2014),

for €3.5 million and €1.2 million respectively, consistent with

the assets’ last reported book values.

• Improved occupancy and turnover were recorded across the

Company’s existing shopping and entertainment centers in

Total assets
2014: €466 million

2013: €586 million

2007

2008

2009

2010

2011

2012

2013

2014

Consolidated cash position*
2014: €41.7 million

€m

1500

1200

900

600

300

the CEE, with the overall portfolio occupancy level increasing

2013: €33.7 million

€m

300

to 94% as of 31 December 2014.

- At Torun Plaza, Poland, occupancy increased to 92.5%

(2013: 89%). An additional 4,100 sqm of GLA was opened

during the year, and asset management initiatives contributed

to a 21.2% increase in turnover and 6.3% increase in footfall

compared to 2013.

- In Latvia, Riga Plaza’s occupancy level increased to 99.5%

(2013: 97%) and the shopping center recorded the second

highest increase in turnover in the portfolio (15.6%) along

with a 7.2% increase in footfall.

- Occupancy at Suwalki Plaza, Poland, increased to 97.7%

(2013: 91%) and it continues to perform well, with a 7%

270

240

210

180

150

120

2007

2008

2009

2010

2011

2012

2013

2014

* Including short term and long term liquid ﬁ nancial instruments.

increase in turnover in 2014.

and Carry. In April, H&M opened its largest store in Latvia

- Zgorzelec Plaza, Poland, also experienced strong occupancy

(2,700 sqm) at Riga Plaza, where a further 1,060 sqm was leased

growth, reaching 95.2% (2013: 91%), attributable to the

opening of a 547 sqm store for Carry and a number of

to Elkor Kids. At Suwalki Plaza, more than 87% of the existing
tenants signed lease options or renewals during the year and leases

smaller fashion and service stores. The center reported a

for new premises were secured with KIK and several fashion stores.

14.1% increase in turnover and 8.4% rise in footfall.

- Liberec Plaza, Czech Republic, reported a 7.5% increase

in turnover in 2014. Occupancy remains steady at 84%

Financial highlights

(2013: 86%). The slight decrease was due to lease agreement

• Reduction in total assets to €466 million (31 December 2013:

expiries, but were in part offset by the opening of a

€586 million), primarily due to the impairment of trading

1,611 sqm Sports Direct store in April.

properties and equity accounted investees, and to the strategic

disposal of Kragujevac Plaza, Serbia.

• Considerable letting success was achieved and contracts with a

- 25% (€124 million) reduction in the book value of the

number of signiﬁ cant new tenants improved the overall tenant

Company’s trading properties, largely due to impairments

strength and mix in the portfolio, including TK Maxx, Sports Direct

recorded.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

2014 highlights

Net Asset Value (NAV)
2014: €153 million

2013: €274 million

2007

2008

2009

2010

2011

2012

2013

2014

Proﬁ t (loss) after tax
2014: €(120) million

2013: €(218) million

• Net Asset Value decreased by 44% to €153 million

(31 December 2013: €274 million) primarily as a result of the

impairment of assets, mainly in Romania, Greece and India.

- Net Asset Value per share of £0.17 (31 December 2013: £0.79),

a decline of 78%, attributable to dilution (increase in the

number of shares by 130%) and the abovementioned

impairments.

• Losses in the period of €120 million (31 December 2013:

loss of €218 million), stemming from a non-cash €89 million

impairment of trading properties and equity accounted investees

(31 December 2013: €186 million of impairments), and an overall

net ﬁ nance cost of €36 million (2013: €39 million).

- Basic and diluted loss per share of €0.39 (31 December 2013:

loss per share of €0.73).

€m

1200

1000

800

600

400

200

• Consolidated cash position at year end (including restricted bank

deposits, short term deposits and held for trading ﬁ nancial assets)

of €41.7 million (31 December 2012: €33.7 million) and current

cash position of circa €39.5 million (€7 million restricted).

€m

250

• Gearing increased to 74% (31 December 2013: 64%) as a result of

impairment losses and ﬁ nance costs incurred during the year.

200

150

100

-50

-100

-150

-200

-250

2007

2008

2010

2011

2009

2012

2014

2013

• A 3.5% increase in 2014 in NOI from the operation of shopping

centers (from €17 million to €17.6 million, including Company

share in NOI from commercial center of Riga, Latvia). Excluding

the impact of the commercial center Kragujevac, which was sold

Key highlights since the period end

• On 24 February 2015, the Israeli credit rating agency which is a

division of International Standard & Poor’s, updated the credit

rating of Plaza’s two series of Notes traded on Tel Aviv Stock

Exchange from “D” to “BBB-”, on a local Israeli scale, with a stable

outlook.

• On 13 March 2015, one of the Company’s subsidiaries in

Romania, which has a 49 year leasehold on a plot in Bucharest,

Romania, signed a pre-agreement to waive its leasehold rights for

a certain consideration to be agreed with the owner of the property

(a subsidiary of EI) and approved by the relevant stakeholders

of these entities. The mentioned pre-agreement is subject to

the fulﬁ lment of certain conditions and approval by the relevant

stakeholders of the Company.

• After almost 10 years at the helm, Plaza’s CEO, Ran Shtarkman,

has informed the Board of Directors that he intends to leave the

Company to pursue other opportunities. The Board of Directors

has accepted Mr. Shtarkman’s resignation and he has agreed to

continue in the role until the end of July, to ensure an orderly

in the summer of 2014, the Group recorded a 13% increase in

succession.

NOI from the operation of shopping centers (from €13.2 million

to €14.9 million).

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Our strategy

Develop

Plaza develops modern, western-style shopping and entertainment

centers in capital and regional cities, primarily in Central and Eastern

Europe.

Acquire

Plaza acquires operating shopping centers that have signiﬁ cant

redevelopment or growth potential.

Flexibility

Depending on market yields, Plaza either pre-sell or hold and manage

its assets until the exit yields are sufﬁ ciently attractive.

Plaza shall not make any dividend distributions, unless at least 75%

of the unpaid principal balance of the debentures (€199 million)

has been repaid and the coverage ratio on the last examination date

prior to such distribution is not less than 150% following such

distribution.

Plaza continues to focus on deleveraging its balance sheet during the

period but, as a result of impairment losses recorded in the period
and ﬁ nance costs incurred, the gearing level increased to 74% in 2014.

Objectives

1 To concentrate on existing projects and target new development

opportunities in the strongest countries in Central and Eastern

Europe that have the potential to generate returns of 40% to 60%

on equity invested.

Maintain liquidity and debt management

2 To fund 50% to 75% of total project construction costs through

competitively priced bank ﬁ nance.

2014 marked a year of progress for Plaza as the Company

successfully completed the Dutch restructuring plan, with 92% of

3 To limit the commencement of construction projects to those that

creditors approving the plan in June and the Dutch Court’s formal

meet two major criteria, namely intensive demand from tenants

and irrevocable approval being granted in July, just seven months

and those which are backed by external bank ﬁ nancing to ensure

after the Company made its initial announcement. The successful

minimal equity investment.

rights offering, which concluded in November, provided the Company

with a welcome €20 million cash injection and the completion of this

4 Plaza will continue to pursue its intensive asset management

considerable activity provided Plaza with a strengthened platform at

strategy which has seen clear success at the Company’s income-

the start of 2015.

generating centers in the CEE, where Plaza’s focus remains on

initiatives that will drive occupancy levels, footfall and turnover to

Recently, the Israeli credit rating agency which is a division of

maximise income and deliver value.

International Standard & Poor’s, updated the credit rating of Plaza’s

two series of Notes traded on the Tel Aviv Stock Exchange from “D”

5 Plaza will continue to drive the reshaping of the portfolio with

to “BBB-”, on a local Israeli scale, with a stable outlook, an upgrade

the disposal of further non-core assets in order to deleverage

which further strengthens the Company’s position.

the balance sheet and advance key development projects in core

geographies including Timisoara in Romania, Belgrade in Serbia

Pursuant to the restructuring plan, the net cash ﬂ ow to be received

and Lodz in Poland.

by Plaza following an exit or the raising of new ﬁ nancial indebtedness

(except if taken for the purpose of purchase, investment or

development of real estate assets (“REA”) or the reﬁ nancing of REAs

after the full repayment of the asset’s related debt that was realised

or in respect of a loan paid in case of debt recycling and direct

expenses in respect of the asset) will be used for the repayment of

the accumulated interest until that date for all of the series of Notes

and 75% of the remaining cash (following the interest payment) will

be used for an early repayment of the near principal payments for

each of the series of Notes (A, B, Polish) each in accordance with its

deferred debt ratio. Such prepayment will be actual cash repayment

and not in bond purchases.

Development criteria

Selection of target countries

Plaza’s primary focus is on countries in emerging markets and the

Company is currently present in CEE and India. In order to determine

a favourable investment climate, Plaza takes into account country

risk, GDP per capita and economic growth, ratio of retail sales per

capita, political stability, sophistication of banking systems, land

ownership restrictions, ease of obtaining building and operating

permits, business risks, existing competition and market saturation

levels.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Our strategy

Site evaluation

Plaza looks to develop its ﬁ rst project in the capital city of a new

country, and thereafter in regional cities with a minimum catchment

area of 50,000 residents. Site evaluation includes site area,

catchment area, local zoning and town planning schemes, proximity

to transportation and vehicular routes and legal issues. A carefully

structured, internally developed evaluation process is in place

involving each of the relevant disciplines (economics, engineering,

marketing, etc.).

Project development

Once the Company has approved a site, Plaza manages its

development from inception to completion, incorporating

engineering, marketing, ﬁ nancial and legal stages, designs,

architects, market forecasts and feasibility studies.

Emerging markets

Plaza has a strong track record in developing real estate projects

such as shopping and entertainment centers in emerging markets.

The Group has been present in the CEE region since 1996 and was

a pioneer in bringing western-style shopping malls to Hungary.

The concept continued throughout the CEE and was exported

to India.

The Company has had considerable success in capitalising on the

fantastic opportunities that emerging markets have offered.

Plaza carefully investigates the beneﬁ ts and challenges inherent in

every proposed project, adhering to its development criteria.

The Company is currently focusing its development efforts on

Rormania, Serbia and Poland. Plaza will continue to advance

remaining projects within its land bank, through obtaining planning

consents and construction permits.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Feature

developments

Since foundation, the Group has developed and let

32 shopping and entertainment centers in the CEE

region and one in India of which 27 were sold with

an aggregate gross value of €1.2 billion, resulting

in a gain of €372.4 million.

Plaza currently owns and manages six shopping and entertainment centers.

Improved occupancy and turnover were recorded across the Company’s

existing shopping and entertainment centers, with the overall portfolio

occupancy level increasing to 94% as at the reporting date.

Riga Plaza
(Latvia)

Opened March 2009

Plaza share 50%

49,000
sqm GLA

Riga Plaza shopping and entertainment center is located on the western
bank of the Daugava river by the Sala Bridge. The two-ﬂ oor mall includes
an eight-screen multiplex cinema and 2,000 sqm of Fantasy Park.
The center continues to deliver signiﬁ cant operational improvements,
seeing occupancy levels increase to 99.5% following the lease agreement
signed wiht H&M for a 2,700 sqm store which was opened in April 2014.
The shopping center recorded 15.6%, the second highest increase in
turnover in the portfolio along with a 7.2% increase in footfall.

Opened March 2009

Plaza share 100%

Liberec Plaza
(Czech Republic)

17,000
sqm GLA

Plaza continues to own and manage Liberec Plaza shopping and
entertainment center, which reported 7.5% increase in turnover in 2014.
Occupancy remains steady at 84%. The slight decrease compared to 86%
in 2013 due to lease agreement expiries, but were in part offset by the
opening of a 1,611 sqm Sports Direct store in April 2014.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Opened May 2010

Plaza share 100%

Suwalki Plaza
(Poland)

20,000
sqm GLA

Suwalki Plaza, the three-ﬂ oor shopping and entertainment center which
includes a three-screen cinema, achieved signiﬁ cant occupancy growth
from 91% in 2013 to 97.7% in 2014. It is let to international and local
tenants such as H&M, Rossmann, New Yorker, KappAhl and Cinema
Lumiere, and continues to perform well. Turnover of the center increased
by 7% in 2014. Contracts with KIK and several fashion stores, were signed
for new premises during the year and, to date, more than 87% of the
existing tenants have signed lease options or renewals.

Opened March 2010

Plaza share 100%

Zgorzelec Plaza
(Poland)

13,000
sqm GLA

Zgorzelec Plaza experienced strong occupancy growth, reaching 95%
compared to 91% in 2013, attributable to the opening of a 547 sqm store
for Carry and a number of smaller fashion and service stores. The center
reported a 14.1% increase in turnover and 8.4% in footfall.

Opened November 2011

Plaza share 100%

Torun Plaza
(Poland)

40,000
sqm GLA

Torun Plaza represents Plaza’s tenth completed center in Poland.
The center is 92.5% let to premium international and local brands.
An additional 4,100 sqm retail space was opened at the center in 2014,
increasing the total lettable area of the shopping center by more than
10%. Among the most notable openings were TK Maxx, Sports Direct,
Carry, Sinsay and various smaller fashion stores. As a result of these asset
management initiatives and other marketing activities, the shopping center
contributed to a 21.2% increase in turnover and 6.3% increase in footfall
compared to 2013.

Opened March 2012 Koregaon Park Plaza
(India)

Plaza share 100%

41,000
sqm GLA

The Company has signed a preliminary non-binding agreement for the sale
of Koregaon Park Plaza, the Company’s ﬁ rst completed entertainment and
shopping center in India. The agreement is subject to certain conditions
and discussions to complete the disposal are currently at advance stage.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Debt restructuring

General

On 14 November 2013, Plaza Centers announced that its Board of

Directors had concluded that the Company would withhold payment

on the upcoming maturities of its bonds and approach its creditors

with a restructuring plan. The restructuring plan was approved on

26 June 2014 by the vast majority of the Company’s creditors and,

subsequently, approved by the Court on 9 July 2014, becoming an

irrevocable decision on 21 July 2014. The Company announced

the publication of a prospectus in respect of a rights offering on

16 October 2014. The shareholders approved the rights offering on

28 November 2014 which was followed on that date by the capital

injection of €20 million by the existing shareholders. All conditions

precedent of the restructuring plan were fulﬁ lled.

The creditors included in the debt restructuring were the bondholders

in Israel, the bondholders in Poland and the banks at asset level with

a right of recourse to the parent company.

Plaza’s ordinary shares were listed for trade on the Tel Aviv Stock

Exchange with effect from 27 November 2014.

Actual ﬁ rst payment of both principal and interest to debentures

occurred on 7 January 2015 with the Company transferring all funds

already effective 23 December 2014 to the governing authorities.

Summary

A summary of the main terms of the restructuring plan are set

out below:

• An injection of €20 million into the Company at a price per share

of €0.0675 (the “equity contribution”).

• The Company issued to the holders of unsecured debt (i.e.

outstanding debt under the Israeli Series A and B Notes and

the Polish Notes) (“unsecured debt”) 13.21% of the Company’s

shares (“post equity contribution”). Such shares issuance was

distributed among the holders of unsecured debt pro rata to

the relative share of each relevant creditor in the deferred debt

(“deferred debt ratio”).

• Each principal payment under the debentures due in the years

2013, 2014 and 2015, pursuant to the original terms of the

debentures, shall be deferred by exactly four and a half years

and each principal payment due pursuant to the original terms

of the debentures in subsequent years (i.e. 2016 and 2017) will

be deferred by exactly one year. In the event that the Company

does not succeed in prepaying an aggregate amount of at least

€92 million (NIS 434 million) of the principal of the debentures,

excluding linkage differentials within a period of two years

ending 1 December 2016, then all principal payments under the

debentures deferred in accordance with above, shall be advanced

by one year (i.e. shall become due one year earlier).

• All unpaid interest accrued on the Israeli debentures and Polish

debentures up to and including 31 December 2013 will be added

to the principal and paid together with it.

• As of 1 January 2014, the annual interest rate of the unsecured

debt increased by 1.5%.

• The Company paid to the holders of the unsecured debt an

amount of €13.8 million in 2014 interest payments.

• The Company and all other companies of the Group, the current

and former directors and ofﬁ cers of the Group, all direct and

indirect shareholders of the Group from any and all liability under

any applicable law other than with respect to claims or demands

regarding which the grounds are fraud or malice or other ground

for which a release is not permitted by law.

• The net cash ﬂ ow to be received by the Company following an exit

or the raising of new ﬁ nancial indebtedness, except if taken for

the purpose of purchase, investment or development of real estate

assets (“REA”) or reﬁ nancing of REAs after the full repayment of

the asset’s related debt that was realised or in respect of a loan

paid in case of debt recycling (and in case where the exit occurred

in the subsidiary – amounts required to repay liabilities to the

creditors of that subsidiary) and direct expenses in respect of the

asset (any sale and tax costs, as incurred) will be used for the

repayment of the accumulated interest until that date for all of the

series (in the case of an exit which is not one of the four shopping

centers, only 50% of the interest) and 75% of the remaining

cash (following the interest payment) will be used for an early

repayment of the near principal payments for each of the series

of Notes (A, B, Polish) each in accordance with its deferred debt

ratio. Such prepayment will be actual cash repayment and not in

bond purchases.

• Permitted disposals (provisions with respect to the four shopping
malls) – The Company will be allowed to sell the four shopping
malls (Torun, Suwalki, Kragujevac and Riga) or to undertake a

reﬁ nancing for any of these (hereinafter “disposal event”), subject

to the cumulative net cash ﬂ ow in the disposal event in respect of

these four shopping malls being no less than €70 million. Should

no disposal event occur for the four shopping malls together, the

Company will be allowed to perform a special purpose disposal

event only if, after execution of the special purpose disposal event,

the surplus value of the shopping malls not sold (according to

the valuation deducting the speciﬁ c debt to banks) is no less than

€70 million, deducting the net cash ﬂ ows received from previous

disposal events and deducting the net cash ﬂ ow from the special

purpose disposal event.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Debt restructuring

• Restrictions on issuance of additional debentures – The Company
undertakes not to issue any additional debentures other than is

the outstanding debentures debt (as of 30 November 2014) has

been repaid in full, except in certain events, mainly:

expressly provided for in the restructuring plan.

- the new FI is incurred for the purpose of investing in the

• Restrictions on amendments to the terms of the debentures –
The Company shall not be entitled to amend the terms of the

development of a real estate asset;

- the new FI is incurred by a subsidiary for the purpose of

debentures, with the exception of purely technical changes, unless

purchasing a new REA by such a subsidiary, provided that

such amendment is approved under the terms of the relevant

following such a purchase the cash reserve is not less than the

series and the applicable law and the Company also obtains

MCRC;

the approval of the debentures holders of all other series of

- at least 75% of the net cash ﬂ ow resulting from the incurrence

debentures issued by the Company by ordinary majority.

of new FI is used to for a mandatory early repayment of the

• Coverage ratio covenant (“CRC”) – CRC is equal to asset value
plus cash and cash equivalents less the Group’s bank liabilities

Notes.

• Dividend policy – Plaza shall not make any dividend distributions,

secured by an encumbrance over any of the Group’s rights or

unless (i) at least 75% of the unpaid principal balance of the

assets or otherwise rank in priority ahead of the plan claims;

debentures (€199 million) has been repaid and the coverage ratio

and divided by the aggregate amount of remaining plan claims

on the last examination date prior to such distribution is not less

plus all other liabilities of the Group that rank pari passu with the

than 150% following such distribution, or (ii) a majority of the

plan claims and that are not subordinated debt. The calculation

plan creditors consents to the proposed distribution.

is based on known Group valuations reports and consolidated

ﬁ nancial information available at each reporting period. Minimum

CRC deemed to be complied with by the Group is 118% in each

reporting period.

• Minimum cash reserve covenant (“MCRC”) – The cash reserves
of the Company have to be greater than the amount estimated

by the Company’s management required to pay all administrative

and general expenses and interest payments to the debentures

holders falling due in the following six months, minus sums of

proceeds from transactions that have already been signed (by

the Company or a subsidiary) and closed and, to the expectation

of the Company’s management, have a high probability of being

received during the following six months. Investments in new or

existing REA of the group shall not be permitted if following such

investment the cash reserves are less than the minimum cash

reserve and minimum CRC is not met.

• Negative pledge on REA of the Company – The Company

undertakes that until the debentures have been repaid in full,

it shall not create any encumbrance on any of the REA, held,

directly or indirectly, by the Company except in the event that

the encumbrance is created over the Company’s interests in a

subsidiary as additional security for ﬁ nancial indebtedness (“FI”)

incurred by such subsidiary which is secured by encumbrances on

assets owned by that subsidiary.

• Negative pledge on the REA of subsidiaries – The subsidiaries

shall undertake that until the debentures has been repaid in full,

none of them will create any encumbrance on any of REA except

certain cases.

• Limitations on incurring new FI by the Company and the

subsidiaries – The Company undertakes not to incur any new FI
(including by way of reﬁ nancing an existing FI with new FI) until

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Competitive strengths

Com

2014 has been another signiﬁ cant year for the business as Plaza

completed its restructuring process efﬁ ciently, within an eight month

period and with the resounding support of 92% of its creditors. Plaza

ﬁ nished the year with a successful rights offering, which provided

the Company with a €20 million capital injection, and a third listing

on the Tel Aviv Stock Exchange, and it has started 2015 with the

news of an upgrade to its credit rating from Standard & Poor’s from

“D” to “BBB-” on a local Israeli scale with a stable outlook. The

market prices of Plaza’s traded debt have reacted positively to the

restructuring plan.

In terms of the portfolio, Plaza has continued its efforts to dispose

of non-core assets and it is pleased to report considerable

operational improvements across its CEE shopping center portfolio.

Of particular note was the sale of Kragujevac Plaza in Serbia, which

was completed a year and a half ahead of schedule, with 75% of

proceeds being returned to the Company’s bondholders as per the

restructuring agreement, as well as sales of two non-core sites in

Romania. These disposals have been in line with Plaza’s strategy

to shed the portfolio of non-core assets in order to deleverage the

balance sheet and pay down debt.

Alongside this activity, operational and asset management initiatives

have been continuing with strength. Occupancy has risen to 94%

across the portfolio and the Company’s centers continued to attract

high proﬁ le, international brands including TK Maxx, Sports Direct

and H&M, contributing to higher footfall and turnover across its core

CEE portfolio.

These improvements have been possible by leveraging of the deep

relationships that Plaza has created with retailers over a number of

years, many of whom the Company has helped introduce into new

geographies.

Plaza has been working closely with its reconﬁ gured Board and its

continued conﬁ dence in the management’s ability to deliver value

and repay the Company’s creditors is supportive of its strategy going

forward. The economic landscape in the Company’s core markets is

improving slightly and Plaza has entered 2015 with renewed focus.

By utilising the extensive skills of its experienced management

team, the deep relationships Plaza has with its tenants and ﬁ nance

providers, and maintaining its cautious but opportunistic approach,

the Company is positioning itself, following the completion of the

restructuring, to be able to return the rewards of capital appreciation

and income growth to its shareholders.

Proven track record

Plaza continues to beneﬁ t from its unrivaled track record across

CEE, having been active in the region for more than 19 years.

The economic landscape in Plaza’s core markets is improving lightly

and the Company has entered 2015 with renewed focus. However,

Plaza has seen marked differences between the countries north of

the region, which have proved more resilient, and the struggling

southern economies, including Romania and Bulgaria.

During the period, Plaza made signiﬁ cant headway in the

repositioning of its portfolio, disposing of a number of non-core

assets:

• In the fourth quarter of 2014, 18 months ahead of schedule, Plaza

successfully completed the disposal of Kragujevac Plaza in Serbia

for €38.6 million, in line with the asset’s last reported book value.

Following the repayment of related bank debt of c. €28.2 million,

75% of the net cash proceeds (c. €12.4 million, including the

released restricted cash deposit of c. €2 million) were distributed

to the Company’s bondholders as an early repayment of the

bonds, in line with the Company’s stated restructuring plan.

• Successful disposals of non-core sites in Romania, at Targu

Mures (September 2014) and Hunedoara (December 2014), for

€3.5 million and €1.2 million respectively, consistent with the

assets’ last reported book values.

• Following the year-end, on 13 March 2015, one of the Company’s

subsidiaries in Romania, which has a 49 year leasehold on a

plot in Bucharest, Romania, signed a pre-agreement to waive its

leasehold rights for a certain consideration to be agreed with

the owner of the property (a subsidiary of EI) and approved by

the relevant stakeholders of these entities. The mentioned

pre-agreement is subject to the fulﬁ lment of certain conditions and

approval by the relevant stakeholders of the Company.

To date, 27 of the completed centers have been subsequently sold

with an aggregate gross value of circa €1.2 billion. These disposals

comprise 17 shopping centers in Hungary, seven in Poland, two

in the Czech Republic and one in Serbia, with the remaining six

shopping centers currently being held as operational assets, of which

three are located in Poland, one in the Czech Republic, one in Latvia,

and one in India (agreement to sell is in place).

Plaza focuses upon creating an attractive tenant mix, including

fashion, hypermarkets, food courts, electronics, sports and other

retailers, with a special focus on entertainment and having a cinema

multiplex in most centers.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

petitive strengths

Flexible business model

During the years 1996-2004, when exit yields were high, the Group

retained and operated shopping centers on completion and earned

rental income. Once property yields decreased, between 2004-2008,

the Group sold 26 shopping centers in line with the Company’s

commercial decision to focus its business more on development and

sale rather than operational management. During 2014, the Company

sold one shopping center in line with the current strategy to realise

value from assets that are close to full potential in order to reduce

debt and recycle Plaza’s capital for new developments pursuant to

the approved restructuring plan.

Mindful of the impact of the ongoing issues in the Eurozone on

the economies in which Plaza operates, the Company will continue

to ﬁ nd the optimal blend of reducing its levels of gearing while

progressing its limited development programme into the strongest

economies of the CEE. Plaza’s cautious but opportunistic approach

is set to unlock signiﬁ cant value on behalf of its shareholders. It will

continue to sell completed developments as appropriate, but will

hold them on its balance sheet and beneﬁ t from the rental income

until sufﬁ cient sale prices are achieved.

Diversiﬁ cation

The Group is well diversiﬁ ed and active in eight countries in CEE

and India, while additional countries are being examined for further

expansion.

Plaza has signed a preliminary non-binding agreement with an

Indian-based developer for the sale of Koregaon Park shopping

and entertainment center in Pune, and it collected €2.6 million

(INR 200 million) of advances in 2014 and 2015. The agreement

is subject to certain conditions and discussions to complete the

disposal are currently at advance stage.

In Chennai Plaza has a major JV residential development to be

delivered in the next few years, which is 80% owned by the JV and

20% by a prominent local developer. The scheme will be developed

into a residential project consisting of approximately 110,000 sqm of

plotted area for development and approximately 62,000 sqm for high

quality villas.

Having monitored the US real estate market for a number of

years, Plaza announced its ﬁ rst transaction in the region in 2010

through the acquisition of a strategic stake in EDT Retail Trust with

its joint venture partners. During 2011, Plaza achieved its aim of

repositioning the portfolio through reducing debt levels, improving

occupancy rates as well as lengthening lease maturities.

Consequently, in June 2012, EPN Group, Plaza’s US-based joint

venture, completed the sale of 47 of its 49 US-based assets in a

transaction valued at US$1.428 billion, which reﬂ ects an ROE for

Plaza of nearly 50% in a period of little over 18 months. In July 2012,

EPN Group completed the disposal phase of the Company’s highly

successful ﬁ rst venture in the US with the sale of its two remaining

US assets and, in March 2013, Plaza received the remaining

proceeds from the dissolution of the US holding entity.

Limited number of active developments

In light of market conditions, Plaza took the strategic decision in

the second half of 2008 to scale back on the commencement of

new projects and to focus on projects with availability of external

ﬁ nancing and strong tenant demand. Plaza will progress a selected

number of projects in the CEE, such as Poland, Serbia and Romania,

where GDP growth and forecasts remain above the average for

Europe.

Deferral of debt maturities will facilitate the development of selective

sites to maximise the value with no material equity investment

and enables Plaza to progress with the initiation of projects and

investment as appropriate, including actively managing its income

generating assets to prepare for their ultimate sale, whilst continuing

to identify exit opportunities from its remaining non-core assets.

Construction is planned to commence on Belgrade Plaza (Visnjicka)

in Serbia, Casa Radio and Timisoara Plaza in Romania and Chennai

in India. In 2016, construction is scheduled for Lodz Plaza in Poland

and Belgrade Plaza (MUP) in Serbia. The Company’s cautious but

opportunistic approach is set to unlock signiﬁ cant value on behalf

of its shareholders.

Debt & Leverage

The successful completion of the restructuring plan in which, among

others, repayment deferral of principal payments for 3.5 years with

an early repayment mechanism and a repayments postponement

mechanism in case of early repayments of part of the debt deriving

mainly from quality sale of the improved assets and shareholders

contribution by cash injection to the Company, will support debt

management and asset sale and development.

Generated net cash ﬂ ow surplus will be used mainly for reducing

the debt. In the case of generating cash ﬂ ow surplus, for example

from assets sale or reﬁ nance, an early repayment will be carried out

under which the entire accumulated interest on the bonds until the

date of the exit/reﬁ nance will be paid, and 75% of the remaining cash

following the interest payment (or after the deduction of part of the

interest payment, in certain cases), will be used for early principal

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Competitive stren

repayment. In addition, no dividend distribution will be made prior to

A third listing on the Tel Aviv Stock Exchange and the recent upgrade

repayment of 75% of the principal balance of the bonds in cycle on

in Plaza’s credit rating from the Israeli division of Standard & Poor’s

the effective date of the trust deeds and compliance with a coverage

have further underlined the achievements of the year and strengthens

ratio of 150% following the distribution.

the Company’s position.

Besides the deﬁ ned risk level, the Company’s future will be

determined by the bondholders. Covenants were deﬁ ned in order

Strong brand name

to allow the debt holders to future-proof the Company against

Plaza Centers has become a widely recognised brand name for

unwanted situations.

successful property development in CEE which is beneﬁ cial at

all stages of project execution (e.g. following portfolio sales to

Plaza continued to focus on deleveraging its balance sheet during

Klepierre, Dawnay Day, AAIM and NEPI, the purchasers continue to

the period but, as a result of impairment losses recorded in the

use the “Plaza Centers” trade name under license).

period and ﬁ nance costs incurred, the gearing level increased to

74% in 2014.

Highly skilled management team

In November 2013, the Company’s Latvian 50% subsidiary signed

Plaza has extensive local and business knowledge with a proven

a new €59.3 million investment loan with a consortium comprising

ability to source strategic development sites, as well as purchasing

two banks for its shopping and entertainment center in Riga, Latvia.

yielding assets at an attractive price and designing projects that

The new facility has duration of four years and therefore substantially

meet the demands of the local market. A signiﬁ cant proportion of

lengthens the duration of the debt compared to the previous loan

management team members have been with Plaza for several years.

facility, which was due for repayment on 30 June 2014. Total bank

borrowing reduced to €150.8 million. This decrease is primarily the

result of loans disposed of and repaid during the year. Following the

Extensive network

conclusion of the restructuring plan, all non-current maturities of

Plaza has a vast and extremely well established network of business

interest bearing loans (previously short termed due to cross default

connections with most anchors and large international tenants and

clause covenant) were reclassiﬁ ed to long term, unless covenant

extensive business relationships with large international funds and

breach is still valid, and no waiver obtained.

real estate market participants. This has been demonstrated by the

Clearly identiﬁ ed pipeline and acquisitions

construction) and achieve high levels of pre-lets.

Company’s proven ability to pre-sell projects (before or during the

Plaza is engaged in 18 development projects, and owns two ofﬁ ce

buildings and six operational assets, located across the CEE region

Thorough project evaluation

and in India. The Group has the ability to identify new growth

Prior to each project, Plaza goes through a carefully developed,

opportunities, constantly targeting attractive returns in fast growing

structured evaluation process involving each of the relevant

disciplines (economics, engineering, marketing, etc.).

emerging markets.

Capital markets

During 2014, Plaza successfully completed the restructuring process

which was followed by the completion of a successful rights offering

in the last quarter of 2014, which provided the Company with a

€20 million capital injection and marked an important ﬁ nal step in the

restructuring process.

On 24 February 2015, the Israeli credit rating agency which is a

division of International Standard & Poor’s, updated the credit rating

of Plaza’s two series of Notes traded on Tel Aviv Stock Exchange

from “D” to “BBB-”, on a local Israeli scale, with a stable outlook.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

gths

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Our markets

Europe

Poland

Serbia

Romania

Latvia

Czech Republic

Hungary

Greece

Bulgaria

India

Population (m)*

Poland

Serbia

Romania

Latvia

Czech Republic

GDP per capita*

38.3

7.2

21.7

2.2

10.6

Hungary

Greece

Bulgaria

India

9.9

10.8

6.9

1,236.3

US$ ’000

Poland

Serbia

Romania

Latvia

Czech
Republic

Hungary Greece

Bulgaria

India

Unemployment*

Poland

Serbia

Romania

Latvia

Czech
Republic

Hungary Greece

Bulgaria

India

CPI - Change in 2014*

* Source: CIA – The World Factbook

Poland

Serbia

Romania

Latvia

Czech
Republic

Hungary

Greece

Bulgaria

India

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Our portfolio at a glance

Total of 26 assets located across CEE region and in India.
Estimated value of €1,947 million on completion.

Portfolio composition – by country

Market value of the land and project

Active

Under development/planning

Ofﬁ ces

Poland

Serbia

Romania

Latvia

Czech
Republic

Hungary Greece

Bulgaria

India

Project

Complete and active projects

Current developments

Pipeline projects

Total as at 31 December 2014

1 Value of Plaza Centers’ stake by Cushman and Wakeﬁ eld as of 31 December 2014.

2 Leszno Plaza was valued with the comparative sales price method, no value at completion was estimated.

Group NAV at 31 December 2014

Market value of land and projects by Cushman and Wakeﬁ eld

Assets minus liabilities as at 31 December 20143

Total

NAV per issued share

3 Excluding book value of assets which were valued by Cushman and Wakeﬁ eld.

169

113

Serbia Romania

Latvia

Hungary Greece

Bulgaria

India

Czech
Republic

€m

200

160

120

Market value on
completion (€m)1

Market value of the land
and the project (€m)1

247

962.1

7372

1,946.5

247.4

145.9

55.5

448.8

€’000

448,844

(295,577)

153,267

£0.17

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Development focus

Plaza will continue in its efforts to best position the

Company against the ongoing economic and market

uncertainty by striving to ﬁ nd the optimal blend of

progressing with a limited and targeted development

programme in the strongest economies of the

CEE whilst reducing its levels of gearing. Plaza’s

cautious but opportunistic approach is set to unlock
signiﬁ cant value on behalf of its shareholders.

Timisoara Plaza

Romania

40,000 sqm GLA

Plaza owns a plot of land with an area of 32,000 sqm in Timisoara, on which it is

intending to develop a shopping and entertainment center. The planned center

will have a GLA of approximately 40,000 sqm and includes a supermarket,

a hypermarket complex, fashion retailers, a fantasy park, a food court and

restaurants. Plaza intends to commence construction in 2015 and the center is

scheduled to open in 2016.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Belgrade Plaza
(Visnjicka) Serbia
32,000 sqm GLA

Plaza owns a 31,000 sqm plot of land in Belgrade, the capital of Serbia. The

Belgrade market offers particular potential, with its large populated catchment

area of approximately 1.7 million people. Plaza intends to develop a new

shopping and entertainment center with a GLA of approximately 32,000 sqm.

The Group intends to commence construction in late 2015 and the center is

scheduled to open in 2017.

Lodz Plaza

Poland

35,000 sqm GLA

Lodz is the third largest city in Poland with over 720,000 inhabitants. Lodz Plaza is

planned to be a two-ﬂ oor shopping and entertainment center with approximately

35,000 sqm of GLA anchored by a supermarket, a department store as well as

a multi-screen cinema and bowling and entertainment center. Plaza intends to

commence construction in late 2016, with completion targeted for 2017.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Current portfolio

Poland

Project

City

Ownership

GLA (sqm)

Market value Market value of the

Expected

on completion

land and project

completion

31 December

2014 (€)

96,300,000

96,300,000 Opened in Q4 2011*

43,075,000

43,075,000 Opened in Q2 2010*

13,450,000

13,450,000 Opened in Q1 2010*

70,911,000

70,158,000

n/a1

7,400,000

3,600,000

800,000

80,0002

86,448,000

4,800,000

2017

40,000

20,000

13,000

35,000

33,000

16,000

Torun Plaza

Suwalki Plaza

Zgorzelec Plaza

Lodz Plaza

Kielce Plaza

Leszno Plaza

Lodz (Residential)

Torun

Sulwalki

Zgorzelec

Lodz

Kielce

Leszno

Lodz

100%

* Operating

** Under planning and feasibility examination

1 Asset was valued with the comparative sales price method, no value at completion

was estimated.

2 GBA

Plaza has already completed 10 shopping and entertainment

centers in Poland of which seven have already been sold.

Currently the Group owns and operates three completed shopping

and entertainment centers across Poland. During the year, each

of the centers delivered notable asset management success,

improving overall occupancy throughout the Polish portfolio

from 90% in 2013 to 95% as at the reporting date.

Torun Plaza: complete and active project

Zgorzelec Plaza

Torun Plaza is located in Torun, an almost 800-year-old city of

approximately 200,000 inhabitants. Torun is one of the most beautiful

Zgorzelec Plaza: complete and active project

cities in Poland, located at the intersection of ancient trade routes.

The gothic buildings of Torun’s old town were designated as a world

Zgorzelec Plaza is located in Zgorzelec in south west Poland,

heritage site by UNESCO in 1997. Torun Plaza, which opened in

near the German border. Thanks to two roads border crossing

November 2011, is the Group’s tenth completed development in Poland.

(including one of the largest in Poland), a railway border crossing

The two-ﬂ oor shopping and entertainment center, with approximately

and the restored old town bridge which connects the old towns

40,000 sqm of GLA, is anchored by Zara, Reserved, Home & You,

of Zgorzelec and Goerlitz (55,000 citizens on the German side),

New Yorker, H&M, Media Expert, Carry, TK Maxx, a multi-screen

Zgorzelec is a “gate” between Germany and Poland. The shopping

Cinema City and Pure ﬁ tness center. In 2014, occupancy of the mall

and entertainment center is situated less than ﬁ ve minutes walking

increased to 92.5% compared to 89% in 2013. A total of 4,100 sqm

distance from the railway station. Zgorzelec Plaza comprises

of additional retail space was opened at the center in 2014,

approximately 13,000 sqm of GLA anchored by H&M, KappAhl,

increasing the total lettable area of the shopping center by more

Douglas, Carry, a ﬁ tness center, a cinema and 300 parking spaces.

than 10%. Among the most notable openings were TK Maxx,

In 2014, occupancy increased to 95.2% from 91% in 2013 with

Sports Direct, Carry (replacing a previously underperforming tenant),

the opening of a 547 sqm Carry and a number of small fashion and

Sinsay and various smaller fashion stores. As a result of these asset

service stores contributing to its success. The center had an increase

management initiatives and other marketing activities, the shopping

of 14.1% in turnover and 8.4% rise in footfall.

center reported a signiﬁ cant increase in turnover (+21.2%) compared

to 2013 and footfall also increased by 6.3% during the year.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Suwalki Plaza

Leszno Plaza

Suwalki Plaza: complete and active project

Kielce Plaza: pipeline project

Suwalki Plaza is located in Suwalki, a city crossed by expressway

Plaza has won a competitive tender and acquired a site from PKS

E67(8), which links Augustow with the Lithuanian border. Suwalki

Kielce S.A. (the local branch of the Polish National Bus Company)

is a city with approximately 70,000 inhabitants and is located 45km

for the development of a major new shopping and entertainment

from the Polish-Lithuanian border. The creation of Suwalki special

center in Kielce. The new center will be located on a 25,000 sqm

economic zone offers new opportunities for trade, commerce

plot alongside a major road and 2km from the heart of Kielce. Kielce

and tourism. Suwalki Plaza, which was opened in May 2010, is

has over 200,000 inhabitants and an estimated catchment area of

located in the main commercial and residential district of the city

approximately 350,000 people, and is located in central Poland on

and is fronted by an important arterial route to the east. It is also

the main motorway linking Warsaw and Krakow. On completion, the

located on a junction of a street which links directly into the city

scheme will have a GLA of 33,000 sqm, and approximately 1,000 car

center. The PKS bus terminal and main railway station are located

parking spaces. The Company will be targeting a mixture of domestic

approximately 1km from the shopping and entertainment center.

and high-proﬁ le international retailers and entertainment operators

Suwalki Plaza is a three-ﬂ oor shopping and entertainment center

as potential tenants for the center. The project is under planning and

with approximately 20,000 sqm of GLA anchored by Delima

feasibility examination.

Delicatessen, H&M, KappAhl, Deichmann, Carry, HeBe, Douglas,

Empik and a three-screen cinema. In 2014, occupancy increased

Leszno Plaza: pipeline project

to 97.7% compared to 91% in 2013 and turnover increased by 7%

during the year. Contracts with KIK and several fashion stores were

Plaza has a perpetual usufruct over a 18,000 sqm site in Leszno,

signed for new premises during the year and, to date, more than 87%

for the development of a new shopping and entertainment

of the existing tenants have signed lease options or renewals, with

center. The site is ideally located in the center of Leszno, a city

the ﬁ fth anniversary of the opening of the center approaching in May.

with 65,000 inhabitants, situated in western Poland between the

Lodz Plaza: current development

two big economic centers of Poznan and Wroclaw, and is close to

the central railway and bus station. On completion, the shopping

and entertainment center is intended to have a GLA of 16,000 sqm,

Lodz Plaza is located in Lodz, the third largest city in Poland with

providing space for over 70 shops and 450 car parking spaces.

over 720,000 inhabitants. Lodz is recognised as an important

The project is under planning and feasibility examination.

academic and cultural center in Poland, hosting well-known

cultural events. Lodz Plaza is planned to be a two-ﬂ oor shopping

Lodz (Residential): pipeline project

and entertainment center with approximately 35,000 sqm of GLA

anchored by a supermarket, a department store as well as a multi-

Plaza owns part of a development site and has a perpetual usufruct

screen cinema and bowling and entertainment center. The Group

over the remaining part of the site, located in the center of Lodz,

intends to commence construction in late 2016, with completion

which is suitable for use as a residential and ofﬁ ces area. The city

targeted for 2017.

of Lodz, which is the administrative capital of the Lodzkie region, is

situated in the center of Poland approximately 140km south west of

Warsaw, and, with a population of over 720,000, it is the third most

populous city in Poland. The site is located in the central university

district, within 500 meters of the popular Piotrkowska pedestrian

street. The site is also located in close proximity to large high

density housing estates. The planned development will comprise

built area of approximately 80,000 sqm. The Group is also

considering selling the plot.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Current portfolio

Serbia

Project

City

Ownership

GLA (sqm)

Market value Market value of the

Expected

on completion

land and project

completion

31 December

2014 (€)

Belgrade Plaza (Visnjicka)

Belgrade

Belgrade Plaza (MUP)

Belgrade

100%

32,000

63,0001

91,299,000

18,850,000

153,831,000

13,650,000

2017

1 GBA

In the fourth quarter of 2014, Plaza completed the disposal of its

ﬁ rst shopping and entertainment center in Serbia, Kragujevac

Plaza for €38.6 million. It was the ﬁ rst western-style shopping and

entertainment center to be opened outside the capital, Belgrade.

As of the reporting date, the center is fully let to remarkable

tenants, demonstrating the success of the Company’s ﬁ rst venture

into Serbia. Currently the Group has two additional sites for

the development of mixed-use and shopping and entertainment

projects in the capital Belgrade. On 1 March 2013, Serbia was

granted candidate status to the European Union. The Company

believes this will signiﬁ cantly increase the ﬂ ow of international

capital into the country, enabling its carefully selected Serbian

development pipeline and complete and operate the assets to

beneﬁ t from an anticipated growth in investor interest.

Belgrade Plaza (Visnjicka): current development

Plaza owns a 31,000 sqm plot of land in Belgrade, the capital of

Serbia. The Belgrade market offers particular potential, with its large

populated catchment area of approximately 1.7 million people.

The Company intends to develop a new shopping and entertainment

center with a total GLA of approximately 32,000 sqm. The Group

intends to commence construction in late 2015 and the center is

scheduled to open in 2017. Planning permission was granted.

Belgrade Plaza (MUP)

Belgrade Plaza (MUP): current development

Plaza won a competitive tender announced by the Government of

Serbia for a site located in the center of Belgrade, which it intends to

develop into an ofﬁ ce space together with a hotel and retail gallery.

The development is expected to comprise a total of 63,000 sqm of

GBA including an apartment hotel, business center and shopping

gallery as well as 700 car parking spaces.

The Belgrade market offers particular potential, with its large

populated catchment area of approximately 1.7 million people. The

new complex will be located on the prominent site of the former

Federal Ministry of Internal Affairs, situated on the main street which

runs through the center of Belgrade. The area is home to foreign

embassies, the Serbian Government, the Serbian Ministry of Finance,

the Belgrade Chamber of Commerce and Belgrade’s largest public

hospital as well as the city fair and the future railway station. The

Group intends to commence construction in 2016 and the center is

scheduled to open in 2017. Processes to secure the relevant local

planning and permitting approvals are underway.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

O
V
E
R
V

E
W

Belgrade Plaza
(Visnjicka) Serbia
32,000 sqm GLA

Plaza owns a 31,000 sqm plot of land in Belgrade, the capital of Serbia. The

Belgrade market offers particular potential, with its large populated catchment

area of approximately 1.7 million people. Plaza intends to develop a new

shopping and entertainment center with a GLA of approximately 32,000 sqm.

