Platzer Fastigheter Annual Report 2017

FY2017 Annual Report · Platzer Fastigheter

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ANNUAL REPORTPLAZA CENTERS 2017PLAZA CENTERSContents

Overview
Who we are . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2017 highlights . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Business concept and strategy . . . . . . . . . . . . . . . . . .
6
8
Debt restructuring . . . . . . . . . . . . . . . . . . . . . . . .
Our portfolio at a glance . . . . . . . . . . . . . . . . . . . . . 15
Development focus . . . . . . . . . . . . . . . . . . . . . . . . 16
Current portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 17

Business review
Chief Executive Officer’s statement . . . . . . . . . . . . . . . . 18
Operational review . . . . . . . . . . . . . . . . . . . . . . . . 20
Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Valuation summary . . . . . . . . . . . . . . . . . . . . . . . . 26

Management and governance
Management structure . . . . . . . . . . . . . . . . . . . . . . 27
Board of Directors and Senior management . . . . . . . . . . . 28
Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . 30
Corporate governance . . . . . . . . . . . . . . . . . . . . . . 34
Risk management . . . . . . . . . . . . . . . . . . . . . . . . 40
Remuneration report . . . . . . . . . . . . . . . . . . . . . . . 50
Statement of the directors . . . . . . . . . . . . . . . . . . . . 53

Financial statements
Independent auditors’ report . . . . . . . . . . . . . . . . . . . 54
Consolidated statement of financial position . . . . . . . . . . . 58
Consolidated statement of profit or loss . . . . . . . . . . . . . 59
Consolidated statement of comprehensive income . . . . . . . . 60
Consolidated statement of changes in equity . . . . . . . . . . . 61
Consolidated statement of cash flow . . . . . . . . . . . . . . . 62
Notes to the consolidated financial statements . . . . . . . . . . 64

Additional information
Company’s offices . . . . . . . . . . . . . . . . . . . . . . . . 116
Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

This annual report is not intended for Dutch statutory filing purposes .

The Company is required to file an annual report containing

consolidated and Company financial 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 offices in Amsterdam .

Who we are

We are a Central and Eastern European property developer
focusing on western-style shopping and entertainment centers.

The Plaza Centers Group was a property developer and investor
with a focus on operations in Central and Eastern Europe (“CEE”)
until the end of 2017 . The Group has been present in the Central
and Eastern Europe region since 1996 and was the first to develop
western-style shopping and entertainment centers in Hungary .
The Group has pioneered this concept throughout the CEE whilst
building a strong track record of successfully developing, letting and
selling shopping and entertainment centers . Since 2006, the Group
has extended its area of operations beyond the CEE into India . In
2010, Plaza identified, with its joint venture partners, a window of
opportunity for investment in the US as a result of the dislocation
of the property market, specifically within the retail sector . In 2012,
taking advantage of its qualities and experience in identifying
opportunities, managing and exiting assets, gained over the years,
the Group completed another significant sale of 49 US-based assets,
mainly to a joint venture between Blackstone Real Estate and DDR
Corp . In a transaction valued at US$1 .47 billion, which reflects a ROE
for the Group of nearly 50% in a period of little over 18 months .

Plaza has implemented debt restructuring plan that was approved by
the Dutch court on July 9, 2014 and became final in November 2014
by the completion of a successful rights offering, which provided
Plaza with a €20 million capital injection and marked an important
final step in the restructuring process followed by A third listing on
the Tel Aviv Stock Exchange .

In line with the debt restructuring plan, Plaza repays 75% of
proceeds from disposals to bondholders . An Amended Plan was
agreed in November 2016 according to which, the Group agreed
with its bondholders to amend the terms of the early repayment
requirement under the original debt restructuring plan . During
first three months 2017, the Company paid to its bondholders a
total amount of NIS 191 .7 million (EUR 49 .2 million) as an early
redemption . Upon such payments, the Company complied with the
Early Prepayment Term (early redemption at the total sum of at least
NIS 382,000,000) and thus obtained a deferral of one year for the
remaining contractual obligations of the bonds . In January 2018,
a settlement agreement was signed by and among the Company
and the two Israeli Series of Bonds including among others: New
repayment ratios, an increase in the level of the mandatory early
repayments, new repayment schedule, a waiver of claims and to
waive the request for publication of quarterly financial reports .