The Group intends to commence construction in late 2015 and the center is

scheduled to open in 2017.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Current portfolio

Romania

Project

City

Ownership

GLA (sqm)

Market value Market value of the

Expected

on completion

land and project

completion

31 December

2014 (€)

700

1,320,000

Operating

40,000

72,283,000

8,940,000

467,0001

555,138,000

87,075,000

2016

20172

58,000

14,000

17,000

18,000

4,786

82,355,000

7,280,000

14,276,000

2,460,0003

30,151,000

1,000,000

3,300,000

3,300,0003

n/a5

100%

75%

100%

100%4

Palazzo Ducale

Timisoara Plaza

Casa Radio

Iasi

Bucharest

Timisoara

Bucharest

Iasi

Csiki Plaza

Miercurea Ciuc

Slatina Plaza

Constanta Plaza

Cina

Slatina

Constanta

Bucharest

* Under planning and feasibility examination

1 GBA including parking

2 First phase

3 The Company applied a more conservative approach, and lower value was used in the

ﬁ nancial statements than in the valuation report.

4 Development rights

5 External valuation was not conducted.

Plaza has a signiﬁ cant development pipeline in Romania,

with seven sites for shopping and entertainment centers and

mixed-use schemes in various stages of development.

In 2014, the Company successfully disposed of two of its non-core

sites in Romania, at Targu Mures and Hunedoara for a total of

€4.7 million. The Company continues checking the feasibility and

planning of the projects, including obtaining permits.

Timisoara Plaza

Palazzo Ducale (Bucharest): operational ofﬁ ce

Timisoara Plaza: current development

In October 2007, the Company acquired a prestigious French-style

Plaza owns a plot of land with an area of 32,000 sqm in Timisoara,

villa converted into an ofﬁ ce building. The building is located in the

on which it is intending to develop a shopping and entertainment

center of Bucharest and was completely renovated in 2005. The total

center. The site is situated in the north east of Timisoara, a city in

constructed area is approximately 540 sqm, built on a plot of around

western Romania, close to the border with Hungary with a population

450 sqm and consists of three ﬂ oors, a basement and a garage. Two

of 320,000 inhabitants and a catchment area of approximately

ﬂ oors are currently leased.

700,000 inhabitants. The site is situated on a three-way junction

and enjoys excellent visibility. The planned center will have a

GLA of approximately 40,000 sqm which is intended to include a

supermarket, a hypermarket complex, fashion retailers, a fantasy

park, a food court and restaurants. The Group intends to commence

construction in 2015 and the center is scheduled to open in 2016.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Casa Radio
Romania

467,000 sqm GBA

Casa Radio will include a 90,000 sqm GLA shopping mall and indoor leisure center,

approximately 127,000 sqm GBA of ofﬁ ces, hotel complex with conference center,

Public Authority Building and underground car parking spaces.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Iasi Plaza

Slatina Plaza

Casa Radio (Bucharest): current development

is planned to have a GLA of approximately 14,000 sqm, and is

intended to include a supermarket, fashion retailers, a food court

In February 2007, the Company consummated a transaction for the

and restaurants. Construction commenced in late 2008 and stopped

acquisition of a 75% interest in a company (the “Project Company”),

during 2009 due to lack of interest from tenants derived from the

which under a public-private partnership agreement with the

economic crisis. Currently the Group intends to sell the project or

Government of Romania is expected to develop the Casa Radio

alternatively consider the option to lease-up the project parallel to the

(Dambovita) site in central Bucharest. The property comprises a site

development of other sites in Romania – subject to leasing progress

covering an approximate area of 92,000 sqm (97,000 sqm including

and ﬁ nancing.

5,000 sqm for Public Authority Building (“PAB”)). The proposed

scheme will comprise the refurbishment of the existing building as

Slatina Plaza: pipeline project

well as the development of additional space annexed to the building

and on adjoining land. The development of Casa Radio comprises

Plaza has acquired a site in Slatina, in southern Romania. The site

approximately 467,000 sqm of built area, including a 90,000 sqm

totals approximately 24,000 sqm and is located in the north west

GLA shopping mall and indoor leisure center, approximately

part of Slatina. Slatina is a city with around 63,500 inhabitants and

127,000 sqm GBA of ofﬁ ces, hotel complex with conference center

is considered a major city in the county of Olt. The Company plans

and underground car parking spaces. The Company expects to

to build a shopping and entertainment center with approximately

complete the ﬁ rst phase of the project, which includes the shopping

17,000 sqm of GLA. The project is under planning and feasibility

center, parking and PAB, in 2017. The Company has obtained the

examination.

“PUD” (Detailed Urban Permit) and the “PUZ” (Zonal Urban Permit)

tor the site.

Iasi Plaza: pipeline project

Constanta: pipeline project

Plaza has acquired a 26,500 sqm plot in Constanta. The plot is

conveniently located on one of the two main entrance roads to the

Plaza has purchased a 46,500 sqm plot of land in Iasi, on which it

city and consists of an existing shopping center and an open parking

is expecting to develop a shopping and entertainment center and

lot of 8,500 sqm. Constanta is located on the Black Sea bank and is

ofﬁ ce space. Iasi Plaza is situated in Iasi, a city in the north east of

one of Romania’s main industrial, commercial and tourist centers.

Romania, with a population of approximately 320,000 inhabitants

The Group is investigating the option of adapting the existing

and a catchment area of approximately 820,000 inhabitants. The

shopping center to create approximately 18,000 sqm of GLA which

shopping center is planned to comprise approximately 40,000 sqm

will be suitable for one big anchor such as a leading supermarket

of GLA, and is intended to include an anchor supermarket, a cinema,

and/or a DIY store together with some smaller retail units.

fashion retailers, a fantasy park, a food court and restaurants. In

addition, the project is intended to include ofﬁ ce space of

Cina (Bucharest): pipeline project

18,000 sqm GLA. The project is under planning and feasibility

examination.

Csiki Plaza: pipeline project

Plaza has lease rights for 49 years (starting 12/2007) for an existing

building in Cina, Bucharest. Cina is located in Bucharest city center,

on Calea Victoriei Venue, next to Romanian Athenaeum, among

central iconic landmarks: Romanian Art Museum, Revolution Square,

Plaza purchased a plot of land with an area of 36,500 sqm in

Central University Library and more. The Group intends to develop

Miercurea Ciuc, for the development of a shopping and entertainment

the building into an exclusive ofﬁ ce building with luxury retail space

center. Csiki Plaza is situated in the center of Miercurea Ciuc, a

with a GLA of approximately 5,000 sqm.

city in Romania, with a population of 50,000 inhabitants and a

catchment area of approximately 300,000 inhabitants. The site

is situated 400 meters from the city hall. The shopping center

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Current portfolio

India

Project

City

Ownership

GLA (sqm)

Market value Market value of the

Expected

on completion

land and project

completion

31 December

2014 (€)

Koregaon Park Plaza

Chennai

Bangalore

Pune

Chennai

Bangalore

100%

40%

25%

41,000

33,816,000

33,816,000 Opened in Q1 2012*

172,0001

310,0002

18,709,000

10,032,000

2016-2020

109,646,000

14,206,000

* Operating. Under sale. ** Under planning and feasibility examination.

1 For sale.

2 GBA

Currently the Group owns Koregaon Park Plaza shopping and

entertainment center in Pune, India and has interest (through

a joint venture with Elbit Imaging) in two sites for residential

developments located in the cities of Chennai and Bangalore.

Koregaon Park Plaza: complete and active project

Koregaon Park Plaza shopping and entertainment center comprises

a 41,000 sqm GLA and it was completed and opened to the public

in March 2012. It is the Group’s ﬁ rst completed project in India

and is located in the upmerket area of Pune, Maharashta State.

The Company has signed a preliminary non-binding agreement with

an Indian-based developer for the sale of Koregaon Park shopping

and entertainment center. The agreement is subject to certain

conditions and discussions to complete the disposal are currently

at advanced stage.

Chennai: current development

The Indian JV Vehicle (in which Plaza’s share is 50%) has an 80%

stake in a company which holds a 75 acre plot (and paid advances

in order to secure acquisition of an additional 8.4 acres) in Chennai,

India’s fourth largest city with a population of over eight million

people. The site will be developed into a residential project consisting

of approximately 110,000 sqm of plotted area for development and

approximately 62,000 sqm for high quality villas. The Company

anticipates that the project will be completed in phases between

2016 to 2020.

Bangalore

Bangalore: pipeline project

The Indian JV Vehicle currently has a 50% stake in a company

which has rights on a 54 acre plot in Bangalore. The site is located

on the eastern side of Bangalore, India’s ﬁ fth largest city, with a

population of over eight million people. The JV Vehicle intends to

develop the site into a mega mixed-use project with a total built

area of 310,000 sqm. The project will comprise over 1,100 luxury

residential units. The project is under planning and feasibility

examination.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

Current portfolio

Latvia, Czech Republic, Hungary, Greece, Bulgaria

Project

City

Ownership

GLA (sqm)

Market value Market value of the

Expected

on completion

land and project

completion

31 December

2014 (€)

Latvia

Riga Plaza

Czech Republic

Liberec Plaza

Hungary

Riga

50%

49,000

45,000,000

45,000,000 Opened in Q1 2009*

Liberec

100%

17,000

15,725,000

15,725,000 Opened in Q1 2009*

David House

Budapest

Arena Plaza Extension

Budapest

100%

2,000

40,000

2,625,000

Operating

87,353,000

6,650,000

Greece

Pireas Plaza

Bulgaria

Athens

100%

38,000

73,141,000

4,475,000

Shumen Plaza

Shumen

100%

20,000

29,176,000

1,025,000

* Operating ** Under planning and feasibility examination

Plaza owns two operating shopping centers in Latvia and in the

Czech Republic, three developments in Hungary, Greece and

Bulgaria, and one ofﬁ ce building in Hungary.

Latvia

Riga Plaza: complete and active project

Liberec Plaza, Czech Republic

Riga Plaza is located on the west coast of the Daugava river, south

west of Riga’s city center. Riga, the capital of Latvia and the largest

city in the Baltic States, has a population of approximately 700,000

inhabitants. Riga Plaza has excellent connections to the city center

(a three to ﬁ ve-minute drive), as well as outstanding connections

to the nearby main roads. There are several public transport stops

Czech Republic

(trolleybus and bus) located nearby, with the nearest public transport

stop located directly in front of Riga Plaza. Riga Plaza is a two-ﬂ oor

shopping and entertainment center with a GLA of approximately

49,000 sqm, anchored by a hypermarket, an eight-screen multiplex

cinema and 2,000 sqm of Fantasy Park. In 2014, occupancy of

the mall increased to 99.5% from 97% in 2013. H&M opened its

largest store in Latvia (2,700 sqm) at Riga Plaza in April 2014, and

another 1,060 sqm was leased to Elkor Kids. The shopping center

had the second highest increase in turnover in the portfolio, with

15.6% increase in sales compared to the previous year, and a 7.2%

increase in footfall.

Liberec Plaza: complete and active project

Liberec Plaza is located in the center of Liberec, a city in the north of the

Czech Republic, close to the border with Germany and Poland, with a

population of 101,000 inhabitants and catchment area of approximately

350,000 inhabitants. The site is situated 20 meters from the main

square. The complete center comprises of approximately 17,000 sqm

of GLA, and includes an anchor supermarket, fashion retailers, a squash

and sports center, a Dinopark, a food court and restaurants. The center

is also comprising a residential area of 514 sqm (ﬁ ve apartments) and

1,100 sqm of ofﬁ ce space. The center was opened to the public in

March 2009. Occupancy of the mall in 2014 remained steady at 84%.

OVERVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Riga Plaza, Latvia

Arena Plaza Extension, Hungary

Hungary

Bulgaria

David House (Budapest): operational ofﬁ ce

Shumen Plaza: pipeline project

The Company owns an ofﬁ ce building located on Andrassy

Plaza has purchased a 26,000 sqm plot of land in Shumen,

Boulevard, a prestigious location and one of the most soughtafter

one of the largest cities in north-eastern Bulgaria, 80km from Varna.

streets in the center of Budapest. Several foreign embassies are

The site is ideally situated at the crossroads of the two major trafﬁ c

situated nearby. The building facades of all buildings on the Andrassy

arteries in Shumen, within a short walking distance to the city

Boulevard, including David House, are listed in the “World Heritage”

center, railway station and university. Shumen Plaza is expected

list. The building was reconstructed / refurbished by Plaza during

to be the ﬁ rst western-style shopping center in the district and to

2000-2001 in cooperation with the local Monument Preservation

serve the city population of approximately 100,000 people and a

Authority. Many of the original features have been retained, including

larger catchment of 205,000 people. Shumen Plaza is planned to

the inner courtyard, staircases, stucco, ornate metalwork and ﬁ ne

be a three-ﬂ oor commercial and entertainment center with

wood carvings. The building is located on a 800 sqm plot and

20,000 sqm GLA and 650 parking spaces. The project is under

consists of four ﬂ oors, an atrium and a basement, with a total

planning and feasibility examination.

constructed area of approximately 2,000 sqm.

Arena Plaza Extension (Budapest): pipeline project

The Arena Plaza Extension is a planned ofﬁ ce addition to Arena

Plaza that is intended to comprise approximately 40,000 sqm GLA of

“class A” ofﬁ ces. The Arena Plaza Extension will occupy part of the

former historic Kerepesi trotting track in the 8th district of Budapest.

The project is under planning and feasibility examination.

Greece

Pireas Plaza (Athens): pipeline project

Plaza currently owns a plot of approximately 15,000 sqm in the city

of Piraeus, a commercial-industrial center 10km from the heart of

Athens. The site has an ideal highly visible and commercial position

at the junction of two of the biggest arteries in Attica National

Highway, running from the north to the south of Greece and Piraeus

Avenue, connecting the center of Athens with the port of Piraeus.

Conveniently located in front of the ISAP metro line, bus stations

and in a walking distance from Europe’s largest passenger port, the

project will be easily accessed by a large catchment of more than

one million people. Pireas Plaza is planned to be a 38,000 sqm

mixed-use ofﬁ ce and retail developments, including 700 car spaces.

The project is under planning and feasibility examination.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

OVERVIEW

President and Chief
Executive Ofﬁ cer’s

statement

2014 has been another signiﬁ cant year for the business as we

• On 20 November 2014, the Company published a listing document

completed our restructuring process efﬁ ciently, within an eight

in Israel announcing its intention to list all of its ordinary shares

month period and with the resounding support of 92% of our

on the Tel Aviv Stock Exchange (“TASE”). With effect from

creditors. We ﬁ nished the year with a successful rights offering,

27 November 2014 Plaza’s ordinary shares have been traded

which provided the Company with a €20 million capital injection,

on the TASE under the ticker “PLAZ”.

and a third listing on the Tel Aviv Stock Exchange, and we have

• On 28 November, an EGM was held at which shareholders

started 2015 with the news of an upgrade to our credit rating from

approved the proposed rights offering, which formed part of the

Standard & Poor’s from “D” to “BBB-” on a local Israeli scale with

Company’s restructuring plan, enabling the Company to raise

a stable outlook.

€20 million.

• On 19 December 2014, the Company announced the successful

We have continued to make strides in restructuring our portfolio by

completion of the rights offering.

disposing of non-core assets, using the proceeds to repay our debts

and allowing us to focus more on operational improvements within

In addition, in line with its stated strategy, Plaza made a number of

the core portfolio. Notably, the sale of Kragujevac Plaza in Serbia was

signiﬁ cant disposals of its non-core assets during the year, including:

completed 18 months ahead of schedule and 75% of the net cash

proceeds from the transaction was returned to bondholders as an

• On 2 October 2014, Plaza successfully completed the disposal

early repayment, in line with our restructuring plan.

of its shopping and entertainment center, Kragujevac Plaza in

Alongside this activity, we are seeing signs of economic

book value. Following the repayment of related bank debt of

Serbia for €38.6 million, in line with the asset’s last reported

improvement in our core geographies.

c. €28.2 million, the Company received net cash from the disposal

of c. €10.4 million. Restricted cash linked to the bank debt and

Against this background, I am pleased to report that Plaza has

other working capital balances of circa €2 million were also

achieved notable progress at an asset level, with increases in

released following the transaction. 75% of the net cash proceeds

footfall, occupancy and turnover reported across our core portfolio

(including the released restricted cash deposit) was distributed to

of CEE shopping centers. During the year we secured a number of

the Company’s bondholders in the fourth quarter of the year as an

signiﬁ cant lettings with high proﬁ le anchor tenants including H&M,

early repayment of the bonds, in line with the Company’s stated

which opened its largest store in Latvia at Riga Plaza in April,

restructuring plan.

TK Maxx and Sports Direct, and turnover at these core assets is also

• On 4 September 2014, Plaza reached an agreement to sell

up considerably thanks to our asset management activity. Torun

its 31,500 sqm site in Targu Mures, Romania, to a third party

Plaza alone achieved a 21.2% uplift in turnover, compared to 2013.

developer for €3.5 million, consistent with the asset’s last reported

book value.

After a busy 2014, we are entering 2015 with renewed vigour and we

• On 2 December 2014, Plaza reached an agreement to sell its

are looking forward to the year ahead.

41,000 sqm site in Hunedoara, Romania, to a third party developer

Key Events

During the ﬁ rst half of 2014, the Company focused its efforts

on ensuring a successful and efﬁ cient conclusion to the debt

restructuring process, which was completed in July. Subsequent

to these events, the Company announced a rights offering, which

formed part of the restructuring plan and which provided the

Company with a €20 million cash injection.

• On 26 June 2014, Plaza announced that its amended Dutch

restructuring plan, ﬁ led with the Dutch Court on 27 May 2014,

had been approved with 92% of creditors voting in favour.

• On 21 July, following the plan’s approval by the Dutch Court

for €1.2 million, consistent with the asset’s last reported book

value.

75% of the net cash proceeds of the above two transactions was

distributed to the Company’s bondholders in the December as an

early repayment of the bonds.

Alongside this substantial activity, Plaza continued to make

signiﬁ cant progress in its operational and asset management

initiatives, with a focus on delivering positive uplifts in key

performance indicators at our income-generating centers.

Results

on 9 July 2014, Plaza was in a position to announce the

Due to a circa €89 million non-cash impairment charged against

formal completion of the debt restructuring process and that

the Company’s trading properties and equity accounted investees,

management had resumed control of the full business.

Plaza ended the year with a loss attributable to the owners of the

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Ran Shtarkman
President and Chief Executive Ofﬁ cer

Company of €120 million. A €89 million impairment charge related

same day. In addition to the trading on the Tel Aviv Stock Exchange

to the reduction in the value of our assets across the portfolio in

of Plaza’s Series A and Series B Bonds, the listing of the Company’s

the following main geographic areas: Romania (€51 million); India

shares on the Tel Aviv Stock Exchange also took place.

(€12 million); Greece (€11 million); Serbia (€6 million); Poland

(€6 million); Czech Republic (€2 million); and Bulgaria (€1 million).

Summary of the restructuring plan

There was a €0.4 million increase in the value of Riga Plaza, Latvia.

A summary of the main terms of the restructuring plan are set out

The writedowns are a reﬂ ection of the ongoing economic uncertainty

below:

in many of the countries in which we operate.

• A deferral of principal payment obligations to bondholders for a

period of between 3.5-4.5 years;

As at 31 December 2014, Plaza had a consolidated cash position

• Deferral of obligations under guarantees issued as security for

(including restricted bank deposits, and held for trading ﬁ nancial

liabilities of subsidiaries for a period of four years and the claims

assets) of approximately €41.7 million, of which circa €7 million of

will only be enforceable after the collateral granted as security

cash was held as restricted cash on a consolidated basis. Working

for the underlying loan has been realised. The amount of the

capital stood at negative €6 million (including €33 million of debt

guarantee claim will be reduced to the extent that the collateral is

expected to be revolved). Following the successful completion of

sold at a price below 90% of the fair market value as determined

the debt restructuring, part of the liabilities were reclassiﬁ ed to

by a reputable appraiser;

non-current. As at the date of this report, the Company has a current

• 1.5% per annum interest to be paid to bondholders in addition to

cash position of circa €39.5 million (inclusive of the €7 million of

regular interest;

restricted cash).

Debt restructuring plan

Background

Due to reasons previously reported, by the end of 2013, the

Company was faced with signiﬁ cant liquidity challenges.

Notwithstanding the liquidity issues, the Company continued to

have a strong balance sheet, with a signiﬁ cant positive net asset

value, and it had assets and development opportunities under

ownership that offered signiﬁ cant potential to deliver returns over

the medium to long term. Accordingly, the Board believed that, on

a going concern basis, the Company retained substantial value for

its stakeholders and would be able to repay its creditors in full, and

that a forced liquidation or a bankruptcy would cause creditors and

shareholders to incur signiﬁ cant losses.

Suspension of payment procedure

Therefore, on 18 November 2013, the Company applied for

suspension of payment proceedings under Dutch law and

• Early repayment of the Company’s outstanding bonds in certain

events upon the realisation or reﬁ nancing of certain assets with

75% of the net cash ﬂ ows (subject to certain adjustments);

• An issue to bondholders of ordinary shares representing 13.21%

of the outstanding share capital of the Company following any

capital injection;

• Agreement to a “negative pledge”, “no new ﬁ nancial indebtedness”
and “coverage ratio” covenants (subject to certain exceptions)

in favour of all creditors bound by the restructuring plan and

certain limitations on distributions (including dividends) to

shareholders. In addition, the restructuring plan includes certain

ﬁ nancial covenants with respect to the realisation of certain real

estate assets of the Group and with respect to the purchase

and development of real estate assets. The subsidiaries of Plaza

Centers have issued an undertaking to be bound by certain of

these covenants and restrictions;

• A mutual “waiver from claims” provision, in favour of the

Company, the direct and indirect shareholders of the Group,

and their respective directors and ofﬁ cers, the bondholders, the

trustees under the Trust Deeds, and other afﬁ liated parties.

simultaneously ﬁ led a draft restructuring plan (the “restructuring

plan”) with the District Court of Amsterdam, The Netherlands (the

NAV

“Court”). The restructuring plan was adopted by the plan creditors

The Company’s property portfolio (CEE and India) was valued by

on 26 June 2014. On 9 July 2014, the Court approved the restruc-

Cushman and Wakeﬁ eld as at 31 December 2014 and their summary

turing plan which became ﬁ nal and deﬁ nitive on 18 July 2014.

valuation is shown overleaf.

One of the terms of the approved restructuring plan was that at least

Net Asset Value per share decreased to €0.22/share from €0.92/share

€20 million should be injected into the Company against the issuance

at year end 2013, mainly as a result of further impairments and new

of new ordinary shares by means of a rights offering (the “rights

shares issued during 2014 (basic NAV/share €0.52/share).

offering”). The rights offering was concluded on 28 November 2014

The writedown in value reﬂ ects uncertainties in respect of the

and consequently the restructuring plan became effective on the

development of projects, depressed rental levels in the above

PLAZA CENTERS N.V. ANNUAL REPORT 2014

BUSINESS REVIEW

W
E

V
E
R

S
S
E
N

S
U
B

mentioned countries and low transaction volumes resulting from

a constrained supply of debt. The majority of written down assets

comprise land with associated planning consent, which management

continues to value at the lower of cost or net realisable value.

Management will continue to evaluate the local economic context

before any development programme commences, as well as looking

at other alternatives to monetise the land bank if development is not

economically viable.

The Company’s NAV was calculated as follows:

Use

EUR (Thousand)

Market value of land and projects by Cushman Wakeﬁ eld

448,844

Assets minus liabilities as at 31 December 20141

Total

(295,577)

153,267

1 Excluding book value of assets which were valued by Cushman and Wakeﬁ eld.

Portfolio progress

The Company is currently engaged in 18 development projects and

owns six operational shopping and entertainment center assets and

two ofﬁ ce schemes, located across the CEE and in India. The location

of the projects, as at 19 March 2015, is summarised as follows:

Number of assets (CEE and India)

Location

Active

Under development/

Ofﬁ ces

planning

Romania

India

Poland

Hungary

Serbia

Czech Republic

Bulgaria

Greece

Latvia

Total

Liquidity & Financing

Plaza ended the year with a consolidated cash position (including

restricted bank deposits, short term deposits and available for sale

ﬁ nancial assets) of approximately €41.7 million, of which circa

€7 million of cash is held as restricted cash on a consolidated basis.

Working capital as at 31 December 2015 totalled negative €7 million,

and, as mentioned above, the Company’s current cash position is

circa €39.5 million (of which €7 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 ﬁ nance costs incurred, the gearing level increased to 74% in 2014.

Strategy & Outlook

2014 marked a year of progress for Plaza as the Company
successfully completed the Dutch restructuring plan, with 92% of
creditors approving the plan in June, and the Dutch Court’s formal
and irrevocable approval being granted in July, just seven months
after the Company made its initial announcement. The successful
rights offering, which concluded in November, provided the Company
with a welcome €20 million cash injection and the completion of this
considerable activity provided us with a strengthened platform to
start the new year.

Going into 2015, the economic outlook is relatively positive in the
Company’s core geographies. This trend is expected to continue and
the effect of lower oil prices, together with the knock-on impact of
quantitative easing and the wider Eurozone recovery, should prove
beneﬁ cial.

Transactional activity has been strong, as evidenced by the sales of
Kragujevac in Serbia and non-core land in Romania, reﬂ ecting the
improvement in investor sentiment. In the year ahead, the Company
will continue to drive the reshaping of the portfolio with the disposal
of further non-core assets in order to deleverage the balance sheet
and advance key development projects in core geographies including
Timisoara in Romania, Belgrade in Serbia and Lodz in Poland.
In Poland, the Company expects to deliver a master plan for the
planned retail and entertainment scheme, Lodz Plaza, by the end
of this year and has secured a number of pre-lets for Timisoara
Plaza in Romania and Belgrade Plaza (Visnjicka) in Serbia, where
construction is planned to commence later this year, subject to
securing bank ﬁ nancing and sufﬁ cient levels of pre-lets.

Day to day, we will continue to pursue our intensive asset
management strategy which has seen clear success at our income-
generating centers in the CEE, where our focus remains on initiatives
that will drive occupancy levels, footfall and turnover to maximise
income and deliver value.

While there remains a lot to do in the short and medium term, we
have conﬁ dence in the long term future growth of the Company
and the management is resolute in its belief that, with the ongoing
support of our bondholders and shareholders, the delivery of the
strategy, together with the brightening economic outlook, will result
in the delivery of value and growth to our investors.

Ran Shtarkman
President and Chief Executive Ofﬁ cer
19 March 2015

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Operational review

During the reporting period, Plaza made signiﬁ cant progress against

As of the reporting date, Plaza has 26 assets in nine countries,

its operational and strategic objectives, by delivering improved

of which 18 are under various stages of development across the

fundamentals at the portfolio level and realising value through the

CEE region and India. Of these, seven are located in Romania, two

sale of a number of its non-core assets.

in India, four in Poland, two in Serbia, and single assets in Bulgaria,

Greece and Hungary. In addition to these developments, Plaza retains

Highlights for the ﬁ nancial year included:

the ownership of and operates six shopping and entertainment

centers in Poland, Czech Republic, India and Latvia and two ofﬁ ce

• Operations: Improving performance of its operating shopping and

buildings in Budapest and Bucharest.

entertainment centers located in four countries in the CEE.

• Disposals: In 2014, the Company received net cash of circa

cycle, from the landholdings through to the planning and permits.

The development projects are at various stages of the development

€17.1 million (including restricted cash released) through the

disposal of three assets out of which 75% was repaid to the

The Company’s current assets and pipeline projects are summarised

bondholders as early repayment.

in the table below:

• Financial position: Plaza’s current consolidated cash position

stands at circa €40 million (out of which €7 million is restricted).

Asset/Project

Location

Nature of asset

Size

sqm

(GLA)

Status *

Plaza’s

effective

ownership %

Operating Shopping and Entertainment Centers

Suwalki Plaza

Suwalki,

Poland

Retail &

20,000

100

Operating, opened in

entertainment scheme

May 2010

Zgorzelec Plaza

Zgorzelec,

Retail &

13,000

100

Operating, opened in

Poland

entertainment scheme

March 2010

Torun Plaza

Torun,

Poland

Retail &

40,000

100

Operating, opened in

entertainment scheme

November 2011

Liberec Plaza

Liberec,

Retail &

17,000

100

Operating, opened in

Czech Rep.

entertainment scheme

March 2009

Riga Plaza

Riga,

Latvia

Retail &

49,000

Operating; opened in

entertainment scheme

March, 2009

Koregaon Park Plaza

Pune,

Retail, entertainment

41,000

100

Operating; opened in

India

and ofﬁ ce scheme

March, 2012. Under sale

* All completion dates of the projects are subject to securing external ﬁ nancing and securing sufﬁ cient tenant’s demand.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

BUSINESS REVIEW

Operational review

Asset/Project

Location

Nature of asset

Size

sqm

(GLA)

Status *

Plaza’s

effective

ownership %

Development Assets

Casa Radio

Bucharest,

Mixed-use retail

467,000

Under planning; completion

Romania

and leisure plus

ofﬁ ce scheme

(GBA including

parking spaces)

of the ﬁ rst phase is

scheduled for 2017

Timisoara Plaza

Timisoara,

Retail &

40,000

100

Construction scheduled

Romania

entertainment scheme

commence in 2015;

completion scheduled for 2016

Lodz Plaza

Lodz,

Poland

Retail &

35,000

100

Construction scheduled

entertainment scheme

commence in 2016;

completion scheduled for 2017

Belgrade Plaza

Belgrade,

Apartment-hotel and

(MUP)

Serbia

business center with

63,000

(GBA)

100

Construction scheduled

to commence in 2016;

a shopping gallery

completion scheduled for 2017

Belgrade Plaza

Belgrade,

Retail &

32,000

100

Construction scheduled

(Visnjicka )

Serbia

entertainment scheme

commence in 2015;

completion scheduled

for 2017

Chennai

Chennai,

Residential scheme

172,000

Construction scheduled

India

(for sale)

to commence in late 2016;

phased completion scheduled

over 2016-2020

Operational Ofﬁ ce Buildings

David House

Budapest,

Ofﬁ ce

2,000

100

Operational ofﬁ ce

Hungary

Palazzo Ducale

Bucharest,

Ofﬁ ce

700

100

Operational ofﬁ ce

Romania

* All completion dates of the projects are subject to securing external ﬁ nancing and securing sufﬁ cient tenant’s demand.

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Asset/Project

Location

Nature of asset

Size

sqm

(GLA)

Status *

Plaza’s

effective

ownership %

Plot size (sqm)

Pipeline Projects

Kielce Plaza

Leszno Plaza

Lodz (Residential)

Kielce,

Poland

Leszno,

Poland

Lodz,

Poland

Retail &

25,000

100

Under planning and

entertainment scheme

feasibility examination

Retail &

18,000

100

Under planning and

entertainment scheme

feasibility examination

Residential scheme

33,000

100

Under planning and

feasibility examination

Arena Plaza

Extension

Budapest,

Ofﬁ ce scheme

22,000

100

Under planning and

Hungary

(land use right)

feasibility examination

Csíki Plaza

Miercurea Ciuc, Retail &

36,500

100

Under planning and

Romania

entertainment scheme

feasibility examination

Iasi Plaza

Iasi,

Retail, entertainment

46,500

100

Under planning and

Romania

and ofﬁ ce scheme

feasibility examination

Slatina Plaza

Slatina,

Romania

Retail &

24,000

100

Under planning and

entertainment scheme

feasibility examination

Cina

Bucharest,

Retail &

Romania

ofﬁ ce scheme

5,000
(49 years leashold)

100

Under planning and
feasibility examination

Constanta Plaza

Constanta,

Retail &

26,500

100

Under planning and

Romania

entertainment scheme

feasibility examination

Shumen Plaza

Pireas Plaza

Shumen,

Bulgaria

Athens,

Greece

Retail &

26,000

100

Under planning and

entertainment scheme

feasibility examination

Ofﬁ ce scheme

15,000

100

Bangalore

Bangalore,

Residential scheme

218,500

India

Under planning and

feasibility examination

Under planning and

feasibility examination

* All completion dates of the projects are subject to securing external ﬁ nancing and securing sufﬁ cient tenant’s demand.

Project that are classiﬁ ed as “Under planning and feasibility examination“ – potential also to be sold as land.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

BUSINESS REVIEW

Operational review

Details of these activities by country are as follows:

Hungary

Poland

Plaza owns and operates three completed shopping and enter-

tainment centers across Poland. During the year, each of the centers

has delivered notable asset management successes, improving the

overall occupancy of the Polish portfolio to above 95%.

Torun Plaza, which was completed and opened in late 2011,
comprises approximately 40,000 sqm of GLA and is Plaza’s tenth

completed center in Poland. Occupancy level increased to 92.5%

at year end. A total of 4,100 sqm of additional retail space was

opened at the center in 2014, increasing the total lettable area of

the shopping center by more than 10%. Among the most notable

openings were TK Maxx, Sports Direct, Carry (replacing a previously

underperforming tenant), Sinsay and various smaller fashion stores.

As a result of these asset management initiatives and other marke-

ting activities, the shopping center reported a signiﬁ cant increase in

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 ofﬁ ce
complex extension to the existing shopping center. In line with

Plaza’s cautious approach to development, the Company will hold off

on the commencement of any construction on the project until it is

satisﬁ ed that a recovery in the Budapest ofﬁ ce market and a general

rise in both occupancy rates and rental levels is underway.

David House, an ofﬁ ce building on Andrassy Boulevard, in Budapest,
remains under the Company’s ownership.

Czech Republic

Turnover at Liberec Plaza shopping and entertainment center
(approximately 17,000 sqm GLA), which has been owned and

managed by the Company since it opened in March 2009, improved

turnover (+21.2%) compared to 2013 and footfall also increased by

by 8%, while occupancy remained steady at 85%.

6.3% during the year.

Suwalki Plaza, comprising approximately 20,000 sqm of GLA
with tenants such as H&M, Rossmann, New Yorker, KappAhl and

Cinema Lumiere, continues to perform well. Occupancy increased

to 97.7% (2013: 91%) and turnover increased by 7% during the

year. Contracts with KIK, and several fashion stores, were signed

for new premises during the year and to date, more than 87% of the

existing tenants have signed lease options or renewals, with the ﬁ fth

anniversary of the opening of the center approaching in May.

Signiﬁ cant operational improvement was also achieved at
Zgorzelec Plaza. The 13,000 sqm shopping and entertainment
center experienced strong occupancy growth in reaching 95.2%

(2013: 91%), with the opening of a 547 sqm Carry and a number

of small fashion and service stores. The center had an increase of

14.1% in turnover and 8.4% rise in footfall.

Feasibility and planning studies were also progressed at
Lodz Plaza (comprising approximately 35,000 sqm of GLA)
and construction is now scheduled to begin in late 2016,

with completion expected in 2017.

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 center,

ofﬁ ces, 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 Center

Multifunctional Complex and completion of the ﬁ rst phase is

scheduled for 2017. In light of the ﬁ nancial 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 ofﬁ cially notiﬁ ed the authorities that it will be

seeking to redeﬁ ne some of the terms in the existing PPP contract,

including the timetable, structure and project milestones.

The Company has progressed the feasibility and planning studies
and permitting of Timisoara Plaza (comprising approximately
40,000 sqm of GLA) and construction is scheduled to begin in 2015,

with completion expected in 2016.

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Latvia

India

At Riga Plaza, which is 50% owned by Plaza, occupancy increased
to 99.49% (2013: 97%). H&M opened its largest store in Latvia

(2,700 sqm) at Riga Plaza in April 2014, and another 1,060 sqm was

The Company has signed a preliminary non-binding agreement with
an Indian based developer for the sale of Koregaon Park shopping
and entertainment center in Pune, and it collected €2.6 million

leased to Elkor Kids. The shopping center had the second highest

(INR 200 million) of advances in 2014 and 2015. The agreement

increase in turnover in the portfolio, with 15.6% increase in sales

is subject to certain conditions and discussions to complete the

compared to the previous year, and a 7.2% increase in footfall.

disposal are currently at an advanced stage.

The Latvian economy has continued to grow over 2014, despite

In 2008, Plaza formed a 50:50 joint venture with Elbit Imaging (the

the geopolitical turbulence in the region between the Ukraine and

“JV”) to develop mega mixed-use projects in Bangalore, Chennai

Russia. Unemployment has decreased and average salaries have

and Kochi. Under the terms of the agreement Plaza acquired a

increased, having a positive effect on the purchasing power of

47.5% stake in Elbit India Real Estate Holdings Limited, which had

consumers and on the country’s wider retail market.

existing stakes in mixed-use projects in India, in conjunction with

Serbia

Plaza’s most prominent investment in Serbia is a building in the

central administrative district of Belgrade, which Plaza secured in

a competitive tender and which housed the former Yugoslavian

Government’s Federal Ministry of Internal Affairs. Development
plans for Belgrade Plaza (MUP) comprise a shopping gallery, an
apartment-hotel and a business center, totalling circa 63,000 sqm.

Construction is planned to commence in 2016 and scheduled for

completion in 2017. Processes to secure the relevant local planning

and permitting approvals are underway.

Planning permission has been granted for Belgrade Plaza (Visnjicka)
(previously known by the project name Sport Star Plaza), with

construction on the 32,000 sqm shopping and entertainment center

set to commence this year and completion anticipated in 2017.

On 1 March 2013, Serbia was granted candidate status to the European

Union. The Company believes this will signiﬁ cantly increase the

ﬂ ow of international capital into the country, enabling its carefully

selected Serbian development pipeline and complete and operate the

assets to beneﬁ t from an anticipated growth in investor interest.

Greece

Plaza owns a development site in Athens, with plans intended for a

38,660 sqm mixed-use ofﬁ ce and retail development, including 700
car parking spaces. While the project, Pieras Plaza, is currently under
planning and feasibility examination, Plaza will wait until it is fully

satisﬁ ed that the recovery in the ofﬁ ce market and a general rise in

both occupancy rates and rental levels is underway before beginning

construction, in line with its cautious approach to development.

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 ﬁ fth largest city with a population

of more than eight million inhabitants. With a total built area of over

310,000 sqm, it will comprise over 1,100 luxury residential units

when completed. In July 2010, the JV signed a new framework

agreement with the local developer which, inter alia, decreased

the scope of the project to 165 acres. Currently the project is in a

planning and permitting phase. As at 31 December 2013, due to

uncertainty around the Group’s ability to progress the project in the

foreseeable future, the Group recorded a €31 million writedown in

expenses for the year.

Chennai - A residential development, which is 80% owned by the
JV and 20% by a prominent local developer. The scheme will be

developed into a residential project consisting of approximately

110,000 sqm of plotted area for development and approximately

62,000 sqm for high quality villas. Chennai is India’s fourth largest

city with a population of more than eight million inhabitants. The

JV signed a Memorandum of Understanding (the “MOU”) with a

reputable local developer for the joint development of the project. On

the basis of the MOU, the parties to the transaction have ﬁ nalised the

terms and conditions of the deﬁ nitive Joint Development Agreement,

and they intend to execute the Joint Development Transaction upon

fulﬁ lment of a certain conditions.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

BUSINESS REVIEW

Financial review

Results

During 2014, Plaza remained focused on the execution of its strategy

to dispose of the non-core assets in its portfolio in order 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

• Plots in the planning phase

In respect of its completed trading properties projects, the Company

still faces material uncertainties in respect of the time needed 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 classiﬁ ed as trading properties. As at 31 December

2014, the trading properties were classiﬁ ed as non-current assets in

the statement of ﬁ nancial position.

Income comprised rental income from operating shopping centers.

In 2014, Plaza generated €22.1 million of income compared to

€23.7 million in 2013. This includes rental income and service

charges collected from the tenants. The rental income in 2014 was

€15.4 million while in 2013 it was €16.6 million. The decrease is

a result of the strategic sale of Kragujevac Plaza in mid-2014 (c.

€1.1 million of income) and also by the sale of other undeveloped

projects. A 3.5% increase in 2014 in NOI from the operation of

shopping centers (from €17 million to €17.6 million, including

company share in NOI from commercial center of Riga, Latvia).

Excluding the impact of the commercial center Kragujevac, which

The disposal of Kragujevac Plaza also led to a decrease in operating

costs from €9.4 million 2013 to €8.5 million in 2014. The cost of the

Fantasy Park operations also decreased from €4 million in 2013 to

€2.2 million in 2014 after the closures.

A writedown of trading properties amounted to €87 million in

2014 (€118 million in 2013), comprising projects in Romania

(€51.3 million); India (€10 million); Greece (€11 million); Serbia

(€6 million); Poland (€6 million); Czech Republic (€2 million); and

Bulgaria (€1 million).

The writedown in relation to joint ventures classiﬁ ed as equity

accounted investments amounted to €1.7 million in 2014 and

€56 million in 2013. The writedown relates to Plaza’s Indian project

(Chennai) and was slightly offset by the €0.4 million increase in the

value of Riga Plaza (Latvia).

The Company’s active efforts to reduce costs bore fruit as

administrative costs fell by 20% to €7.4 million (2013: €9.4 million),

comprising a decrease in payroll and employee related expenses

(€1 million) and a decrease in the expense of professional service

providers (€0.8 million).

Other expenses net a reduction from €11 million in 2013 to nil

(where a change in the fair value of the Prague 3 investment property

and an impairment of advances received in connection with the Kochi

project in India were recorded). The net result in 2014 is attributable

to the €2.3 million insurance pay out received in connection with

the Koregaon Park ﬁ re incident, the expenses resulting from the

impairment of other assets (mainly Palazzo Ducale ofﬁ ce 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.

A net ﬁ nance loss of €35.6 million was recorded in 2014, compared

to a net ﬁ nance cost of €39.3 million in 2013.

Finance income remained at the same level (€1.3 million) attributable

to the settlement of the airplane loan (with a gain recorded of

was sold in the summer of 2014, the Group recorded a 13% increase

€0.6 million).

in NOI from the operation of shopping centers (from €13.2 million

to €14.9 million). Income from the Group’s Fantasy Park operation,

which provides gaming and entertainment services in Plaza’s active

shopping centers, decreased to €1.7 million from €3.3 million in

2013 following the operational closure of some units in the Group’s

shopping centers.

Finance expenses decreased from €40.6 million to €36.8 million

(in 2013 borrowing costs of €6.5 million were capitalised). The main

components of the expenses were:

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Roy Linden
Chief Financial Ofﬁ cer

• Interest expense on debentures (€5.3 million compared to

Total bank borrowings (long and short term) amounted to

€9.6 million in 2013)

€150.8 million (31 December 2013: €175.5 million). This decrease

is primarily the result of loans repaid during the year, largely through

• €9.6 million interest expense on bank borrowings compared to

the proceeds of the Kragujevac Plaza disposal.

€10.7 million in 2013

• Change in the fair value of debentures measured at fair value due

€162.9 million (with an adjusted par value of circa €191.5 million)

to the successful conclusion of the restructuring process and the

from issuing debentures on the Tel Aviv Stock Exchange and to

changes in the exchange rate of EUR/NIS (€21.3 million in 2014

Polish institutional investors. These debentures are presented at

while €13.2 million in 2013).

amortised cost.

Apart from bank ﬁ nancing, Plaza has a balance sheet liability of

A tax beneﬁ t of €1.3 million recorded in the consolidated income

Provisions are booked in connection with the Company’s Casa Radio

statement largely represents the creation of deferred tax assets

project in Bucharest Romania.

attributed to the Polish operations.

As a result of the above, the loss for the year amounted to

controlling shareholders, is a liability of approximately €1.2 million,

c. €120 million in 2014, compared to €218 million in 2013. Basic

in the main related to projects in India.

As at 31 December 2014, the net balance of the Company, with its

Other current liabilities have increased from €11.2 million to

€13.2 million in 2014. The increase is attributable to the advance

payment received in respect of a potential sale of Koregaon Park in

India and the disposal of land in Romania.

The total equity decreased from €210 million in 2013 to

€120 million in 2014 due to a €119.7 million loss suffered mainly

from writedowns, the result of rights issuances (net of issuance

costs) and allocation of shares to bondholders under the debt

arrangement (€24.7 million addition) and from a €4 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.

Roy Linden

Chief Financial Ofﬁ cer

19 March 2015

and diluted loss per share for 2014 was €0.39 (2013: €0.73).

Balance sheet and cash ﬂ ow

The balance sheet as at 31 December 2014 showed total assets of

€466 million, compared to total assets of €586 million at the end of

2013. The decrease was mainly driven by the writedown 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 ﬁ nancial assets)

increased to €41.7 million (31 December 2013: €33.7 million) after

the sale of assets and capital raised during the rights issuance.

Gearing increased to 74% (31 December 2013: 64%) as a result of

impairment losses and ﬁ nance costs incurred during the year.

Trading property values decreased from €495 million in 2013 to

€371 million in 2014 as result of writedowns booked in the period

and the selling of assets. At the end of the year, trading properties

were classiﬁ ed as non-current assets due to uncertainties around the

development and commencement dates.

Plaza has on its balance sheet a €42 million investment in equity

accounted investees which includes joint venture projects. The only

operating asset currently classiﬁ ed under this heading is Riga Plaza.

The remainder are the two development sites in India (Bangalore and

Chennai). The value has increased by €2 million since 2013, as a

result of various factors. It has increased by €1.6 million by the share

in results and by €2.7 million due to exchange rate movements, while

it has decreased by €2.7 million due to disposals and impairments.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

BUSINESS REVIEW

Valuation summary
by Cushman and

Wakeﬁ eld

as at 31 December 2014 (in EUR)1

Country

Project name

Market value of
the land and project
31 December 2013

Market value of
the land and project
31 December 2014

Market value
upon completion
31 December 2013

Market value

upon completion

31 December 2014

Hungary

Poland

Arena Plaza Extension
David House

Torun Plaza
Zgorzelec Plaza
Suwalki Plaza
Lodz (Residential)
Lodz Plaza
Leszno Plaza
Kielce Plaza

7,800,000
3,950,000

97,580,000
17,125,000
43,525,000
6,500,000
7,925,000
1,719,000
5,350,0003

6,650,000
2,625,000

96,300,000
13,450,000
43,075,000
4,800,000
7,400,000
800,000
3,600,000

88,941,000
3,950,000

97,580,000
17,125,000
43,525,000
89,331,000
74,214,000
n/a2
75,502,000

87,353,000
2,625,000

96,300,000
13,450,000
43,075,000
86,448,000
70,911,000
n/a2
70,158,000

Czech Republic

Liberec Plaza

17,675,000

15,725,000

17,675,000

15,725,000

Romania

Palazzo Ducale
Casa Radio
Timisoara Plaza
Csiki Plaza (Miercurea Ciuc)
Hunedoara Plaza
Slatina Plaza
Iasi Plaza
Targu Mures
Constanta Plaza
Brasov

1,800,000
130,613,000
10,825,000
5,625,000
2,375,000
1,650,000
11,550,000
6,175,0003
6,300,000
n/a

1,320,000
87,075,000
8,940,000
2,460,0003
SOLD
1,000,000
7,280,000
SOLD
3,300,0003
1,990,000

1,800,000
622,880,000
76,965,000
14,868,000
9,959,000
40,920,000
94,946,000
72,344,000
n/a2
n/a

1,320,000
555,138,000
72,283,000
14,276,000
SOLD
30,151,000
82,355,000
SOLD
3,300,000
147,039,000

Latvia

Riga Plaza

43,863,000

45,000,000

43,863,000

45,000,000

Greece

Pireas Plaza

15,300,000

4,475,000

94,555,000

73,141,000

India

Koregaon Park Plaza
Bangalore
Chennai

n/a
12,251,000
11,272,000

33,816,000
14,206,000
10,032,000

n/a
90,665,000
39,899,000

33,816,000
109,646,000
18,709,000

Bulgaria

Shumen Plaza

2,125,000

1,025,000

31,260,000

29,176,000

Serbia

TOTAL

Belgrade Plaza (MUP)
Belgrade Plaza (Visnjicka)
Kragujevac Plaza

16,150,000
19,025,000
41,775,000

13,650,000
18,850,000
SOLD

145,729,000
108,309,000
41,775,000

153,831,000
91,299,000
SOLD

547,823,000

448,844,000

2,038,580,000

1,946,525,000

1 Rounded to nearest thousand.

Notes:

2 Assets were valued with the comparative sales price method, no value at completion

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

was estimated.

• Plaza Centers has a 50% interest in the Riga Plaza shopping center development.

3 The Company applied a more conservative approach, and lower value was used in the

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

ﬁ nancial statements than in the valuation report.

• Plaza Centers has a 25% share of Bangalore.

• Plaza Centers has a 40% share of Chennai.

• All the ﬁ gures reﬂ ect Plaza’s share.

BUSINESS REVIEW

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Management structure

Plaza Centers’ Board

Ron Hadassi
Chairman
Non-executive Director

Nadav Livni
Executive Director

Shlomi Kelsi
Non-executive Director

Yoav Kﬁ r
Non-executive Director

Marco Wichers
Independent
Non-executive Director

Sarig Shalhav
Independent
Non-executive Director

David Dekel
Independent
Non-executive Director

Senior Management

Ran Shtarkman
President and CEO

Roy Linden
CFO

Uzi Eli
General Counsel

Yaron Moryosef
Chief Engineer

Therese Keys
CEE Management and Leasing
Director

Functional Management Support

Local Country Management

Dori Keren
Country Director
Poland and Latvia

Rabia Shihab
Country Director
Czech Republic, Serbia and Balkan States

Luc Ronsmans
Country Director
The Netherlands and Romania

Oren Kolton
Country Director
India

Bulgaria and Greece are being managed
from Poland and Romania

• Oversight of company

strategy and all project

development decisions

• Wide-ranging property

development expertise

• Review and approval

of business plan and

budgets

• Active management

and monitoring of

development risks

• Experienced

property development

professionals with global

property development

expertise

• Responsible for sourcing

development projects

• Development of

business plans

• Overseeing the

management of

development projects

• Extensive local

experience

• Cultivating connections

within market to source

opportunities

• Day-to-day management

of local operations and

developments

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Board of Directors and
Senior management

Chairman

Mr. Ron Hadassi, Non-executive director (male, 50, Israeli)
Mr. Ron Hadassi has a broad experience in leading real estate ﬁ rms.

Committee member in the restructuring process at Elbit; receiver and trustee

to Alvarion Ltd; ﬁ nancial advisor to Moti Ben Moshe and the Extra Holding

Group in the IDB Group take-over and restructuring process; trustee to Eshbal

Technologies Ltd; and a court-appointed expert to Sunny Electronics Ltd. Prior

Mr. Hadassi currently is the senior manager of Bronfman-Fisher Group,

to founding VAR Group, he managed auditing projects as well as business

engaged in industry, real estate, ﬁ nance and retail and holds various positions

development at Kesselman & Kesselman, a member of PwC International.

within the Bronfman-Fisher Group. He also serves on the Board of Directors

Mr. Kﬁ r is the sole non-government member of the Friends’ Society of

of the controlling shareholder and Carmel Winery and he is the chairman

Jerusalem Mental Hospitals and serves on several audit committees of non-

of Elbit Medical Technologies Ltd. Mr. Hadassi holds a BA in economics,

proﬁ t organisations. He holds a BA in business administration from the College

political science, an LLB and an MBA from the Tel Aviv University. Mr. Hadassi

of Management, Rishon LeZiyon and is a certiﬁ ed public accountant (CPA,

was appointed as an executive director on 8 July 2014 and elected as a

Israel). Mr. Kﬁ r was appointed as a non-executive director on 8 July 2014.

chairman and non-executive director on 28 November 2014. Mr. Hadassi

Mr. Kﬁ r may periodically be re-elected by the Annual General Meeting pursuant

may periodically be re-elected by the Annual General Meeting pursuant to

to article 23.6 of the Articles, provided that Mr. Kﬁ r will have expressed his

article 23.6 of the Articles, provided that Mr. Hadassi will have expressed his

availability for a subsequent term of ofﬁ ce.

Executive director

Mr. Nadav Livni, (male, 41, British)
Mr. Nadav Livni is the founder of The Hillview Group, an independent

privately owned merchant bank based in London. Since 2006, The Hillview

Group has expertly managed over $3.5 billion of strategic capital market

transactions across Central and Eastern Europe, Russia, Africa and USA.

Mr. Livni previously worked at Deutsche Bank, Goldman Sachs and KPMG.

He also serves on the board of EI. Mr. Livni is a qualiﬁ ed chartered accountant,

holds a Bachelor of Commerce (honours in economics), a Master of Science

(ﬁ nance), and is a guest speaker on the topics of private equity and real estate

investment at London Business School. Mr. Livni was appointed as a non-

executive director on 8 July 2014 and elected as an executive director on 28

November 2014. Mr. Livni may periodically be re-elected by the Annual General

Meeting pursuant to article 23.6 of the Articles, provided that Mr. Livni will

have expressed his availability for a subsequent term of ofﬁ ce.

Non-executive directors

Independent non-executive directors

Mr. Marco Habib Wichers (male, 56, Dutch)
Mr. Marco Habib Wichers is currently the chief executive ofﬁ cer of Branco

Europe B.V. Between 1994 and 2013 he acted as the CEO of AMGEA Holding

B.V. Between 1988 and 1995, he acted as the CEO of Branco International Inc.

New York (a manufacturing company) and between 1983 and 1995 he acted as

the CEO and owner of Cravat Club, Inc. New York (a manufacturing company).

Mr. Wichers holds a degree in economics and marketing from the International

University of Hospitality Management. Mr. Wichers was appointed as non-

executive director on 1 November 2006. In November 2011, he was appointed

as chairman of the Board. The General Meeting appointed Mr. Wichers as

non-executive director, in accordance with the Dutch Act on Management and

Supervision (Wet bestuur en toezicht) on 20 November 2012. Mr. Wichers has

been re-elected in accordance with article 23.6 of the Articles, by the General

Meeting on 8 July 2014. Mr. Wichers may periodically be re-elected by the

Annual General Meeting pursuant to article 23.6 of the Articles, provided that

Mr. Wichers will have expressed his availability for a subsequent term of ofﬁ ce.

Mr. Shlomi Kelsi (male, 43, Israeli)
Mr. Shlomi Kelsi is currently the managing director of all holding subsidiaries

Mr. Sarig Shalhav (male, 41, Dutch)
Mr. Sarig Shalhav is a lawyer and tax counsel and has extensive experience

of Ampal-American Israel Corporation, which was one of the largest investment

on commercial real estate and real estate ﬁ nance transactions and advises

companies in Israel, traded on the NASDAQ and the Tel Aviv Stock Exchange.

multinational businesses, government agencies, private equity houses and

He also serves on the Board of Elbit Imaging Ltd. Mr. Kelsi holds an MSc in

banks on a wide range of real estate and real estate ﬁ nance related matters.

ﬁ nance from the Tel Aviv University. He is a certiﬁ ed public accountant (CPA,

In addition he acts as a counsel in restructuring and enforcement scenarios,

Israel) and holds a BA in accounting and economics (summa cum laude) from

buyout and venture capital transactions. Mr. Shalhav holds an LLB degree in

the Tel Aviv University. Mr. Kelsi was appointed as a non-executive director on

law from Manchester University, an LLM degree in international business law

8 July 2014. Mr. Kelsi may periodically be re-elected by the Annual General

Meeting pursuant to article 23.6 of the Articles, provided that Mr. Kelsi will

have expressed his availability for a subsequent term of ofﬁ ce.

Mr. Yoav Kﬁ r (male, 43, Israeli)
Mr. Yoav Kﬁ r serves as the founder and managing director of VAR Group. He

has served as interim chief executive ofﬁ cer, chief ﬁ nancial ofﬁ cer, advisor

or court appointed ofﬁ cer, crisis manager and trustee with respect to various

companies. He currently serves as Board and Audit Committee member at Elbit

and a PhD in international taxation from Amsterdam University. He has been

working with leading law ﬁ rms and major audit & tax corporations. Mr. Shalhav

was appointed as a non-executive director by the General Meeting on

19 December 2013. Mr. Shalhav may periodically be re-elected by the Annual

General Meeting pursuant to article 23.6 of the Articles, provided that

Mr. Shalhav will have expressed his availability for a subsequent term of ofﬁ ce.

Mr. David Dekel (male, 50, Dutch)
Mr. David Dekel is currently a non-executive director at Nanette Real Estate

Imaging Ltd, Plaza Centers N.V. and Elbit Medical and served in such capacities

Group N.V., a residential developer, operating in Central Europe. He is the

in Orkit Communications Ltd. Among his roles, Mr. Kﬁ r served as a Creditors’

founder and chief executive ofﬁ cer of Endeavour Enterprises N.V. from Amster-

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Board of Directors
and Senior management

dam, the Netherlands and has several other managerial functions.

Mr. Dekel holds a BBA from the Delta University in Utrecht, the Netherlands

Mr. Yaron Moryosef (41) BSc, Chief Engineer
Mr. Yaron Moryosef joined the Company in 2007. Prior to joining the Company,

and an MBA from the University of Teesside (the Hague extension) in the

he acted as the site engineer of the Arena Herzelia shopping and entertainment

Hague, the Netherlands. Mr. Dekel was appointed as a non-executive director

center, which was developed by Elbit Imaging Ltd. At the Company he was

on 8 July 2014. Mr. Dekel may periodically be re-elected by the Annual General

acting as the project manager of Romanian projects. In 2010 Mr. Moryosef

Meeting pursuant to article 23.6 of the Articles, provided that Mr. Dekel will

became the Company’s country chief engineer in Romania and on 1 August

have expressed his availability for a subsequent term of ofﬁ ce.

2012 he was appointed as the Group’s chief engineer and head of construction.

Senior management

Mr. Ran Shtarkman (47) CPA, MBA, President & CEO
Mr. Ran Shtarkman joined the Company in 2002. He was appointed chief

Mr. Luc Ronsmans (64) MBA, The Netherlands and Romania

Country Director
Mr. Luc Ronsmans joined the Europe Israel Group in 1999. Located in

Amsterdam and Bucharest, he acts as manager for European operations for

ﬁ nancial ofﬁ cer of the Company in 2004, and he was appointed chief executive

both the company and its group afﬁ liates. Prior to joining the Europe Israel

ofﬁ cer in 2006. Prior to his joining the Company, Mr. Shtarkman acted as CFO

Group, Mr. Ronsmans was active in the banking sector, holding managerial

of SPL Software Ltd., the ﬁ nance and administration manager of the Israeli

positions with Manufacturers Hanover Bank, Continental Bank (Chigaco),

representative ofﬁ ce of Continental Airlines (a publicly traded company – New

AnHyp Bank and Bank Naggelmachers in Belgium.

York Stock Exchange), and the controller of Natour Ltd. (a publicly traded

company – TASE). Mr. Shtarkman holds a BA degree in accounting and

economics from the Tel Aviv University and an MBA degree from Ben-Guryon

University of the Negev. Mr. Shtarkman was initially appointed as an executive

director on 12 September 2006 and as president of the Company in 2007. He

was dismissed from his position as executive director by the Annual General

Meeting on 8 July 2014 after which he remained with the Company as chief

executive ofﬁ cer. The term “chief executive ofﬁ cer” is not a concept of Dutch

law and, as per the amendment of 18 August 2014, this term has been

deleted from the Articles therewith introducing the possibility to grant the

– unofﬁ cial – title to persons not being members of the Board. The Board

has resolved to grant Mr. Shtarkman the title of chief executive ofﬁ cer, to

emphasise the importance of Mr. Shtarkman’s presence with the Company.

Mr. Roy Linden (38) BBA, CPA (USA, Isr), Chief Financial Ofﬁ cer
Mr. Roy Linden joined the Company in November 2006 and has acted as chief

ﬁ nancial ofﬁ cer since then. Prior to joining the Company, he served as manager

in the real estate desk of KPMG in Hungary for nearly four years, specialising

in auditing, business advisory, local and international taxation for companies

operating throughout the CEE region. He also served as a senior member of an

audit team of Ernst and Young in Israel for three years and specialised in high-

tech companies. Mr. Linden holds a BBA degree in accounting from the College

of Management Academic Studies and he is a certiﬁ ed public accountant in

Israel and in the United States.

Mr. Dori Keren (45) BA, MBA, BB in Accounting, Poland and Latvia

Country Director
Mr. Dori Keren joined Plaza Centers in 2006 as ﬁ nancial director of Poland

and Latvia and was appointed Poland country director in 2013. Prior thereto,

he worked in Israel for 10 years in variety of ﬁ nancial jobs in positions which

accompany business activity as economist, ﬁ nancial controller and CFO.

Mr. Oren Kolton (39) BSc, MSc, MBA, Republic of India Country Director
Mr. Oren Kolton has served as the India country director for Elbit Imaging

Group ventures in India since January 2010. From mid 2007 to December

2009, he has served as Elbit’s vice president of business development Asia.

Prior to joining the Elbit Imaging Group in April 2005, he served as a faculty

member at the civil engineering faculty, in the Technion – the Israel Institute

of Technology –, where he was involved in research and taught undergraduate

management courses. Mr. Kolton holds a BSc (magna cum laude) in civil

engineering and MSc in construction management from the Technion, and an

MBA in ﬁ nancing and marketing from the Tel Aviv University.

Mr. Rabia Shihab (36) BA, CPA, Czech Republic, Serbia and

Balkan States Country Director
Mr. Rabia Shihab joined Plaza Centers in June 2008 as ﬁ nancial director of

Romania and Bulgaria. From November 2011, he has been serving as the

ﬁ nancial director of Serbia and the Czech Republic. On March 2014, he was

additionally appointed as the country manager. Prior joining Plaza Centers, he

served as ﬁ nancial controller for Tefron Ltd. Mr. Shihab holds Bachelor degree

Mr. Uzi Eli (39) LLB, Attorney at Law (Isr), MBA, General Counsel

of economics from the Hebrew University of Jerusalem.

and Compliance Ofﬁ cer
Mr. Uzi Eli joined the Company as general counsel and compliance ofﬁ cer

in 2007. Prior to joining the Company, he practised law in two leading

commercial law ﬁ rms in Israel. His main practice concentrated in commercial

Ms. Therese Keys (44) Bbus (Marketing), CEE Management and

Leasing Director
Ms. Therese Keys joined the Plaza team in January 2013 as CEE Management

and corporate law, providing ongoing legal services to corporate clients

and Leasing Director. Prior to joining Plaza Centers, she was involved for 9

(mainly hi-tech and bio-tech companies and venture capital funds) in all

years in land acquisition and commercial, and residential development in the

aspects of corporate governance, and representation in various transactions,

Balkans. Before moving to Eastern Europe Ms. Keys worked for 10 years in

such as ﬁ nancing and M&A transactions and other wide varieties of licensing

the shopping center industry in Australia, initially with the Stockland Trust

and technology transactions. Mr. Eli holds a LLB degree and an MBA degree

Group, and then The Westﬁ eld Group. Roles in these companies included

from the College of Management Academic Studies and he is an attorney

development, management, marketing and leasing of shopping centers.

at law.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Directors’ report*

Principal activities and review of business

Plaza Centers N.V. is a leading developer of shopping and
entertainment centers with a focus on the emerging markets of
Central and Eastern Europe (“CEE”), where it has operated since
1996 when it became the ﬁ rst company to develop western-style
shopping and entertainment centers in Hungary. This followed
its early recognition of the growing middle class and increasingly
afﬂ uent consumer base in such markets.

Since then, it has expanded its CEE operations into Poland, the
Czech Republic, Latvia, Romania and Serbia. In addition, the Group
has extended its area of operations beyond the CEE into India and
the US. The Group has been present in real estate development
in emerging markets for over 19 years. To date, the Group has
developed, let and opened 33 shopping and entertainment centers
and one ofﬁ ce building. 21 of these centers were acquired by
Klepierre, one of the largest shopping center owners/operators in
Europe. Four additional shopping and entertainment centers were
sold to the Dawnay Day Group, one of the UK’s leading institutional
property investors at that time. One shopping center (Arena
Plaza in Budapest, Hungary) was sold to Active Asset Investment
Management (“AAIM”), a UK commercial property investment group
and one shopping center (Kragujevac Plaza in Serbia) was sold in
2014 to New Europe Property Investments plc (“NEPI”), a publicly
traded commercial property investor and developer in Eastern
Europe, holding 26 income producing assets. The remaining six
centers, which were completed during 2009, 2010, 2011 and 2012
are being held and managed by the Company, while utilising the
Company’s extensive experience in managing retail assets.

For a more detailed status of current activities and projects,
the directors refer to the President and Chief Executive Ofﬁ cer’s
statement on pages 28 to 30 as well as to the following chapters:
Overview, Business Review and Management and Governance.

meet the mandatory repayment terms of the banking facilities and
debentures, as disclosed in notes 12 and 17 of the consolidated
ﬁ nancial statements.

The Board of Directors have analysed the following two major risks
associated with the preparation of the ﬁ nancial statements included
in the annual report:
1 Extensive review and assessment of the real estate valuation
process, together with senior management and the external
valuators of the Company as of 31 December 2014, which is the
base for important disclosures included in the Company’s 2014
ﬁ nancial reports.

2 Review and assessment of the features of the debt restructuring
plan details, including prospective cash outﬂ ow, covenants and
comply with these elements.

Based on the above assessments, done for the period of 12 months
following the signature of these reports, the Board of Directors have
a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due.

Dividends

The Company shall not make any dividend distributions, unless
(i) at least 75% of the unpaid principal balance of the debentures
(€199 million) has been repaid and the coverage ratio on the last
examination date prior to such distribution is not less than 150%
following such distribution, or (ii) a majority of the plan creditors
consents to the proposed distribution.

Notwithstanding the aforesaid, in the event an additional capital
injection of at least €20 million occurs, then after one year following
the date of the additional capital injection, no restrictions other than
those under restructuring plan as speciﬁ ed on page 54 and the
applicable law shall apply to dividend distributions in an aggregate
amount up to 50% of such additional capital injection.

For an overview of subsequent events refer to note 33 to the
consolidated ﬁ nancial statements.

Directors’ interests

Pipeline projects

The Company is active in seeking new sites and development
opportunities in countries in which the Company is currently
operating. The Company is also analysing and contemplating
investment in further countries that meet its development
arameters and investment criteria.

Going concern

The consolidated ﬁ nancial statements have been prepared on a
going concern basis, which assumes that the Group will be able to

* Chapters 1 (Overview), 2 (Business review) and 3 (Management and governance) are part

of the Directors’ report.

The directors have no interests in the shares of the Company, other
than the directors’ share options as given on page 64 of this report.

Directors and appointments

The following served as directors of the Company at
31 December 2014:

Ron Hadassi – Chairman, Non-executive director
Nadav Livni – Executive director
Shlomi Kelsi – Non-executive director
Yoav Kﬁ r – Non-executive director
Marco Wichers – Independent non-executive director
Sarig Shalhav – Independent non-executive director
David Dekel – Independent non-executive director

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Directors’ report

The General Meeting of Shareholders is the corporate body
authorised to appoint and dismiss the directors. All directors in
function, unless they are retiring, submit themselves for re-election
every three years, pursuant to the rotation scheme for directors as
laid down in Article 15.3 of the Articles of Association. The General
Meeting of Shareholders is entitled to suspend and dismiss directors
by a simple majority vote.

Annual General Meeting (AGM)

The Annual General Meeting of Shareholders is held every year within
six months from the end of the ﬁ nancial year in order to discuss
and approve the annual report and adopt (vaststellen) the Dutch
statutory annual accounts, discharge of the directors from their
liability for the conduct of business in the preceding year and any
other issues mentioned below.

Substantial shareholdings

As of the balance sheet date, Burlington Loan Management Limited
held approximately 26.3%%*, SC Fundamental Value Fund LP held
approximately 4.76% and York Capital Management Global Advisors
held approximately 3.64% of the entire issued share capital of the
Company. Other than that and except as disclosed under “directors’
interests” above, the Company is not aware of any additional
interests amounting to 3% or more in the Company’s shares besides
that of its parent company Elbit Imaging Ltd.

Issue of shares

Pursuant to the Articles of Association, the General Meeting of
Shareholders is the corporate body authorised to issue shares and
to disapply pre-emption rights. In each Annual General Meeting,
the General Meeting of Shareholders is requested to delegate these
powers to the Board. The scope of this power of the Board shall be
determined by the resolution of the General Meeting of Shareholders
to give the authorisation. Typically, the Company requests in each
Annual General Meeting of Shareholders the authorisation for the
Board to issue shares up to an aggregate nominal value of 33%
of the then issued share capital and an authorisation for the Board
to disapply pre-emption rights which is limited to the allotment of
shares up to a maximum aggregate nominal amount of 10% of the
then issued share capital. The authorisation is valid for a period
ending on the date of the next Annual General Meeting.

Employee involvement

The Company has 120 employees and other persons providing
similar services. In 2013 the Group had 136 employees and other
persons providing similar services. The management does not expect
signiﬁ cant changes in the development of the number of employees,
following the reorganisation process in recent years. The Company’s
employees are vital to its ongoing success. It is therefore important
that all levels of staff are involved in its decision-making processes.
To this end, the Company has an open culture and ﬂ exible structure,
and staff are encouraged formally and informally to become involved
in discussions on the Company’s future strategy and developments.
Employee share option schemes were adopted on 26 October 2006
(as was amended in October 2008 and November 2011) and on
22 November 2011, which enable employees to share directly in
the success of the Company.

The main powers of the General Meeting of Shareholders relate
to the appointment of members of the Board, the adoption of the
annual ﬁ nancial statements, declaration of dividend, release the
Board’s members from liability and amendments to the Articles of
Association.

The Annual General Meeting of Shareholders was held at Park Plaza
Victoria Hotel Amsterdam, Damrak 1-5, 1012 LG Amsterdam, the
Netherlands on 8 July 2014 at 10.30 am (CET).

In this AGM, inter alia, the following resolutions were proposed
to the shareholders: (i) to approve the Company’s Dutch statutory
annual accounts and annual report for the 2013 ﬁ nancial year being
drawn up in the English language; (ii) to adopt the Company’s Dutch
statutory annual accounts for the year ended 31 December 2013;
(iii) not to distribute any dividend to the holders of ordinary shares
in respect of the year ended 31 December 2013; (iv) to discharge
the directors of the Company from their liability for the conduct
of business for the year ended 31 December 2013; (v) to appoint
Mazars Paardekooper Hoffman Accountants N.V. as the external
auditor for the 2014 ﬁ nancial year; (vi) to amend the Company’s
Articles of Association relating to the proposed listing of the
Company’s ordinary shares on the Tel Aviv Stock Exchange; (vii) to
grant power of attorney to have the notarial deed of amendment of
the Articles of Association executed; (viii) to authorise the Board
generally and unconditionally to exercise all powers of the Company
to allot equity securities in the Company up to 98,071,426 (ninety
eight million seventy one thousand four hundred twenty-six) ordinary
shares, being 33 per cent of the Company’s issued ordinary share
capital as at the date of the notice for the Annual General Meeting,
provided that such authority shall expire on the conclusion of the
Annual General Meeting to be held in 2015, save that the Company
may, before such expiry, make an offer or agreement which would
or might require equity securities to be allotted after such expiry
and the Board may allot equity securities in pursuance of such an
offer or agreement as if the authority conferred hereby had not
expired; (ix) to designate the Board, generally and unconditionally,
as the competent body to restrict or exclude pre-emptive rights
upon issuing ordinary shares set out in article 6 of the Company’s
Articles of Association, such power to expire at the conclusion of
the next Annual General Meeting to be held in 2015, and the Board

* As of 19 December 2014, based on the latest disclosed positions made by Davidson

Kempner Capital Management LLC (“DK”). Burlington Loan Management Limited holds

23.89%. and DK holds 2.4% directly.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Directors’ report

may allot equity securities following an offer or agreement made
before the expiry of the authority and provided that the authority is
limited to the allotment of the equity securities up to the percentage
of 10% of the issued capital of the Company at the date of the notice
for this Annual General Meeting, being 29,718,614 (twenty nine
million seven hundred eighteen thousand six hundred fourteen)
ordinary shares in the capital of the Company; (x) to approve the
contemplated admission to trading of the Company’s ordinary shares
on the Tel Aviv Stock Exchange; (xi) to re-elect as a non-executive
director, Mr. Marco Habib Wichers; (xii) to honourably dismiss
Mr. Mordechay Zisser from his position as executive director, in
accordance with article 15 paragraph 1 of the Articles of Association;
(xiii) to honourably dismiss Mr. Ran Shtarkman from his position
as executive director, in accordance with article 15 paragraph 1 of
the Articles of Association, (xiv) to honourably dismiss Mr. Shimon
Yitzchaki from his position as non-executive director, in accordance
with article 15 paragraph 1 of the Articles of Association; (xv) to
honourably dismiss Mr. Marius Willem van Eibergen Santhagens
from his position as non-executive director, in accordance with
article 15 paragraph 1 of the Articles of Association; (xvi) to appoint,
in accordance with article 15 of the Articles of Association, Mr. Ron
Hadassi as executive director of the Company; (xvii) to appoint, in
accordance with article 15 of the Articles of Association, Mr. David
Dekel as non-executive director of the Company; (xviii) to appoint, in
accordance with article 15 of the Articles of Association, Mr. Shlomi
Kelsi as non-executive director of the Company; (xix) to appoint, in
accordance with article 15 of the Articles of Association, Mr. Yoav
Kﬁ r as non-executive director of the Company and (xx) to appoint, in
accordance with article 15 of the Articles of Association, Mr. Nadav
Livni as non-executive director of the Company.

All proposed resolutions were passed, save for the proposed
resolution to appoint the external auditor of the Company for the
2014 ﬁ nancial year under item (v) herein above which was not
brought to vote and the resolution was included in the agenda of the
Extraordinary General Meeting speciﬁ ed herein below.

Extraordinary General Meeting (EGM)

An Extraordinary General Meeting of Shareholders was held
at Park Plaza Victoria Hotel Amsterdam, Damrak 1-5, 1012 LG
Amsterdam, the Netherlands on 28 November 2014 at 10am
(CET). The background of the EGM is detailed on pages 8 and 9.
In this EGM, inter alia, the following resolutions were proposed
to the shareholders: (i) to designate the Board, generally and
unconditionally as the competent body to issue ordinary shares
to cover the issue of new ordinary shares and the escrow shares
(including rights to acquire ordinary shares) up to an aggregate
nominal amount of €7,028,138.62 (seven million twenty eight
thousand hundred thirty eight euro and sixty two eurocent), being
the unissued part of the Company’s authorised share capital
(maatschappelijk kapitaal) as at the date of the notice of the EGM

being €10,000,000 (ten million euro), provided that such authority
shall expire on the conclusion of the Annual General Meeting to be
held in 2015 unless previously renewed, varied or revoked by the
General Meeting, save that the Company may, before such expiry,
make an offer or agreement which would or might require equity
securities to be allotted after such expiry and the Board may allot
equity securities in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired; (ii) to designate
the Board, generally and unconditionally, as the competent body
to restrict or exclude pre-emptive rights upon issuing ordinary
shares to cover the issue of new ordinary shares and the escrow
shares such power to expire at the conclusion of the Annual General
Meeting to be held in 2015, and the Board may allot equity securities
following an offer or agreement made before the expiry of the
authority and provided that the authority is limited to the allotment
of equity securities (including rights to acquire equity securities)
up to a maximum aggregate nominal amount of €7,028,138.62
(seven million twenty eight thousand hundred thirty eight euro
and sixty two eurocent), being the unissued part of the Company’s
authorised share capital as at the date of the notice of the EGM being
€10,000,000 (ten million euro); (iii) to designate the Board, generally
and unconditionally as the competent body to issue ordinary shares
(including rights to acquire ordinary shares) to cover the issue of
the bondholders’ shares and any additional placing shares) up to an
aggregate nominal amount of €7,028,138.62 (seven million twenty
eight thousand hundred thirty eight euro and sixty two eurocent),
being the unissued part of the Company’s authorised share capital
as at the date of this notice being €10,000,000 (ten million euro),
provided that such authority shall expire on the conclusion of
the Annual General Meeting to be held in 2015 unless previously
renewed, varied or revoked by the General Meeting, save that the
Company may, before such expiry, make an offer or agreement which
would or might require equity securities to be allotted after such
expiry and the Board may allot equity securities in pursuance of such
an offer or agreement as if the authority conferred hereby had not
expired; (iv) to designate the Board, generally and unconditionally,
as the competent body to restrict or exclude pre-emptive rights upon
issuing bondholders’ shares and any additional placing shares such
power to expire at the conclusion of the annual general meeting to
be held in 2015, and the Board may allot equity securities following
an offer or agreement made before the expiry of the authority and
provided that the authority is limited to the allotment of equity
securities (including rights to acquire equity securities) up to a
maximum aggregate nominal amount of €7,028,138.62 (seven
million twenty eight thousand hundred thirty eight euro and sixty
two eurocent), being the unissued part of the Company’s authorised
share capital as at the date of this notice being €10,000,000 (ten
million euro); (v) to approve the arrangements under the Controlling
Shareholders Undertaking, including, without limitation, approving
the undertaking by Elbit Ultrasound Luxembourg (“EUL”) that to the
extent that not all shareholders take up their rights to subscribe for
new ordinary shares under the rights offering, to subscribe, and/

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

or procure that other persons subscribe, for such number of rump
shares (being ordinary shares left in the rights offering due to the
fact that not all shareholders have exercised their rights) at the rights
offering price such that the aggregate consideration to be received
by the Company pursuant to the rights offering, together with the
consideration received from the bondholders (or their nominees)
in respect of the escrow shares, shall not be less than €20 million);
approving the Board to issue additional placing shares to EUL or
persons nominated by it; and approving the placing of the additional
placing shares at the rights offering price at what may, at the time
of the issuance of such shares, be a discount of more than
10 per cent to the middle market quotation of the Company’s
ordinary shares as derived from the daily ofﬁ cial list or any other
publication of a recognised international exchange showing
quotations for listed securities for the relevant date; (vi) to amend the
Company’s Articles of Association; (vii) to grant power of attorney to
have the notarial deed of amendment of the Articles of Association
executed; (viii) to appoint Grant Thornton Accountants en Adviseurs
B.V as the external auditor for the 2014 ﬁ nancial year; (ix) to
dismiss Mr. Nadav Livni from his position as non-executive director
of the Company, in accordance with article 23.4 of the Articles of
Association and proposal to appoint Mr. Nadav Livni as executive
director of the Company, in accordance with article 23 of the Articles
of Association; (x) to dismiss Mr. Ron Hadassi from his position
as executive director of the Company, in accordance with article
23.4 of the Articles of Association and proposal to appoint Mr. Ron
Hadassi as non-executive director of the Company, in accordance
with article 23 of the Articles of Association; (xi) to approve the
terms of the appointment letter relating to Mr. Livni; (xii) to approve
the terms of appointment of Mr. Ron Hadassi;(xiii) to approve the
terms of appointment of Mr. Yoav Kﬁ r; (xiv) to approve the terms of
appointment of Mr. Shlomi Kelsi and (xv) to approve the terms of
appointment of Mr. David Dekel.

All proposed resolutions were passed.

Article 10 of Directive 2004/25

With regard to the information referred to in the resolution of Article
10 of the EC Directive pertaining to a takeover bid which is required
to be provided according to the Dutch law, the following can be
reported:

• There are no special restrictions on the transfer of the shares of

the Company.

• There are no special statutory rights related to the shares of the

Company.

• There are no restrictions on the voting rights on the Company’s shares.
• Information on signiﬁ cant shareholding can be found above.
• There are no agreements between the shareholders which are
known to the Company and may result in restrictions on the
transfer of securities and/or voting rights.

• The applicable provisions regarding the appointment and

dismissal of members of the Board and amendments to the
Articles of Association are set forth above.

• The power of the Board regarding the issue of shares and the

exclusion of pre-emption rights and the repurchase of shares in
the Company can be found above.

• There are no signiﬁ cant agreements to which the Company is a
party and which take effect alter or terminate upon a change of
control of the Company following a takeover bid.

• There are no agreements between the Company and its Board

members or employees providing for compensation if they resign
or are made redundant without valid reason or if their employment
ceases because of a takeover bid.

• Other information can be found in the notes to the ﬁ nancial

statements (please see note 19 - Equity)

Forecast

Plaza continues to evaluate its extensive development pipeline,
which it believes offers signiﬁ cant opportunities. Plaza remains
prudent and pragmatic in its approach to deploying signiﬁ cant
levels of equity to commence new projects. This being said, Plaza
continues to progress a limited number of projects in the most
resilient countries in CEE, such as Poland and Serbia, where GDP
growth and forecasts remain above the averages for Europe and, as
such, Visnjicka Plaza in Belgrade, Serbia and Lodz Plaza in Poland,
as well as Timisoara Plaza in Romania will be the next centers to
commence construction.

In light of market conditions at the time, in the second half of 2008,
the Group took the strategic decision to scale back on starting
new projects and to focus on projects with availability of external
ﬁ nancing and strong tenants demand. The Group currently plans to
progress in a selected number of projects which are: (i) Casa Radio
(Phase I) in Romania; (ii) Timisoara in Romania; (iii) Lodz Mall in
Poland; (iv) Belgrade Plaza (MUP) in Serbia; (v) Belgrade Plaza
(Visnjicka) in Serbia; and (vi) Chennai in India.

Following the successful completion of the restructuring plan, Plaza
has conﬁ dence in the long term future growth of the Company
and the management is resolute in its belief that, with the ongoing
support of the Group’s bondholders and shareholders, the delivery
of the strategy, together with the brightening economic outlook, will
result in the delivery of value and growth to the Company’s investors.

Plaza is on various stages of negotiation for selling part of its assets,
but currently there are no signed agreements or head of terms in
place, except the agreement to sell Koregaon Park in India and pre-
agreement for selling of leasehold right in a plot in Romania.

The number of the Group’s employees changed signiﬁ cantly in the
course of the past years, however, following the approval of the
restructuring plan, no material change is expected for 2015, except
for the resignation of the current CEO.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Corporate governance

Cor

The Company was incorporated in the Netherlands on 17 May 1993

option schemes were drafted in accordance with Elbit’s share

as a private limited liability company (besloten vennootschap met

option scheme, in order to maintain the incentive for all employees

beperkte aansprakelijkheid). The Company was converted into a

of Elbit group based upon the same principles.

public limited liability company (naamloze vennootschap) on 12

October 2006, with the name “Plaza Centers N.V.”. The principal

• Best Practice Provision II.2.7 stipulates that neither the exercise

applicable legislation and the legislation under which the Company

price nor the other conditions regarding the granted options

and the ordinary shares in the Company have been created is book 2

shall be modiﬁ ed during the term of the options, except insofar

of the Dutch Civil Code (Burgerlijk Wetboek).

as prompted by structural changes relating to the shares of the

Compliance

The Board is committed to high standards of corporate governance,

in order to maintain the trust of the Company’s shareholders and

other stakeholders. The Company has a one-tier board (as provided

for in the Dutch Civil Code) whereas the Dutch Corporate Governance

Code is based on a separate management board and supervisory

board. Where possible, taking the aforesaid into consideration, the

Company complies with the Dutch Corporate Governance Code and

the UK Corporate Governance Code, with the exception of a limited

number of best practice provisions which it does not consider to be

in the interests of the Company and its stakeholders or which are not

practically feasible to implement.

Deviations from the Dutch Code in 2014

• Best Practice Provision II.1.3 stipulates, inter alia, that the

Company should have an internal risk management and control

system which should in any event employ as instruments of the

internal risk management and control system a code of conduct

which should be published on the Company’s website. Such code

of conduct has not been available during 2014.

• Best Practice Provision II.1.4 (b) stipulates that the management

board shall provide a description of the design and effectiveness

of the internal risk management and control system for the main

risks. Since the Company has no such code, it cannot refer its

design and effectiveness.

• Best Practice Provision II.1.6 stipulates that the management

board shall describe the sensitivity of the results of the Company

to external factors and variables. Since the Company has no

streaming/ﬁ xed annual revenue from the operation of properties,

it does not perform such analysis.

• Best Practice Provision II.2.4 stipulates that granted options shall

not be exercised in the ﬁ rst three years after the date of granting.

The current share incentive schemes of the Company do not

restrict the exercise of options to a lockup period of three years.

The reason therefore is that the Company and the Elbit group

share the same remuneration policy and the Company’s share

Company in accordance with established market practice. On

25 November 2008 the Company adjusted the exercise price of the

granted options and in November 2012 the Company extended the

option term from ten (10) to ﬁ fteen (15) years from the date of the

grant of the share option scheme as was adopted in 2006 (“2006

share option scheme”). This has been done since the Board was of

the view that the share option scheme should serve as an effective

incentive for the employees of the group of companies, headed by

the Company, to encourage them to remain in employment and

work to achieve the best possible results for the Company and

its shareholders. The market conditions and the global economic

crisis that are still impacting the geographic regions and real

estate sectors in which the Company operates, however, led to a

strong decline in the Company’s share price at both the London

Stock Exchange and the Warsaw Stock Exchange, resulting in

practically all options being out of the money without a favourable

outlook for a quick recovery. In order to maintain the incentive for

all employees, the Board submitted to the Extraordinary Meeting

of Shareholders that was held on 25 November 2008, a proposal

to amend the 2006 share option scheme and to determine the

exercise price of all options granted on or prior to 25 October

2008, to £0.52 and to the Extraordinary Meeting of Shareholders

that was held on 20 November 2012, a proposal to amend the

2006 share option scheme and to extend the option term from

ten (10) to ﬁ fteen (15) years from the date of grant to be in line

with the end date of the option term under the “Plaza Centers

N.V. second incentive plan”, adopted by the Extraordinary General

Meeting of Shareholders on 22 November 2011. In an attempt

to ensure that the options are and remain an effective incentive

and to assist in the retention of employees, and that the option

holders should have the opportunity to exercise their options until

the same end date as the holders of options under the 2011 share

option scheme, the revised 2006 share option scheme includes

an extension of the vesting term for options granted less than one

year prior to 25 October 2008. The shareholders approved the

amendments of the 2006 share option scheme, the adjustment of

the exercise price and the extension of the option term.

• Best Practice Provision II.2.12 and Best Practice Provision

II.2.13 stipulate, inter alia, that the remuneration report of the

supervisory board shall include account of the manner in which

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

porate governance

the remuneration policy has been implemented in the past

includes an assessment by all board members of their own

ﬁ nancial year as well as an overview of the remuneration policy

functioning and that of their fellow Board members. The board is

planned by the supervisory board for the next ﬁ nancial year and

of the view that, given the fact that the Company has a one-tier

subsequent years and should contain the information speciﬁ ed in

board rather than a separate management board and supervisory

these provisions. The current remuneration policy of the Company

board, this course of action appropriately meets the requirements

has remained unchanged from 2006 at the moment the Company’s

as laid down in this Best Practice Provision.

shares were admitted to listing and is fairly straight forward, as

such that “implementation” is not an issue. Furthermore, pursuant

• Best Practice Provision III.1.8 stipulates that the supervisory

to the Articles of Association, the General Meeting of Shareholders

board shall discuss at least once a year the corporate strategy

determines the remuneration policy, and not the non-executive

and the risks of business and the results of assessment by the

directors. When the remuneration policy needs changing, this will

management board of the structure and operation of the internal

be addressed in a General Meeting of Shareholders.

risks management and control systems, as well as any signiﬁ cant

changes thereto. In 2014, there have not been separate meetings

• Best Practice Provision II.3.3 and Best Practice Provision III.6.2

of the non-executive directors to discuss the items mentioned

stipulate that both executive directors and non-executive directors

in this Best Practice Provision. The reason therefore is that

shall not take part in any discussion or decision-making that

risk management at the Company is, pursuant to the internally

involves a subject or transaction in relation to which they have a

applicable corporate governance regulations, a matter speciﬁ cally

conﬂ ict of interest with the Company. Since 4 July 2013, section

reserved for decision by the full Board. Board Meetings in 2014

17.1 of the Articles of Association provides for this. Section

have included discussions in respect of corporate strategy and

17.2 of the Articles of Association further stipulates that if as a

risk management and periodically throughout the year, the internal

consequence of the provision of section 17.1. of the Articles of

system of risk management has been assessed by the full Board.

Association, no board resolution can be passed, then despite the

conﬂ ict of interest, such resolution can be resolved by the Board

Best Practice Provisions III.2.1 and III.8.4 stipulate that the

provided that the resolution is adopted unanimously and in a

majority of the members of the Board shall be independent non-

meeting where all board members are present or represented.

executives within the meaning of Best Practice Provision III.2.2.

The Company currently has one executive director, Mr. Nadav Livni

• Best Practice Provision II.3.4 and Best Practice Provision III.6.3

and six non-executive directors out of whom three non-executive

stipulate, inter alia, that decisions to enter into transactions in

directors are considered to be independent, applying the criteria

which there are conﬂ icts of interest with management board

of Best Practice Provision III.2.2. The non-executive directors who

members that are of material signiﬁ cance to the Company and/

are considered to be non-independent are Messrs. Ron Hadassi,

or to the relevant board members require the approval of the

Yoav Kﬁ r and Shlomi Kelsi. The independent non-executive

non-executive directors. Though, pursuant to the Articles, each

directors are Messrs. Mark Wichers, Sarig Shalhav and David

board member is obliged to notify all direct and indirect conﬂ icts

Dekel. See also page 40 – Additional information for an overview

of interest, the articles contain no speciﬁ c approval clause.

of the directors’ former and current functions. Consequently,

• Best Practice Provision III.1.7 stipulates that the supervisory

The Board believes that the experience of the non-independent

board shall discuss at least once a year on its own, both its

directors is of great importance to the Company.

three out of the six directors are considered to be independent.

own functioning and that of its individual members, and the

conclusions that must be drawn on the basis thereof. The desired

• Best Practice Provision III.3.3 and Best Practice Provision III.4.1

proﬁ le, composition and competence of the supervisory board

(a) stipulate that all supervisory board members shall follow an

shall also be discussed. Moreover, the supervisory board shall

induction program. In 2014, four new non-executive directors

discuss at least once a year without the management board being

have started working in the Company. At that time, no induction

present, the functioning of the management board as an organ

programme was in place as, since 1 November 2006, there had

of the company and the performance of its individual members,

been no changes to the Board (and no changes were foreseen)

and the conclusions that must be drawn on the basis thereof.

and thus there had been no necessity to have an induction

In 2014 the non-executive directors have not speciﬁ cally

programme. Given the fact that, at the time the four new non-

discussed the items that appear in this Best Practice Provision

executive directors came in function, the Company was in the

on separate occasions. The Board, however, feels it important

middle of a debt restructuring and was in the process of setting up

to notify the shareholders that as a rule, every Board Meeting

a rights offering, the four non-executive directors followed an

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Corporate governa

ad hoc introduction to the Company which made them familiar

being Messrs. Wichers, Dekel and Shalhav and the non-

with the Company and its business and which enabled them to

independent director being Mr. Shlomi Kelsi, which is in

perform their tasks.

compliance with the Dutch Code.