The Group has been present in real estate development in emerging
markets for more than 22 years, initially pursuing shopping
and entertainment center development projects in Hungary and
subsequently expanding into Poland, the Czech Republic, Romania,
Latvia, Greece, Serbia, Bulgaria and India . To date, the Group has
developed, let and sold 34 shopping and entertainment centers in the
CEE region and India, with an aggregate gross value of circa €1 .55
billion . 21 of these centers were acquired by Klepierre, a leading
player in the continental European shopping center property market,
which owns shopping center in 57 cities and 16 countries, with a
property portfolio value of €23 .8 billion as of the year ending 2017 .
Four additional shopping and entertainment centers were sold to the
Dawnay Day Group . One shopping center was sold in 2007 to Active
Asset Investment Management (“AAIM”), a UK commercial property
investment group . The transaction had a completion value totaling
approximately €387 million, representing circa 20% of all real estate
transactions completed in Hungary in 2007 . Kragujevac Plaza was
sold in 2014 to New Europe Property Investments plc (today “NEPI
Rockcastle plc”) a commercial property investor and developer,
listed on the Main Board of the Johannesburg Stock Exchange
Limited (JSE) and Euronext Amsterdam .

In 2017 Plaza announced the successful completion of the sale of
Belgrade Plaza shopping and entertainment centre to a subsidiary
of BIG Shopping Centers Ltd, a publicly traded company in Tel Aviv
Stock Exchange . Belgrade Plaza (Visnjicka) has been the largest
development underway in Serbia . In addition Torun plaza mall
in Poland was sold to a private investment fund, being the last
operating asset .

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Serbia

During 2017 and up to date, Plaza received net proceeds of €119 .4
million from sales transactions and price adjustments . The focus of
2017 has very much been centred on our extensive disposal program-
me, as we continued with our efforts to decrease the Company’s debt
and to meet the demands of the restructuring programme .

The Company is an indirect subsidiary of Elbit Imaging Ltd . (“EI”), an
Israeli public company whose shares are registered for trade on the
Tel Aviv Stock Exchange in Israel and on the NASDAQ Global Select
Market in the United States .

In 2018 the Company remains focused on completing the disposal of
the assets identified for sale and on delivering on its commitments to
its stakeholders .

Since 1 November 2006, Plaza Centers N .V .’s shares have been
traded on the main board of the London Stock Exchange under the
ticker “PLAZ” . From 19 October 2007, Plaza Centers N .V .’s shares
are also traded on the main list of the Warsaw Stock Exchange under
the ticker “PLZ”, making it the first property company to achieve this
dual listing, and on the Tel Aviv Stock Exchange .

PLAZA CENTERS N.V. ANNUAL REPORT 2017

2017 highlights

The focus of the last 12 months has very much been
centred on our extensive disposal programme, as we
continued with our efforts to decrease the Company’s
debt and to meet the demands of the restructuring
programme. While it has been challenging, we are
pleased with the progress we have made, having
divested €183 million of assets (including an office
building) during the course of the year.

Financial highlights:

• Reduction in total assets to €141 million as a result of the

Company’s portfolio repositioning and deleveraging strategy

(31 December 2016: €322 million) .

• Book value of the Company’s Trading properties and investment

in equity accounted investees decreased by €201 million to

€93 million over the period, due to disposals (mainly Suwalki

Plaza and Torun Plaza (in Poland) and Belgrade Plaza (in Serbia))

in line with the restructuring plan .

• Consolidated cash position as at December 31, 2017 increased to

€44 .8 million (31 December 2016: €12 .8 million including restricted

bank deposits) and current cash position of circa €5 .2 million .

• Revenue from disposal of trading properties totalled €193 million

(2016: €29 million) in line with the Company’s extensive disposal

program .

• €15 million loss recorded at an operating level (December 31,

2016: €30 .4) where a gain from selling trading properties and

profit from operating active shopping centres was offset by write-

down of trading properties and administrative expenses .

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Total assets
2017: €141 million

2016: €322 million

€m

1500

1200

900

600

300

270

240

210

180

150

120

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Consolidated cash position*
2017: €44.8 million

2016: €12 .8 million

€m

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

* Including restricted bank deposits, short term deposits in 2016 .

Sale of Suwalki Plaza:
In January 2017, The Company sold its SPV holding Suwałki Plaza
shopping and entertainment centre in Poland for €16 .7 million .

The purchaser was an investment fund which is connected to a

former employee of the Company .