• Best Practice Provision III.3.5 stipulates that a non-executive

• Best Practice Provision V.3 stipulates, inter alia, that the Company

director (in terms of the Dutch Corporate Governance Code a

should have an internal auditor. Though in fact the Company does

supervisory director (commissaris)) may be appointed to the

not have an internal auditor itself, as part of Elbit Imaging Group

board for a maximum of three four-year terms. Section 23 of the

the Company has a quality control regulator, which practically

Articles provides for a retirement schedule whereby directors who

functions as an internal auditor.

have been in ofﬁ ce for not less than three consecutive annual

general meetings shall retire from ofﬁ ce. Pursuant to section 23.9

of the Articles, such a director may be reappointed, which could

result in a term of ofﬁ ce which is longer than three four-year

terms.

• Best Practice Provision III.5.1 provides that the committee

Deviations from the UK Code on
Corporate Governance

The Company did not comply with the following provisions of the UK

Code on Corporate Governance in the year ended 31 December 2014:

rules stipulate that a maximum of one member of each

• Code Provision A.2.1 states that the division of responsibilities

committee need not be independent within the meaning of Best

between the chairman and chief executive should be clearly

Practice Provision III.2.2. Whereas prior to 8 July 2014, the

established, set out in writing and agreed by the board. Whilst

Company’s Nomination Committee comprised two non-independent

the Company does not possess such a document, it believes that

members, which was not in compliance with the Dutch Code, from

the division of responsibilities between the chairman and chief

8 July 2014 onwards, the Nomination Committee is comprised of

executive is sufﬁ ciently clear.

four members, three of whom are considered to be independent,

Messrs. Wichers, Dekel and Shalhav and one of whom, Mr. Kelsi,

• Code Provision A.4.2 states that the chairman should hold

is considered to be non-independent, which is in compliance with

meetings with the non-executive directors without the executive

the Dutch Code.

directors present and, led by the senior independent director, the

non-executive directors should meet without the chairman present

• Best Practice provision III.5.6 stipulates that the Audit Committee

at least annually to appraise the chairman’s performance and on

must not be chaired by the chairman of the board or by a former

such other occasions as are deemed appropriate.

executive director of the Company. Whereas prior to 8 July 2014,

the Company’s Audit Committee comprised two non-independent

• Code Provision B.6.1 states that the board should refer in the

members, which was not in compliance with the Dutch Code,

annual report as to how performance evaluation of the board, its

from 8 July 2014 onwards, the Audit Committee is comprised of

committees and its individual directors has been conducted.

four members, three of whom are considered to be independent,

Messrs. Wichers, Dekel and Shalhav and one of whom, Mr. Kﬁ r,

• Code Provision B.6.3 states that the non-executive directors,

is considered to be non-independent. The Audit Committee is

led by the senior independent director, should be responsible

chaired by Mr. Dekel, who has been a non-executive independent

for performance evaluation of the chairman, taking into account

director of the Company and thus the Company does not deviate

the views of executive directors. In 2014, the chairman and the

from this Best Practice Provision.

non-executive directors did not meet separately. However, at every

Board Meeting, an assessment is made by each Board member of

• Best Practice Provision III.5.11, inter alia, provides that the

his/her own performance and that of other members. The Board

Remuneration Committee shall not be chaired by a non-executive

is of the view that this course of action provides an appropriate

director who is either a former executive director or a member

mechanism for the evaluation of the performance of Board

of the management board of another listed company. Whereas,

members.

prior to 8 July 2014, the Company’s Remuneration Committee

was chaired by Mr. Shimon Yitzchaki, who is a former executive

• Code Provision B.2.1 states, amongst other things, that a majority

director and serves as president of Elbit Imaging Ltd., from

of members of the Nomination Committee should be independent

8 July 2014 onwards, the Remuneration Committee comprises

non-executive directors and that the chairman or an independent

four members, three of whom are considered to be independent,

non-executive director should chair the Committee. Whereas prior

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

nce

to 8 July 2014, the Company’s Nomination Committee comprised

recommendations related to best practice for listed companies

two non-independent members, which was not in compliance with

(Part I) and best practice provisions relating to management

the Code, from 8 July 2014 onwards, the Nomination Committee

boards, supervisory board members and shareholders (Parts II

is comprised of four members, three of whom are considered to

to IV). The WSE Corporate Governance Rules impose upon the

be independent, Messrs. Wichers, Dekel and Shalhav and one

companies listed on the WSE an obligation to disclose in their

of whom, Mr. Kelsi, is considered to be non-independent. The

current reports continuous or incidental non-compliance with best

Nomination Committee is chaired by Mr. Wichers, who has been a

practice provisions (with the exception for the rules set forth in

non-executive independent director of the Company and thus the

Part I). Moreover, every year each WSE-listed company is required

Company does not deviate from this Code Provision.

to publish a detailed statement on any noncompliance with the WSE

Corporate Governance Rules (including the rules set forth in

• Code Provision C.2.3 states that the Board should, at least

Part I) by way of a statement submitted with the Company’s

annually, conduct a review of the effectiveness of the Company’s

annual report. Companies listed on the WSE are required to justify

risk management and internal control systems and should report

non-compliance or partial compliance with any WSE Corporate

to shareholders that they have done so. The Board did not conduct

Governance Rule and to present possible ways of eliminating the

a review of the effectiveness of the Company’s risk management

potential consequences of such non-compliance or the steps such

and internal control systems in the year under review. However,

company intends to take to mitigate the risk of non-compliance

the Board has established a process for identifying and managing

with such rule in the future. The Company intends, to the extent

the risks faced by the Company and both the Audit Committee

practicable, to comply with all the principles of the WSE Corporate

and the executive director regularly consider the effectiveness of

Governance Rules. However, certain principles will apply to the

the Company’s internal controls and risk management procedures

Company only to the extent permitted by Dutch law. Detailed

as part of the on-going management of the Company. The Board

information regarding non-compliance, as well as additional

conﬁ rms that any appropriate actions either have been or are

explanations regarding partial compliance with certain Corporate

being taken to address any weaknesses in these areas.

Governance Rules of the WSE due to incompatibilities with Dutch

law, will be included in the aforementioned reports, which will be

• Code Provision C.3.6 states, amongst other things, that, where

available on the Company’s website and published by way of a

there is no internal audit function, the Audit Committee should

current report.

consider annually whether there is a need for an internal audit

function and make a recommendation to the Board, and the

reasons for the absence of such a function should be explained in

Board practices

the relevant section of the annual report. Although the Company

In the Netherlands, statutory law provides for both a one-tier

does not have an internal auditor, the Company has access to a

governance and a two-tier governance (the latter having a separate

quality control regulator who, in practice, functions as an internal

management board and a separate supervisory board). It is well

auditor.

established practice for international active companies in the

Netherlands to have a one-tier structure in the management board

• Code Provision E.2.3 states that the chairman should arrange

(raad van bestuur). Although all members of the management board

for the chairmen of the Audit, Remuneration and Nomination

are formally managing directors (bestuurders), the Articles provide

Committees to be available to answer questions at the Annual

that certain directors have tasks and obligations which are similar

General Meeting of Shareholders and for all directors to attend. In

to tasks and obligations of executive directors and certain directors

the year under review, the chairman of the Nomination Committee

which have tasks and obligations which are similar to tasks of

and Audit Committee was unable to attend the Annual General

non-executive directors. The Articles provide that some directors

Meeting.

Compliance with WSE Corporate
Governance Rules

are responsible for the day-to-day management of the Company

and other directors are responsible for supervising the day-to-day

management of the Company. All responsibilities are subject to the

overall responsibility of the board. All statutory provisions relating

to the members of the management board apply in principle to all

The WSE Corporate Governance Rules (the Code of Best Practice

members of a one-tier board.

for WSE-listed Companies) applies to companies listed on the WSE,

irrespective of whether such companies are incorporated outside of

The board is accountable to the general meeting of

Poland. The WSE Corporate Governance Rules consist of general

shareholders.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Corporate governa

Composition and operation of the Board

Composition: Mr. Wichers, Mr. Dekel, Mr. Shalhav and Mr. Kﬁ r.

Since 8 July 2014 the Company has seven directors – one executive

director and six non-executive directors, of whom three are

independent.

The appointment of board members is done by the general meeting.

The current Articles of Association contain (section 23A) an

arrangement for the appointment/re-appointment of independent

directors, if and for so long as the ordinary shares are admitted to

the ofﬁ cial list of the London Stock Exchange, which in essence

provide for a regulation pursuant to which the appointment is made

by separate resolutions of the general meeting and the meeting of

independent shareholders (an independent shareholder not being

a person who exercises or controls on its own or together acting

in concert thirty percent (30%) or more of the votes in a general

meeting).

The Company has taken notice of recently adopted Dutch legislation

effective as of 1 January 2013 as a consequence of which a “large”

company under Dutch law, when nominating or appointing members

of the management board should take into account as much as

possible a balanced composition of the board in terms of gender,

to the effect that at least 30% of the positions are held by women

and at least 30% by men. Currently there are no women serving in

Plaza on the Board of Directors. The Company is striving to achieve

a balanced composition of the Board in question for the future.

However, it should be noted that the real estate market is a market in

which women are under-represented.

The Board meets regularly throughout the year, when each

director has full access to all relevant information. Non-executive

directors may, if necessary, take independent professional advice

at the Company’s expense. The Company has established three

committees, in line with the UK Combined Code and the Dutch

Corporate Governance Code. These are the Audit Committee, the

Chairman: Mr. Dekel.

Remuneration Committee

The Remuneration Committee – comprising four non-executive

directors, three of whom are independent – meets at least twice each

ﬁ nancial year to prepare the Board’s decisions on the remuneration

of directors and other senior employees and the Company’s share

incentive plans (under Dutch law and the Articles, the principal

guidelines for directors’ remuneration and approval for directors’

options and share incentive schemes must be determined by a

General Meeting of Shareholders). The Committee also prepares

an annual report on the Company’s remuneration policy. The

remuneration report may be found on pages 62 to 64 of this

document.

Composition: Mr. Wichers, Mr. Dekel, Mr. Shalhav and Mr. Kelsi.

Chairman: Mr. Wichers.

Nomination Committee

Meeting at least twice a year, the Nomination Committee comprises

four non-executive directors, three of whom are independent.

Its main roles are to prepare selection criteria and appointment

procedures for Board members and to review the Board’s structure,

size and composition. Whereas since 8 July 2014 new directors

have been appointed, the Committee met only once to appoint the

members of the Committees.

Composition: Mr. Wichers, Mr. Dekel, Mr. Shalhav and Mr. Kelsi.

Chairman: Mr. Wichers.

Internal control/risk management

The Board has established a continuous process for identifying and

managing the risks faced by the Company, and conﬁ rms that any

appropriate actions have been or are being taken to address any

Remuneration Committee and the Nomination Committee, and a brief

weaknesses.

description of each may be found below.

Audit Committee

Comprising four non-executive directors, three of whom are

independent. The Audit Committee meets at least three times each

ﬁ nancial year. Th Audit Committee has the general task of evaluating

and advising the Board on matters concerning the ﬁ nancial

It is the responsibility of the Audit Committee to consider the

effectiveness of the Company’s internal controls, risk management

procedures, and risks associated with individual development

projects.

Share Dealing Code

administrative control, the ﬁ nancial reporting and the internal and

The Company operates a Share Dealing Code, which limits the

external auditing. Among other matters, it must consider the integrity

freedom of directors and certain employees of the Company to

of the Company’s ﬁ nancial statements, the effectiveness of its

deal in the Company’s shares. The Share Dealing Code imposes

internal controls and risk management systems, auditors’ reports

restrictions beyond those that are imposed by law. The Company

and the terms of appointment and remuneration of the auditor.

takes all reasonable steps to ensure compliance by those parties

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

nce

affected. The Company operates a Share Dealing Code, particularly

The main channels of communication with shareholders are the

relating to dealing during close periods, for all Board members

senior independent director, chairman, CEO, CFO and the Company’s

and certain employees, as is appropriate for a listed company. The

ﬁ nancial PR advisers, although all directors are open to dialogue with

Company takes all reasonable steps to ensure compliance by those

shareholders as appropriate. The Board encourages communication

parties affected. The Share Dealing Code meets the requirements of

with all shareholders at any time other than during close periods,

both the model code set out in the listing rules and the market abuse

and is willing to enter dialogue with both institutional and private

chapter of the Netherlands act on the ﬁ nancial supervision.

shareholders.

Controlling shareholder and conﬂ icts
of interest

At the date of this document, the Company is aware of the following

persons who are interested directly or indirectly in 3% or more of the

It also actively encourages participation at the AGM, which is the

principal forum for dialogue with private shareholders. As well as

presentations outlining the progress of the business, it includes an

open question and answer session in which individual interests and

concerns may be addressed. Resolutions put to vote and their results

issued share capital of the Company:

will be published following the meeting.

Number of

Percentage of

The Company’s website (www.plazacenters.com) contains

ordinary

issued share

capital/voting

comprehensive information about the business, and there is

a dedicated investor relations section where detailed ﬁ nancial

Elbit Imaging Limited

307,847,376

Davidson Kempner Capital

180,282,196

Management LLC

rights

44.90%

26.30%

The SC Fundamental Value

14,153,376

4.76%

Fund LP

ING Open Pension Fund

13,509,540

York Capital Management

24,936,483

4.55%

3.63%

Global Advisors LLC

The Board is satisﬁ ed that the Company is capable of carrying on

its business independently of Elbit Imaging Limited, with whom it

has a relationship agreement to ensure that all transactions and

relationships he has with the Group are conducted at arm’s length

and on a normal commercial basis.

Shareholder communication

The Board meets with shareholders each year at the Annual General

Meeting (AGM) to discuss matters relating to the business.

Details of this year’s AGM can be found on pages 43 and 44.

The Board is committed to maintaining an open, honest and positive

dialogue with shareholders.

To ensure that all its communications are factually correct, it is

furnished with full information before every meeting on the state

and performance of the business. It also has ultimate responsibility

for reviewing and approving all information contained in its annual,

information on the Company may be found.

Corporate, social and ethical policies

The Company is responsible not only to its shareholders, but also

to a range of other stakeholders including employees, customers,

suppliers and the communities upon whom its operations have an

impact. It is therefore the responsibility of the Board to ensure that

the Company, its directors and its employees act at all time in an

ethical manner. As a result, the Company seeks to be honest and

fair in its relations with all stakeholders and to respect the laws and

sensitivities of all the countries in which it operates.

Environment

The Company regards compliance with environmental legislation

in every country where it operates as its minimum standard, and

signiﬁ cant levels of management attention are focused on ensuring

that all employees and contractors achieve and surpass both

regulatory and internal environmental standards.

The Company undertakes a detailed environmental impact study

of every project it undertakes, including an audit of its waste

management, water and energy usage, emissions to air and water,

ozone depletion and more.

Health and safety

The Company regards compliance with environmental legislation

in every country where it operates as its minimum standard, and

signiﬁ cant levels of management attention are focused on ensuring

interim and other reports, ensuring that they present a balanced

that all employees and contractors achieve and surpass both

assessment of the Company’s position.

regulatory and internal environmental standards.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Corporate governa

The Company undertakes a detailed environmental impact study

• Compliance with the provisions and best practice principles of the

of every project it undertakes, including an audit of its waste

Code (pages 46 to 51);

management, water and energy usage, emissions to air and water,

ozone depletion and more.

Corporate governance declaration

This declaration is included pursuant to Article 2a of the Decree

further stipulations regarding the content of annual reports

(Vaststellingsbesluit nadere voorschriften inhoud jaarverslag) of

23 December 2004 (as amended) (hereafter the “Decree”).

For the statements in this declaration as understood in Articles 3, 3a

and 3b of the Decree, please see the relevant sections of this annual

report. The following should be understood to be inserts to and

repetitions of these statements:

• The functioning of the Shareholders’ Meeting and its primary

authorities and the rights of shareholders and how they can be

exercised (pages 43 to 45);

• The composition and functioning of the Board and its Committees

(starting on pages 40 and 41, and page 50);

• The regulations regarding the appointment and replacement of

members of the Board (page 50);

• The regulations related to amendment of the Company’s Articles of

Association (pages 43 to 45); and

• The authorisations of the members of the Board in respect of the

possibility to issue or purchase shares (page 43).

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

nce

Risk management

Plaza mainly operates its business in emerging markets and therefore

to risks arising from unforeseen changes, such as legal, political,

it is exposed to a relatively high degree of inherent risk in such

regulatory, and economic changes. Plaza’s investments in emerging

activities. The Management Board is responsible for setting strategic,

markets expose the Company to a relatively high degree of inherent

ﬁ nancial, and operational objectives as well as for implementing risk

risk.

management according to these objectives.

2014 marked a year of progress for Plaza, as the Company

The Group’s risk management policies are established to identify and

successfully completed the Dutch restructuring plan, with 92% of

analyse the risks faced by the Group, to set appropriate risk limits

creditors approving the plan in June and the Dutch Court’s formal

and controls, and to monitor risks and adherence to limits. Risk

and irrevocable approval being granted in July, just seven months

management policies are reviewed regularly to reﬂ ect changes in

after the Company made its initial announcement. The successful

market conditions and the Group’s activities.

rights offering, which concluded in November, provided the Company

The strategic risks largely pertain to the real estate sector and

considerable activity provided Plaza with a strengthened platform to

with a welcome €20 million cash injection and the completion of this

country allocation, and to the timing of purchases, development,

start 2015.

investments and sales and the corresponding ﬁ nancing

arrangements. Operational risks include, amongst other things,

Plaza has been working closely with its reconﬁ gured Board and its

the selection of properties and lessees, the technical condition of

continued conﬁ dence in the management’s ability to deliver value and

properties, tax-related risks, as well as the performance of Plaza’s

repay the Company’s creditors is supportive of Plaza strategy going

organisation and its systems. The ﬁ nancial risks concern interest-

forward. The economic landscape in the Company’s core markets is

rate, liquidty and credit risks as well as reﬁ nancing risks and

improving slightly and Plaza has entered 2015 with renewed focus.

compliance with its debt restructuring plan.

The strategy is evaluated by the Management Board each year,

Plaza has an adequate risk management and internal control

reformulated as necessary and established in a business plan and a

system. An important element of the internal control system is a

cash ﬂ ow forecast. The strategy considers a period of ﬁ ve years, with

management structure that can take decisions effectively and on the

detailed budget proposals elaborated in the ﬁ rst year. The strategy is

basis of consultation. Strict procedures are followed for the regular

then translated into concrete tasks and actions. During this process,

preparation of monthly, quarterly and annual ﬁ gures based on the

opportunities and important business risks are identiﬁ ed, and the

Company’s accounting principles. Monthly meetings or conference

Company’s objectives and strategy are evaluated and adjusted if

calls are held between the reconﬁ gured Management Board and local

appropriate. The strategy is discussed with and approved by the

managers to discuss the results per country versus budgets and the

Management Board pursuant to the restrecuturing plan restrictions.

long term ﬁ nancial planning. The internal management reporting

system is designed to follow developments in rental income, the

Following the approval of the restructuring plan, it is vital that Plaza

value of investments, rent arrears, vacancies, the progress of

continues to look to the long term objectives of the business.

(re)development and expansion projects and disposal of further

The deferral of the repayment of its debt maturities enables Plaza

non-core assets, and the development of the ﬁ nancial results for

to progress with the initiation of projects and investments as

the review period in comparison with the budget. There is a back-up

appropriate, including actively managing its income generating

and recovery plan to ensure that data will not be lost in case of

assets to prepare for their ultimate sale, whilst continuing to identify

emergencies.

exit opportunities from its remaining non-core assets.

The Group Audit Committee oversees how management monitors

The Company is ﬂ exible on decision making regarding the holding

compliance with the Group’s risk management policies and

and management of centers as opposed to selling them.

procedures and reviews the adequacy of the risk management

framework in relation to the risks faced by the Group and compliance

Due to the global crisis starting in late 2008, the Company adjusted

with debt restructuring plan.

Business strategy and restructuring plan

its activity to the market conditions and limited the commencement

of construction for projects to those meeting two major criteria

as follows:

Plaza is focused on its businesses in CEE region and India (emerging

1 Projects enjoying intensive demand from tenants.

markets). By nature, various aspects of the emerging markets are

2 Projects that are based on external bank ﬁ nancing which require

relatively underdeveloped and unstable and therefore often exposed

minimal equity investment.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Risk management

The fact that Plaza has – to a certain degree – diversiﬁ ed its business

• Plaza issued to the holders of unsecured debt (i.e. outstanding

over different markets (geographic segments) and sectors also

debt under the Israeli Series A and B Notes and the Polish Notes)

results in some risk mitigation. The Group is well diversiﬁ ed and

13.21% of the Company’s shares (post equity contribution). Such

active in eight countries in CEE and India.

shares issuance was distributed among the holders of unsecured

debt pro rata to the relative share of each relevant creditor in the

In addition, to ensure knowledge and understanding of its business

deferred debt.

environments, Plaza employs local employees and consultants, and

in some cases has entered into local partnerships.

• A third listing on the Tel Aviv Stock Exchange and the recent

Capital management

upgrade in Plaza’s credit rating from the Israeli division of Stan-

dard & Poor’s.

The Board’s policy is to maintain a strong capital base so as to

maintain investors, creditors and market conﬁ dence and to sustain

future development of the business. The basis of the Company’s

stated dividend policy at the time of its IPO was to reﬂ ect the long

term earnings and cash ﬂ ow potential of the Group, taking into

account its capital requirements, whilst at the same time maintaining

The Board seeks to maintain a balance between the higher returns

that might be possible with higher levels of borrowings and the

advantages and security afforded by a sound capital position.

Financing risk management

an appropriate level of dividend cover.

Liquidity risk

Despite ongoing efforts to complete a number of asset sales and

According to the Company’s dividend policy, dividends are expected

secure some alternative ﬁ nancing transactions, Plaza had been

to be paid at the rate of 25% on the ﬁ rst €30 million of such annual

unable to conclude these deals within a timeframe that would have

net proﬁ ts and thereafter at the rate of between 20% and 25%, as

enabled it to meet those payment obligations. Therefore, to ensure

determined by the Company’s Board of Directors, on any additional

the long term viability of the business, the Board agreed to approach

annual net proﬁ ts which exceed €30 million.

the creditors of the Company with a restructuring plan so that a

formalised restructuring process could be implemented. For a

However, pursuant to the approved restructuring plan,

non-exhaustive brief summary of the material agreed commercial

the Company will be allowed to distribute dividends to its

terms refer to note 30(A) in the consolidated ﬁ nancial statements

shareholders only if at least 75% of the unpaid balance of the

and on pages 8 and 9 of the annual report.

bonds (excluding bonds that are sold by a Company’s subsidiary)

following the date the restructuring plan will come into effect and

The restructuring plan purports to enable the Company to continue

shall bind all creditors which are subject to it, have been repaid

its business operations in the forthcoming future by, inter alia, the

in full prior to such distribution and provided that following such

extension of the maturity of certain debt.

distribution a certain ﬁ nancial coverage ratio is met, unless such

distribution has been approved in a meeting of the creditors that are

Plaza continued to focus on deleveraging its balance sheet during

subject to the restructuring plan by a majority of at least 67% of the

the period but, as a result of impairment losses recorded in the

debt’s balance which is being held by the creditors participating in

period and ﬁ nance costs incurred, the gearing level increased to

such meeting and voting. Notwithstanding the aforesaid, in case of

74% in 2014.

an additional equity investment in the Company of at least

€20 million that occurs following the date the restructuring plan

A prolonged restriction on accessing the capital markets and

comes into force (i.e., in addition to the equity contribution), the

additional ﬁ nancing negatively affect Plaza’s ability to fund existing

Company will be allowed (subject to applicable law) to distribute a

and future development projects.

dividend to its shareholders in an amount equal to 50% of the said

additional equity investment and such distribution will not be subject

As Plaza depends on external ﬁ nancing and has high exposure to

to the said limitations.

emerging markets, Plaza bears the risks that due to ﬂ uctuations in

interest rates, exchange rates, selling yields and other indices, its

Under the restructuring plan Plaza’s equity was inﬂ uenced, as

ﬁ nancial assets and debt value, cash ﬂ ow, covenants and cost of

follows:

capital will be effected, thereby affecting its ability to raise capital. On

• An injection of €20 million into the Company at a price per share

24 February 2015, the Israeli credit rating agency, which is a division

of €0.0675, (equity contribution) through successful rights offering

of International Standard & Poor’s, updated the credit rating of

which marked an important ﬁ nal step in the restructuring process.

Plaza’s two series of Notes traded on Tel Aviv Stock Exchange from

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

“D” to “BBB-”, on a local Israeli scale, with a stable outlook,

in the same currency (namely the Euro), or are linked to the rate

which put Plaza in a strengthened position going into 2015.

of exchange of the local currency and the Euro. In order to limit

the foreign currency exchange risk in connection with the Notes,

As a basis for and contribution to effective risk management and

the Company has hedged in previous years, the future payments

to ensure that Plaza will be able to pursue its strategy even during

to correlate with the Euro under certain swap arrangements and

periods of economic downturn, Plaza limits its ﬁ nancial risks by

forward transactions in respect of the Notes previously issued, and

hedging these risks if and when expedient.

may enter into similar hedging arrangements (as necessary) in

respect of each of the series of Notes, subject to market conditions.

External factors inﬂ uencing the results

The Company’s streaming/ﬁ xed revenues are sensitive to various

If the Company is not successful in fully hedging its foreign

external factors, which inﬂ uence the ﬁ nancial results. Such variables

exchange rate exposure, changes in currency exchange rates relative

are:

to the Euro may adversely affect the Group’s proﬁ t or loss and cash

ﬂ ows. A devaluation of the local currencies in relation to the Euro,

• Market yield determining the valuation of the trading property,

or vice versa, may adversely affect the Group’s proﬁ tability.

and in certain circumstances the need for impairment of trading

property. The higher the market yields are the less the value of

Furthermore, Plaza is monitoring its currency exposure on a

the trading properties are, and the probability for impairment is

continuous basis and acts accordingly by investing in foreign

increasing; and

currencies in certain cases for which it expects that future

development projects will be purchased in foreign currency or when

• Occupancy rate of the operating malls together with the rental

cash ﬂ ows denominated in foreign currency are needed according to

fee level deﬁ nes the rental income derived from the shopping

project construction budget. As a policy, the Group does not invest in

center, and the other component of the valuation of the investment

foreign currencies for speculative purposes.

property. Higher occupancy rates and higher rental levels result in

better operating results.

The ﬁ nancial statements include additional information about and

Interest rate risks

In view of Plaza’s policy to hold investments for the long term

while exit yields are high, the loans used to fund this are also taken

with long maturities. Plaza uses interest-rate swaps to manage its

interest-rate risk. This policy regarding the hedging of interest-rate

risk is defensive in nature, with the objective of protecting itself

against rising interest rates.

The Group incurs certain ﬂ oating rate indebtedness and changes

in interest rates may increase its cost of borrowing, impacting on

its proﬁ tability. On a project by project basis, the Group considers

hedging against interest rate ﬂ uctuations or as sometimes required

to hedge by the lending bank.

Foreign currency exchange rates

As Plaza’s functional currency is Euro, it is exposed to risks deriving

from changes in foreign currency exchange rates as some of its

purchases of services and construction agreements are conducted

in local currencies, or are affected by them. Its rental revenues may

also be denominated in local currencies.

disclosure on Plaza’s use of ﬁ nancial instruments.

The Company’s top risks

The following risks and related mitigation actions, where applicable,

are reported below:

• Global ﬁ nancial and economic developments

Risk description: Plaza’s ﬁ nancial performance reﬂ ects the

ongoing ﬁ nancial turmoil of 2008, as writedowns of trading

properties are a reﬂ ection of the ongoing economic uncertainty

in many of the countries in which Plaza operates. The global

economy is still fragile and a very slow pace of recovery cannot

be excluded. This could jeopardise Plaza’s development project,

proﬁ tability and cash ﬂ ows as demand and rents for shopping

and entertainment centers may decline and adversely affect the

Group’s ﬁ nancial condition, results and prospects. Furthermore,

economic recession may detrimentally affect the ability of the

Group (where it has retained a development) to collect rent from

tenants, which could negatively impact cash ﬂ ow and debt service

reserve covenants under its ﬁ nancing facilities.

The Group seeks to minimise these risks by ensuring that its

principal liabilities (ﬁ nancing and construction) and its principal

sources of revenue (sale proceeds and rentals) are all denominated

Risk mitigation: In reaction to the economic downturn, Plaza

has successfully initiated measures to reduce costs and focus on

commitment to reposition the business by raising €17.1 million

through the successful disposal of one shopping center in

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Risk management

Serbia and disposals of non-core sites in Romania, and restrict

have the opposite effect where the value of underlying assets is

its commencement of construction projects to only the very

falling. Any fall in the value of any of the Group’s properties may

best opportunities focusing on projects with tenant demand and

signiﬁ cantly reduce the value of the Group’s equity investment in

availability of external bank ﬁ nancing which require minimal

the member of the Group which holds such property, meaning

equity investment. Plaza will progress a selected number of

that the Group may not make a proﬁ t, may incur a loss on the sale

projects in the most resilient countries of CEE, such as Poland,

or revaluation of any such property and/or increase the likelihood

Serbia and Romania. These measures have been and will be

of a member of the Group breaching certain ﬁ nancial covenants

pursued with vigour. Market development will be closely watched

in its existing debt arrangements resulting in an event of default

and additional measures will be taken if necessary. Plaza will

under such arrangements. The occurrence of one or more of

continue to make signiﬁ cant progress in its operational and asset

these factors may have a material adverse effect on the Group’s

management initiatives, with a focus on delivering positive uplifts

business, ﬁ nancial condition and/or results of operations.

in key performance indicators at its income-generating centers.

Occupancy has risen to 94% across the portfolio and our centers

Risk mitigation: Continous negotiation with ﬁ nancing banks

continued to attract high proﬁ le, international brands contributing

in order to improve credit facilities’ terms, or disposal of

to higher footfall and turnover across our core CEE portfolio.

subsidiaries, in which facility agreement is in place.

• Events of default under the Group’s debt arrangements may

• The Group’s ﬁ nancial performance is dependent on local real

result in cross-defaults being triggered under other debt

estate prices and rental levels

arrangements that the Group has in place

Risk description: There can be no guarantee that the real estate

If an event of default were to subsist under one or more of

markets in CEE region and India will continue to develop, or

the Group’s debt arrangements, that event of default may, in

develop at the rate anticipated by the Group, or that the market

accordance with the cross-default provisions, constitute an event

trends anticipated by the Group will materialise. In case the yields

of default under the Group’s other debt arrangements. Upon an

will be high, such as some of the current market yields, the Group

event of default (whether due to cross-default or otherwise), the

will not be able to achieve substantial capital gains by selling the

relevant lenders would have the right, subject to the terms of the

commercial centers.

relevant facility arrangements to, amongst other things, declare

the borrower’s outstanding debts under the relevant facilities to

Risk mitigation: Once assets are developed, and given the

be due and payable and/or cancel their respective commitments

Company’s ﬁ nancial strength, Plaza is able to hold developments

under the facilities, enforce their security, take control of certain

on its balance sheet as yielding assets. Sales of assets will not be

assets or make a demand on any guarantees given in respect

undertaken if offered yields are high and Plaza will capitalise upon

of the relevant facility. In respect of the bonds, the trustees

its extensive experience gained over eight years of managing and

representing holders of bonds (or a resolution of the holders of

running shopping malls efﬁ ciently to hold and manage these as

bonds) may be able to claim, under circumstances where the

income-generating investments in its portfolio, and continue to

Company does not fulﬁ l its obligations under the bonds (including

drive occupancy at these centers until sufﬁ cient offered yields are

but not limited to payment obligations) an immediate settlement,

in place, subject to the restructuring plan.

and declare all or any part of the unsettled balance of the bonds

immediately due and payable. In respect of the Polish bonds,

• Real estate valuation is inherently subjective and uncertain

each holder of the Polish bonds has the right to ask for an early

Risk description: The valuation of property is inherently subjective

redemption of the Polish bonds on the occurrence of an event

due to, amongst other things, the individual nature of each

of default by the Company (including but not limited to payment

property, and furthermore valuations are sensitive to change in

obligations). A default and/or acceleration of repayment of debt

market sentiment. As such, valuations are subject to uncertainty

under the debt arrangements may affect the ability of the Group to

and cash generated on disposals may be different from the value

obtain alternative ﬁ nancing in the longer term, either on a timely

of assets previously carried on the Group’s balance sheet. There is

basis or on terms favourable to the Group, and the Group’s ability

no assurance that valuations of properties, when made, will reﬂ ect

to pursue its strategic business plans. This may have an adverse

the actual sale prices even where those sales occur shortly after

effect on the Group’s business, results of operations, ﬁ nancial

the valuation date. This may mean that the value ascribed by the

condition and/or prospects. Whilst the use of borrowings is

Group to the properties held by it may not reﬂ ect the value realised

intended to enhance the returns on the Group’s invested capital

on sale, and that the returns generated by the Group on disposals

when the value of the Group’s underlying assets is rising, it may

of properties may be less than anticipated. In addition, the value of

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

the Group’s properties may ﬂ uctuate as a result of factors such as

level. The amended maturity schedule of debentures and loans

changes in regulatory requirements and applicable laws (including

is detailed in the restructuring plan on page 8 and 9. In addition,

taxation and planning), political conditions, the availability of

the Group maintains good relations with the ﬁ nancing banks who

credit ﬁ nance and the condition of ﬁ nancial markets, interest and

remain supportive of companies with strong track records and few

inﬂ ation ﬂ uctuations and local factors such as competition. Each

debt facilities are under negotioaiton.

of these factors may have an adverse effect on the Group’s

business, result of operations, ﬁ nancial condition and/or

• Plaza may be subject to risk relating to its co-investments,

prospects. The Company may from time to time publish such

because ownership and control of such investments are shared

valuations. Any decreases in the published value of the Group’s

with third parties

properties may adversely affect the price of the ordinary shares.

Risk description: Some of the Group’s projects (at the date of

this document, Riga Plaza, Plaza Bas projects, the Casa Radio

Risk mitigation: Plaza will rely on its extensive experience and

development and two projects in India (Bangalore and Chennai)

knowledge of managing retails assets and strong relationships

are held through joint venture arrangements with third parties

with local and international retailers while using estimates

meaning that ownership and control of such assets is shared with

and associated assumptions. These estimates and underlying

third parties. As a result, these arrangements involve risks that are

assumptions are closely reviewed on an ongoing basis by the

not present with projects, in which the Group owns a controlling

Board members.

interest, including:

• The Group’s borrowing costs and access to capital markets

- the possibility that the Group’s joint venture partner might at

depend signiﬁ cantly on the Company’s credit ratings and market

any time have economic or other business interests that are

perception of the Company’s and the controlling shareholder’s

inconsistent with the Group’s business interests;

ﬁ nancial resilience

- the possibility that the Group’s joint venture partner may be in

Risk description: On 24 February 2015, the Israeli credit rating

a position to take action contrary to the Group’s instructions or

agency, which is a division of International Standard & Poor’s,

requests, or contrary to the Group’s policies or objectives, or

updated the credit rating of Plaza’s two series of Notes traded on

frustrate the execution of acts which the Group believes to be in

Tel Aviv Stock Exchange from “D” to “BBB-”, on a local Israeli

the interests of any particular project;

scale, with a stable outlook. The update follows the performance

- the possibility that the Group’s joint venture partner may have

of debt arrangement of Plaza with its creditors. Reduction in the

different objectives from the Group, including with respect to

credit ratings of the Group or deterioration in the capital market

the appropriate timing and pricing of any sale or reﬁ nancing of a

perception of the Group’s ﬁ nancial resilience, could signiﬁ cantly

development and whether to enter into agreements with potential

increase its borrowing costs, limit its access to the capital

contractors, tenants or purchasers;

markets and trigger additional collateral requirements in derivative

- the possibility that the Group’s joint venture partners may engage

contracts and other secured funding arrangements. Therefore,

in, or be perceived to engage in, disreputable conduct;

any further reduction in credit ratings or deterioration of market

- the possibility that the Group’s joint venture partner might become

perception could materially adversely affect the Group’s access

bankrupt or insolvent; and

to liquidity and competitive position and, hence, have a material

- the possibility that the Group may be required to provide ﬁ nance

adverse effect on the Group’s business, ﬁ nancial position and/or

to make up any shortfall due to the Group’s joint venture partner

results of operations. These material adverse effects could also

failing to provide such equity ﬁ nance or to furnish collaterals to

follow from a reduction in the credit ratings of the controlling

the ﬁ nancing banks.

shareholder.

Risk mitigation: Implementing the restructuring plan will resolve

partners could result in signiﬁ cant delays and increased costs

the Company’s liquidity situation. Plaza is making big efforts to

associated with the development of the Group’s properties.

raise external ﬁ nancing for capital needs and continues reviewing

Even when the Group has a controlling interest, certain major

ﬁ nancing options available to the Company to achieve the most

decisions (such as whether to sell, reﬁ nance or enter into a lease

Disputes or disagreements with any of the Group’s joint venture

effective debt proﬁ le.

or contractor agreement and the terms on which to do so) may

require joint venture partner or other third party approval. If the

Plaza is actively pursuing sales opportunities to generate cash

Group is unable to reach or maintain agreement with the joint

which will contribute to the Company’s liquidity and reduced debt

venture partner or other third party on the matters relating to the

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Risk management

operation of its business, this may have a material adverse effect

on the Group’s reputation, business, ﬁ nancial condition and/or

results of operations.

Risk mitigation: Plaza has very detailed agreements with all of its

partners that contain provisions that are supposed to limit the

risks and exposures mentioned above (e.g. deadlock provisions,

information and visitation rights provisions, etc.).

• Limitations by the Indian Government to invest in India may

adversely affect the Group’s business and results of operations

Risk description: Under the Indian Government’s policy on foreign

direct investment (“FDI policy”), an acquisition or investment

by the Group, in an Indian sector or activity in particular in the

shopping and entertainment centers business, which does not

comply with certain limitations, is subject to a governmental

approval. With respect to the real estate sector, these limitations

include, among other things, a minimum investment and

minimum size of build-up land. In addition, under the FDI policy

it is not permitted for foreign investors to acquire agricultural

land for real estate development purposes. There is no assurance

that the Group will comply with the limitations prescribed in the

FDI policy in order to not be required to receive governmental

approvals. Failure to comply with the requirements of the FDI

policy will require the Group to receive governmental approvals

which it may not be able to obtain or which may include

limitations or conditions that will make the investment unviable or

impossible, and non-compliance with investment restrictions may

result in the imposition of penalties. This would have an adverse

effect on the Group’s business and results of operations.

Risk mitigation: The Company conducts a thorough due diligence

procedure and acquires local legal advice prior to concluding any

transaction.

Legal and regulatory risk

Like all international companies, the Company is exposed to the

changing regulatory environment in the countries and regions where

it conducts business. Many of the CEE countries in which the Group

operates or intends to operate are countries that until the last two

decades were allied with the former Soviet Union under a communist

economic system, and they are still subject to various risks, which

may include instability or changes in national or local government

The Group may be liable for the costs of removal, investigation
or remediation of hazardous or toxic substances located on or in
a site owned or leased by it, regardless of whether a member of
the Group was responsible for the presence of such hazardous or
toxic substances. The costs of any required removal, investigation
or remediation of such substances may be substantial and/or
may result in signiﬁ cant budget overruns and critical delays in
construction schedules. The presence of such substances, or the
failure to remediate such substances properly, may also adversely
affect the Group’s ability to sell or lease the development or to
borrow using the real estate as security. Additionally, any future sale
of the development will be generally subject to indemnities to be
provided by the Group to the purchaser against such environmental
liabilities. Accordingly, the Group may continue to face potential
environmental liabilities with respect to a particular property even
after such property has been sold. Laws and regulations, as may
be amended over time, may also impose liability for the release of
certain materials into the air or water from a property, including
asbestos, and such release can form the basis for liability to third
persons for personal injury or other damages. Other laws and
regulations can limit the development of, and impose liability for, the
disturbance of wetlands or the habitats of threatened or endangered
species. Any environmental issue may signiﬁ cantly increase the cost
of a development and/or cause delays, which may have a material
adverse effect on the proﬁ tability of that development and the results
of operations of the Group.

There is an increasing awareness of environmental issues in
Central and Eastern Europe. This may be of critical importance in
areas previously occupied by the Soviet Army, where soil pollution
may be prevalent. The Group generally insists upon receiving an
environmental report as a condition for purchase, or alternatively,
conducts environmental tests during its due diligence investigations.
Also, some countries such as Poland, Hungary, Romania and the
Czech Republic require that a developer carries out an environmental
report on the land before building permit applications are considered.
Nevertheless, the Group cannot be certain that all sites acquired
will be free of environmental pollution. If a property that the Group
acquires turns out to be polluted, such a ﬁ nding will adversely affect
the Group’s ability to construct, develop and operate a shopping and
entertainment center on such property, and may cause the Group to
suffer expenses incurred in cleaning up the polluted site which may
be signiﬁ cant.

authorities, land expropriation, changes in taxation legislation or

While the Group makes every effort to conduct thorough and reliable

regulation, changes to business practices or customs, changes to

due diligence investigations, in some countries where former

laws and regulations relating to currency repatriation and limitations

on the level of foreign investment or development. The Group will be

affected by the rules and regulations regarding foreign ownership of

real and personal property.

communist regimes carried out extensive land expropriations in
the past, the Group may be faced with restitution claims by former
land owners in respect of project sites acquired by it. If upheld,
these claims would jeopardise the integrity of its title to the land and

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

its ability to develop the land, which may have a material adverse
effect on the Group’s business, ﬁ nancial condition and/or results of
operations.

company” within the meaning of art. 20 (4) of the Dutch Corporate
Income Tax Act 1969, provided that the net balance of intragroup
receivables has not increased compared to the relevant loss making
year (unless there are sufﬁ cient business reasons for such increase).

Relief from taxation available to the Group may not be in accordance
with the assumptions made by the Company and/or may change.
Changes to the tax laws or practice in the countries in which the
Company operates or any other tax jurisdiction affecting the Group
could be relevant. Such changes could affect the value of the
investments held by the Company or affect the Company’s ability
to achieve its investment objective or alter the post-tax returns to
shareholders. The tax positions taken by the Group, including the tax
effect of transfer pricing and the availability of tax relief provisions,
are also subject to review by various tax authorities.

Under the Dutch participation exemption rules, income including
dividends and capital gains derived by Dutch companies in respect
of qualifying investments in the nominal paid up share capital of
resident or non-resident investee companies, are exempt from Dutch
corporate income tax provided the conditions as set under these
rules have been satisﬁ ed. The participation exemption rules and
more particularly the statutory conditions thereunder have most
recently been amended with effect of 1 January 2010. Such amended
conditions require, among others, a minimum percentage of the
share capital in the investee company requires that the investee
company is not held as a passive investment (the ‘motive test’). If
the motive test is not met, the participation exemption nevertheless
applies provided that either the subject-to-tax-test or asset test is
met. To beneﬁ t from the participation exemption regime during the
entire holding period, the requirements must be met throughout the
entire holding period. The participation exemption also applies to
qualifying hybrid loans. Should the Company not be in compliance
with all participation exemption requirements or should the partici-
pation exemption rules be amended, this will affect its tax relief
which could have an adverse effect on its cash ﬂ ow position and net
proﬁ ts.

The Company has provided substantial amounts of loans to its
subsidiaries which are treated as hybrid loans and exempt under the
participation exemption. Most of these loans are not covered by a tax
ruling conﬁ rming the treatment for Dutch tax purposes. Therefore,
there is a risk that a discussion arises with the Dutch tax authorities
on the treatment thereof.

Tax losses may be carried forward and set off against income of the
immediately preceding tax year and the nine subsequent tax years
and may be offset against any income of the companies currently
included in the ﬁ scal unity as long as these remain part of the ﬁ scal
unity. If losses are considered so-called “holding and/or ﬁ nancing
losses”, they may only be offset against income that is derived in
years that the Company also qualiﬁ es as “holding and/or ﬁ nancing

If the Company were to be treated as having a permanent
establishment, or as otherwise being engaged in a trade or business
(including owning real estate outside the Netherlands), in any
country in which it develops shopping and entertainment centers or
in which its centers are managed, income (positive and negative)
attributable to or effectively connected with such permanent estab-
lishment or trade or business, is generally excluded from the Dutch
tax base. Speciﬁ c conditions may apply based on the relevant double
taxation treaty and Dutch domestic law. The occurrence of one or
more of these factors may have a material adverse effect on the

Group’s business, ﬁ nancial condition and/or results of operations.

Financial reporting

Plaza prepares an annual budget for each country, which budget is
compared with actual results. Investment budgets and cash ﬂ ow
forecasts are also prepared. The quarterly ﬁ gures are reviewed by
the external auditor prior to their publication by means of a press
release. The ﬁ nancial statements are audited by the external auditor,
and the quarterly and semi-annual ﬁ gures are subjected to a limited
review by the external auditor.

Internal control and risk management
procedures

I) Deﬁ nition and objectives
Internal control is the structure within which resources, behavior,
procedures and actions are implemented by the Management Board
and throughout the Company to ensure that activities and risks are
fully controlled and to obtain the reasonable assurance that the
Company’s strategic objectives have been met.

Plaza’s internal control procedures aim to ensure:

• the optimisation of operations and the smooth functioning of the

Groups internal processes;

• compliance with current laws and regulations;
• the application of instructions and directions given by the

Management Board; and

• the reliability of ﬁ nancial information.

The system is based on the following three key principles:

• the involvement of and taking responsibility by all personnel: all
Group employees contribute to internal control procedures; each
employee, at his or her level, should exercise effective control over
the activities for which he or she is responsible;

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Risk management

• the full extent of the scope covered by the procedures: the

procedures should apply to all entities (operational and legal); and

• separation of tasks: control functions should be independent of

operating functions.

The internal control procedures designed to address the objectives
described above cannot, however, ensure with certainty that these
objectives will be achieved in full, since all procedures have inherent
limitations. However, they aim to make a very signiﬁ cant contribution
in this direction.

II) Four components of internal control procedures
a) Organisation and environment
Plaza’s internal control procedures distinguish permanent control
from periodic control, which are independent but complementary.
Permanent control is the responsibility of all Group employees. It is
linked directly to the business sectors, functions and subsidiaries.

Managers of the business functions, country directors, aim to ensure
compliance with the Group’s internal control procedures, whose
tasks are:

• to ensure the methods chosen at Group level are coordinated and

implemented by their teams;

framework for the activity, in a more precise way where risks have
been identiﬁ ed, and their application provides a control mechanism.

c) Control activities to meet these risks
The internal control and risk management system is based on two
levels of control as follows:

First level – First degree – Permanent control
The ﬁ rst level and ﬁ rst degree of control is exercised by every
employee as part of his or her job-related tasks with reference to
the applicable procedures. Control is ensured on an ongoing basis
by the initiation of a task by operating employees themselves or by
automatic systems for carrying out operations.

First level – Second degree – Permanent control
The second level is exercised by the management of the business
function. Controls are carried out in the framework of operating
procedures.

Second level – Permanent control
The second level of control is intended to ensure that the ﬁ rst level
controls have been carried out and respected correctly. It is under-
taken by separate functions, specially dedicated to permanent control.

• to design and adapt the reporting procedures on a regular basis,
giving the most appropriate indicators to obtain clear visibility of
their permanent control; and

• to regularly transmit this reporting to their superiors and indicate

problems and incoherences in order to enable appropriate
decisions to be taken regarding changes to the controls.

Internal accounting control
A dedicated function within the Accounting Department is charged
with checking the smooth functioning of ﬁ rst level accounting
controls. See section below “Internal control procedures relating to
the preparation and processing of the accounting and ﬁ nancial
information”.

The powers of the Group companies’ legal representatives are limited
and subject to controls. Functional departments provide expertise
to operational departments. Permanent control procedures require
several participants. The involvement of many players necessitates
tight coordination of actions and methods. At Group level, the
coordination of permanent control is carried out under the authority
of the head of accounting and CFO, whose tasks are:
• to ensure the design and implementation of actions to improve

permanent control in the Group’s business functions;
• to coordinate the choice of methodologies and tools; and
• to monitor the development of the procedures in the business

functions and subsidiaries.

d) Management and supervision of internal control systems
Under the direction of the Management Board, the activities and
functions managers carry out the supervision of the internal control
system with the support of the permanent control coordination
function. The Audit Committee meets at least twice per year.
Its work and conclusions are reported to the Management
Board. The supervision is also supported by the comments and
recommendations of the statutory auditors and by any regulatory
supervision which may take place.

III) Risk management and internal control bodies
The main bodies involved in managing the internal control system are:

b) Risk management
The Group is careful to anticipate and manage major risks likely to
affect the achievement of its goals and to compromise its compliance
with current laws and regulations. These risks are identiﬁ ed above
in this section. The identiﬁ cation and evaluation of risks is used as
a reference to determine procedures and controls which, in their
turn, inﬂ uence the level of residual risk. The procedures provide a

a) Management Board
The Management Board has overall responsibility for the Group’s
internal control systems. The Management Board is tasked with
deﬁ ning the general principles of the internal control system,
creating and implementing an appropriate internal control system
and associated roles and responsibilities, and monitoring its smooth
functioning in order to make any necessary improvements.

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

b) Audit Committee
The Audit Committee is informed at least once a year of the status
of the Group’s entire internal control system, changes made to
the system and the ﬁ ndings of the work carried out by the various
participants working in the system.

c) Functional management
Business unit management deﬁ nes the orientation and procedures
and provides guidance to employees in their business unit.

d) Group employees
Operating supervisors and line managers are responsible for
controlling risks and are the principal actors in permanent control.

They exercise ﬁ rst level controls.

Internal control procedures relating
to the preparation and processing of the
accounting and ﬁ nancial information

I) Deﬁ nition and objectives
The aim of accounting controls is to ensure adequate coverage of
the main accounting risks. They rely on understanding operational
processes and the way they are translated into the Company
accounts, and on deﬁ ning the responsibilities of the individuals
responsible for accounting scopes and information system security.
Internal accounting controls aim to ensure:
• that published accounting and ﬁ nancial information complies with

accounting regulations;

• that the accounting principles and instructions issued by the

Group are applied by all its subsidiary companies; and

• that the information distributed and used internally is sufﬁ ciently

reliable to contribute to processing accounting information.

II) Management process for accounting and ﬁ nancial organisation
a) Accounting organisation
The production of accounting information and the application of the
controls implemented to ensure the reliability of said information are
primarily the responsibility of the Company’s Financial & Accounting
Department that submit information to the Group, and which
certify its compliance with the internal certiﬁ cation procedure. The
corporate and consolidated ﬁ nancial statements are prepared by the
Financial & Accounting Department, which reports directly to the
Management Board. The department is charged with:
• updating accounting rules in view of changes in accounting

regulations;

• deﬁ ning the various levels of accounting control to be applied to

the ﬁ nancial statement preparation process;

• ensuring correct operation of the internal accounting control

environment within the Group, with particular reference to the
internal certiﬁ cation procedure described below;

• preparing and updating the procedures, validation rules and

authorisation rules applying to the department; and

• monitoring the implementation of recommendations made by

external auditors.

b) Financial risk management
The management of ﬁ nancial risks, and in particular the ﬁ nancial
structure of the Group, its ﬁ nancing needs and interest rate and
exchange rate risk management procedures, is provided by the
Financial & Accounting Department, which reports directly to the
Management Board. At the end of each year, the Board validates
the provisional ﬁ nancing plan for the following year, which sets out
the broad outlines in terms of the balance and choice of resources,
as well as interest rate and exchange rate hedges. During the year,
key ﬁ nancial transaction decisions are submitted individually for
approval by the Board and Audit Committee, which also receives a
summary of these transactions once they have been completed. The
processing and centralisation of cash ﬂ ows, together with interest
rate and exchange rate hedging, are the responsibility of the Financial
& Accounting Department, which keeps a record of commitments
and ensures that they are reﬂ ected in the accounting system.

III) Processes contributing to the preparation of accounting
and ﬁ nancial information
a) Operational processes used to generate accounting information
The ﬁ nancial statements of Plaza are prepared centrally at Plaza’s
corporate headquarters. The country departments are responsible
for collecting information from the local bookkeepers and applying
a series of appropriate controls to their job functions, as deﬁ ned in
the corresponding procedures. The Accounting Department has set
up a system of internal collection and veriﬁ cation of country data and
controls carried out. This system of control covers all Group entities.

b) Processes used to prepare the corporate and consolidated
ﬁ nancial statements
The ﬁ nancial statements for the entire scope of consolidation are
consolidated by the Accounting Department. At the end of each year,
the Management Board validates the provisional ﬁ nancing plan for
the following year, which sets out the broad outlines in terms of the
balance and choice of resources, as well as interest rate hedges. During
the year, key ﬁ nancial transaction decisions are submitted individually
for approval. The processing and centralisation of cash ﬂ ows, together
with interest rate and exchange rate hedging, are the responsibility of
the Investment Committee, which keeps a record of commitments and
ensures that they are reﬂ ected in the accounting system.

c) The Audit Committee
The clarity of ﬁ nancial information and the relevance of the
accounting principles used are monitored by the Audit Committee

(whose role has already been speciﬁ ed).

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Remuneration report

Remuneration Committee

Remuneration policy

As stated in the Corporate governance report on pages 46 to 52 of

Plaza Centers’ remuneration policy is designed to attract,

this document, the Remuneration Committee meets at least twice

motivate and retain the high-calibre individuals who will enable the

each ﬁ nancial year to prepare, among other matters, the decision

Company to serve the best interests of shareholders over the long

of the Board relating to the remuneration of directors and any

term, through delivering a high level of corporate performance.

share incentive plans. It is also responsible for preparing an annual

Remuneration packages are aimed at balancing both short term and

report on the Company’s remuneration policies and for giving full

long term rewards, as well as performance and non-performance

consideration in all its deliberations to the principles set out in the

related pay.

Combined Code.

The Committee comprises four non-executive directors – since

Increases for all employees are recommended by reference to cost

8 July 2014 it is chaired by Marco Wichers, and the other members

of living, responsibilities and market rates, and are performed at the

are David Dekel, Sarig Shalhav and Shlomi Kelsi.

same time of year.

The Remuneration Committee reviews base salaries annually.

Under Dutch corporate law and the Articles of the Company, a

The Remuneration Committee believes that senior management’s

General Meeting of Shareholders must determine the principal

total remuneration should aim to recognise his or her worth on

guidelines governing the remuneration both of executive and non-

the open market and to this end pays base salaries in line with the

executive directors. In addition, such a meeting also has to approve

market median supplemented by a performance-related element

the granting to them of options and share incentive plans.

with the capacity to provide more than 50% of total potential

The Board may only determine the remuneration of directors within

such guidelines, and no director or manager may be involved in any

decisions relating to his or her own remuneration.

remuneration.

2014

Executive directors

Mr. Mordechay Zisser2

Mr. Nadav Livni3

Mr. Ran Shtarkman4

Subtotal

Non-executive directors

Mr. Shimon Yitzchaki2

Mr. Marius van Eibergen Santhagens2

Mr. Sarig Shalhav

Mr. Ron Hadassi3

Mr. David Dekel3

Mr. Shlomi Kelsi3

Mr. Yoav Kﬁ r3

Mr. Marco Wichers

Subtotal

Total – All directors

Salary and fees

€’000

Share
option plan1
€’000

114

479

625

373

998

Total remuneration

for the year 2014

€’000

114

479

625

394

1,019

There were no performance related remuneration in 2014.
1 Accounting non-cash expenses recorded in the Company’s consolidated income statement in connection with the share option plan.
2 Until July 2014.
3 Directors from July 2014. Mr. Hadassi serves also as the chairman of the Board.
4 Directors until July 2014. Mr. Shtarkman serves also as the CEO of the Company throughout 2014, salaries and fees are included for the entire year of 2014.

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

muneration report

Service arrangements

Bonuses

The directors have speciﬁ c terms of reference. Their letters of

The Company has the authority to award discretionary bonuses for

appointment state an initial 12-month period, terminable by either

senior executives and employees up to certain level based on general

party on three months’ written notice. Save for payment during

achievements.

respective notice periods, these agreements do not provide for

payment on termination.

The shareholder returns performance 2014*

0.15

0.12

0.9

0.6

0.3

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

* Source: Bloomberg, as of 31 December 2014. Past performance is not an indication of future returns.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Remuneration rep

Share options

The Company adopted its share option schemes (“ﬁ rst ESOP”)

on 26 October 2006 (which was amended on 25 November 2008,

22 November 2011 and 20 November 2012) and on 22 November

2011 (“second ESOP”) (refer to note 21 to the consolidated ﬁ nancial

statements) the terms and conditions of which (except for the

exercise price) are regulated by the share option schemes.

Options will vest in three equal annual portions and have a

contractual life of ﬁ fteen and ten years following grant date for ﬁ rst

ESOP and second ESOP, respectively. In the course of 2014,

no options were granted under ESOP. For the exercise and forfeit of

options refer to the table below.

For further detailed information about share option schemes refer to

note 21 in the consolidated ﬁ nancial statements.

Mr. Mordechay Zisser

Mr. Ran Shtarkman

Mr. Shimon Yitzchaki

Mr. Marius van Eibergen Santhagens

Mr. Sarig Shalhav

Mr. Ron Hadassi

Mr. David Dekel

Mr. Shlomi Kelsi

Mr. Yoav Kﬁ r

Mr. Nadav Livni

Mr. Marco Wichers

Number

Number exercisable

of options granted

as at 31 December,

and unexercised

2013 and 2014

3,907,895

7,089,151

1,794,361

3,907,895

7,089,151

1,794,361*

Exercise

price of

options £

0.43

0,43

Remaining

maturity

(years)

6.82

Number of options

as at 31 December

2014

47,834,586

47,195,174

8,420,598

(14,502,203)

15,141,615

Total pool

Granted

Exercised

Forfeited

Left for future grant

* 2013: 1,127,695 options exercisable

Amsterdam, 30 April 2015

The Board of Directors:

Ron Hadassi

Marco Wichers

Nadav Livni

Sarig Shalhav

Shlomi Kelsi

David Dekel

Yoav Kﬁ r

MANAGEMENT AND GOVERNANCE

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ort

Statement

of the directors

The responsibilities of the directors are determined by applicable law

maintaining the accuracy of corporate and ﬁ nancial information on

and International Financial Reporting Standards (IFRSs) as adopted

the website, where a failure to update or amend information may

by the European Union.

cause inappropriate decision making.

The directors are responsible for preparing the annual report and the

On the basis of the above and in accordance with Best Practice

annual ﬁ nancial statements in accordance with applicable law and

Provision II.1.4. of the Netherlands Corporate Governance Code,

regulations.

the directors conﬁ rm that internal controls over ﬁ nancial reporting

within the Company provide a reasonable level of assurance that the

Netherlands law requires the directors to prepare ﬁ nancial

ﬁ nancial reporting does not contain any material inaccuracies, and

statements for each ﬁ nancial year that give, according to generally

conﬁ rm that these controls functioned properly in the year under

acceptable standards, a true and fair view of the assets, liabilities,

review and that there are no indications that they will not continue

ﬁ nancial position and proﬁ t or loss of the Company and the

to do so.

companies that are included in its consolidated accounts for that

period.

The ﬁ nancial statements fairly represent the Company’s ﬁ nancial

condition and the results of the Company’s operations and provide

Netherlands law requires the directors to prepare an annual report

the required disclosures.

that gives a true and fair view of the position as per the balance sheet

date, the course of business during the past ﬁ nancial year of the

It should be noted that the above does not imply that these

Company and its afﬁ liated companies included in the annual ﬁ nancial

systems and procedures provide absolute assurance as to the

statements, and that the annual report contains a proper description

realisation of operational and strategic business objectives, or that

of the principal risks the company faces.

they can prevent all misstatements, inaccuracies, errors, fraud and

Directors are required to abide by certain guidelines in undertaking

these tasks.

non-compliance with legislation, rules and regulations.

In view of all of the above, hereby following the requirements of

Article 5:25c Paragraph 2 under c. of the Netherlands Act on the

The directors need to select appropriate accounting policies and

Financial Supervision (Wet op het ﬁ nancieel toezicht), the directors

apply them consistently in their reports. They must state whether

hereby conﬁ rm that (i) the annual ﬁ nancial statements 2014, as

they have followed applicable accounting standards, disclosing and

included herein, give a true and fair view of the assets, liabilities,

explaining any material departures in the ﬁ nancial statements.

ﬁ nancial position and proﬁ t or loss of the Company and its afﬁ liated

Any judgments and estimates that directors make must be both

companies that are included in the consolidated ﬁ nancial statements;

reasonable and prudent. The directors must also prepare ﬁ nancial

and (ii) the annual report includes a fair review of the position at the

statements on a “going concern” basis, unless it is inappropriate to

balance sheet date and the development and performance of the bu-

presume that the Company will continue in business.

siness of the Company and its afﬁ liated companies that are included

The directors conﬁ rm that they have complied with the above

in the consolidated annual ﬁ nancial statements and that the principal

requirements in preparing the ﬁ nancial statements.

risks and uncertainties that the company faces are described.

Throughout the ﬁ nancial year, the directors are responsible for

keeping proper accounting records which disclose at any time and

The Board of Managing Directors

with reasonable accuracy the ﬁ nancial position of the Company. They

are also responsible for ensuring that these statements comply with

Ron Hadassi

Marco Wichers

applicable company law.

Non-executive director

Independent non-executive

In addition, they are responsible for internal control systems

Nadav Livni

that help identify and address the commercial risks of being in

Executive director

Sarig Shalhav

business, and so safeguard the assets of the Company. They are

Independent non-executive

also responsible for taking reasonable steps to enable the detection

Shlomi Kelsi

director

and prevention of fraud and other irregularities.

Non-executive director

The Company’s website may be accessed in many countries, which

Yoav Kﬁ r

David Dekel

Independent non-executive

have different legal requirements. The directors are responsible for

Non-executive director

director

30 April 2015

PLAZA CENTERS N.V. ANNUAL REPORT 2014

MANAGEMENT AND GOVERNANCE

Independent

auditors’ report

The Board of Directors and Stockholders

Plaza Centers N.V.

Report on the consolidated ﬁ nancial statements

We have audited the accompanying consolidated ﬁ nancial statements of Plaza Centers N.V. (“the Company”), which comprise the consolidated

statement of ﬁ nancial position as at December 31, 2014, the consolidated statement of proﬁ t or loss and the consolidated statements of

comprehensive income, changes in equity and cash ﬂ ows for the year then ended, and notes, comprising a summary of signiﬁ cant accounting

policies and other explanatory information.

Management’s responsibility for the consolidated ﬁ nancial statements

Management is responsible for the preparation and fair presentation of these consolidated ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated ﬁ nancial statements.

The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated ﬁ nancial

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 ﬁ nancial 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 ﬁ nancial statements.

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

Opinion

In our opinion, the consolidated ﬁ nancial statements present fairly, in all material respects, the consolidated ﬁ nancial position of the Company

as at December 31, 2014 and of its consolidated ﬁ nancial performance and its consolidated cash ﬂ ows for the year then ended in accordance

with International Financial Reporting Standards adopted by the EU.

Budapest, Hungary

March 19, 2015

KPMG Hungaria Kft.

Michael Carlson

Partner

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Consolidated

statement of

ﬁ nancial position

ASSETS

Cash and cash equivalents
Restricted bank deposits
Held for trading ﬁ nancial assets
Trade receivables
Other receivables
Prepayments and advances
Trading properties

Total current assets

Trading properties
Equity accounted investees
Loan to equity accounted investees
Property and equipment
Deferred taxes
Other non-current assets

Total non-current assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing loans from banks
Debentures at fair value through proﬁ t or loss
Debentures at amortised cost
Trade payables
Related parties liabilities
Derivatives
Provisions
Other liabilities

Total current liabilities

Interest bearing loans from banks
Debentures at amortised cost
Provisions
Derivatives
Deferred tax liabilities

Total non-current liabilities

Share capital
Translation reserve
Capital reserve due to transaction with Non-controlling interests
Other reserves
Share premium
Retained losses

Equity attributable to owners of the Company

Non-controlling interests

Total equity

Total equity and liabilities

March 19, 2015
Date of approval of the
ﬁ nancial statements

Note

December 31, 2014
€’000

December 31, 2013
€’000

4
5

6
7a
7b
8

8
10
10
9

12
16
17
13
14
11
8
15

12
17
8
11
18

19
19

33,363
6,886
1,434
2,719
2,963
767
-

48,132

370,761
36,108
6,121
4,029
921
25

417,965

466,097

37,885
-
-
1,893
1,161
430
-
13,175

54,544

112,962
162,862
15,597
559
-

291,980

6,856
(36,699)
(20,706)
35,340
282,596
(148,486)

118,901

672

119,573

466,097

26,157
6,319
1,246
3,372
4,871
1,393
40,333

83,691

454,841
33,102
7,039
6,520
-
573

502,075

585,766

175,338
97,983
70,636
2,432
944
910
15,597
11,219

375,059

-
-
-
-
379

379

2,972
(40,651)
(20,706)
35,133
261,773
(28,799)

209,722

606

210,328

585,766

Ran Shtarkman
President and Chief
Executive Ofﬁ cer

David Dekel
Director and Chairman of the
Audit Committee

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Consolidated

statement of

proﬁ t or loss

Continuing operations

Revenue from disposal of trading property

Rental income

Revenues from entertainment centers

Total revenues

Cost of trading property disposed

Cost of operations

Cost of operations – entertainment centers

Gross proﬁ t

Loss from disposal Trading Property

Writedown of Trading Properties

Writedown of equity-accounted investees, net

Note

30(d)

22(a)

22(b)

30(d)

23(a)

23(b)

30(d), 30(e)

Loss from disposal of equity accounted investees (holding undeveloped Trading Properties)

30(j)

Share in results of equity-accounted investees

Administrative expenses, excluding restructuring costs

Restructuring costs

Other income

Other expenses

Results from operating activities

Gain from restructuring plan

Finance income

Finance costs

Net ﬁ nance costs

Loss before income tax

Tax beneﬁ t

Loss from continuing operations

Discontinued operation

Proﬁ t from discontinued operation, net of tax

Loss for the year

Loss attributable to:

Owners of the Company

Earnings per share

Basic and diluted loss per share (in EURO)

Earnings per share – continuing operations

Basic and diluted loss per share (in EURO)

24a

24b

For the year ended

December 31, 2014

December 31, 2013

€’000

Restated* €’000

38,600

22,112

1,713

62,425

(38,600)

(8,491)

(2,169)

13,165

(573)

(87,489)

(1,687)

(4,048)

1,641

(7,434)

(2,388)

2,484

(2,507)

(88,836)

3,443

1,263

(36,839)

(35,576)

(120,969)

1,282

23,678

3,345

27,023

(9,408)

(4,025)

13,590

(346)

(117,913)

(56,417)

(3,724)

952

(9,435)

(702)

413

(11,468)

(185,050)

1,288

(40,632)

(39,344)

(224,394)

6,256

(119,687)

(218,138)

(119,687)

(218,073)

(119,687)

(218,073)

(0.39)

(0.73)

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Consolidated

statement of

comprehensive income

For the year ended

December 31, 2014

December 31, 2013

€’000

Restated* €’000

(119,687)

(218,073)

Loss for the year

Other comprehensive income

Items that are or may be reclassiﬁ ed to proﬁ t or loss:

Net change in fair value of available for sale ﬁ nancial assets transferred to proﬁ t or loss

Change in fair value of available for sale ﬁ nancial assets

Foreign currency translation differences - foreign operations (Equity accounted investees) – reclassiﬁ ed to proﬁ t or loss

Foreign currency translation differences - foreign operations (Equity accounted investees)

Foreign currency translation differences - foreign operations (Trading properties)

Tax on other comprehensive income due to change in fair value of available for sale ﬁ nancial assets

Other comprehensive income (loss) for the year, net of income tax

Total comprehensive loss for the year

Total comprehensive income (loss)attributable to:

Owners of the Company

Non-controlling interests

2,740

1,278

4,018

(115,669)

(115,735)

(723)

(14)

4,360

(15,036)

(3,726)

184

(14,955)

(233,028)

(232,918)

(110)

Total comprehensive loss for the year

(115,669)

(233,028)

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Consolidated

statement of

changes in equity

Attributable to the equity holders of the Company

Capital

reserve from

acquisition of

non-controlling Financial

interests

assets

without

available

Retained

Non-

based

payment Translation

a change

for sale

earnings

controlling

capital

premium

reserves

reserve

in control

reserve

(losses)

Total

interests*

€’000

Total

€’000

Balance at

December 31, 2012

2,972

261,773

34,709

(26,359)

(20,706)

553

189,274

442,216

716

442,932

Share based payment

(refer to note 21)

424

Comprehensive income for the year

Net loss for the year

Foreign currency translation

differences

Available for sale reserve,

net of tax

Total comprehensive loss

for the year

Balance at

(14,292)

424

(218,073)

424

(218,073)

(14,292)

(110)

(14,402)

(553)

(218,073)

(232,918)

(110)

(233,028)

December 31, 2013

2,972

261,773

35,133

(40,651)

(20,706)

Right issuance

(refer to note 19)

Share based payment

(refer to note 21)

3,884

20,823

207

Comprehensive income for the year

Net loss for the year

Foreign currency translation

differences

Total comprehensive loss

for the year

Balance at

3,952

(28,799)

209,722

606

210,328

24,707

207

(119,687)

24,707

207

(119,687)

3,952

4,018

(119,687)

(115,735)

(115,669)

December 31, 2014

6,856

282,596

35,340

(36,699)

(20,706)

(148,486)

118,901

672

119,573

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Consolidated

statement of
cash ﬂ ow

Cash ﬂ ows from operating activities

Loss for the year

Adjustments necessary to reﬂ ect cash ﬂ ows used in operating activities:

Depreciation and impairment of property and equipment

Change in fair value of investment property

Net ﬁ nance costs

Equity-settled share-based payment transaction

Gain from restructuring plan

Discontinued operations

Loss (gain) on sale of property and equipment

Share of loss of equity-accounted investees, net of tax

Tax beneﬁ t

Subtotal

Changes in:

Trade receivables

Other accounts receivable

Trading properties

Equity Accounted Investees

Trade payables

Other liabilities, related parties liabilities and provisions

Subtotal

Interest received

Interest paid

Taxes paid

Net cash from (used in) operating activities

Cash from investing activities

Purchase of property and equipment

Proceeds from sale of property and equipment

Proceeds from sale of investment property

Proceeds from liquidation of equity accounted investee EPUS

Purchase of marketable debt securities ﬁ nancial assets

Proceeds from sale of available for sale ﬁ nancial assets

Net cash from investing activities

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

For the year ended

December 31, 2014

December 31, 2013

Note

€’000

Restated* €’000

(119,687)

(218,073)

30(f)

982

35,576

207

(3,443)

232

(1,641)

(1,282)

423

4,267

39,344

424

(65)

(23)

(952)

(6,256)

(89,056)

(180,911)

222

2,566

106,176

5,122

(64)

3,964

117,986

(20,664)

(18)

8,341

(12)

1,375

1,363

(122)

10,126

108,831

79,569

(4,028)

3,498

197,874

353

(10,926)

(295)

6,095

(75)

169

7,649

32,410

(1,424)

12,012

50,741

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Consolidated

statement of
cash ﬂ ow

Cash from ﬁ nancing activities

Proceeds from bank loans and ﬁ nancial institutions

Proceeds (payments) from hedging activities through sell of options

Changes in restricted cash

Proceeds from re-issuance of long term debentures

Proceeds from right issuance, net of right issuance costs

Repayment of debentures

Repayment of interest bearing loans from banks

Net cash used in ﬁ nancing activities

Effect of movement in exchange rate ﬂ uctuations on cash held

Increase (decrease) in cash and cash equivalents during the year

Cash and cash equivalents as at January 1st

Cash and cash equivalents as at December 31st

The notes on pages 73 – 136 are an integral part of these consolidated ﬁ nancial statements.

For the year ended

December 31, 2014

December 31, 2013

Note

€’000

313

(2,019)

18,836

(12,057)

(7,527)

(2,454)

(44)

7,206

26,157

33,363

659

(2,364)

9,316

13,772

(60,319)

(27,490)

(66,426)

373

(9,217)

35,374

26,157

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

Notes to the

consolidated ﬁ nancial

statements

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 ofﬁ ce is at Prins Hendrikkade
48-S, 1012 AC, Amsterdam, the Netherlands. The Company conducts its activities in the ﬁ eld of establishing, operating and selling of shopping and entertainment
centers, as well as other mixed-use projects (retail, ofﬁ ce, residential) in Central and Eastern Europe (starting 1996), India (from 2006), and, between 2010 and
2012, also in the USA. The consolidated ﬁ nancial 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.a r.l. (“EUL”), which holds 44.9% of the Company’s shares, as at the end of
the reporting period (December 31, 2013 – 62.5%). Refer to note 19 for the issuance of shares in the course of 2014. The Company regards Elbit Imaging Limited
(“EI”) as the ultimate parent company (refer to note 31 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 ﬁ nancial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as adopted by the European
Union (“EU”).

These consolidated ﬁ nancial statements are not intended for statutory ﬁ ling purposes. The Company is required to ﬁ le consolidated ﬁ nancial statements prepared
in accordance with The Netherlands Civil Code. At the date of approving these ﬁ nancial statements the Company had not yet prepared consolidated ﬁ nancial
statements for the year ended December 31, 2014 in accordance with the Netherlands Civil Code.

The consolidated ﬁ nancial statements were authorised for issue by the Board of Directors on March 19, 2015.

b. Basis of measurement

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

• Liabilities for cash-settled share-based payment arrangements are measured at fair value
• Held for trading ﬁ nancial assets are measured at fair value
• Derivative ﬁ nancial instruments are measured at fair value
• Non-Derivative ﬁ nancial instruments at fair value through proﬁ t or loss were measured in 2013 at fair value. No such assets exist in 2014.

c. Functional and presentation currency

These consolidated ﬁ nancial statements are presented in EURO (“EUR”), which is the Company’s functional currency. All ﬁ nancial information presented in EUR
has been rounded to the nearest thousand, unless otherwise indicated.

d. Going concern

The consolidated ﬁ nancial 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 17.

e. Investment property vs. trading property classiﬁ cation

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 Company still faces material uncertainties in respect of the time needed to sell the
properties. However 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.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

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 we also believe that these are appropriately classiﬁ ed as trading
properties.

f. Use of estimates and judgments

The preparation of the consolidated ﬁ nancial 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 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 recognised 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 signiﬁ cant effect on the amounts recognised in the consolidated ﬁ nancial
statements is included in the following notes:

• Note 8 – Suspension of borrowing costs capitalisation
• Note 8 – Classiﬁ cation of trading properties as current vs. non-current
• Note 2(e) – Trading property vs. Investment property
• Note 10 – Classiﬁ cation of the joint arrangement
• Note 17 – Measurement of fair value of new debenture series

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

• Notes 8 – Key assumptions used in determining the net realisable value of trading properties
• Note 8, 29 – Provisions and contingencies
• Note 21 – Measurement of share-based payments
• Note 27 – Recognition of deferred tax assets and availability of future taxable proﬁ ts 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; it also determines its ﬁ nancing 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 ﬁ ve 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 stabilised tenants list, improving
the tenant mix, increasing occupancy rates, completion of certain tenant improvements and ﬁ nding the qualiﬁ ed buyers. For plots, this includes obtaining permits,
ﬁ nance and construction.

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

In view of these uncertainties and abnormalities, the Company has taken in 2013 (and reassured this position in 2014) a position of reclassifying its entire trading
properties to long term, with the exception of a property where a sale and purchase agreement exists, until the abnormal level of uncertainty is reduced.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 3,4,5

NOTE 3 - MEASUREMENT OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the measurement of fair value, for both ﬁ nancial and non-ﬁ nancial 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 ﬁ nance department reviews
signiﬁ cant unobservable inputs and valuation adjustments. If third party information, such as broker quotes, is used to measure fair values, then the ﬁ nance
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 classiﬁ ed. 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 16 – Debentures at fair value through proﬁ t or loss in 2013 and 2014
• Note 21 – Employee share option plan
• Note 28 – Financial instruments

NOTE 4 - CASH AND CASH EQUIVALENTS

Interest rate as of

December 31, 2014

December 31, 2013

Bank deposits and cash denominated in

December 31, 2014

EUR

Polish Zlotys (PLN)

Romanian Lei (RON)

New Israeli Shekel (NIS)

United States Dollar (USD)

Indian Rupee (INR)

Other currencies

Cash and cash equivalents in the statement of ﬁ nancial position

See below1

Mainly overnight Wibid*0.7

Mostly 2.5%

€’000

26,954

2,248

2,203

554

505

497

402

33,363

€’000

13,894

3,393

192

3,375

3,250

1,541

512

26,157

1 Main EUR deposits as of December 31, 2014 are held on corporate level and bear money market interest rates which are mainly 0%.

The Group’s exposure to interest rate risk and a sensitivity analysis for ﬁ nancial assets and liabilities are disclosed in note 28.

NOTE 5 - RESTRICTED BANK DEPOSITS

Short-term restricted bank deposits

In EUR

In USD

In other currencies

Total short-term

Interest rate as of

December 31, 2014

December 31, 2013

December 31, 2014

€’000

See below1

See below2

5,232

1,037

617

6,886

5,579

740

6,319

1 As of December 31, 2014, EUR 3.8 million is restricted mainly in respect of bank facilities agreements signed to ﬁ nance Projects in Poland and the Czech Republic. These amounts carry

an annual interest rate of mainly Overnight rates. Additional EUR 1.3 is a secured deposit due to hedging activities through sell of currency options, and carrying no interest.

2 As of December 31, 2014, EUR 1.0 million is a secured deposit bearing no interest due to hedging activities through sale of currency options.

The Group’s exposure to interest rate risk and a sensitivity analysis for ﬁ nancial assets and liabilities are disclosed in note 28.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 6 - TRADE RECEIVABLES

Trade receivables

Less - Allowance for doubtful debts

Total

December 31, 2014

December 31, 2013

€’000

4,255

(1,536)

2,719

€’000

4,887

(1,515)

3,372

NOTE 7 - OTHER RECEIVABLES, PREPAYMENTS AND ADVANCES

a. Other receivables

December 31, 2014

December 31, 2013

Receivable in respect of disposal of equity-accounted investee Uj Udvar

VAT and tax receivables

Others

Total

€’000

2,502

461

2,963

€’000

2,350

1,877

644

4,871

b. Prepayments and advances

December 31, 2014

December 31, 2013

Advances to suppliers

Prepaid expenses

Total

NOTE 8 - TRADING PROPERTIES

Balance as at 1 January

Acquisition and construction costs1

Capitalised borrowing costs2

Writedown of trading properties3

Effect of movements in exchange rates

Trading properties disposed (refer to note 30 (D), (E) and (F))

Balance as at 31 December4

Completed trading properties (operating shopping centers)

Plots scheduled for construction4, 5

Plots under planning stage

Total

€’000

275

492

767

€’000

776

617

1,393

December 31, 2014

December 31, 2013*

€’000

495,174

7,520

(87,489)

3,713

(48,157)

370,761

170,189

164,930

35,642

370,761

612,475

3,728

6,530

(117,913)

(7,831)

(1,815)

495,174

222,976

206,236

65,962

495,174

* As of December 31, 2013, the Koregaon Park trading property was the only trading property presented as short term, owing to the existence of a sale and purchase agreement on the

trading property. Following the continuous delay in the selling process it was decided in 2014 to reclassify the abovementioned property to long term. All other trading properties are

classiﬁ ed as long term.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 6,7,8

1 Including EUR 5 million acquired following the termination of the BAS joint venture (refer to note 30(J) for more details).

2 Regarding accounting policy of capitalizing borrowing costs refer to note 34 (e). The Company temporarily suspended capitalisation 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 crisis.

3 Breakdown of writedown of trading properties:

Project name (location)

Iasi (Iasi, Romania)

Koregaon Park (Pune, India)

Belgrade Plaza (Belgrade, Serbia)

Helios Plaza (Athens, Greece)

Liberec (Liberec, Czech Republic)

Belgrade Plaza Visnjicka (Belgrade, Serbia)

Lodz Plaza (Lodz, Poland)

Casar Radio (Bucharest, Romania)

Zgorzelec (Zgorzelec, Poland)

Constanta (Constanta, Romania)

Ciuc (Ciuc, Romania)

Kragujevac (Kragujevac, Serbia)

Timisoara (Timisoara, Romania)

Roztoky (Prague, Czech Republic)

Kielce (Kielce, Poland)

Other, aggregated

Total

The year ended

December 31, 2014

December 31, 2013

€’000

4,280

10,059

2,500

10,901

2,080

175

829

33,583

3,868

3,813

3,653

3,395

2,027

(323)

6,649

87,489

€’000

1,582

15,564

29,347

12,267

11,578

6,825

6,400

6,305

2,013

4,972

4,414

751

3,968

3,500

828

7,599

117,913

The writedowns were caused mainly by the following factors:

• There were signiﬁ cant decreases in Net Realisable Values of certain projects below the carrying amount due to deteriorating market condition in certain countries in which the Group

operates.

Also affecting the valuations (in respect of plots under development) are delays in the execution and commencement of construction of projects by the Company, increase in the risks

inherited with 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 to schemes of projects (e.g Casa Radio, please see (4) below) which triggered additional signiﬁ cant impairments.

In the operational projects (Koregaon Park in India and Zgorzelec in Poland) impairment was performed due to delays in executing a sale transaction for the project and that current

transaction is in lower prices (in case of Koregaon Park), and also a decrease in the performance of both commercial centres.

• The disposal, or contracted disposal, of certain properties at a selling price below their carrying amount triggered writedown of these properties to their contractual selling price (refer

to note 30(E)).

4 Including carrying amount of Casa Radio project in Romania in a total amount of EUR 116 million (2013 – EUR 153 million). The 2014 impairment is attributed to the change of scheme of

the project, mainly by excluding a residential component.

5 The 2013 value of the Casa Radio project in Romania includes two non-operative gas turbines with a total carrying amount of EUR 3 million (following writedown). These turbines were

purchased in the past with the purpose of supplying energy to the completed project due to lack of sufﬁ cient energy infrastructure capabilities in Bucharest at the time. Following an

improvement in the energy infrastructure in recent years the turbines became redundant and efforts were made to dispose of them. In the course of 2013 the turbines were written down

(EUR 6.3 million) to their Net Realisable Values based on most recent offering prices received from potential buyers. Refer to note 30 (F) for the selling of the turbines.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

Casa Radio note

1. 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.
In addition, 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 3 below).

2. 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.

3. Discussions with Authorities on construction time table deferral

As a result of point 2, 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 ofﬁ cially notiﬁ ed 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 ﬁ nancial statement – refer to point
4 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.

Management believes that an agreement should be reached with the Authorities regarding the future development of the project (management cannot assess at
this stage the timing of reaching such agreement).

4. Provision in respect of PAB

As mentioned in point 1 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 beneﬁ t 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 utilised the amount of EUR 1.5 million out of this provision, but in the last 3 years has made no change
in the provision, in view of signiﬁ cant changes that might be implemented to the project, mainly with the timing of the construction, and the construction
speciﬁ cations depending upon the outcome of the negotiations with the Authorities. 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 update the provision.

Security over trading properties

As of December 31, 2014, a total carrying amount of EUR 170 million (December 31, 2013 – EUR 223 million) which represent operating shopping centres is
pledged against secured bank loans of approximately EUR 141 million.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 8

Writedown of trading properties

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

Actual results could be signiﬁ cantly different than the Company’s estimates and could have a material effect on the Company’s ﬁ nancial results. Trading Properties
accumulated writedowns from cost as of December 31, 2014, amounted to EUR 274 million or 42% percent of trading properties original cost (December 31,
2013 – EUR 222 million or 31% of gross trading property balance).

These valuations becomes increasingly difﬁ cult as it relates to estimates and assumptions for projects in the preliminary stage of development in addition to
current economic uncertainty and the lack of transactions in the real estate market in the CEE and India for same or similar properties.

Management is responsible for determining the net realisable value of the Group’s Trading Properties. In determining net realisable value of the vast majority of
Trading Properties, management utilises the services of an independent third party recognised as a specialist in valuation of properties (As at December 31, 2014,
98% of the value of trading properties was based on valuations done by the independent third party valuation service (2013 - 98%). The remaining properties
were valued internally.

On an annual basis, the Company reviews the valuation methodologies utilised by the independent third party valuator service for each property. The main features
included in each valuation are:

1. Completed trading properties (operating shopping centers)

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

The Net Realisable Value also reﬂ ects, on a similar basis, any cash outﬂ ows that could be expected in respect of the property. The Group uses professional
appraisers for determining the Net Realisable Value of the operating shopping centers.

Independent valuation reports are prepared by Cushman & Wakeﬁ eld by using discounted cash ﬂ ow 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 Realisable 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.

2. Incomplete trading properties (undeveloped plots of lands)

The net realisable 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 proﬁ t) to arrive at the underlying land

value. This is known as the residual method.

2a – Comparative 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 identiﬁ ed 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 comparables 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 because of 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, ﬂ uctuations in supply and demand, or any combination or forces working in concert to alter market conditions
from one date to another.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

• Adjustment because of 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 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 ﬁ nancial, business, or family relationship between
the 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 inﬂ uencing 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 reﬂ ect such differences based on the valuers’ professional
experience. Extreme location differences may indicate that a transaction is not truly comparable and are disqualiﬁ ed.

2b – 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 proﬁ t) = land value. Each element of this equation is discussed in the following paragraphs.

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.

Development costs

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

Some larger schemes such as Casa Radio in Romania, Bangalore and Chennai in India are phased over time. Is such case the phasing is reﬂ ected in the cash
ﬂ ows as deferment of some of costs to a date when it might be reasonable to expect them to be incurred. Similarly, not all receipts occur simultaneously.

Developer’s proﬁ t

The nature of the development determines the selection of the proﬁ t margin, or rate of return and the percentage to be adopted varies for each case. The
developers proﬁ t 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) with the exception
of one project (2013: four projects) with a total amount of EUR 0.8 million (2013: EUR 15.5 million) using the comparative method.

All the trading properties carrying amounts equal their net realisable values with the exception of the following projects: Torun and Suwalki in Poland and Arena
extension in Hungary (2013: Torun, Suwalki and Lodz residential in Poland, Arena Extension in Hungary and Casa Radio project in Romania), where the carrying
amount reﬂ ects the cost.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 8

3. Signiﬁ cant estimates

The following table shows the valuation techniques used in measuring the net realisable values of trading properties, including those held by joint ventures which

are equity accounted:

Group of assets

Valuation technique

Signiﬁ cant unobservable inputs

Inter-relationship between key
unobservable inputs and fair value
measurement

Operating shopping centers –
Poland

Discounted cash ﬂ ows: The valuation
model considers the present value
of the net cash ﬂ ows expected to be
generated by the shopping centers. The
cash ﬂ ow projections include speciﬁ c
estimates for 10 years. The expected
net cash ﬂ ows are discounted using a
risk-adjusted discount rate.

• Estimated rental prices per SQM
(EUR 3–40.0, weighted average
EUR 13.70).

The estimated fair value would increase
(decrease) if:
• the estimated rental prices per sqm were

• Estimated exit yield is between 7.45%

higher (lower);

and 9.75%.

• the Estimated yield rates were lower

• Discount rate is between 9.50% to

(higher);

11.75%.

• the Estimated discount rates were lower

• Based on 100% occupancy rate to be

(higher);

achieved within 2 years.

• The occupancy of the mall was higher

(lower).

Operating shopping center –
Czech Republic

• Estimated rental prices per SQM

(EUR 3.50–42.0, weighted average
EUR 5.3).

The estimated fair value would increase
(decrease) if:
• the estimated rental prices per sqm were

• Estimated exit yield is 10.00%.
• Discount rate is 11.50%.
• Based on 100% occupancy rate to be

higher (lower);

• the Estimated yield rates were lower

(higher);

achieved within 1 year.

• the Estimated discount rates were lower

(higher);

• The occupancy of the mall was higher

(lower).

Plots in CEE
(except Casa Radio)

Residual method: The valuation
model considers the net present value
(based on an NPV factor) based on
the estimated value of the project
upon completion less the estimated
development cost including a
provision for the proﬁ t for the potential
development.

• Estimated weighted average rental

prices per SQM is between EUR 10.00
to EUR 20.00.

The estimated fair value would increase
(decrease) if:
• the estimated rental prices per sqm were

• The estimated exit yield for the

higher (lower);

projects are between 8.50% and
10.50%.

• The construction cost of the projects
are between 400 EUR/sqm for retail
parks to 1,100 EUR /sqm for the
malls.

• the Estimated yield rates were lower

(higher);

• the Estimated discount rates were lower

(higher);

• The construction costs of the project

were lower (higher);

• The development ﬁ nance rate is

• The developer’s proﬁ t provisions for the

7.00%.

• The occupancy of the projects at
opening are estimated at 95%.

project were lower (higher);

• The development ﬁ nance provisions for

the project were lower (higher);

• The estimated completion of the project

were shorter (longer);

• The occupancy of the mall were higher

(lower);

• The land prices for comparable

transactions on the market would be
higher (lower);

• The characteristics of the project would

be changed.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

Group of assets

Valuation technique

Signiﬁ cant unobservable inputs

Inter-relationship between key
unobservable inputs and fair value
measurement

Casa Radio

• Estimated weighted average rental

prices per SQM EUR 25.00.

• The Estimated Exit Yield is 7.50%

for the mall and 8.00% for the ofﬁ ce
component.

• The construction cost of the project is
1,000 EUR/sqm for the mall; 850 EUR/
sqm for the ofﬁ ces; 500 EUR/sqm for
the residential component.

The estimated fair value would increase
(decrease) if:
• the estimated rental prices per sqm were

higher (lower);

• the estimated yield rates were lower

(higher);

• The construction cost of the project were

lower (higher);

• The developer’s proﬁ t provision for the

• The development ﬁ nance rate is

project were lower (higher);

7.50%.

• The occupancy of the project at
opening is estimated at 95%.
• The scheme would compose the

following components: (i) retail; (ii)
ofﬁ ces; (iii) residential.

Bangalore and Chennai
(Joint Ventures)

Residual method was used as follows:
The valuation model considers the
net present value (based on an NPV
factor) based on the estimated value of
the project upon completion less the
estimated development cost including a
provision for the proﬁ t for the potential
development

For residual approach:
• The sales price per sqm for the

development is between INR 92,000
and INR 126,000 subject to the size,
location and the quality of the asset
class.

• The construction cost per sqm for the
development is INR 21,000 to INR
38,000 subject to location and the
quality of the asset class.

• The development ﬁ nance provision for

the project were lower (higher);

• The estimated completion of the project

were shorter (longer);

• The occupancy of the mall were higher

(lower);

• The characteristics of the project would

be changed.

The estimated residual fair value would
increase (decrease) if:
• the estimated sales prices per sqm were

higher (lower);

• the estimated construction cost were

lower (higher);

• The development ﬁ nance provision for

the project were lower (higher);

• The estimated completion of the project

were shorter (longer);

• The characteristics of the project would

be changed;

• The developer’s proﬁ t provision for the

project were lower (higher).

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 8

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PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

Below is a summary table for main projects status:

Purchase

Holding

Planned

Carrying

Gross

amount

Lettable December 31, December 31,

Project

Location

year Rate (%) Nature of rights

Permit status

Area (sqm)

2014 (MEUR)

2013 (MEUR)

Suwalki Plaza

Poland

2006

100

Ownership

Operating shopping center

20,000

39.2

38.7

(starting Q2 2010)

Zgorzelec Plaza

Poland

2006

100

Ownership

Operating shopping center

13,000

13.5

17.1

Torun Plaza

Poland

2007

100

Ownership

Operating shopping center

40,000

68.0

67.4

(starting Q1 2010)

(starting Q4 2011)

Lodz (Residential)

Poland

2001

100

Ownership/

Planning permit valid

80,000*

4.8

Perpetual usufruct

Lodz Plaza

Kielce Plaza

Leszno Plaza

Liberec Plaza

Poland

Czech Republic

2009

2008

2006

100

Perpetual usufruct

Planning permit pending

Perpetual usufruct

Planning permit valid

Perpetual usufruct

Planning permit valid

Ownership

Operating shopping center

35,000

33,000

16,000

17,000

7.4

3.5

0.8

15.7

5.5

7.9

4.0

1.7

17.7

Koregaon Park Plaza

India

2006

100

Ownership

Operating shopping center

41,000

33.8

40.3

(starting Q1 2012)

Casa Radio

Romania

2007

Leased for 49 years

Detailed Zoning Plan

467,000*

116.1

152.3

(starting Q1 2009)

Iasi Plaza

Slatina Plaza

Targu Mures Plaza

Hunedoara Plaza

Timisoara Plaza

Constanta Plaza

Romania

Miercurea Ciuc Plaza

Romania

2007

2008

2007

2009

2007

(“PUD”) valid

100

Ownership

(“PUD”) valid

100

Ownership

Zoning Plan (“PUZ”) valid

Detailed Zoning Plan

Zoning Plan (“PUZ”) valid

Existing building

No valid permit

58,000

17,000

30,000

14,000

40,000

18,000

14,000

7.3

1.1

Sold

8.9

2.5

2.0

11.6

1.7

3.5

2.4

10.8

6.3

5.6

Kragujevac Plaza

Serbia

2007

100

Currently

Operating shopping center

22,000

Sold

41.8

Construction lease

(starting Q1 2012)

(Building Permit expired)

Belgrade Plaza (Visnjicka) Serbia

Belgrade Plaza (MUP)

Serbia

Shumen Plaza

Bulgaria

Arena Plaza Extension

Hungary

Piraeus Plaza

Greece

Other small plots, grouped

2007

2005

2002

100

Total

* GBA (sqm)

period (99 years) with

subsequent ownership

Ownership

Building Permit pending

32,000

Approval of DRP pending

63,000*

Planning permit valid

20,000

40,000

38,660

Land use rights

Building permit valid

Ownership

18.9

13.7

1.0

3.4

4.4

4.8

19.0

16.2

2.1

3.4

15.3

2.9

370.8

495.2

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 9

NOTE 9 - PROPERTY AND EQUIPMENT

Cost

Balance at January 1, 2013*

Additions

Disposals

Exchange rate effect

Land and

buildings

€’000

7,181

Balance at December 31, 2013

7,181

Additions

Disposals

Exchange rate effect

Balance at December 31, 2014

7,181

Accumulated depreciation and impairment

Balance at January 1, 2013*

Depreciation

Disposals

Exchange rate effect

Balance at December 31, 2013

Depreciation

Impairment**

Disposals

Exchange rate effect

2,691

2,776

700

4,357

(749)

(141)

3,542

(208)

3,400

3,403

194

(333)

(44)

3,220

197

(66)

(34)

Equipment

€’000

Fixtures

and ﬁ ttings

€’000

Airplane1

€’000

1,397

4,737

1,397

4,737

1,397

1,054

1,071

(4,737)

3,143

127

3,270

(3,270)

1,467

1,594

Total

€’000

17,672

(749)

(141)

16,857

(4,945)

11,978

10,291

423

(333)

(44)

10,337

282

700

(3,336)

(34)

7,949

4,029

6,520

7,381

Balance at December 31, 2014

3,561

3,317

1,071

Net carrying amounts

At December 31, 2014

At December 31, 2013

At January 1, 2013

3,620

4,405

4,490

322

954

326

343

* Restated in 2013 due to Retrospective application. A net amount of EUR 0.7 million was transferred to investment in Equity accounted investee Ercorner,

as part of implementation of IFRS 11.

** 2014 depreciation – including impairment of EUR 0.7 million due to ofﬁ ce building in Romania.

1 For the selling of the airplane refer to note 30(F).

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 10 - EQUITY ACCOUNTED INVESTEES

The Group has the following interest (directly and indirectly) in the below joint ventures (the Group has no investment in associates), as at December 31,
2014 and 2013:

Interest of holding

(percentage) as at

Interest of holding

(percentage) as at

Activity

December 31, 2014

December 31, 2013

Company name

Elbit Plaza USA II LP

Elbit Plaza India Real Estate Holdings Ltd. (“EPI”)

Elbit Kochin Ltd.

Bas - Adams Invest S.R.L 1

Bas - Colorado Invest S.R.L 1

Bas - Malibu Invest S.R.L 1

Bas - Spring Invest S.R.L 1

Bas - Sunny Invest S.R.L 1

Bas - Primavera Invest S.R.L 1

Bas development S.R.L 1

SIA Diksna (“Diksna”)

Country

USA

Cyprus

Romania

Inactive

Mixed-use

large scale projects

Inactive

Residential

Latvia

Operating shopping center

1 Refer also to note 30(J) for the transaction with joint venture partner.

None of the joint ventures are publicly listed.

The movement in equity accounted investees (in aggregation) was as follows:

Balance as at 1 January

Investments in equity-accounted investees

Share in results of equity-accounted investees, net of tax

Writedown of Equity-accounted investees2

Effect of movements in exchange rates

EPUS dissolved1

Equity-accounted investees disposed3

Balance as at 31 December 4

50%

47.5%

40%

N/A

50%

2014

€’000

40,141

463

1,641

(1,687)

2,740

(1,069)

42,229

50%

47.5%

40%

25%

12.5%

25%

50%

2013

€’000

161,779

1,849

952

(56,417)

(15,036)

(32,410)

(20,576)

40,141

1 EPUS was the top holding company of the US operations, holding all the discontinued operations in the US. Upon the disposal of all US assets, EPUS remained with undistributed cash

amounts, and had no activity, therefore the EPUS remaining asset was deemed not to be part of the discontinued operations, and therefore reclassiﬁ ed to equity accounted investees.

EPUS was dissolved in March 2013, and all of the remaining cash in it was distributed as liquidation dividend to the owners.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 10

2 Breakdown of the Group’s share of writedowns (reversals of writedowns) of trading properties projects held by equity accounted investees is as follows:

Project name (holding company name)

Bangalore (held by EPI)

Chennai (held by EPI)

Kharadi (sold in 2013)

Riga Plaza (held by Diksna)

Elbit Kochin

Új Udvar (sold in 2013)

Total

The year ended

December 31, 2014

December 31, 2013

€’000

(557)

2,463

(420)

201

1,687

€’000

31,017

20,745

4,311

(1,513)

1,857

56,417

3 Refer also to note 30(J) in respect of the termination of the BAS joint venture.

4 As of December 31, 2014, the loan to equity accounted investee Diksna totalled EUR 6.1 million bearing interest of 3 months EURIBOR +2.5% per annum (December 31, 2013 – EUR

7.04 million). Other investment in equity accounted investees is either through various equity instruments, or by loans to cover negative equity position considered part of the Group’s net

investment in the investee.

Material joint ventures

Within the joint ventures, two joint ventures were deemed as material, and these are EPI (due to holding of major schemes in Bangalore and Chennai) and Diksna
(being the only active shopping center held through a joint venture). The summarised ﬁ nancial information of the material joint ventures is as follows:

December 31, 2014

December 31, 2013

Current assets*

Trading properties-non current

Other current liabilities

Interest bearing loans from banks

Group loan to Diksna

Net assets (100%)

Group share of net asset (50%)**

Purchase price allocated to trading property

Carrying amount of interest in joint venture

EPI

€’0000

3,168

48,475

(709)

50,934

25,467

Diksna

€’000

2,696

90,000

(2,414)

(56,884)

(12,242)

21,156

10,578

EPI

€’000

1,274

46,752

(674)

47,352

23,676

Diksna
€’000

2,776

87,725

(1,275)

(59,046)

(14,078)

16,102

8,051

* Including cash and cash equivalents in the amount of EUR 0.8 million (2013 - EUR 1.1 million).

** Though EPI is 47.5% held by the Company, the Company is accounted for 50% of the results, as the third party holding 5% in EPI is deemed not to participate in accumulated losses,

hence EI and the Company, the holders of the remaining 95% each account for 50% of the results of EPI.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

The year ended

December 31, 2014

December 31, 2013

Revenue

Cost of operations

Interest expenses

Gain from reﬁ nance of loan

Reversal of writedown (Writedowns)

Total net proﬁ t (loss) and comprehensive income (100%)

EPI

€’000

(3,812)

(4,730)

Group share of Proﬁ t (loss) and comprehensive income (50%)

(2,365)

Interest income on Diksna loan

Impairment of purchase price allocated to trading property

Total results from investee

Immaterial joint ventures information

(2,365)

Diksna

€’0000

11,244

(4,291)

(2,018)

840

5,092

2,546

2,628

EPI

€’000

(66,024)

(67,446)

(33,723)

(18,750)

(52,473)

Diksna
€’000

10,122

(4,304)

(2,016)

1,800

3,026

7,666

3,833

3,923

With the exception of EPI and Diksna, all other December 31, 2014 and 2013 outstanding joint ventures were considered immaterial. The aggregation of the
information in respect of these immaterial joint ventures was as follows (the Group’s part):

Current assets

Trading properties

Interest bearing loans from banks

Current liabilities

Carrying amount of interest in joint venture

Revenues

Cost of operations

Writedowns (refer to impairment table above)

Loss and comprehensive income

December 31, 2014

December 31, 2013

€’000

7,152

(5,727)

(70)

1,416

The year ended

December 31, 2014

December 31, 2013

€’000

(201)

(309)

€’000

801

(674)

(6,168)

(6,915)

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 11

NOTE 11 - DERIVATIVES

The table below summarises the results of the 2014 and 2013 derivatives activity, as well as the outstanding derivatives as of December 31, 2014 and 2013:

Derivative type

Nominal

Fair value of

amount as of

derivatives at

December 31,

2014

Currency options1

EUR 25 million

(95)

Cross currency

Interest Rate SWAP2 N/A

Interest Rate

Swap (“IRS”) 13

IRS 24

IRS 35

Total

N/A

EUR 35.5 million

(894)

(989)

Gain

(loss)

2014

217

N/A

220

(689)

(232)

Fair value of

derivatives at

December 31,

2013

N/A

(222)

(475)

(213)

(910)

Gain

(loss)

2013

Maturity

date of

derivative

(2,364)

March 2015

N/A

December 2017

(251)

188

(31)

187

(2,271)

1 Selling options strategy (by writing call and put options through Israeli banks) in order to manage its foreign currency risk (EUR-NIS) inherent in its long term debentures series A and

series B issued in NIS. The Company wrote call option on an amount of EUR 25 million with a strike exchange rate of 4.92 NIS per EUR, and collected EUR 0.3 million in cash premium.

In respect of collaterals to this transaction refer to note 5 above. In respect of post balance sheet activity refer to note 33(B).

2 The Company was paying a ﬁ xed interest of 6.98% based on a nominal EUR amount of EUR 15.1 million and receiving an interest of six months WIBOR + 4.5% with the same

amortisation schedule as the Polish bonds (refer to note 17). The swap was settled in March 2013 for a cash payment of EUR 0.8 million, in order to release EUR 2.7 million restricted

cash served as guarantee in respect of the SWAP.

3 In respect of Suwalki project loan. The project company paid EUR ﬁ xed interest rate of 2.13% and receives three months Euribor on a quarterly basis, until June 30, 2014.

4 In respect of Kragujevac project loan. The project company paid EUR ﬁ xed interest rate of 1.85% and receives three months EURIBOR on a quarterly basis, until December 31, 2014.

5 In respect of Torun project loan. The project company pays ﬁ xed interest rate of 1% and receives three months Euribor on a quarterly basis, until December 31, 2017. Regarding pledges

in respect of derivative activity refer to note 29(d)(2).

None of the abovementioned activities qualiﬁ ed for hedge accounting.

Fair value measurement

Fair values of the SWAP may be determined in whole or in part using valuation techniques based on assumptions that are not supported by prices from current
market transactions or observable market data, where current prices or observable market data are not available.

Factors such as bid-offer spread, credit proﬁ le, collateral requirements and model uncertainty are taken into account, as appropriate, when fair values are
calculated using valuation techniques. Valuation techniques incorporate assumptions that other market participants would use in their valuations, including
assumptions about interest rate yield curves, and middle exchange rates, as determined by relevant central banks at each cut dates.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 12 - INTEREST BEARING LOANS FROM BANKS

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more
information about the Group’s exposure to interest rate, foreign currency and liquidity risk, refer to note 28. All interest bearing loans from banks are secured.
Terms and conditions of outstanding loans were as follows:

Non-current loans
Trading properties secured bank loans

Current loans (including current maturities of long-term loans)
Trading properties secured bank loans
Other secured bank loans

Total

Below is the breakdown of all outstanding bank loans:

Nominal interest rate

Currency

Torun project secured bank loan (1)
Liberec project secured bank loan (2)
Suwalki project secured bank loan
Zgorzelec project secured bank loan (3)
Kragujevac project secured bank loan
Koregaon Park project secured bank loan (4)
Bas project secured bank loans (5)

3M Euribor+3%
3M Euribor+1.5%
3M Euribor+1.65%
3M Euribor+2.75%
3M Euribor+5%
13.50%
3M EURIBOR+5.5%

EUR
EUR
EUR
EUR
EUR
INR
EUR

Other secured bank loans (6)

3M USD Libor+4%

USD

Total interest bearing liabilities

1 IRS on bank loans – refer to note 11.

December 31, 2014
€’000

December 31, 2013
€’000

112,962

37,885
-

37,885

172,810
2,528

175,338

December 31,
2014

€’000

46,735
20,468
29,886
21,993
-
22,065
9,700

Year of
maturity

2017
2018
2020
2014

2021
2014

December 31,
2013
Carrying amoung
€’000

47,906
20,498
31,595
21,993
29,108
21,710
-

150,847

172,810

2,528

150,847

175,338

2 Liberec loan – recourse loan. The Company obtained a waiver for the remaining maturity of the loan for all covenants breached.

3 Zgorzelec loan – mostly non-recourse loan (except a component of a EUR 1.2 million which is recourse) –the loan has expired – the Company is in discussions with the ﬁ nancing bank on

signing new facility. The Company has also pledged its plot in Leszno, Poland (refer also to note 11) in favour of the ﬁ nancing bank. Full loan reclassiﬁ ed as short termed. Refer also to

note 33(d) for subsequent event on this issue.

4 Koregaon Park loan – out of 2014 balance, an amount of EUR 14.2 million is recourse loan.

5 The two loans have expired, and the Company is currently negotiates with the ﬁ nancing banks new terms and conditions for the loans. Loans are with recourse on interest payments (not

principal). Both loans were reclassiﬁ ed as short term.

6 Refer to note 30(F) in respect of selling of the airplane and the repayment of the secured loan.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 12,13,14

The below table summarise the main covenants (Loan to Value (“LTV”) and Debt Service Coverage Ratio (“DSCR”)) on group loans:

Bank facility

Actual LTV

Torun project secured bank loan

Liberec project secured bank loan

Suwalki project secured bank loan

Zgorzelec project secured bank loan1

49%

130%

69%

N/A

Contractual

LTV

70%

80%

70%

N/A

Actual DSCR

Contractual

DSCR

1.56

1.07

1.68

N/A

1.25

1.15

1.20

N/A

1 The Zgorzelec loan has expired, with no new ratios established, therefore no DSCR and LTV comparisons can be made

Long term vs. Short term reclassiﬁ cation

Following the conclusion of the restructuring plan in 2014, all non-current maturities of interest bearing loans (previously short termed due to cross-default clause
covenant) were reclassiﬁ ed to long term, unless covenant breach is still valid, and no waiver obtained.

NOTE 13 - TRADE PAYABLES

Construction related payables

Other trade payables

Total

Currency

Mainly in PLN

December 31, 2014

December 31, 2013

€’000

1,893

€’000

1,115

1,317

2,432

NOTE 14 - RELATED PARTIES PAYABLES

EI Group- ultimate parent company – expenses recharged

Other related parties in EI group

Total

Currency

EUR, USD

EUR

December 31, 2014

December 31, 2013

€’000

457

704

1,161

€’000

672

272

944

For payments (including share based payments) to related parties refer to note 31. Transactions with related parties are priced at an arm’s length basis.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 15 - OTHER LIABILITIES

Short-term

Advance payment in respect of selling of trading property1

Obligations to tenants

Accrued bank interest

Obligation in respect of plot purchase

Loan from non-controlling interest

Accrued expenses and commissions

Government institutions and fees

Salaries and related expenses

Other

Total

Currency

INR, RON

EUR

Mainly EUR

EUR

December 31, 2014

December 31, 2013

€’000

5,868

2,401

2,265

1,380

215

529

180

287

€’000

2,343

2,613

2,377

1,380

1,455

305

416

174

156

13,175

11,219

1 Advances in respect of selling of Koregaon Park shopping center. Refer to note 33(A) for more details. In addition, an amount of EUR 2 million was received as an advance payment for a

potential selling of the plot of the Company in Iasi, Romania.

NOTE 16 - DEBENTURES AT FAIR VALUE THROUGH PROFIT OR LOSS

In comparative 2013 ﬁ gures, and up and until December 9, 2014 (refer to note 30(A) for details) NIS 190.6 million par value of debentures Series A (raised in July
2007) and NIS 319.2 million par value of debentures Series B (raised in February and May 2008), were measured at fair value through proﬁ t or loss. For the terms
and conditions of both debentures series, prior and post the Restructuring Plan, refer to note 17.

The below table summarise the quotes of the bonds (in NIS cents):

Series A Debentures
Market quote at January 1:
Market quote at December 31*:

Series B Debentures
Market quote at January 1:
Market quote at December 31*:

Total

2014
€’000

91.60
110.6

92.42
112.07

37,885

2013
€’000

80.62
91.60

90.47
92.42

175,338

* In 2014: This is the last quote of previous Debentures on December 9, 2014. Following this date a total carrying amount was de-recognised to proﬁ t or loss, as part of re-measurement of

newly extended debentures. For the calculation of the gain due to new debentures series refer to note 17.

Following the issue of new debentures, the Company decided to present all its bonds at amortised cost (refer to note 17). Therefore, as of December 31, 2014,
there are no more debentures measured at fair value through proﬁ t or loss.

The total net carrying amounts (in EUR thousands) of the Debentures measured at fair value were as follows:

Series A Debentures
Series B Debentures

Total

December 9, 2014
€’000

December 31, 2013
€’000

43,260
73,411

116,671

36,294
61,689

97,983

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 15,16,17

All debentures (including those presented at amortised cost) were reclassiﬁ ed in 2013 to current liabilities, in view of the decision to withhold all payments
to creditors, which was an event of default. For more details on the Debt Restructuring Plan, refer to note 30(A). In 2014 the presentation of debentures is in
accordance with repayment schedule, as determined under the trust deed of the Debentures.

Fair value

The fair value of debentures was determined by an active market price quotation, as the debentures are traded on the TASE.

NOTE 17 - DEBENTURES AT AMORTISED COST

Old debentures issued in Israel

In comparative 2013 ﬁ gures, and up and until December 9, 2014 (refer to note 30(A) for details) NIS 54.6 million par value of debentures Series A (raised after
July 2007) and NIS 189.3 million net par value of debentures Series B (raised after May 2008, net after deduction of NIS 15.9 million par value which are held by a
Company’s subsidiary), were measured at amortised cost.

Both debentures principal were adjusted (“adjusted par value”) based on the change in the Israeli Consumer Price Index (“CPI”), meaning that every 1 percent
change in Israeli CPI is causing a one (1) percent change in the principal value of the bond, and also on the interest paid. Indexation is made on a monthly basis.
As the Company holds indirectly debentures series B in treasury (refer to note 30(I)), all the information in this note relates to the net debenture debt of the
Company, after eliminating debentures held in treasury.

Table 1

The total net adjusted par value, being the carrying amounts of old amortised costs debentures (in EUR thousands) were as follows:

Series A Debentures
Series B Debentures

Total

December 9, 2014
€’000

December 31, 2013
€’000

13,522
41,653

55,175

13,765
42,403

56,168

New debentures following the conclusion of the restructuring plan

In view of the signiﬁ cant change in the terms of the Debentures, the Company de-recognised all of its outstanding debentures, and recognised new debentures at
fair value (with subsequent measurement at amortised cost) determined by the market quote at the end of the trade date of December 10, 2014.

Table 2

Following the above, a value of EUR 170.2 million was deemed to be the fair value of the principal of new debentures.

Short-term

Series A Debentures*

Series B Debentures*

Polish Debentures**

Total

Principal fair value

determined

Effective

interest rate

Quote deemed as fair

Value of Debenture
(in NIS or PLN cents)

54,119

101,476

14,562

170,157

12.6%

15.2%

13.8%

112

105.34

96.5

* In respect of Israeli bonds, market quote of December 10, 2014 was inclusive of accrued interest due to the year 2014, therefore, and in order to reach a clean quote of the principal,

accrued interest in the amount of EUR 3.5 million and EUR 7.9 million had to be deducted from the fair value derived from the quote of debentures A, and B, respectively.

** See below in respect of general information on Polish bonds. Fair value of Polish debentures (untraded) was determined using the known effective interest rates determined for Israeli

debentures, and the value of the Polish debentures was derived from it.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

Gain from de-recognition and re-recognition (restructuring plan gain)

Table 3

As a result of the above, the Company recorded a gain of EUR 3.4 million from eliminating the old debentures and recording of the new debentures. Refer to table
3 below for the calculation. The gain is calculated as follows:

Items de-recognised
Total Israeli debentures at fair value through proﬁ t or loss (refer to note 16)
Total Israeli debentures at amortised costs (refer to table 1 above)
Total Polish debentures
Old accrued interest due debentures at amortised cost as of December 10, 2014

Total amounts de-recognised

Items added
Fair value of new bonds (refer to table 2 above)
New accrued interest due debentures at amortised cost as of December 10, 2014
Value of new shares issued to bondholders (share premium - refer to note 19)

Total amounts recognised

Gain recorded at December 10, 2014

Carrying amount recognised
(de-recognised) €’000

(116,671)
(55,175)
(14,425)
(6,097)

(192,368)

170,157
12,614
6,154

188,925

3,443

As part of the restructuring plan (refer to note 30(A)), and as interest due up and until December 31, 2013 was added to the principal of the debentures, an
additional NIS 5.5 million par value debentures series A and net NIS 13.3 million par value debentures series B were issued (refer also to note 30(A)). Also
additional PLN 2.8 million of par value was issued to Polish investors.

Table 4

Following the additional issuance, the total par value and adjusted par value (in EUR thousands) outstanding were as follows:

Series A Debentures

Series B Debentures (Net of treasury bonds)

Polish Bonds

Total

Par Value

Adjusted par value

Fair value determined

Discount Created*

€’000

51,447

103,813

15,090

€’000

62,108

121,535

15,090

198,733

€’000

54,119

101,476

14,562

170,157

€’000

7,989

20,059

528

28,576

* The discount created will be recognised as a ﬁ nance cost across the remaining maturity of the debentures, according to the effective interest rate method.

Following the disposal of several asset by the Company (refer to notes 30(D) and 30(E), the Company has repaid principal to Bondholders a total net amount
of EUR 12.1 million, representing 75% of the total proceeds obtained of asset disposal. The Company also repaid all outstanding net interest accrued on the
Debentures in the amount of EUR 13.8 million. The payment of Interest was done also on account of the ﬁ rst six days of 2015 and therefore an amount of
EUR 0.2 million is presented as part of prepaid expenses.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 17

Following the above, refer to the below table for the movement in the carrying amount of the debentures between December 10, 2014 and December 31, 2014:

Fair value As at

Amortisation

December 10, 2014

Of discount in 2014

€’000

54,119

101,476

14,562

170,157

216

488

759

Repayment

Of principal

€’000

(2,615)

(8,406)

(1,036)

(12,057)

Forex and

Carrying Amount

inﬂ ation

as at December 31,

€’000

2014* €’000

1,537

2,820

(354)

4,003

53,257

96,378

13,227

162,862

Series A Debentures

Series B Debentures

Polish Debentures

Total

* Carrying amount as at December 31, 2014 is composed of EUR 191,545 thousands net debentures obligation and EUR 28,683 thousands of discount outstanding.

For debentures established covenants refer to note 29 (b).

As a result of the restructuring plan, new interest rates and maturities were applied to the debentures as follows:

Series A Debentures

Series B Debentures

Polish Debentures

Interest rate

Principal ﬁ nal maturity

Interest rate

Before

4.5%+ CPI

5.4%+ CPI

After

6%+ CPI

6.9%+ CPI

4.5%+ 6M WIBOR

6%+ 6M WIBOR

Before

2017

2015

2013

After*

2019

2018

2017

* Principal payment is subjected to the 75% mandatory prepayment (refer to note 30(A). Also, if until December 1, 2016 the Company manages to repay NIS 434 million (EUR 92 million)

of the Unsecured Debt, then the remaining principal payments shall be deferred for an additional year.

Both new NIS series of debentures are rated BBB- as of the date of approval of these ﬁ nancial statements.

Bonds issued in Poland

In November 2010, the Company completed a bond offering to Polish institutional investors. The Company raised a total of PLN 60 million (approximately EUR
15.2 million). Following the completion of the restructuring plan (refer also to note 30(A)), the terms and conditions of the bonds were changed, as described
above. As also discussed above, additional PLN 2.8 million of par value was issued to Polish investors following the conclusion of the restructuring plan. Refer
also to table 4 above for the determination of fair value of the new Polish bonds.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 18 - RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

Deferred taxes recognised are attributable to the following items:

Assets/(liabilities) 2014

Property, equipment and other assets

Debentures and structures at fair value through proﬁ t or loss

Tax value of loss carry-forwards recognised*

Deferred tax liability, net

* Due to tax losses created on the Company level.

Assets/(liabilities) 2012

Investment property

Property, equipment and other assets

December 31,

2012 restated1

€’000

(1,003)

(293)

Debentures and structures at fair value through proﬁ t or loss

(9,588)

Derivatives

Available for sale ﬁ nancial assets

Tax value of loss carry-forwards recognised

Deferred tax liability, net

(1,569)

(184)

5,707

(6,930)

1 Restated due to Retrospective application.

Unrecognised deferred tax assets

December 31,

Recognised in

December 31,

2013

€’000

(379)

(9,248)

9,248

(379)

Proﬁ t or loss 2014

€’000

1,300

1,914

(1,914)

1,300

2014

€’000

921

(7,334)

7,334

921

Recognised in

December 31,

Proﬁ t or loss

comprehensive income

€’000

1,003

(86)

9,588

1,569

(5,707)

6,367

€’000

184

2013
€’000

(379)

Deferred tax assets have not been recognised in respect of tax losses in a total amount of EUR 135,580 thousands (2013: EUR 90,043 thousand).

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable proﬁ t will be available against which the
Group can utilise the beneﬁ ts there from. As of December 31, 2014 the expiry date status of tax losses to be carried forward is as follows:

Total tax losses carried forward

2015

2016

2017

2018

2019

After 2019

164,915

23,960

6,797

7,549

14,484

25,800

86,325

Tax losses are mainly generated from operations in the Netherlands. Tax settlements may be subjected to inspections by tax authorities. Accordingly, the amounts
shown in the ﬁ nancial statements may change at a later date as a result of the ﬁ nal decision of the tax authorities.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 18,19

NOTE 19 - EQUITY

December 31, 2014

Remarks

Number of shares

December 31, 2013
Number of shares

Authorised ordinary shares of par value EUR 0.01 each

1,000,000,000

Issued and fully paid:

At the beginning of the year

Issuance of shares in respect of right issuance

Issuance of shares to bondholders

See below1

See below2

297,186,138

282,326,830

106,047,307

297,186,138

At the end of the year

685,560,275

297,186,138

1 Right issuance - as part of the implementation of the restructuring plan, certain shareholders participated in a right issuance process, following of which EUR 20 million were injected to

the Company, and the Company has issued a total of 282,326,830 shares to these shareholders for a share price 0.0675 EUR per share. The premium resulted from the share issuance in

a total amount of EUR 16.2 million was attributed to share premium. Legal, prospectus related, and other expenses associated with the issuance of shares in a total amount of

EUR 1.6 million was also attributed to share premium. For more details on the right issuance process refer to note 30(A).

2 Issuance of shares to bondholders - as part of the implementation of the restructuring plan, a total of 106,047,307 shares were issued to the debentures holders, for which the

bondholders have paid the par value of the shares. As a result of the above, a total deemed premium of EUR 6.2 million was contributed to the share premium of the entity, based on the

market value of the shares granted at the closing of the day of trading December 10, 2014.

As a result of the abovementioned two processes, the holding rate of EI in the Company was reduced from 62.25% to 44.9%.

Share based payment reserve

Other capital reserve is in respect of Employee Share Option Plans (“ESOP”) in the total amount of EUR 35,520 thousands as of December 31, 2014
(2013 – EUR 35,313 thousands). Regarding the amendments of ESOP 1 and ESOP No. 2 and its effect on other capital reserves refer to note 21.

Translation reserve

The translation reserve comprises, as of December 31, 2014, all foreign exchange differences arising from the translation of the ﬁ nancial statements of foreign
operations in India.

Dividend policy

The Company shall not make any dividend distributions, unless (i) at least 75% of the Unpaid Principal Balance of the Debentures (EUR 199 million) has been
repaid and the Coverage Ratio on the last Examination Date prior to such Distribution is not less than 150% following such Distribution, or (ii) a Majority of the
Plan Creditors consents to the proposed Distribution.

Notwithstanding the aforesaid, in the event an additional capital injection of at least EUR 20 million occurs, then after one year following the date of the additional
capital injection, no restrictions other than those under the applicable law shall apply to dividend distributions in an aggregate amount up to 50% of such
additional capital injection.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

NOTE 20 - EARNINGS PER SHARE

The calculation of basic earnings per share (“EPS”) at December 31, 2014 was based on the loss attributable to ordinary shareholders of EUR 119,687 thousand
(2013: loss of EUR 218,073 thousand) and a weighted average number of ordinary shares outstanding of 309,955 thousand (2013: 297,181 thousand).

The calculation of basic EPS at December 31, 2013 from continuing operations was based on the loss attributable to ordinary shareholders of EUR 218,138
thousand.

Weighted average number of ordinary shares (for both EPS and EPS from continuing operations)

In thousands of shares with a EUR 0.01 par value

Issued ordinary shares at 1 January

Issuance of shares due to restructuring plan

Weighted average number of ordinary shares at 31 December

December 31, 2014

December 31, 2013

€’000

297,186

12,769

309,955

€’000

297,186

The calculation of diluted earnings per share from continuing operations for comparative ﬁ gures is calculated as follows:

Weighted average number of ordinary shares (diluted)

In thousands of shares with a EUR 0.01 par value

Weighted average number of ordinary shares (basic)

Effect of share options on issue

Weighted average number of ordinary shares (diluted) at 31 December

December 31, 2014

December 31, 2013

€’000

309,955

€’000

297,186

The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the
period that the options were outstanding.

NOTE 21 - EMPLOYEE SHARE OPTION PLAN

On October 26, 2006 the Company’s Board of Directors approved the grant of up to 33,834,586 non-negotiable options for the Company’s ordinary shares to the
Company’s board members, employees in the company and other persons who provide services to the Company including employees of the Group (”Offerees”).
The options were granted to the Offerees for no consideration.

On November 22, 2011 the Company’s general shareholders meeting and the Board of Directors approved to amend the 1st ESOP to extend the Option Term (i.e.,
as deﬁ ned in the 1st ESOP, being the term during which options can be exercised under the 1st ESOP) from seven (7) to ten (10) years from the Date of Grant.

Furthermore, 2nd ESOP plan was adopted on November 22, 2011 which is based on the terms of the 1st ESOP as amended in accordance with the terms as
referred to above, with a couple of amendments, the most important of which is the total number of options to be granted under the 2nd ESOP is fourteen million
(14) and a cap of GBP 2.

On November 22, 2012 the Company’s general shareholders meeting and the Board of Directors approved to amend the 1st ESOP to extend the Option Term (i.e.,
as deﬁ ned in the 1st ESOP, being the term during which options can be exercised under the 1st ESOP) from ten (10) to ﬁ fteen (15) years from the Date of Grant.

FINANCIAL STATEMENTS

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 20,21

Exercise of the options is subject to the following mechanism:

Grant date / employees entitled

ESOP No.1

Option grant to key management at October 27, 2006

Option grant to employees at October 27, 2006

Total granted in 2006

Total granted in 20072

Total granted in 20082

Total granted in 20092

Total granted in 20112

ESOP No.2

Total granted in 20112

Total granted in 20122

Total granted in 20132

Number

of options

13,218,073

1,858,589

15,076,662

1,016,156

763,887

391,668

120,000

Vesting

conditions

Contractual life

options1

See below3

Three years of service

15 years

4,704,000

Three years of service

930,000

Three years of service

10 years

1,270,000

Three years of service

Total share options Granted

24,272,373

1 Following the 4th amendment of ESOP1, the contractual life for stock options granted changed from 10 years to 15 years.

2 Share options granted to key management: 2007 – 100,000 share options; 2008 – 260,000 share options; 2009 - 73,334 share options; 2011- 3,225,000 share options (ESOP No. 2);

2012 – 450,000 share options; 2013 – 150,000 share options.

3 Vesting conditions - On November 25, 2008 the Company’s general shareholders meeting and the Board of Directors approved modiﬁ cation of the ﬁ rst ESOP. The amendment plan

determined that all options that were not vested on October 25, 2008 (“record date”) shall vest over a new three-year period commencing on the record date, in such way that each year

following that date one third of such options shall be vested. The number of options which were modiﬁ ed under the amendment was 28,182,589.

On exercise date the Company shall allot, in respect of each option so exercised, shares equal to the difference between (A) the opening price of the Company’s
shares on the LSE (or WSE under certain conditions) on the exercise date, provided that if the opening price exceeds GBP 3.24, the opening price shall be set at
GBP 3.24 (Except 2nd ESOP as stated above); less (B) the Exercise Price of the Options; and such difference (A minus B) will be divided by the opening price of
the Company’s Shares on the LSE (or WSE under certain conditions) on the exercise date:

Outstanding at the beginning of the year

Exercised during the year**

Forfeited during the period - back to pool**

Granted during the year

Outstanding at the end of the year

Exercisable at the end of the year

Weighted average

exercise price* 2014

GBP

0.43

0.42

0.43

Number of

Weighted average

exercise price* 2013

GBP

0.43

0.45

0.29

0.43

options

2014

25,061,138

(618,765)

24,442,373

23,115,706

Number of

options
2013

24,997,557

(1,586,419)

1,650,000

25,061,138

21,070,033

* The options outstanding at 31 December 2014 have an exercise price in the range of GBP 0.28 to GBP 0.54 (app. EUR 0.34 - EUR 0.65), and have weighted average remaining contractual

life of 7.1 years. The weighted average share price at the date of exercise for share options exercised in 2013 was GBP 0.425.

** The total accumulated share based payment costs due to options exercise and forfeiture were 13,216 thousands as of December 31, 2014 (December 31, 2013 – EUR 13,073 thousands,

December 31, 2012 – 12,280 thousands).

PLAZA CENTERS N.V. ANNUAL REPORT 2014

FINANCIAL STATEMENTS

Financial statemen

The maximum number of shares issuable upon exercise of all outstanding options as of the end of the reporting period is 34,783,568.

The estimated fair value of the services received is measured based on a binomial lattice model using the following assumptions:

Key management

Employees

personnel 2014

personnel 2013

€’000

2014

€’000

Fair value of share options and assumptions

Fair value at measurement date (in EUR)*

Weighted average Exercise price

Expected volatility

Weighted average share price (Gbp)

Suboptimal exercise multiple

Expected dividends

Risk-free interest rate

(based on the yield rates of the non-indexed

linked UK treasury bonds)

22,849

0.28

49.36%-49.85%

0.28

0.33%-4.42%

2013

€’000

183,403

0.29

46.74%-49.9%

0.3

1.5

0.18%-4.42%

* Not including information in respect of the amendment of the 1st ESOP.

During 2014 the total employee costs for the share options granted was EUR 207 thousands (2013 - EUR 424 thousands).

Due to low trading volumes, there is not enough information concerning Plaza share price. Therefore, in order to derive the expected stock price volatility, analysis
was performed based on the data of Plaza, and of three other companies operating in the similar segment, which have similar market capital and are traded at
the Warsaw Stock Exchange. In an attempt to estimate the expected volatility in 2013 and 2012, ﬁ rst calculation of the short-term standard deviation (standard
deviation of company’s share during one year as of the options’ Grant Date) has been done. In the next stage, calculation of the long-term standard deviation
(standard deviation for the period starting one year prior to the Grant Date for the remaining period of the plan) has been done, where the weight of the standard
deviation for the Company was ranging between 45% -65% and the weight of the average of standard deviations of comparative companies was 35% – 55%
(2012: the same)The working assumption is that the standard deviation of the underlying asset yield converges in the long term with the multi-year average.

PCI and EPI Share Option plans

On March 14, 2011 (“Date of grant”) the Company’s direct subsidiaries PCI and EPI (“Companies”) granted non-negotiable options, exercisable into the
Companies’ ordinary shares, to employees, directors and ofﬁ cers of the Companies and/or afﬁ liates of the Companies. The options were granted for no
consideration and have 3 years of vesting with contractual life of 7 years following the date of grant of such options. PCI had granted 14,212 share options with
exercise price of EUR 227 per option. EPI had granted 51,053 share options with exercise price of EUR 0.01 per option. PCI and EPI common shares valuation
methodology was based on NAV Model. The expected stock price volatility was based on 5 Indian publicly traded real estate companies and set to range
43.31%-54.4%. The annual risk free interest rate range was: 1.25% -4.03%. The suboptimal exercise multiple for key management personnel were set to 2 and
for employees 1.5 in 2011. The Option Plans include, among others, a Cashless Exercise mechanism prior to/following IPO and conversion upon the listing of a
subsidiary.

The total number of Underlying Shares reserved for issuance under PCI Plan and EPI Plan and any modiﬁ cation thereof shall be 14,697 Underlying Shares and
52,600 Underlying Shares, respectively (representing approximately 5% of the share capital of the Companies on a fully diluted basis, inclusive of all Underlying
Shares).

FINANCIAL STATEMENTS

100

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 22,23

NOTE 22 - RENTAL INCOME

a. Continuing operations (rental)

Rental income from operating shopping centers1

Other rental income2

Total

For the year ended

December 31, 2014

December 31, 2013

€’000

21,343

769

22,112

€’000

22,480

1,198

23,678

1 As of the end of 2014 there are ﬁ ve operating shopping centers presented as part of trading properties, 2013 – six), following the sale Kragujevac shopping center in September 2014

(refer to note 30(D)).

2 2014 – Small scale rental fees charged on plots held by the Group (2013 - Composed mainly from rental income generated by the Investment property Prague 3 (disposed in July 2013) in

the amount of EUR 0.7 million). The rest of

b. Continuing operations (entertainment centers)

Revenue from operation of entertainment centers is attributed to a subsidiary of the Company known as as “Fantasy Park” which provided gaming and
entertainment services in operating shopping centers. As of December 31, 2014, these subsidiaries operate in one shopping centre held by the group (December
31, 2013 – in four shopping centers).

NOTE 23 - COST OF OPERATIONS

a. Continuing operations (cost of operations)

Operating shopping centers1

Other cost of operations2

Total

1 Refer to note 22 above.

For the year ended

December 31, 2014

December 31, 2013

€’000

7,669

822

8,491

€’000

8,187

1,221

9,408

2 2014 - Attributed to small scale costs on plots held by the Group (2013- Composed mainly from costs generated by the Investment property Prague 3 (disposed in July 2013) in the

amount of EUR 0.3 million). The rest of the cost is attributed to small scale costs on plots held by the Group.

b. Continuing operations (entertainment centers)

Refer also to note 22 (b) above. The costs are inclusive of management of the operation of the entertainment centers, as well as utility, rent and spent material
associated with the operation of the entertainment centers.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

101

FINANCIAL STATEMENTS

Financial statemen

NOTE 24 - ADMINISTRATIVE EXPENSES AND RESTRUCTURING COSTS

a. Administrative expenses, excluding restructuring costs

Salaries and related expenses

Professional services

Ofﬁ ces and ofﬁ ce rent

Travelling and accommodation

Depreciation and amortisation

Others

Total

For the year ended

December 31, 2014

December 31, 2013

€’000

3,594

2,961

281

266

133

199

7,434

€’000

4,522

3,743

445

180

382

163

9,435

* Restated mainly due to Retrospective application – refer to note 3 regarding initial application of the new suite of standards. Additional reclassiﬁ cation of EUR 3.5 million of administrative

expenses (of mainly marketing costs) into cost of operations was performed in order to better reﬂ ect the operation performance of active shopping centers and entertainment activities.

b. Restructuring costs

The Company incurred restructuring cost as a result of the restructuring process completion during 2013 and 2014 (refer to note 30(A)).

NOTE 25 - OTHER INCOME AND OTHER EXPENSES

Gain from selling property and equipment

Income from insurance company (refer to note 30 (G))

Other income

Total other income

Impairment of Kochi advance

Impairments of other assets1

Loss from selling turbines, airplane and other

Change in fair value of investment property2

Other expenses related to plots sold

Total other expenses

Other expense, net

For the year ended

December 31, 2013

December 31, 2012

€’000

Restated* €’000

2,287

197

2,484

(1,014)

(852)

(641)

(2,507)

390

413

(4,321)

(2,548)

(4,267)

(332)

11,468

(23)

(11,055)

1 2014 – Including impairment of Palazzo Du Calle ofﬁ ce building in Romania in the amount of EUR 0.7 million. 2013 - Mainly due to assets associated with trading properties in Romania

(Targu Mures and BAS).

2 2013 – Due to the impairment of the Prague 3 asset sold in July 2013.

FINANCIAL STATEMENTS

102

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 24,25,26,27

NOTE 26 - NET FINANCE INCOME (COSTS)

Recognised in proﬁ t or loss

Gain from settlement of bank debt (refer to note 30(F))

Finance income from hedging activities through sale of options

Foreign exchange gain on bank deposits, bank loans

Interest income on bank deposits

Finance income from held for trading ﬁ nancial assets

Changes in fair value of derivatives

Interest from loans to related parties

Finance income

Interest expense on debentures (including CPI)

Interest expense on bank loans

Changes of fair value in debentures measured at fair value through proﬁ t or loss*

Loss from reissuance of bonds

Finance costs from hedging activities through sale of options

Foreign exchange losses on debentures

Other ﬁ nance expenses

Subtotal
Less-borrowing costs capitalised to trading properties under development

Finance costs

Net ﬁ nance costs

For the year ended

December 31, 2014

December 31, 2013

€’000

622

217

202

1,263

(5,325)

(9,557)

(21,290)

(469)

(199)

(36,840)

(35,577)

119

956

103

1,288

(9,580)

(10,732)

(13,185)

(5,707)

(2,364)

(5,352)

(242)

(47,162)

6,530

(40,632)

(39,344)

* Credit risk of the entity couldn’t be reliably measured in 2014, as the Company started the year at a state of default in her payments, and no reliable cash ﬂ ow projection could have been

measured. In 2013 the change in fair value includes a total of EUR 4 million attributable to the credit risk of the Company.

NOTE 27 - TAXES

Tax recognised in proﬁ t or loss

Current year

Deferred tax beneﬁ t (refer to note 18)

Total

Deferred tax expense (tax beneﬁ t)

Origination and reversal of temporary differences

Total

For the year ended

December 31, 2014

December 31, 2013

€’000

(18)

1,300

1,282

€’000

(295)

6,551

6,256

For the year ended

December 31, 2014

December 31, 2013

€’000

1,300

€’000

6,551

PLAZA CENTERS N.V. ANNUAL REPORT 2014

103

FINANCIAL STATEMENTS

Financial statemen

Reconciliation of effective tax rate:

Dutch statutory income tax rate

Loss from continuing operations before income taxes

Tax at the Dutch statutory income tax rate

Recognition of previously unrecognised tax losses

Effect of tax rates in foreign jurisdictions

Current year tax loss for which no deferred tax asset is provided (1)

Non-deductible expenses

Tax Expense (Tax beneﬁ t)

1 2013 and 2014 – Mainly due to impairments not recognised for tax purposes.

The main tax laws imposed on the Group companies in their countries of residence:

The Netherlands

25%

For the year ended

December 31, 2014

December 31, 2013

€’000

25%

(120,969)

(30,242)

(981)

6,356

18,695

4,890

(1,282)

€’000

25%

(224,394)

(56,098)

19,607

26,854

3,381

(6,256)

a. Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25%. The ﬁ rst EUR 200,000 of proﬁ ts is taxed at a rate of

20%. Tax losses may be carried back for one year and carried forward for nine years.

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

- Motive Test, the investee company is not held as passive investment;
- Tax Test, the investee company is taxed locally at an effective rate of at least 10% (calculated based on Dutch tax accounting standards);
- Asset Test, the investee company owns (directly and indirectly) less than 50% low taxed passive assets.

India

The corporate income tax rate applicable to the taxable income of an Indian Company is 32.445% (including surcharge of 5% and cess of 3%) or 33.99%
(including surcharge of 10% and cess of 3%. Surcharge of 5% is applicable if the total income exceeds INR 10 million (EUR 0.12 million) but is less than INR 100
million (EUR 1.2 million) and 10% if the total income exceeds INR 100 million). Minimum alternate tax (MAT) of 20.01% (including surcharge of 5% and cess of
3%) or 20.96% (including surcharge of 10% and cess of 3%) would apply on the taxable book proﬁ ts of a company.

Taxable book proﬁ ts are computed in accordance with relevant provisions of the Indian Income Tax Act. The ﬁ nal tax payable is the higher of the MAT liability or
corporate income tax payable. If taxes are paid under MAT, then credit to the extent of MAT paid over corporate income tax is available (MAT credit). MAT Credit
can be availed, if the company has future taxable proﬁ ts in the following ten years and credit to the extent of difference of the MAT payable and corporate income
tax payable of the Company is allowed.

Capital gains on transfer of capital assets (on which tax depreciation has not been claimed) are taxed at the rate of 21.63% (Including surcharge of 5% and rate of
3%) or 22.66% (including surcharge of 10% and cess of 3%), provided that the capital assets were held for more than 36 months immediately preceding the date
of the transfer or 32.445% (including surcharge of 5% and cess of 3%) or 33.99% (including surcharge of 10% and cess of 3% if they were held for less than 36
months (in case of capital asset being shares or any security listed on a stock exchange in India or unit of the Unit Trust of India or a Unit of Mutual fund or Zero
Coupon Bonds, a period of 12 months is considered).

Dividends paid out of the proﬁ ts are subject to Dividend Distribution Tax at the rate of 19.99% (on account of grossing up and including surcharge of 10% and
cess of 3%) There is no withholding tax on dividends distributed by an Indian company and no additional taxes need to be paid by the Shareholder. Business
losses can be offset against proﬁ ts and gains on any business or profession for a period of eight years from the incurrence year’s end. There is no limit for carry
forward of unabsorbed depreciation.

FINANCIAL STATEMENTS

104

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ts NOTE 27

India-Cyprus treaty issue

India has a Tax Treaty with Cyprus and under the Indian domestic tax laws, a resident of Cyprus would be eligible to claim recourse to the provisions of the India-
Cyprus Tax Treaty to the extent the provisions of the Tax Treaty are more beneﬁ cial than those of the Indian domestic tax laws.

The India-Cyprus Tax Treaty contains more beneﬁ cial provisions in respect of taxation of interest, capital gains etc. (In connection with the taxability of interest
income, tax rates in the Indian domestic tax laws are more beneﬁ cial than those in the Tax Treaty in certain cases such as interest earned on foreign currency
loans given between 1 June 2012 and 1 July 2017).

However, with effect from 1 November 2013, Cyprus has been notiﬁ ed as a Notiﬁ ed Jurisdictional Area (“NJA”) under the Indian domestic tax laws due to lack of
effective exchange of information with Cyprus.

The notiﬁ cation of Cyprus as an NJA is an anti tax-avoidance measure and provides for onerous tax consequences in respect of transactions with Cypriot entities.

The consequences of entering into transactions with Cypriot entities in light of the NJA provisions are:

•

If a taxpayer enters into a transaction with a person in Cyprus, then all the parties to the transaction shall be treated as Associated Enterprises [‚AE’] and
the transaction shall be treated as an international transaction resulting in application of transfer-pricing provisions contained in the Indian domestic tax law
including maintenance of prescribed documentation;

• No deduction in respect of any payment made to any ﬁ nancial institution in Cyprus shall be allowed unless the taxpayer furnishes an authorisation allowing for

seeking relevant information from the said ﬁ nancial institution;

• No deduction in respect of any other expenditure or allowance arising from the transaction with a person located in Cyprus shall be allowed unless the taxpayer

maintains and furnishes the prescribed information;

•

If any sum is received from a person located in Cyprus, then the onus is on the taxpayer to satisfactorily explain the source of such money in the hands of such
person or in the hands of the beneﬁ cial owner, and in case of his failure to do so, the amount shall be deemed to be the income of the taxpayer;

Any payment made to a person located in Cyprus shall be liable for withholding tax at the highest of the following rates - (a) rates prescribed in the domestic tax
laws (b) rates prescribed in the Tax Treaty (c) 30 per cent

Despite the above, the Company does not expect the above to have a material effect on its business in India, as , the proposed transaction with potential buyer
(refer to note 33(A)) will not give rise to a capital gain on Cypriot level and hence, there would no impact of the above provisions for the Group.

PLAZA CENTERS N.V. ANNUAL REPORT 2014

105

FINANCIAL STATEMENTS

Financial statemen

NOTE 28 - FINANCIAL INSTRUMENTS

FINANCIAL RISK MANAGEMENT

Overview

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

• Credit risk
• Liquidity risk
• Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing
risk, and the Group’s management of capital.

The Board of Directors has established a continuous process for identifying and managing the risks faced by the Group (on a consolidated basis), and conﬁ rms
that it is responsible to take appropriate actions to address any weaknesses identiﬁ ed.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to moni-
tor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reﬂ ect changes in market conditions and the Group’s activities.

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

a. Credit risk

Credit risk is the risk of ﬁ nancial loss to the Group if a customer or counterparty to a ﬁ nancial instrument fails to meet its contractual obligations, and arises
principally from the Group’s ﬁ nancial instruments held in banks and from other receivables.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers
requiring credit over a certain amount. The Group requires collateral in the form of mainly deposit equal to three months of rent from tenants of shopping centers
(collected deposits from tenants totalled EUR 2.4 million and EUR 2.6 million as at December 31, 2014 and 2013, respectively).

Cash and deposits and other ﬁ nancial assets

The Group limits its exposure to credit risk in respect to cash and deposits, including held for sale ﬁ nancial assets (debt instruments) by investing mostly in
deposits and other ﬁ nancial instruments with counterparties that have a credit rating of at least investment grade from international rating agencies. Given these
credit ratings, management does not expect any counterparty to fail to meet its obligations.

b. Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial obligations as they fall due. The Group encountered severe liquidity crisis during the
last months of 2013 and suspended all payments to its debt holders in November 2013 and sought for credit protection from the Dutch court. Following the
completion of the Restructuring Plan this risk was mitigated.

c. Market risk

Currency risk

Currency risk is the risk that the Group will incur signiﬁ cant ﬂ uctuations in its proﬁ t or loss as a result of utilizing currencies other than the functional currency of
the respective Group company.

The Group is exposed to currency risk mainly on borrowings (debentures issued in Israel and in Poland) that are denominated in a currency other than the
functional currency of the respective Group companies. The currencies in which these transactions primarily are denominated are the NIS or PLN.

The Board of Directors approved a framework for hedging risk using currency options and forwards. Regarding currency and risk hedging of the debentures refer
also to note 11.

FINANCIAL STATEMENTS

106

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ts NOTE 28

Interest Rate Risk (including inﬂ ation)

The group’s interest rate risk arises mainly from short and long term borrowing (as well as debentures). Borrowings issued at variable interest rate expose the
Group to variability in cash ﬂ ows. Borrowings issued at ﬁ xed interest rate (but are presented at their fair value) expose the Group to changes in fair value, if the
interest is changing. In certain case, the Group uses IRS to minimise the exposure to interest risk by ﬁ xing the interest rate. Regarding interest rate risk hedging
of the debentures and bank facilities, refer to note 11. As the Israeli inﬂ ation risk is diminishing to a level that management believes is acceptable (Israeli CPI 2014
-0.2%; 2013 1.9%), the Company has stopped using hedging of CPI risk in 2012.

Shareholders’ equity management

Refer to note 19 in respect of shareholders equity components in the restructuring plan. The Company’s Board of Directors is updated on any possible equity
issuance, in order to assure (among other things) that any changes in the shareholders equity (due to issuance of shares, options or any other equity instrument)
is to the beneﬁ t of both the Company’s bondholders and shareholders. Refer also to note 19 on dividend policy.

Credit risk

The carrying amount of ﬁ nancial assets represents the maximum credit exposure. The vast majority of ﬁ nancial assets are not passed due, and the management
believes that the unimpaired amounts that are past due by more than 60 days are still collectible in full, based on historic payment behavior and extensive analysis
of customer credit risk. The maximum exposure to credit risk at the reporting date was:

Cash and cash equivalents

Restricted bank deposits- short term

Held for trading ﬁ nancial assets

Trade receivables, net

Other receivables

Loan to Diksna

Restricted bank deposits – long term

Total

Note

Credit quality

Mainly Baa3

Mainly BBB+

Mostly BB+

N/A

Carrying amount as

at December 31, 2014

at December 31, 2013

€’000

33,363

6,886

1,434

2,719

2,963

6,121

53,511

€’000

26,157

6,319

1,246

3,372

4,871

7,039

181

49,185

As of December 31, 2014 and 2013, all debtors without credit quality have a relationship of less than ﬁ ve years with the Group. At 31 December 2014, the ageing
of trade and other receivables that were not impaired was as follows:

Neither past due nor impaired

Past due 1–90 days

Past due 91–120 days

Total

Carrying amount

December 31, 2014

December 31, 2013

€’000

1,160

1,130

3,392

5,682

€’000

4,443

3,372

428

8,243

PLAZA CENTERS N.V. ANNUAL REPORT 2014

107

FINANCIAL STATEMENTS

Financial statemen

The maximum exposure to credit risk for the abovementioned table at the reporting date by type of debtor was as follows:

Banks and ﬁ nancial institutions

Tenants

Governmental and insurance institutions

Loan to Diksna

Receivable due to selling equity accounted investee

Related parties and other

Total

Liquidity risk

Carrying amount

December 31, 2014

December 31, 2013

€’000

41,683

2,719

2,502

6,121

486

53,511

€’000

33,903

3,372

1,877

7,039

2,350

644

49,185

The following are the contractual maturities of ﬁ nancial liabilities, including estimated interest payments and excluding the impact of netting agreements:

December 31, 2014

Derivative ﬁ nancial liabilities

IRS Derivatives

Non-derivative ﬁ nancial liabilities

Secured bank loans

Debentures issued

Trade and other payables

Related parties

Carrying Contractual

6 months

6-12

amount

cash ﬂ ows

or less*

months

1-2

years

2-5

More than

years

5 years

989

(1,053)

(263)

(163)

(319)

(308)

150,847

(173,058)

(39,616)

162,862

(238,451)

(6,228)

15,068

1,161

(15,068)

(1,161)

(5,697)

(6,602)

(10,202)

(86,362)

(31,181)

(25,466)

(200,155)

Total

329,938

(427,738)

(62,073)

(12,299)

(35,668)

(286,517)

(31,181)

* Out of the total amount of EUR 62.1 MEUR, the Company expects contractual cash ﬂ ows due to secured bank loans in the amount of EUR 33 million and other liabilities in the amount of

EUR 10 million to be revolved.

December 31, 2013*

Derivative ﬁ nancial liabilities

IRS Derivatives

Non-derivative ﬁ nancial liabilities

Secured bank loans

Unsecured debentures issued

Trade and other ﬁ nancial payables

Related parties

Carrying

amount

910

175,338

168,619

13,651

944

Contractual

cash ﬂ ows

6 months

or less

(946)

(179,402)

(207,452)

(13,651)

(944)

(179,402)

(207,452)

(13,651)

(944)

Total

358,552

(401,449)

* In 2013, and in view of the restructuring procedure and the default in bond payments which triggered a cross default on all other loan facilities within the Group, all loan facilities were

payable on demand, triggering also repayments of trade and other payables, and therefore were reclassiﬁ ed and assumed as to be paid within six months from the end of the comparative

reporting period. The Restructuring plan did not provide any protection from the banks rights to demand early repayment under secured bank loans without recourse rights, including

exercising the collateral, of loans provided to the Groups’ entities.

FINANCIAL STATEMENTS

108

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 28

Currency risk

The Company’s main currency risk is in respect of its NIS denominated debentures. Following the discontinuance and full settlement of all currency options
effective July 2013, the Company is exposed to changes in EUR/NIS rate.

The following exchange rate of EUR/NIS applied during the year:

EUR

NIS 1

Average rate

2014

0.211

2013

0.208

Reporting date

Spot rate

2014

Spot rate
2013

0.212

0.209

PLN denominated debentures - A change of 6 percent in EUR/PLN rates at the reporting date would have increased/(decreased) proﬁ t or loss by EUR 0.8 million,
as a result of holding PLN linked bonds.

NIS denominated debentures - A change of 11 percent in EUR/NIS (2013- 10 percent) rates at the reporting date would have increased (decreased) proﬁ t or loss
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

For the year ended

December 31,

2014

2013

Interest rate risk

Proﬁ le

Proﬁ t or loss effect

Carrying

amount of

debentures

149,635

154,151

NIS

strengthening

effect

(16,460)

(16,957)

NIS

devaluation

effect

14,829

16,957

As of the reporting date the interest rate proﬁ le of the Group’s interest-bearing ﬁ nancial instruments was:

Fixed rate instruments

Financial assets

Financial liabilities

Total

Variable rate instruments

Financial assets

Debentures

Other ﬁ nancial liabilities

Total

Carrying amount

2014

€’000

41,683

(162,862)

(150,847)

2013

€’000

30,951

(21,710)

9,241

(168,619)

(153,628)

(313,709)

(322,247)

PLAZA CENTERS N.V. ANNUAL REPORT 2014

109

FINANCIAL STATEMENTS

Financial statemen

Cash ﬂ ow sensitivity analysis for variable rate instruments

A change of 5 basis points in Euribor interest rates (2013 – 5 basis points) at the reporting date would have increased (decreased) proﬁ t or loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for
2013.

Variable Interest rate effect (excluding debentures)

December 31, 2014

December 31, 2013

NIS Debentures

Proﬁ t or Loss

Increase

Proﬁ t or Loss

Decrease

(75)

(77)

Sensitivity analysis – effect of changes in Israeli CPI on carrying amount of NIS debentures

A change of 3 percent in Israeli Consumer Price Index (“CPI”) at the reporting date (and in 2013) would have increased (decreased) proﬁ t or loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

For the year ended

December 31,

2014

2013

Carrying

amount of

debentures

149,635

154,151

Proﬁ t or loss effect

CPI

increase

effect

(4,489)

(4,625)

CPI

increase

effect

4,489

4,625

Sensitivity analysis – effect of changes in NIS basic Interest on carrying amount of NIS debentures

A change of 1 percent in Israeli basic interest rate at the reporting date (and on 2013) would have increased (decreased) proﬁ t or loss by the amounts shown
below. The analysis relates only to debentures presented at fair value through proﬁ t or loss, as there is no effect on carrying amount of debentures presented at
amortised cost. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

For the year ended

December 31,

2014 (Refer to note 16)

2013

Fair values

Carrying

amount of

debentures

N/A

97,983

Proﬁ t or loss effect

Interest

increase

effect

N/A

(1,104)

Interest

decrease

effect

N/A

1,136

Fair values measurement versus carrying amounts

In respect to the Company’s ﬁ nancial assets instruments not presented at fair value, being mostly short term market interest bearing liquid balances, the Company
believes that the carrying amount approximates fair value.

In respect the Company’s ﬁ nancial instruments liabilities:

For the Israeli debentures presented at amortised cost, a good approximation of the fair value would be the market quote of the relevant debenture, had they been
measured at fair value.

FINANCIAL STATEMENTS

110

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 28

Debentures at amortised cost – Polish bonds
Debentures A at amortised cost – Israeli bonds
Debentures B at amortised cost – Israeli bonds

Carrying
amount
2014

13,227
53,257
96,378

Carrying
amount
2013

14,468
13,765
42,403

Fair
value
2014

12,699
47,148
92,666

Fair
value
2013

14,468
10,393
33,507

In respect of most of other non-listed borrowings, the Group was not asked to raise interest rates or to bring forward maturities as a result of the restructuring
procedure, as most ﬁ nancing banks do not expect the restructuring procedure to have a material effect on the security the banks hold under non-recourse loans,
and therefore the Company has a basis to believe that the fair value of non-listed borrowings approximates the carrying amount.

Fair value Hierarchy

The following table shows the carrying amounts and fair values of ﬁ nancial assets and ﬁ nancial liabilities, including their levels in the fair value hierarchy. It does
not include fair value information for ﬁ nancial assets and ﬁ nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair
value:

Financial assets not measured at fair value
Cash and cash equivalents
Restricted bank deposits- short term
Held for trading ﬁ nancial assets
Trade receivables, net
Other receivables
Loan to Diksna
Restricted bank deposits – long term

Total

Financial liabilities not measured at fair value
Interest bearing loans from banks
Debentures at amortised cost
Trade and other payables
Related parties

Total

Financial liabilities measured at fair value
Debentures at fair value through proﬁ t or loss
Derivatives

Total

Note

4
5

6
7a
10

Note

12
17

Note

16
11

Fair value
hierarchy

Carrying amount as

at December 31, 2014
€’000

Carrying amount as
at December 31, 2013
€’000

Level 1

33,363
6,886
1,434
2,719
2,963
6,121
25

53,511

26,157
6,319
1,246
3,372
4,871
7,039
181

49,185

Fair value
hierarchy

Carrying amount as

at December 31, 2014
€’000

Carrying amount as
at December 31, 2013
€’000

Level 2
Level 1

150,847
162,862
15,068
1,161

329,938

175,338
70,636
13,651
944

260,569

Fair value
hierarchy

Carrying amount as

at December 31, 2014
€’000

Carrying amount as
at December 31, 2013
€’000

Level 1
Level 3

-
989

989

97,983
910

98,893

PLAZA CENTERS N.V. ANNUAL REPORT 2014

111

FINANCIAL STATEMENTS

Financial statemen

NOTE 29 - CONTINGENT LIABILITIES AND COMMITMENTS

a. Contingent liabilities and commitments to related parties

1. The Company and/or its subsidiaries were parties to Projects Initiation and Supervision Agreement which was signed in 2006 between the Company and

Control Centers Ltd. (“Control Centers”).

Control Centers is a private company controlled by Mr. Mordechai Zisser, the former controlling shareholder of the Company. Europe-Israel (M.M.S.) Ltd.
(“Europe-Israel”) is an Israeli corporation wholly-owned by Control Centers (which in turn, is controlled by Mr. Zisser).

As a result of the conclusion of the debt restructuring plan in EI, Europe Israel has been diluted to approximately 2% of the issued and outstanding share
capital of EI and therefore ceased to be the controlling shareholder of the Company. In addition, on July 21, 2013 the Israeli District Court in Tel-Aviv Jaffa had
appointed a receiver for Europe Israel and later on the receiver was appointed also as the liquidator of Europe Israel which had ceased to be a going concern.

2. In October 2006, the Company and EI entered into an agreement, pursuant to which with effect from 1 January 2006 the Company will pay commissions to EI
in respect of all and any outstanding corporate and ﬁ rst demand guarantees which have been issued by EI in favour of the Company up to 0.5% of the amount
or value of the guarantee, per annum. As of the end of the reporting period the Group has no outstanding guarantees from EI and no consideration was paid in
this respect.

3. On October 13, 2006, EI entered into an agreement (the “Agreement”) with the Company, under which EI is obliged to offer to the Company potential real
estate development sites sourced by it in India. Under the agreement, EI is obliged to offer the Company the exclusive right to develop all of the shopping
center projects which EI acquires during the 15-year term of the Agreement. The Agreement was terminated upon the signing of the joint venture in India (refer
to note 30(B)), but both EI and the Company agreed that upon the termination of the Joint Venture agreement they will re-execute the Agreement.

4. On November 28, 2014 the Company entered into an indemnity agreement with all of the Company’s newly appointed directors and on June 20, 2011 with
part of the Company’s senior management - the maximum indemniﬁ cation amount to be granted by the Company to the directors shall not exceed 25% of
the shareholders’ equity of the Company based on the shareholders’ equity set forth in the Company’s last consolidated ﬁ nancial statements prior to such
payment. No consideration was paid by the Company in this respect since the agreement was signed.

b. Contingent liabilities and Commitments to others

1. As part of the completion of the restructuring plan (refer also to note 30 (A)), the Group has taken the following commitments and collaterals towards the

creditors:

a. Restrictions on issuance of additional debentures – The Company undertake not to issue any additional debentures other than as expressly provided for

in the Restructuring Plan.

b. Restrictions on amendments to the terms of the debentures – The Company shall not be entitled to amend the terms of the debentures, with the

exception of purely technical changes, unless such amendment is approved under the terms of the relevant series and the applicable law and the Company
also obtains the approval of the debentures holders of all other series of debentures issued by the Company by ordinary majority

c. Coverage Ratio Covenant (“CRC”) – the CRC is a fraction calculated based on known Group valuations reports and consolidated ﬁ nancial information

available at each reporting period. Minimum CRC deemed to be complied with by the Group is 118% in each reporting period. For the December 31, 2014
calculated CRC refer to note 30 (H). In the event that the CRC is lower than the Minimum CRC, then as from the ﬁ rst cut date on which a breach of the
CRC has been established and for as long as the breach is continuing, the Company shall not perform any of the following: (a) a sale, directly or indirectly,
of a Real Estate Asset (“REA”) owned by the Company or a subsidiary, with the exception that it shall be permitted to transfer REA’s in performance of an
obligation to do so that was entered into prior to the said cut date, (b) investments in new REA’s; or (c) an investment that regards an existing project of
the Company or of a subsidiary, unless it does not exceed a level of 20% of the construction cost of such project (as approved by the lending bank of these
projects) and the certain loan to cost ratio of the projects are met.

If a breach of the Minimum CRC has occurred and continued throughout a period comprising two consecutive quarterly reports following the ﬁ rst
quarterly/year end report on which such breach has been established, then such breach shall constitute an event of default under the trust deeds and Polish
debentures terms, and the group of (i) Series A Debentures holders, (ii) Series B Debentures holders, (iii) Polish Debentures holders, and (iv) guarantee
and other creditors shall, each as a separate group acting by majority vote, be entitled to declare by written notice to the Company that all or a part of their
respective (remaining) claims become immediately due and payable.

FINANCIAL STATEMENTS

112

PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 29

d. Minimum Cash Reserve Covenant (“MCRC”) – cash reserves of the Company has to be greater than the amount estimated by the Company’s

management required to pay all administrative and general expenses and interest payments to the debentures holders falling due in the following six
months, minus sums of proceeds from transactions that have already been signed (by the Company or a subsidiary) and closed and to the expectation of
the Company’s management have a high probability of being received during the following six months. MCRC is kept as of December 31, 2014.

e. Negative Pledge on REA of the Company – The Company undertakes that until the debentures has been repaid in full, it shall not create any encumbrance

on any of the REA, held, directly or indirectly, by the Company except in the event that the encumbrance is created over the Company’s interests in a
subsidiary as additional security for ﬁ nancial indebtedness (“FI”) incurred by such subsidiary which is secured by encumbrances on assets owned by that
subsidiary.

f. Negative Pledge on the REA of Subsidiaries – The subsidiaries shall undertake that until the debentures have been repaid in full, none of them will create

any encumbrance on any of REA except in the event that:

(i) the subsidiary creates an encumbrance over a REA owned by such subsidiary exclusively as security for new FI incurred for the purpose of purchasing,
investing in or developing such REA; Notwithstanding the aforesaid, subsidiaries shall be entitled to create an encumbrance on land as security for
FI incurred for the purpose of investing in and developing, but not for purchasing, an REA held by a different Group company (hereinafter: a “Cross
Pledge”), provided the total value of the lands owned by the Group charged with Cross Pledges after the commencement date of the plan does not
exceed EUR 35 million, calculated on the basis of book value (the “Sum of Cross Pledges“). When calculating the Sum of Cross Pledges, lands that
were charged with Cross Pledges created prior to the commencement date of the plan or created solely for the purpose of reﬁ nancing an existing FI
shall be excluded. The Group did not have cross-default as of December 31, 2014.

(ii) The encumbrance is created over an asset as security for new FI that replaces existing FI and such asset was already encumbered prior to the

reﬁ nancing. For the avoidance of doubt, any excess net cash ﬂ ow generated from such reﬁ nancing, shall be subject to the mandatory early prepayment
of 75%.

(iii) The encumbrance is created over interests in a Subsidiary as additional security for FI incurred by such subsidiary which is secured by encumbrances

on assets owned by that subsidiary as permitted by sub-section (i) above. The encumbrance is created as security for new FI that is incurred for
purposes other than the purchase of and/or investment in and development of an REA, provided that at least 75% of the net cash ﬂ ow generated from
such new FI is used for mandatory early prepayment.

g. Limitations on incurring new FI by the Company and the subsidiaries – The Company undertakes not to incur any new FI (including by way of reﬁ nancing
an existing FI with new FI) until the outstanding debentures debt (as of November 30, 2014) has been repaid in full, except in any of the following events:

(i) the new FI is incurred for the purpose of investing in the development of a REA, provided that: (a) the Loan To Cost (“LTC”) Ratio of the investment
is not less than 50% (or 40% in special cases); (b) the new FI is incurred by the subsidiary that owns the REA or, if the FI is incurred by a different
subsidiary, any encumbrance created as security for such new FI is permitted under the negative pledge stipulation above; and (c) following such
investment the consolidated cash is not less than the MCRC;

(ii) The new FI is incurred by a subsidiary for the purpose of purchasing a new REA by such Subsidiary, provided that following such purchase the cash

reserve is not less than the MCRC.

(iii) At least 75% of the net cash ﬂ ow resulting from the incurrence of new FI is used for a 75% early prepayment of the debentures. It shall be clariﬁ ed

that, subject to the terms of the plan, the Group may also reﬁ nance existing FI if this does not generate net cash ﬂ ow.

h. No distribution policy – Refer to note 19 on Dividend Policy.

i. 75% mandatory early repayment – Refer to note 30(A) and to other sections in this note.

j. Permitted Disposals – provisions with respect to the four shopping malls – the Company will be allowed to sell the four shopping malls (Torun, Suwalki,
Kragujevac and Riga) or to perform reﬁ nancing for any of these (hereinafter: “Disposal Event”), subject to the cumulative net cash ﬂ ow in the Disposal
Event in respect of these four shopping malls being no less than EUR 70 million. In case no Disposal Event occurs for the four shopping malls together,
the Company will be allowed to perform a special purpose Disposal Event only if after execution of the special purpose Disposal Event, the surplus value
of shopping malls not sold (according to the valuation deducting the speciﬁ c debt to banks) is no less than EUR 70 million, deducting the net cash ﬂ ows
received from previous Disposal Events and deducting the net cash ﬂ ows from the special purpose Disposal Event.

2. General commitments and warranties in respect of trading property disposals.

In the framework of the transactions for the sale of the Group’s real estate assets, the Group has undertaken to indemnify the respective purchasers for any
losses and costs incurred in connection with the sale transactions. The indemniﬁ cations usually include: (i) Indemniﬁ cations in respect of completeness of title
on the assets and/or the shares sold (i.e that the assets and/or the shares sold are owned by the Group and are clean from any encumbrances and/or
mortgage and the like). Such indemniﬁ cations generally survived indeﬁ nitely and are capped to the purchase price in each respective transaction;

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and (ii) Indemniﬁ cations in respect of other representation and warranties included in the sales agreements (such as: development of the project, responsibility
to defects in the development project, tax matter and others).

Such indemniﬁ cations are limited in time (generally 3 years from signing a closing agreement) and are generally capped to 25% to 50% of the purchase price.
No indemniﬁ cations were provided by the Group till the date of the statement of ﬁ nancial position.

The Hungarian tax authorities have challenged the applied tax treatment in two of the entities previously sold in Hungary by the Company to Klepierre in
the course of the Framework Agreement dated 30 July, 2004 (“Framework Agreement”). In respect of two of the former subsidiaries of the Company, the
tax authorities decision of reducing the tax base by and imposed a penalty in the sum of HUF 428.5 Million (circa EUR 1.4 million), were challenged by the
previously held entities at the competent courts. Klepierre has submitted an indemniﬁ cation request claiming that the tax assessed in the described procedures
falls into the scope of the Framework Agreement tax indemniﬁ cation provisions and the Company in its respond rejected such claims. Subsequently Klepierre
has submitted a claim to the International Chamber of Commerce in Brussels for arbitration procedure. As of the reporting date the procedure is in initial stage,
hearings shall be held in July 2015.

The Company’s management estimates that no signiﬁ cant costs will be borne thereby, in respect of these indemniﬁ cations.

3. Tesco - The Company is liable to the buyer of its previously owned shopping center in the Czech Republic (“NOVO”) – sold in June 2006 - in respect to one
of its tenants (“Tesco”). Tesco leased an area within the shopping center for a period of 30 years, with an option to extend the lease period for an additional
30 years, in consideration for EUR 6.9 million which was paid in advance. According to the lease agreement, the tenant has the right to terminate the lease
agreement subject to fulﬁ lment of certain conditions as stipulated in the agreement. The Company’s management believes that it is not probable that this
commitment will result in any material amount being paid by the Company.

4. The Company is retaining a 100% holding in all its projects in Serbia after it was decided to discontinue the negotiations with a Serbian developer. The

Company has a contingent obligation to pay the developer in any case there is major progress in the projects. The total remaining potential obligation is
EUR 0.9 million.

5. Apart from point 4 above, the Company does not have any contractual commitments in respect of construction activities.

c. Contingent liabilities due to legal proceedings

The Company is involved in litigation arising in the ordinary course of its business. Although the ﬁ nal outcome of each of these cases cannot be estimated at
this time, the Company’s management believes, that the chances these litigations will result in any outﬂ ow of resources to settle them is remote, and therefore
no provision or disclosure is required.

d. Securities, guarantees and liens under bank ﬁ nance agreements with subsidiaries

1. Certain companies within the Group which are engaged in the purchase, construction or operation of shopping centres (“Project Companies”) have secured

their respective credit facilities (with withdrawn facility amounts totalling EUR 180 million, as of December 31, 2014) awarded by ﬁ nancing banks (for projects
in Poland, Latvia, Czech Republic and India), by providing ﬁ rst or second ranking (ﬁ xed or ﬂ oating) charges on property owned thereby, including right in and
to real estate property as well as the ﬁ nanced projects, on rights pertaining to certain contracts (including lease, operation and management agreements), on
rights arising from insurance policies, and the like. Shares of certain Project Companies were also pledged in favour of the ﬁ nancing banks.

In respect of corporate guarantee for the fulﬁ lment of its subsidiaries obligations under loan agreements, refer to note 12.

Shareholders loans as well as any other rights and/or interests of shareholders in and to the Project Companies were subordinated to the respective credit
facilities.

Payment to the shareholders is permitted (including the distribution of dividends but excluding management fees) subject to fulﬁ lling certain preconditions.

Certain loan agreements include an undertaking to fulﬁ l certain ﬁ nancial and operational covenants throughout the duration of the credit, namely: complying
with “a minimum debt services cover ratio”, “loan outstanding amount” to secured assets value ratio; complying with certain restrictions on interest rates;
maintaining certain cash balances for current operations; maintaining equity to project cost ratio and net proﬁ t to current bank’s debt; occupancy percentage
and others. In respect of breach of covenants, refer to note 12.

The Project Companies undertook not to make any disposition in and to the secured assets, not to sell, transfer or lease any substantial part of their assets
without the prior consent of the ﬁ nancing bank.

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ts NOTE 30

In certain events the Project Companies undertook not to allow, without the prior consent of the ﬁ nancing bank:

(i) any changes in and to the holding structure of the Project Companies nor to allow for any change in their incorporation documents;
(ii) execution of any signiﬁ cant activities, including issuance of shares, related party transactions and signiﬁ cant transactions not in the ordinary course of

business;

(iii) certain changes to the scope of the project;
(iv) the assumption of certain liabilities by the Project Companies in favour of third parties;
(v) Receipt of loans by the Project Companies and/or the provision thereby of a guarantee to third parties; and the like.

2. Commitment in respect of derivative transaction

Within the framework of derivative transactions (refer to note 11), executed between the Group and commercial banks (the “Banks”), the Group agreed to

provide the Banks with collateral or cash deposits.

Accordingly, and in respect of Torun IRS the project company also established a bail mortgage up to EUR 5.4 million encumbering the real estate project.

Also, in view of resuming the currency option strategy (refer to note 11), the company also deposited EUR 2.3 million as a collateral to the transaction.

NOTE 30 - SIGNIFICANT EVENTS

A. Restructuring plan

On November 14, 2013, the Company announced that its Board of Directors had concluded that the Company will withhold payment on the upcoming

maturities of its bonds and approach its creditors with a restructuring plan. The restructuring plan was approved on June 26, 2014 by the vast majority of the
creditors, and subsequently approved by the Court on July 9, 2014, becoming an irrevocable decision on July 21, 2014. The company announced publication
of prospectus in respect of Rights offering on October 16, 2014. The Shareholders approved the rights offering on November 28, 2014 followed by capital
injection of EUR 20 million by existing shareholders of the company on that date. All conditions precedent of the restructuring plan were fulﬁ lled by
November 30, 2014.

Actual ﬁ rst payment of both principal and interest to Debentures occurred on January 7, 2015, with the Company transferring all funds already effective
December 23, 2014 to governing authorities.

The following are material commercial features of the restructuring plan:

• An injection of a EUR 20 million into the Company at a price per-share of EUR 0.0675, (“Equity Contribution”, refer also to note 19).

• The Company issued to the holders of unsecured debt (i.e. outstanding debt under the Israeli Series A and B Notes and the Polish Notes) (“Unsecured

Debt”) 13.21% of the Company’s shares (post Equity Contribution) for payment of par value of shares. Such shares issuance was distributed among the
holders of Unsecured Debt pro rata to the relative share of each relevant creditor in the Deferred Debt (“Deferred Debt Ratio”).

• Each principal payment under the debentures due in the years 2013, 2014 and 2015 pursuant to the original terms of the debentures shall be deferred by

exactly four and a half years and each principal payment due pursuant to the original terms of the debentures in subsequent years (i.e. 2016 and 2017) will
be deferred by exactly one year.

In the event that the Company does not succeed in prepaying an aggregate amount of at least NIS 434 million (EUR 92 million) of the principal of the
debentures, excluding linkage differentials within a period of two years before 1 December 2016, then all principal payments under the debentures deferred
in accordance with above, shall be advanced by one year (i.e. shall become due one year earlier).

• All unpaid interest accrued on the Israeli debentures and polish debentures until and including December 31, 2013 will be added to the principal and paid

together with it.

• As of 1 January 2014, the annual interest rate of the Unsecured Debt shall be increased by 1.5%.

• The Company paid to the holders of the Unsecured Debt an amount of EUR 13.8 million of 2014 interest payments.

• The Company, its directors and ofﬁ cers and its controlling shareholder are fully released from claims.

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• The net cash ﬂ ow received by the Company following an exit or raising new FI (except if taken for the purpose of purchase, investment or development
of real estate asset) or reﬁ nancing of REA’s after the full repayment of the asset’s related debt that was realised or in respect of a loan paid in case of
debt recycling (and in case where the exit occurred in the subsidiary – amounts required to repay liabilities to the creditors of that subsidiary) and direct
expenses in respect of the asset (any sale and tax costs, as incurred), will be used for repayment of the accumulated interest until that date in all of the
series (in case of an exit which is not one of the four shopping centers only 50% of the interest) and 75% of the remaining cash (following the interest
payment) will be used for an early repayment of the close principal payments for each of the series (A, B, Polish) each in accordance with its relative share
in the deferred debt. Such prepayment will be real repayment and not via bond purchase.

• The restructuring plan also includes, inter alia: (i) certain limitations on distribution of dividends, actual investments and incurring of new indebtedness
(refer to note 19); (ii) negative pledge on direct and indirect holdings of the Company on real estate assets (refer also to note 29 (b)); (iii) ﬁ nancial
covenants and undertakings of the Company with respect to the sale and ﬁ nancing of certain projects and investment in new projects (refer also to note
29(b) and to note 30(h) below); (iv) compliance with ﬁ nancial covenants CRC and MCRC (refer to note 29(b) and (v) commitment to publish quarterly
ﬁ nancial statements as long as the Unsecured Debt is outstanding.

B. Update in respect of the Bangalore and Chennai projects

Bangalore

In March, 2008 EPI entered into an amended and reinstated share subscription and framework agreement (the “Amended Framework Agreement”), with a
third party (the “Partner”), and a wholly owned Indian subsidiary of EPI which was designated for this purpose (“SPV”), to acquire, through the SPV, up to
440 acres of land in Bangalore, India (the “Project”) in certain phases as set forth in the Amended Framework Agreement. As of December 31, 2014, the
Partner has surrendered land transfer deeds in favor of the SPV to an escrow agent nominated by the parties for approximately 54 acres for a total aggregate
consideration of approximately INR 2,843 million (EUR 40 million), and upon the actual transfer of the title, the Partner will be entitled to receive 50% of the
shareholdings in the SPV. The above mentioned amounts are presented in the statement of ﬁ nancial position as of December 31, 2014 and 2013 as equity
accounted investees.

In addition, the SPV paid to the Partner advances of approximately INR 2,536 million (EUR 35 million) on account of future acquisitions by the SPV of a further
51.6 acres. Such amount is presented in the statement of ﬁ nancial position as of December 31, 2014 and 2013 as part of the equity accounted investees (refer
to note 10).

On July 22, 2010, a new set of arrangements was entered into between, EPI, the SPV and the Partner (the “New Framework Agreement” as deﬁ ned above),

according to which EPI will remain the holder of 100% of the shareholdings and the voting rights in the SPV and the scope of the Project will be decreased to
165 acres. The net proceeds from the Project will be distributed in a manner by which the Group’s share will be approximately 70% until such time that EPI’s
investment in the amount of INR 5,780 million (approximately EUR 75 million) (“EPI’s Investment”) plus an internal return rate of 20% per annum calculated
from September 30, 2009 (“IRR”) is paid to the SPV (the “Discharge Date”). Following the Discharge Date, EPI will not be entitled to receive any additional
proﬁ ts from the Project and it will transfer to the Partner the entire shareholdings in the SPV for no consideration. In addition, the Partner has a call option,
subject to applicable law and regulations, to acquire the entire shareholdings of the SPV, at any time, in consideration for EPI’s Investment plus the IRR
calculated on the relevant date of acquisition.

The New Framework Agreement will enter into full force and effect upon execution of certain ancillary agreements as set forth therein. As of December 31,
2014 these ancillary agreements were not yet executed.

On December 31, 2014, a valuation was prepared by an independent appraiser who valued the project in two methods: residual method and comparable
method. The valuation according to the residual method was performed in accordance with the New Framework Agreement, for 163 Acres and under the
assumptions of developing a residential project. The comparable method was performed in accordance with the current land holdings, held by the SPV
(i.e.:54 acres) which were compared to other assets in the close neighbourhood.

As for December 31, 2013 and 2014 due fact that the New Framework Agreement did not enter into effect and due to the uncertainty to develop the project
in the foreseeable future with the partner according to the New Framework Agreement, the Group measured the net realisable value of the project according
to the comparable method. As a result on December 31, 2013, the SPV wrote down trading properties and advances on account of trading properties in the
amount of EUR 31 million. Such writedown were included in the Company’s proﬁ t and loss account for 2013 as share in losses of an associated.

Chennai

In December 2007, EPI executed agreements for the establishment of a special purpose vehicle (“Chennai Project SPV”) together with one of the leading real
estate developers in Chennai (“Local Partner”). Subject to the fulﬁ llment of certain conditions, the Chennai Project SPV undertook to acquire the ownership
and development rights in and up to 135 acres of land situated in the Sipcot Hi-Tech Park in the Siruseri District of Chennai, India. Due to changes in market
conditions, EPI and Chennai Project SPV later decided to limit the extent of the project to 83.4 acres.

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ts NOTE 30

Under these agreements, EPI holds 80% of the equity and voting rights in the Chennai Project SPV, while the Local Partner will retain the remaining 20%.

The project land is to be acquired by the SPV in stages subject to such land complying with certain regulatory requirements and the due diligence requirements
of EPI. As of December 31, 2014 the Chennai Project SPV has completed the purchase of approximately 75 acres out of the total 83.4 acres for consideration
of a total of INR 2,367 million (EUR 31 million) (EPI share). In addition, as of December 31, 2014, EPI paid advances in the amount of INR 564 million
(EUR 7 million) in order to secure acquisition of an additional 8.4 acres.

The parties have entered into a shareholders’ agreement in respect of the management of the Chennai Project SPV, which provides, among other matters, for
a ﬁ ve member board of directors, with one member appointed by the Seller for so long as it maintains a 10% holding in the Chennai Project SPV and four
members appointed by EPI. The shareholders’ agreement also includes pre-emptive rights and certain restrictions pertaining to transferring of securities in the
Chennai Project SPV. Proﬁ t distributions declared by the Chennai Project SPV will be distributed in accordance with the parties’ proportionate shareholdings,
subject to EPI’s entitlement to receive certain preferential payments out of the Chennai Project SPV’s cash ﬂ ow, as determined in the agreements.

EPI intends to make certain changes in the project’s implementation plan, and in this respect the Chennai Project SPV signed a memorandum of understanding
with a local developer for the joint development of the project (“JD Transaction” and “MOU”, respectively). On the basis of the MOU, the parties to the JD
Transaction have ﬁ nalised the terms and conditions of the deﬁ nitive Joint Development Agreement, and they intend to execute the JD Transaction upon
fulﬁ llment of a certain condition precedent. In accordance with the provisions of the JD Agreement, a certain percentage from the sales of the villas and the
plotted land will be allocated to the Chennai SPV. If the parties fail to execute the JD Transaction prior to 30 June 2015, the Chennai Project SPV shall have to
reimburse the local developer the initial deposit and certain expenses in the aggregate amount of INR 7.5 Crores (EUR 1 million).

On 12 December 2014, the Local Partner ﬁ led a request with the Chennai court for a stay order against, inter alia, the directors of the Chennai Project SPV,

ordering them not to make any disposition with respect to the land property. A temporary stay order was granted by the court, and immediately thereafter, EPI
ﬁ led a request for a removal of the stay order. The court set a date for a hearing on this case on 15 April 2015.

On December 31, 2014 and 2013 a valuation was prepared by, an independent appraiser who valued the asset. In 2013 the valuation was performed on

84 acres, while in 2014 it was performed on 75 acres which are the actual land plots held by the SPV.

Since the Group intends to establish a Joint Development agreement in order to develop the land, we ﬁ nd the residual approach more suitable for the valuation
of the project. However, since there is uncertainty with regard to the Group’s ability to develop the project in the foreseeable future, the Group measured the
net realisable value of the project on discounted basis. Accordingly a writedown of the advances paid to the seller and to the cost of the land, in a total amount
of EUR 20.7 million was recorded in the Company’s 2013 proﬁ t and loss account. In 2014 an additional writedown was recorded in a total amount of
EUR 2.5 million.

C. Additional impairments

For additional impairments information refer to note 8.

D. Disposal of shopping center in Kragujevac, Serbia

Effective beginning September 2014 the Company disposed of its shopping and entertainment centre, Kragujevac Plaza in Serbia for EUR 38.6 million, in line
with the asset’s book value. Following the repayment of related bank debt of circa EUR 28.2 million, the Company received (post balance sheet date) net cash
from the disposal of circa EUR 10.4 million.

Restricted cash linked to the bank debt and other working capital balances of circa EUR 2 million were also released following the transaction. The Company

recorded a loss of EUR 0.6 million from the transaction, relating mainly to the writedown of receivables and bank loan break fees.

75% of the net cash proceeds was distributed to the Company’s bondholders in the fourth quarter of this year as an early repayment of the bonds (refer to note
29 (b)), in line with the Company’s stated restructuring plan.

E. Disposal of plots in Romania

On September 4, 2014 the Company completed the sale of its 31,500 sqm site in Targu Mures, Romania to a third party developer for a consideration of EUR

3.5 million. No proﬁ t or loss was recorded as a result of this transaction. In addition, On December 1, 2014 the Company completed the sale of its 41,000 sqm
site in Hunedoara, Romania to a third party developer for a consideration of EUR 1.2 million. No proﬁ t or loss was recorded as a result of this transaction.

In line with the Company’s stated restructuring plan, 75% of the net cash proceeds from both transactions was distributed to the Company’s bondholders in
the fourth quarter of this year as an early repayment of the bonds (refer to note 29(b)).

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F. Sale of airplane and turbines

On February 25, 2014 the Company disposed of its corporate jet for a total consideration of USD 1.9 million (EUR 1.4 million) and recorded a loss of

EUR 0.1 million. The proceeds from the disposal were used to partially repay the bank facility taken for the purchase of the airplane, and the Company also
paid later on (after reaching a settlement with the airplane ﬁ nancing bank) an amount of EUR 0.8 million. This settlement generated a gain of EUR 0.6 million
in the Company’s books, recorded as part of ﬁ nance income.

In March 2014 the Casa Radio’s project company disposed of the turbines held in respect of the Casa Radio project (and included as part of the trading
property) for a total net consideration of EUR 2.6 million. A loss of EUR 0.6 million was recorded from this transaction, recorded as part of other expenses.

G. Receiving of insurance claim India

In June 2014 the Company reclaimed INR 190 million (EUR 2.3 million) of cash due to the insurance claim in respect of loss of proﬁ t on its Koregaon Park
shopping Center in Pune India, following the ﬁ re there in June 2012. The refund was recorded as part of other income in the income statement.

H. Update on covenants

In respect of covenants update on bank facilities, refer to note 12.

In respect of the CRC, as deﬁ ned in the restructuring plan, as of December 31, 2014 the CRC was 144%, in comparison with 118% minimum ratio required.

I. Treasury bond held

As of December 31, 2014, the Company holds through its wholly owned subsidiary 15.2 million NIS par value bonds in series B debentures (adjusted par value
of NIS 17.8 million (EUR 3.8 million).

J. Termination of Joint venture agreement in Romania

In June 2014, the Company terminated, following a mutual agreement, its joint venture agreement with an Israeli based Company (“Aura”). The seven asset
companies held by the joint venture were split between the Company’s 50.1% subsidiary (“Plaza Bas”) and Aura, where Aura received full control (100%) over
three of the asset companies, Plaza Bas received full control over the remaining four asset companies (including principally four trading property assets valued
at EUR 5 million and two bank facilities with principal of EUR 9.7 million).

In addition, Aura paid in July 2014 an amount of EUR 0.6 million to the Company as part of the joint venture termination. The joint venture has performed
an internal valuation of the assets and liabilities it obtained in full following the termination, and as a result recorded a loss of EUR 4.1 million from this
transaction, included as part of the Loss from disposal of equity accounted investees in the statement of proﬁ t or loss.

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ts NOTE 31

NOTE 31 - RELATED PARTY TRANSACTIONS

Related party transactions

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

The Company has seven directors. In July 2014, four directors (including the CEO) were replaced by ﬁ ve new directors. The annual remuneration of the directors
and the CEO in 2014 amounted to EUR 1 million (2013 – EUR 0.9 million) and the annual share based payments expenses amounted to EUR 20 thousand
(2013 – EUR 0.1 million). There was no change in the number of Company options granted to key personnel in 2014. There are no other beneﬁ ts granted to
directors or CEO. Information about related party balances as of December 31, 2014 and 2013 refer to note 14.

Trading transactions

During the year, Group entities had the following trading transactions with related parties that are not members of the Group:

Income

Interest on balances with EI

Costs and expenses

Recharges – EI and EUL

Executive director1

Project management provision and charges – Control Centers group2

Lease agreement on plot in Bucharest

For the year ended

December 31, 2014

December 31, 2013

€’000

194

115

139

233

222

327

1 The Executive director, who is also the former controlling shareholder of the ultimate parent company, was receiving an annual salary of USD 300 thousand, until July 2014.

2 Control Centers (refer to note 29 a(1)) was a company owned by the former ultimate shareholder of the Company. Control Centers group costs were capitalised to the relevant trading

property.

3 The Company signed in 2007 a 49 years lease agreement with a subsidiary of EI for a monthly fees of EUR 5 thousands on a plot located in Bucharest, Romania. Refer also to note 33(c)

regarding the selling of lease rights.

As of December 31, 2014 the Company identiﬁ ed York Capital Management Global Advisors, LLC (“York”) and Davidson Kempner Capital Management LLC (“DK”)
as the Company related parties.

DK holds 26.3% of the Company’s outstanding shares of the Company as of the reporting date, following the ﬁ nalisation of the Restructuring plan. DK has no
outstanding balance as of the reporting date with any of the Group companies. There were no transactions with DK in the reporting period. York is the main
shareholder in EI, holding 19.8% of the outstanding shares of EI, and also has a direct holding of 3.6% in the Company shares. York is also holding (as of
December 31, 2014) 17.0% of debentures series A of the Company and 29.6% of debentures series B of the Company.

In total, York is holding, as of December 31, 2014, 23.4% out of the total debentures debt of the Company. York has no outstanding balance as of the reporting
date with any of the Group companies. There were no transactions with York in the reporting period.

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NOTE 32 - OPERATING SEGMENTS

The Group comprises the following main reportable geographical segments: CEE and India. None of the Group’s tenants accounts for more than 10% of the
total revenue. Also, no revenue is derived in the Netherlands, where the Company is domiciled. The Group’s CEO reviews the internal management reports of
each segment at least quarterly. In presenting information on the basis of geographical segments, segment revenue is based on the revenue resulted from either
the selling or operating of assets geographically located in the relevant segment. Refer to note 8 for further detail by property on carrying amounts of Trading
Properties and note 12 for detail on project secured bank loans by property.

Year ended December 31, 2014

Total revenues1

Central & Eastern Europe

€’000

61,509

India

€’000

916

Total

€’000

62,425

Operating loss by segment2

(71,068)

(11,736)

(82,804)

Net ﬁ nance costs

Other expenses, net

Share in results of equity-accounted investees

(5,848)

(2,507)

2,319

(3,160)

2,484

(2,365)

Reportable segment loss before tax2

(77,104)

(14,777)

Less - unallocated general and administrative expenses (Dutch corporate level costs)

Gain from restructuring plan

Unallocated ﬁ nance costs (Dutch corporate level- mainly debentures ﬁ nance cost)

Loss before income taxes

Tax beneﬁ t

Loss for the period

Assets and liabilities as at December 31, 2014

Total segment assets3

Unallocated assets (Mainly Cash and other ﬁ nancial instruments held on Dutch level)

362,910

62,584

Total assets

Segment liabilities

Unallocated liabilities (Mainly debentures)

Total liabilities

153,547

29,523

(9,008)

(23)

(46)

(91,881)

(5,963)

3,443

(26,568)

(120,969)

1,282

(119,687)

425,494

40,603

466,097

183,070

163,454

346,524

1 Out of which EUR 38.6 million is due to Kragujevac disposal (refer to note 30(d) and EUR 15.9 million is attributed to Poland.

2 Central Eastern Europe – including EUR 77.4 million of impairments and EUR 4.1 million of loss from selling of Bas equity accounted investees (refer to note 30 (J)). India – including

EUR 12 million of impairments.

3 Refer to note 8 for the breakdown of Trading properties assets by location.

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ts NOTE 32

Year ended December 31, 2013

Total revenues1

Central & Eastern Europe

€’000

26,340

India

€’000

683

Total

€’000

27,023

Operating loss by segment2

(92,684)

(20,756)

(113,440)

Net ﬁ nance costs

Other expenses, net

Share in results of equity-accounted investees

(5,858)

(6,402)

1,348

(4,054)

(4,653)

(56,813)

(9,912)

(11,055)

(55,465)

Reportable segment loss before tax

(103,596)

(86,276)

(189,872)

Less - unallocated general and administrative expenses (Dutch corporate level costs).

Unallocated other expenses (Dutch corporate level)

Unallocated ﬁ nance costs (Dutch corporate level- mainly debentures ﬁ nance cost)

Loss before income taxes

Tax beneﬁ t

Discontinued operations US

Loss for the period

Assets and liabilities as at December 31, 2013

Total segment assets (3)

Unallocated assets (Mainly Cash and other ﬁ nancial instruments held of Dutch level)

480,196

68,829

Total assets

Segment liabilities

Unallocated liabilities (Mainly debentures)

Total liabilities

1 Out of which EUR 16.6 million is attributed to Poland

175,302

26,715

2 Central Eastern Europe – including EUR 109 million of impairments. India – including EUR 76 million of impairments.

3 Refer to note 8 for the breakdown of Trading Property assets by location.

(5,090)

(29,432)

(224,394)

6,256

(218,073)

549,025

36,741

585,766

202,017

173,421

375,438

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NOTE 33 – EVENTS AFTER THE REPORTING PERIOD

A. Koregaon park shopping center in Pune, India

As described in note 15, a total amount of INR 300 million (EUR 3.9 million) was collected in respect of selling the shopping centre. Additional
INR 100 million (EUR 1.3 million) of advances were collected in the ﬁ rst quarter of 2015.

In respect of one of the advances provided in 2013 and 2014 in the amount of INR 200 million (EUR 2.6 million), the Company has reached a settlement in
February 2015 with the potential buyer to settle the liability, in view of the cancellation of the signed pre-agreements, to refund the potential buyer with
INR 150 (EUR 1.9 million) of advances received. The Company will record a gain of INR 50 million (EUR 0.6 million) as a result of this settlement.

The Company has also signed preliminary non-binding agreements with another Indian based developer for the selling of the shopping centre, and collected an
additional INR 200 million (EUR 2.6 million) of advances in 2014 and 2015. The agreement is still subjected to several conditions being met, and the Company
cannot estimate, as of the date of signing of these reports, when it will be able to conclude the sale.

B. Call option strategy activity in 2015 and movements in NIS rate with the EUR

In the course of the ﬁ rst quarter of 2015, the Company wrote a EUR/NIS call option on an amount of EUR 15 million and rolled over another call option on an
amount of EUR 25 million, with a strike price range between 4.30 and 4.38 NIS, and collected EUR 1.0 million in cash as premium.

In the course of the ﬁ rst quarter of 2015, and up and until the approval date of these ﬁ nancial statements, NIS strenghtened against the EUR by circa 11%,
thus resulting (after taking into account impact of changes in Israeli CPI) in an increase of the NIS denominated debentures liability in an amount of circa
EUR 17 million.

C. Selling of leasehold rights in Romania

On March 13, 2015, one of the Company’s subsidiaries in Romania, having a 49 years leasehold rights over a plot in Bucharest, Romania (“Property”

and “Rights”, respectively), signed a pre-agreement for waiving its Rights for a certain consideration to be further agreed with the owner of the Property
(a subsidiary of EI) and approved by the relevant organs of these entities. The mentioned pre-agreement was signed as part of a sale transaction between
the owner of the Property to a certain third party and it is subject to fulﬁ llment of certain conditions precedent and approval by the relevant organs of the
Company.

D. Debt repayment call due to bank ﬁ nance debt in Poland

On March 5, 2015, the Company and its subsidiary (“Zgorzelec”) received a debt repayment call from the ﬁ nancing bank of the Zgorzelec active shopping

centre (refer to note 12), for an immediate repayment of EUR 22.4 million of mostly non-recourse debt (principal and interest). The Company is in discussions
with the ﬁ nancing bank on signing new facility. The Zgorzelec shopping center asset was valuated at EUR 13.5 million, as at December 31, 2014.

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NOTE 34 – SIGNIFICANT ACCOUNTING POLICIES

The Group has consistently applied the following accounting policies to all periods presented in these consolidated ﬁ nancial statements.

A. Basis of consolidation

1. Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The ﬁ nancial statements of subsidiaries are included in the
consolidated ﬁ nancial statements from the date on which control commences until the date on which control ceases.

Where necessary, adjustments are made to the ﬁ nancial statements of subsidiaries to bring the accounting policies used into line with those used by the Group

in the consolidated ﬁ nancial statements.

2. Interests in equity-accounted investees

The Group’s interests in equity-accounted investees comprise interests in associates and joint ventures.

Associates are those entities in which the Group has signiﬁ cant inﬂ uence, but not control or joint control, over the ﬁ nancial and operating policies. A joint
venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its
assets and obligations for its liabilities.

Interests in associates and the joint venture are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs.
Subsequent to initial recognition, the consolidated ﬁ nancial statements include the Group’s share of the proﬁ t or loss and other comprehensive income of
equity-accounted investees, until the date on which signiﬁ cant inﬂ uence or joint control ceases.

3. Non-controlling interests

Non-controlling interests are measured at their proportionate share of the acquiree’s identiﬁ able net assets at the acquisition date. Changes in the Group’s

interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

4. Transactions eliminated on consolidation

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

b. Foreign currency

1. Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group companies at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. Non-
monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair
value was determined. Foreign currency differences are generally recognised in proﬁ t or loss. Non-monetary items that are measured based on historical cost
in a foreign currency are not translated.

However, foreign currency differences arising from the translation of available-for-sale equity investments (except on impairment in which case foreign
currency differences that have been recognised in other comprehensive income are reclassiﬁ ed to proﬁ t or loss) are recognised in other comprehensive
income.

2. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at the exchange
rates at the reporting date. The income and expenses of foreign operations are translated into euro at the exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and accumulated in the translation reserve, except to the extent that the
translation difference is allocated to non-controlling interest.

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When a foreign operation is disposed of in its entirety or partially such that control, signiﬁ cant inﬂ uence or joint control is lost, the cumulative amount in the
translation reserve related to that foreign operation is reclassiﬁ ed to proﬁ t or loss as part of the gain or loss on disposal. If the Group disposes of part of its
interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest.

When the Group disposes of only part of an associate or joint venture while retaining signiﬁ cant inﬂ uence or joint control, the relevant proportion of the

cumulative amount is reclassiﬁ ed to proﬁ t or loss.

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then
foreign currency differences arising from such item form part of the net investment in the foreign operation. Accordingly, such differences are recognised in
other comprehensive income and accumulated in the translation reserve.

c. Financial instruments

1. Non-derivative ﬁ nancial assets and ﬁ nancial liabilities – recognition and de-recognition.

The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other ﬁ nancial assets and ﬁ nancial
liabilities are initially recognised on the trade date.

The Group derecognises a ﬁ nancial asset when the contractual rights to the cash ﬂ ows from the asset expire, or it transfers the rights to receive the contractual
cash ﬂ ows in a transaction in which substantially all of the risks and rewards of ownership of the ﬁ nancial asset are transferred, or it neither transfers nor
retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised
ﬁ nancial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a ﬁ nancial liability when its
contractual obligations are discharged or cancelled, or expire.

Financial assets and ﬁ nancial liabilities are offset and the net amount presented in the statement of ﬁ nancial position when, and only when, the Group has a
legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Refer to note 28
for the list of Non-derivative ﬁ nancial assets and ﬁ nancial liabilities.

2. Non-derivative ﬁ nancial assets – measurement

Cash and cash equivalents and restricted bank deposits

In the consolidated statement of cash ﬂ ows, cash and cash equivalents includes bank deposits deposited for periods which do not exceed three months.
Restricted bank deposits are deposits restricted due to bank facilities and derivatives entered into.

Loans and receivables

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured
at amortised cost using the effective interest method. The collectability of receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off in the period in which they are identiﬁ ed. Doubtful receivables are impaired when there is objective evidence that the Group will
not collect all amounts due. These types of assets are discussed in note 6, 7a and 7b.

Held for trading ﬁ nancial assets

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair
value and changes therein, are recognised in statement of proﬁ t or loss.

Available-for-sale ﬁ nancial assets

These assets are initially recognised at fair value. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment
losses and foreign currency differences on debt instruments, are recognised in other comprehensive income and accumulated in equity. When these assets are
derecognised, the gain or loss accumulated in equity is reclassiﬁ ed to proﬁ t or loss.

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ts NOTE 34

3. Non-derivative ﬁ nancial liabilities

Financial assets at fair value through proﬁ t or loss

A ﬁ nancial asset is classiﬁ ed as at fair value through proﬁ t or loss if it is classiﬁ ed as held-for-trading or is designated as such on initial recognition. Directly
attributable transaction costs are recognised in proﬁ t or loss as incurred. Financial assets at fair value through proﬁ t or loss are measured at fair value and
changes therein, including any interest or dividend income, are recognised in proﬁ t or loss

Financial Liabilities at fair value through proﬁ t or loss

Financial Liabilities at fair value through proﬁ t or loss include selected unsecured non-convertible Debentures series A and series B (refer to note 16).

Upon initial recognition a ﬁ nancial liability may be designated by the Company at fair value through proﬁ t or loss. Financial instruments are designated at fair
value through proﬁ t or loss if the Group manages such instruments and makes purchase and sale decisions based on their fair value in accordance with the
Group’s documented risk management or investment strategy, or to eliminate or signiﬁ cantly reduce a measurement or recognition inconsistency. Upon initial
recognition attributable transaction costs are recognised in proﬁ t or loss when incurred. Financial liabilities at fair value through proﬁ t or loss are measured at
fair value, and changes therein are recognised in proﬁ t or loss.

Other non-derivative ﬁ nancial liabilities

Non-derivative ﬁ nancial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these
liabilities are measured at amortised cost using the effective interest method. The Group has the following non-derivative ﬁ nancial liabilities: interest bearing
loans, debentures (refer to note 17), trade payables, related parties and other liabilities at amortised cost.

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4. Derivative ﬁ nancial instruments

The Group holds derivative ﬁ nancial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the
host contract and accounted for separately if certain criteria are met. Derivatives are recognised initially at fair value; any directly attributable transaction costs
are recognised in proﬁ t or loss as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally
recognised in proﬁ t or loss.

d. Share capital

Ordinary shares are classiﬁ ed as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction

from equity, net of any tax effect. Costs attributable to listing existing shares are expensed as incurred.

e. Trading properties

Properties that are being constructed or developed for sale in the ordinary course of business and empty plots acquired to be developed for such a sale are
classiﬁ ed as trading properties (inventory) and measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete construction and selling expenses.

If net realisable value is less than the cost, the trading property is written down to net realisable value.

In each subsequent period, a new assessment is made of net realisable value. When the circumstances that previously caused trading properties to be written
down below cost no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances, the
amount of the writedown is reversed so that the new carrying amount is the lower of the cost and the revised net realisable value.

The amount of any writedown of trading properties to net realisable value and all losses of trading properties are recognised as a writedown of trading
properties expense in the period the writedown or loss occurs. The amount of any reversal of such writedowns arising from an increase in net realisable value
is recognised as a reduction in the expense in the period in which the reversal occurs.

Costs comprise all costs of purchase, direct materials, direct labour costs, subcontracting costs and other direct overhead costs incurred in bringing the
properties to their present condition.

Borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the costs of the asset. A qualifying asset
is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Other borrowing costs are recognised as an expense in
the period in which they incurred.

Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditure and borrowing costs are being incurred.
Capitalisation of borrowing costs may continue until the asset is substantially ready for its intended use (i.e. upon issuance of certiﬁ cate of occupancy).

In certain cases, where the construction phase is suspended for an unplanned period expected to exceed 25% of the total scheduled time for construction,
cessation of the capitalisation of borrowing cost will apply, until construction phase is resumed.

Non–speciﬁ c borrowing costs are capitalised to such qualifying asset, by applying a capitalisation rate to the expenditures on such asset. The capitalisation
rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowing
made speciﬁ cally for the purpose of obtaining a qualifying asset.

The amount of borrowing costs capitalised during the period does not exceed the amount of borrowing costs incurred during that period.

f. Investment property

Investment property is initially measured at cost and subsequently at fair value with any change therein recognised in proﬁ t or loss. Any gain or loss on
disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in
proﬁ t or loss.

g. Property and equipment

Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses (refer to accounting policy
34(h)).If signiﬁ cant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components)
of property, plant and equipment.

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Any gain or loss on disposal of an item of property and equipment is recognised in proﬁ t or loss. Depreciation is calculated to write off the cost of items of
property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in
proﬁ t or loss. Land is not depreciated.

The estimated useful lives of property for current and comparative periods and equipment are as follows:

Land – owned

Ofﬁ ce buildings

Equipment, ﬁ xture and ﬁ ttings

Aircraft

Other*

Years

25-50

10-15

3-18

* Consists mainly of motor vehicles, equipment, computers, peripheral equipment, etc.

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

h. Impairment

1. Non-derivative ﬁ nancial assets

Financial assets not classiﬁ ed as at fair value through proﬁ t or loss, including interest on loan to equity accounted investee, are assessed at each reporting date
to determine whether there is objective evidence of impairment.

Objective evidence that ﬁ nancial assets are impaired includes:

• default or delinquency by a debtor;
• restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
• indications that a debtor or issuer will enter bankruptcy;
• adverse changes in the payment status of borrowers or issuers;
• the disappearance of an active market for a security; or
• observable data indicating that there is measurable decrease in expected cash ﬂ ows from a group of ﬁ nancial assets

Financial assets measured at amortised cost

The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually signiﬁ cant assets are individually
assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually
identiﬁ ed. Assets that are not individually signiﬁ cant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets
with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an
adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash ﬂ ows discounted at
the asset’s original effective interest rate. Losses are recognised in proﬁ t or loss and reﬂ ected in an allowance account. When the Group considers that there
are no realistic prospects of recovery of the asset, the relevant amounts are written off.

If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised, then the previously recognised impairment loss is reversed through proﬁ t or loss.

2. Non-ﬁ nancial assets and interests in equity accounted investees

At each reporting date, the Group reviews the carrying amounts of its non-ﬁ nancial assets (other than investment property, trading property and deferred tax
assets)) and interests in equity accounted investees to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated.

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For impairment testing, assets are grouped together into the smallest group of assets that generates cash inﬂ ows from continuing use that are largely
independent of the cash inﬂ ows of other assets or cash generating units (“CGU”).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future
cash ﬂ ows, discounted to their present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks
speciﬁ c to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in proﬁ t or loss. They are allocated ﬁ rst to reduce the carrying amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is never reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised.

i. Provisions

Provisions are determined by discounting the expected future cash ﬂ ows at a pre-tax rate that reﬂ ects current market assessments of the time value of money
and the risks speciﬁ c to the liability. The unwinding of the discount is recognised as ﬁ nance cost.

Construction costs

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outﬂ ow of
resources embodying economic beneﬁ ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement

is virtually certain.

The expense relating to any provision is presented in the income statement net of any reimbursement.

Warranties

A provision for warranties is recognised when the underlying products or services are sold, based on historical warranty data and a weighting of possible
outcomes against their associated probabilities.

Restructuring plan

A provision for restructuring is recognised when a detailed and formal Restructuring plan was approved by all relevant bodies, and the restructuring either has
commenced or has been announced publicly. Future operating losses are not provided for.

j. Revenue

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates

and amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic beneﬁ ts will ﬂ ow to the entity
and speciﬁ c criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and speciﬁ cs of each arrangement.

Rental income

The Group leases real estate to its customers under leases that are classiﬁ ed as operating leases. Rental income from investment property and trading
property is recognised in proﬁ t or loss on a straight-line basis over the term of the lease. Lease origination fees and internal direct lease origination costs are
deferred and amortised over the related lease term. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the
lease.

The leases generally provide for rent escalations throughout the lease term. For these leases, the revenue is recognised on a straight line basis so as to
produce a constant periodic rent over the term of the lease. The leases may also provide for contingent rent based on a percentage of the lessee’s gross sales
or contingent rent indexed to further increases in the Consumer Price Index (“CPI”).

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Where rentals that are contingent upon reaching a certain percentage of the lessee’s gross sales, the Group recognises rental revenue when the factor on

which the contingent lease payment is based actually occurs. Rental revenues for lease escalations indexed to future increases in the CPI are recognised only
after the changes in the index have occurred.

Revenues from selling of trading properties and investment properties

Revenues from selling of trading properties and investment properties are measured at the fair value of the consideration received or receivable. Revenues are

recognised when all the following conditions are met:

a. the Group has transferred to the buyer the signiﬁ cant risks and rewards of ownership;
b. the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the property sold;
c. the amount of revenue can be measured reliably;
d. it is probable that the economic beneﬁ ts associated with the transaction will ﬂ ow to the Group (including the fact that the buyer’s initial and continuing

investment is adequate to demonstrate commitment to pay);
the costs incurred or to be incurred in respect of the transaction can be measured reliably; and
there are no remaining signiﬁ cant performance obligations.

e
f.

Determining whether these criteria have been met for each sale transaction, requires a certain degree of judgment by the Group’s management. The judgment
is made in determination whether, at the end of the reporting period, the Group has transferred to the buyer the signiﬁ cant risks and rewards associated with
the real estate assets sold.

Such determination is based on an analysis of the terms included in the sale agreement executed with the buyer as well as an analysis of other commercial
understandings with the buyer in respect of the real estate sold. In certain cases, the sale agreement with the buyer is signed during the construction period
and the consummation of the transaction is subject to certain conditions precedent which have to be fulﬁ lled prior to delivery. Revenues are, therefore,
recognised when all the signiﬁ cant conditions precedent included in the agreement have been fulﬁ lled by the Group and/or waived by the buyer prior to the end
of the reporting period.

Generally, the Group is provided with a bank guarantee from the buyer for the total estimated proceeds in order to secure the payment by the buyer at delivery.

Therefore, the Group is not exposed to any signiﬁ cant risks in respect of payment of the proceeds by the buyer.

k. Operating lease payments

Payments made under operating leases (in respect of plots of land under usufruct) are recognised in proﬁ t or loss on a straight line basis over the term of the
lease but are capitalised in relation to land used for the development of trading properties during the construction period (similar to borrowing costs).

l. Finance income and cost

For the composition of ﬁ nance income and costs refer to note 26. For capitalisation of borrowing costs please refer to note 8.

Interest income and expenses which are not capitalised are recognised in the income statement as they accrue, using the effective interest method. For the
Group’s policy regarding capitalisation of borrowing costs refer to note 34(e).

m. Income tax

Income tax expense comprises current and deferred tax. It is recognised in proﬁ t or loss except to the extent that it relates to a business combination, or items
recognised directly in equity or in other comprehensive income.

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in
respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from
dividends. Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for ﬁ nancial reporting purposes and the

amounts used for taxation purposes. Deferred tax is not recognised for:

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•

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

temporary differences related to investments in subsidiaries and joint arrangements to the extent that the Group is able to control the timing of the reversal
of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

•

taxable temporary differences arising on the initial recognition of goodwill

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future
taxable proﬁ ts will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is
no longer probable that the related tax beneﬁ t will be realised. Such reduction is reversed when the probability of future taxable proﬁ ts improved.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable proﬁ ts will

be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively

enacted at the reporting date.

Deferred tax assets and liabilities are offset only if certain criteria are met.

n. Segment reporting

Segment results that are reported to the Group’s CEO (the chief operating decision maker) include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate debt, assets (primarily the Company’s headquarters), head ofﬁ ce
expenses, and tax assets and liabilities.

o. Employee beneﬁ ts

1. Bonuses

The Group recognises a liability and an expense for bonuses, which are based on agreements with employees or according to management decisions based
on Group performance goals and on individual employee performance. The Group recognises a liability where contractually obliged or where past practice has
created a constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

2. Share-based payment transactions

The fair value of options granted to employees to acquire shares of the Company is recognised as an employee expense or capitalised if directly associated
with development of trading property, with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reﬂ ect the actual number of share
options that vest.

Where the terms of an equity-settled award are modiﬁ ed, the minimum expense recognised is the expense as if the terms had not been modiﬁ ed. An additional
expense is recognised for any modiﬁ cation, which increases the total fair value of the share-based payment arrangement, or is otherwise beneﬁ cial to the
employees as measured at the date of modiﬁ cation. The fair value of the amount payable to employees in respect of share-based payments, which may be
settled in cash, at the option of the holder, is recognised as an expense, with a corresponding increase in liability, over the period in which the employees
become unconditionally entitled to payment. The fair value is re-measured at each reporting date and at settlement date. Any changes in the fair value of
the liability are recognised as an additional cost in salaries and related expenses in the income statement. As of the end of the reporting period share-based
payments which may be settled in cash are options granted to only one person and can be cash settled at the option of the holder.

p. Discontinued operation

A discontinued operation is a component of the Group’s business, the operations and cash ﬂ ows of which can be clearly distinguished from the rest of the
Group, and which:

1. represents a separate major line of business or geographical area of operations;
2. is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
3. is a subsidiary acquired exclusively with a view to re-sale.

Classiﬁ cation as a discontinued operation occurs on disposal or when the operation meets the criteria to be classiﬁ ed as held-for-sale. When an operation

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is classiﬁ ed as a discontinued operation, the comparative statement of proﬁ t or loss and statement of other comprehensive income are re-presented as if the
operation had been discontinued from the start of the comparative year.

q. New standards not yet adopted

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2015; however, the Group has not applied
the following new or amended standards in preparing these consolidated ﬁ nancial statements.

The following new or amended standards are not expected to have a signiﬁ cant impact of the Group’s consolidated ﬁ nancial statements:

• Amendments to IAS 19 – Deﬁ ned Beneﬁ t Plans: Employee Contributions.
IFRIC 21 Levies.
•
•
IFRS 3 Business Combinations.
• Annual Improvements to IFRSs

PLAZA CENTERS N.V. ANNUAL REPORT 2014

131

FINANCIAL STATEMENTS

Financial statemen

NOTE 35 - LIST OF GROUP ENTITIES

As of December 31, 2014, the Company owns the following companies (all are 100% held subsidiaries at the end of the reporting period

presented unless otherwise indicated):

HUNGARY

ACTIVITY

REMARKS

Directly wholly owned
HOM Ingatlanfejlesztesi es Vezetesi Kft.
Plaza House Ingatlanfejelsztesi Kft.
Plaza Centers Establishment B.V.
Szombathely 2002 Ingatlanhasznosito es Vagyonkezelo Kft.
Tatabanya Plaza Ingatlanfejlesztesi Kft.

Management company
Ofﬁ ce building
Inactive
Inacitve
Inacitve

David House

Indirectly or jointly owned
Kerepesi 5 Irodaepulet Ingatlanfejleszto Kft.

Holder of land usage rights

100% held by Plaza Centers Establishment B.V.
Arena Plaza Extension project

SLOVAKIA

ACTIVITY

REMARKS

Kielce Plaza project
Leszno Plaza project
Lodz (Residential) project
Lodz Plaza project
O2 Fitness Club project

Directly wholly owned
Plaza Centers Slovak Republic S.R.O.

POLAND

Directly wholly owned
Kielce Plaza Sp. z o.o.
Leszno Plaza Sp. z o.o.
Lodz Centrum Plaza Sp. z o.o.
Wloclawek Plaza Sp. z o.o.
O2 Fitness Club Sp. z o.o.
Plaza Centers Polish Operations B.V.
EDMC Sp. z o.o.
Plaza Centers (Poland) Sp. z o.o.
Bytom Plaza Sp. z o.o.
Bielsko-Biala Plaza Sp. z o.o.
Bydgoszcz Plaza Sp. z o.o.
Chorzow Plaza Sp. z o.o.
Gdansk Centrum Plaza Sp. z o.o.
Gliwice Plaza Sp. z o.o.
Gorzow Wielkopolski Plaza Sp. z o.o.
Jelenia Gora Plaza Sp. z o.o.
Katowice Plaza Sp. z o.o.
Legnica Plaza Sp. z o.o.
Opole Plaza Sp. z o.o.
Radom Plaza Sp. z o.o.
Rzeszow Plaza Sp. z o.o.
Szczecin Plaza Sp. z o.o.
Tarnow Plaza Sp. z o.o.
Tychy Plaza Sp. z o.o.

Inactive

ACTIVITY

Shopping center project
Owns plot of land
Owns plot of land
Mixed-use project
Entertainment
Holding company
Management company
Management company
Inactive
Inacitve
Inacitve
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

FINANCIAL STATEMENTS

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PLAZA CENTERS N.V. ANNUAL REPORT 2014

ts NOTE 35

Indirectly or jointly owned
Legnica Plaza Spolka z ograniczona
odpowiedzialnoscia S.K.A.
Suwalki Plaza Sp. z o.o.

Operating shopping center

Zgorzelec Plaza Sp. z o.o.

Operating shopping center

EDP Plaza Sp. z o.o.
Lublin Or Sp. z o.o.
P.L.A.Z.A B.V.

Hokus Pokus Rozrywka Sp. z o.o.

Fantasy Park Sp. z o.o.
Fantasy Park Suwalki Sp. z o.o.
Fantasy Park Torun Sp. z o.o.
Fantasy Park Zgorzelec Sp. z o.o.
Fantasy Park Bytom Sp. z o.o.
Fantasy Park Lodz Sp. z o.o.
Fantasy Park Warszawa Sp. z o.o.
Fantasy Park Investments Sp. z o.o.

Inactive
Inactive
Inactive

Inactive

Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

100% held by Plaza Centers Polish Operations B.V.
Torun Plaza project
100% held by Plaza Centers Polish Operations B.V.
Suwalki Plaza project
100% held by Plaza Centers Polish Operations B.V.
Zgorzelec Plaza project
50% held by Plaza Centers N.V. with Israeli-based partner
50% held by Plaza Centers N.V. with Israeli-based partner
50% held by Plaza Centers N.V.
50% held by Mulan B.V.
50% held by Plaza Centers N.V.
50% held by P.L.A.Z.A B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.
100% held by Mulan B.V.

LATVIA

ACTIVITY

REMARKS

Indirectly or jointly owned
Diksna SIA

Operating shopping center

Fantasy Park Latvia SIA

Entertainment

Equity accounted investee
50% held by Plaza Centers N.V.
50% held by JV partner
Riga Plaza project.
100% held by Mulan B.V.

ROMANIA

ACTIVITY

REMARKS

Directly wholly owned
Dambovita Centers Holding B.V.
Plaza Centers Management B.V.
S.C. Elite Plaza S.R.L.
S.C. Green Plaza S.R.L.
S.C. North Eastern Plaza S.R.L.
S.C. North Gate Plaza S.R.L.
S.C. Eastern Gate Plaza S.R.L.
S.C. South Gate Plaza S.R.L.
S.C. Mountain Gate Plaza S.R.L.
S.C. Palazzo Ducale S.R.L.
S.C. Plaza Centers Management Romania S.R.L.
S.C. North West Plaza S.R.L.
S.C. White Plaza S.R.L.
S.C. Blue Plaza S.R.L.
S.C. Golden Plaza S.R.L.
S.C. West Gate Plaza S.R.L.
S.C. South Eastern Plaza S.R.L.
S.C. South West Plaza S.R.L.
S.C. Plaza Operating Management S.R.L.

Indirectly or jointly owned
S.C. Dambovita Center S.R.L.

Plaza Bas B.V.

100% held by Plaza Centers N.V.

Timisoara Plaza project
Iasi Plaza project
Constanta Plaza project
Csiki Plaza (Miercurea Ciuc) project
Cina project
Slatina Plaza project

Palazzo Ducale

Holding company
Holding company
Shopping center project
Shopping center project
Shopping center project
Shopping center project
Real estate project
Shopping center project
Inactive
Ofﬁ ce building
Management company
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

Mixed-use project

Holding company

75% held by Dambovita Centers Holding B.V.
Casa Radio project
50.1% held by Plaza Centers N.V.

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FINANCIAL STATEMENTS

Financial statemen

Adams Invest S.R.L.

Residential project

Colorado Invest S.R.L.

Residential project

Sunny Invest S.R.L.

Residential project

Primavera Invest S.R.L.

Ofﬁ ce project

95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Valley View project
95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Pine Tree project
95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Green Land project
95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Primavera Tower Ploiesti project

SERBIA

ACTIVITY

REMARKS

Directly wholly owned
Plaza Centers (Estates) B.V.
Plaza Centers (Ventures) B.V.
Plaza Centers Management D.O.O.
Plaza Centers Holding B.V.

Indirectly or jointly owned
Leisure Group D.O.O.

Holding company
Holding company
Management company
Inactive

Shopping center project

Orchid Group D.O.O.

Shopping center project

Accent D.O.O.
Telehold D.O.O.

Inactive
Inactive

100% held by Plaza Centers (Estates) B.V.
Belgrade Plaza (Visnjicka) project
Krusevac Plaza project
100% held by Plaza Centers (Ventures) B.V.
Belgrade Plaza (MUP) project
100% held by Plaza Centers Logistic B.V.
100% held by S.S.S. Project Management B.V.

CZECH REPUBLIC

ACTIVITY

REMARKS

Directly wholly owned
P4 Plaza S.R.O.
Plaza Centers Czech Republic S.R.O.

Operating shopping center
Management company

Liberec Plaza project

BULGARIA

ACTIVITY

REMARKS

Directly wholly owned
Shumen Plaza EOOD
Plaza Centers Management Bulgaria EOOD
Plaza Centers Development EOOD

Shopping center project
Management company
Inactive

Shumen Plaza project

GREECE

ACTIVITY

REMARKS

Directly wholly owned
Helios Plaza S.A.
Indirectly or jointly owned
Elbit Cochin Island Ltd.

CYPRUS – UKRAINE

Directly wholly owned
Tanoli Enterprises Ltd.
PC Ukraine Holdings Ltd.
Plaza Centers Ukraine Ltd.
Nourolet Enterprises Ltd.

Shopping center project

Pireas Plaza project

Inactive

ACTIVITY

Finance activity
Inactive
Inactive
Inactive

40% held by Plaza Centers N.V.

REMARKS

100% held by PC Ukraine Holdings Ltd.
100% held by PC Ukraine Holdings Ltd.

FINANCIAL STATEMENTS

134

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ts NOTE 35

THE NETHERLANDS

ACTIVITY

REMARKS

Directly wholly owned
Plaza Dambovita Complex B.V.
Plaza Centers Enterprises B.V.
Mulan B.V. (Fantasy Park Enterprises B.V.)
Plaza Centers Administrations B.V.
Plaza Centers Connections B.V.
Plaza Centers Engagements B.V.
Plaza Centers Foundations B.V.
Plaza Centers Logistic B.V.
S.S.S. Project Management B.V.
Obuda B.V

Holding company
Finance company
Holding company
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

100% held by Plaza Dambovita Complex B.V.
Holds Fantasy Park subsidiaries in CEE

THE DUTCH ANTILLES

ACTIVITY

REMARKS

Directly wholly owned
Dreamland Entertainment N.V.

CYPRUS – INDIA

Directly wholly owned
PC India Holdings Public Company Ltd.

Indirectly or jointly owned
Permindo Ltd.

Inactive

ACTIVITY

Holding company

Anuttam Developers Pvt. Ltd.

Operating shopping center

HOM India Management Services Pvt. Ltd.
Spiralco Holdings Ltd.
Rebeldora Ltd.
Rosesmart Ltd.
Xiﬁ us Services Ltd.
Dezimark Ltd.
Elbit Plaza India Real Estate Holdings Ltd.

Polyvendo Ltd.
Elbit Plaza India Management Services Pvt. Ltd.
Kadavanthra Builders Pvt. Ltd.

Management company
Inactive
Inactive
Inactive
Inactive
Inactive
Holding company

Holding company
Management company
Mixed-use project

Aayas Trade Services Pvt. Ltd.

Mixed-use project

Elbit India Architectural Services Ltd.

UNITED STATES OF AMERICA

Indirectly or jointly owned
Elbit Plaza USA II LP (EPUS II)

Inactive

ACTIVITY

Holding company

EPN REIT II

Inactive

REMARKS

100% held by PC India Holdings Public Company Ltd.
Holds 99.9% of Anuttam Developers Pvt. Ltd.
99.99% held by Permindo Ltd.
Koregaon Park Plaza project
99.99% held by PC India Holdings Public Company Ltd.
100% held by PC India Holdings Public Company Ltd.
100% held by PC India Holdings Public Company Ltd.
100% held by PC India Holdings Public Company Ltd.
100% held by PC India Holdings Public Company Ltd.
100% held by PC India Holdings Public Company Ltd.
Equity accounted investee
47.5% held by Plaza Centers N.V.
100% held by Elbit Plaza India Real Estate Holdings Ltd.
99.99% held by Polyvendo Ltd.
80% held by Elbit Plaza India Real Estate Holdings Ltd.
Chennai (SipCot) project
99.9% held by Elbit Plaza India Real Estate Holdings Ltd.
Bangalore project
100% held by Elbit Plaza India Real Estate Holdings Ltd.

REMARKS

Equity accounted investee
50% held by Plaza Centers N.V.
50% held by Elbit Imaging Ltd.
100% held by Elbit Plaza USA II LP (EPUS II)

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135

FINANCIAL STATEMENTS

Financial statemen

Entities disposed or dissolved in 2013 and 2014

HUNGARY

ACTIVITY

REMARKS

Szeged 2002 Ingatlanhasznosito es Vagyonkezelo Kft.
Ercorner Gazdasagi Szolgaltato Kft.

Inactive
Holding company

Alom Sziget 2004 Ingatlanfejleszto Kft.

Mixed-use project

DI Gaming Holding Ltd.
Alom Sziget Entertainment Zrt.
Alom Sziget Hungary Kaszinojatek Kft.
SBI Hungary Ingatlanforgalmazo es Epito Kft.

Holding company
Holding company
Holding company
Shopping center

Liquidated
50% held by Plaza Centers N.V.
50% held by Hungarian commercial bank
87% held by Ercorner Gazdasagi Szolgaltato Kft.
Dream Island project
87% held by Ercorner Gazdasagi Szolgaltato Kft.
49.99% held by DI Gaming Holding Ltd. - associate
100% held by Alom Sziget Entertainment Zrt.
50% held by Plasi Invest 2007 Ingatlanforgalmazo Kft.
50% held by Israeli-based partner
Uj Udvar project

ROMANIA

ACTIVITY

REMARKS

Malibu Invest S.R.L.

Residential project

Spring Invest S.R.L.

Ofﬁ ce project

Bas Developement S.R.L.

Residential project

Equity account investee
25%/75% held by Plaza Bas B.V. with partner
Fountain Park project
Equity accounted investee
50%/50% held by Plaza Bas B.V. with partner
Primavera Tower Brasov project
Equity accounted investee
50%/50% held by Plaza Bas B.V. with partner
Acacia Park project

CZECH REPUBLIC

ACTIVITY

REMARKS

Praha Plaza S.R.O.
Plaza Housing S.R.O.

INDIA

P-One Infrastructure Pvt. Ltd.

SERBIA

Sek D.O.O.

Logistic center
Owns plot of land

ACTIVITY

Real estate

Prague III project
Roztoky project

REMARKS

50% held by Spiralco Holdings Ltd.
50% held by Indian third party
Kharadi Plaza project
Trivandrum Plaza project

ACTIVITY

REMARKS

Operating shopping center

100% held by Plaza Centers Holding B.V.
Kragujevac Plaza project

FINANCIAL STATEMENTS

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ts NOTE 35

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137

FINANCIAL STATEMENTS

Company’s ofﬁ ces

Plaza Centers The Netherlands

Plaza Centers Serbia

Plaza Centers N.V.

Prins Hendrikkade 48-S

1012 AC Amsterdam

The Netherlands

Phone: +31 20 344 9560

Fax: +31 20 344 9561

E-mail: info@plazacenters.nl

www.plazacenters.com

Lazarevacka street no 1/5

11000 Senjak, Belgrade

Serbia

Phone: +381 11 715 1577

Fax: +381 11 715 1587

E-mail: ofﬁ ce@plazacenters.rs

www.plazacenterserbia.rs

Plaza Centers Hungary

Plaza Centers Czech Republic

David House

Andrassy ut 59.

1062 Budapest

Hungary

Phone: +36 1 462 7100

Fax: +36 1 462 7201

E-mail: info@plazacenters.com

Plaza Centers Poland

Marynarska Business Park

Ul. Tasmowa 7

02-677 Warsaw

Poland

Phone: +48 22 231 9900

Fax: +48 22 231 9901

E-mail: headofﬁ ce@plazacenters.pl

www.plazacenters.com/pl

Shopping Center Liberec / P4 Plaza

Palachova 1404

460 90 Liberec

Czech Republic

Phone: +420 485 104 110

E-mail: ofﬁ ce@plazacenters.cz

www.plazacenters.cz

Plaza Centers Latvia

71 Mukusalas

LV-1004 Riga

Latvia

Phone: +371 67 633 734

Fax: +371 67 633 735

E-mail: ofﬁ ce.latvia@cbre.com

www.rigaplaza.lv

Plaza Centers Romania

Plaza Centers India

63-81 Calea Victoriei

Building I1, Entrance B2, District 1

010065 Bucharest

Romania

Phone: +40 21 315 4646

Fax: +40 21 314 5660

E-mail: ofﬁ ce@plazacenters.ro

Prestige Towers

Unit No 106A, 1st Floor

99/100 (New no 100/31)

Residency road

560 025 Bangalore

India

Phone: +91 80 4041 4444

Fax: +91 80 4041 4408

www.plazacenters.in

ADDITIONAL INFORMATION

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PLAZA CENTERS N.V. ANNUAL REPORT 2014

Advisors

Investor relations

FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
United Kingdom
www.fticonsulting.com

UK sponsor

Spark Advisory Partners Limited
5 St John’s Lane
London EC1M 4BH
United Kingdom
www.sparkadvisorypartners.com

Principal auditor

KPMG Hungaria Kft.
Vaci ut 99.
H-1139 Budapest
Hungary
www.kpmg.hu

Corporate solicitors in the UK

Mayer Brown International LLP
201 Bishopsgate
London EC2M 3AF
United Kingdom
www.mayerbrown.com

Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
United Kingdom
www.blplaw.com

Corporate legal counsels in the Netherlands

Buren N.V.
World Trade Center, Tower A Level 10,
Strawinskylaan 1017
1077 XX Amsterdam
The Netherlands
www.burenlegal.com

Dutch statutory auditor

Corporate legal counsel in Poland

Grant Thornton Accountants en Adviseurs B.V.
Gedempte Zalmhaven 4 E
Postbus 23278
3001 KG Rotterdam
The Netherlands
www.gt.nl

Weil, Gotshal & Manges LLP
Warsaw Financial Center
ul. Emillii Plateer 53
Warsaw 00-113
Poland
www.weil.com/warsaw

Tax counsels in the Netherlands

Registrar

Loyens & Loeff N.V.
Fred. Roeskestraat 100
1076 ED Amsterdam
The Netherlands
Web: www.loyensloeff.com

Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
www.capitaassetservices.com

PLAZA CENTERS N.V. ANNUAL REPORT 2014

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ADDITIONAL INFORMATION

140

PLAZA CENTERS N.V. ANNUAL REPORT 2014

DESIGNED AND PRODUCED BY RESTYÁNSZKI DESIGN STUDIO

PLAZA CENTERS N.V.

Prins Hendrikkade 48-S
1012 AC Amsterdam
The Netherlands
Phone: +31 20 344 9560
Fax: +31 20 344 9561
E-mail: info@plazacenters.nl
www.plazacenters.com