• Losses decreased to €26.5 in million in 2017 from €46.5 million

in 2016 as the write down of trading properties decreased by

€29 million, while net finance expense were €10 .6 and €15 .4

Out of the net proceeds, at least 75% were distributed to the

Company’s bondholders in March 2017, in line with the Company’s
stated amended restructuring plan .

million, respectively .

• Basic and diluted loss per share of €3.87 (December 31, 2016:

loss per share of €6 .78) .

Progress in portfolio rationalisation and
financial highlights:

During 2017 and to the date of this announcement, Plaza received

net proceeds of €119 .4 million from sales transactions and price

Sale of Belgrade Plaza:
On January 26, 2017, the Company signed a binding share purchase
agreement with BIG Shopping Centers Ltd ., a publicly traded
company listed in the TA 100 Index, for the sale of the SPV holding

Belgrade Plaza shopping and entertainment centre .

The shopping centre, which was over 97% pre-let, opened on 20th

of April 2017 and the Company had remained responsible for the

development and leasing of the asset until the opening .

adjustments . The disposals form part of the Company’s ongoing

Upon completion of the transaction, the Company has received an

strategy to reduce the Company’s debt .

initial payment of €31 .7 million from the purchaser, and has since

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Loss after tax
2017: €-26.5 million

2016: €-46 .5 million

Out of the net proceeds, at least 75% were distributed to the

Company’s bondholders in March 2017, in line with the Company’s

stated Amended Plan .

€m

250

Sale of Shumen plaza project, Bulgaria:

200

150

100

-50

-100

-150

-200

-250

2007

2008

2010

2011

2009

2017

2015

2016

2012

2014

2013

received a further €2 million following the opening and further

payments are contingent upon certain operational targets and

milestones being met . The Purchaser has provided a guarantee to

secure these future payments .

The final agreed value of Belgrade Plaza, which comprises circa

32,300 sqm of GLA, will be calculated based on a general cap rate of

8 .25% as well as the sustainable NOI after 12 months of operation,

which the Company estimates will be approximately €6 .2-6 .5 million

per annum .

Further installments will be due to the Company during the first year

of operation based on this 12-month figure . The NOI will be

re-examined again after 24 months and 36 months of operation,
which may lead to an upward adjustment of the final purchase price .
The Company received a further payment of €13 .35 million during

September 2017 based on the SPA on account of the final proceed

which will be calculated one year following the opening of the mall,

subject to price adjustments in the next two years . As a result, the

Company recorded a gain from the sale totalling circa €3 .2 million .

Expected future purchase price adjustments are not recognised .

At least 75% of the net proceeds received from the disposal were

distributed to the Company’s bondholders in March 2017, and

following the receipt of any future additional payments, in line with the

Company’s stated Amended Plan, 78% will be paid to the bondholders .

Sale of office building in Hungary:

On February 16, 2017, the Company signed an agreement for

the sale of its SPV holding in David House, an office building in

Budapest, to private investors for a gross amount of €3 .2 million .

On February 23, 2017, the Company announced that it had concluded

the sale of a 26,057 sqm plot of land in Shumen, Bulgaria, for circa

€1 million, which is slightly above book value . Of the net proceeds, at

least 75% were distributed to the Company’s bondholders in March

2017, in line with the Company’s stated Amended Plan .

Compliance of the early prepayment term:

On March 15, 2017, the Company paid its bondholders a total
amount of NIS 191 .74 million (€49 .2 million) as an early redemption

and, accordingly, upon such payment the Company complied

with the early redemption term with a total sum of at least NIS

382,000,000 and thus obtained a deferral of one year for the

remaining contractual obligations of the bonds .

Preliminary Sale Agreement of Plot in Lodz, Poland:

On June 13, 2017, the Company announced that it has signed a

preliminary sale agreement for the disposal of a 13,770 sqm plot at its

second land holding in Lodz, Poland, (representing 22% of this hol-

ding) to a retail developer, for €1 .2 million . As part of the agreement,

the purchaser paid an immediate installment of EUR 0 .035 million

and the completion payment to make it totaling 10% of the sale price,

comprising an immediate installment already paid of EUR 0 .035

million followed by an installment of EUR 0 .085 million shall be paid

when the purchaser obtains environmental permit for investing in the

access road to the plot . The remaining balance minus 50% of the sum

invested in the road (up to maximum amount of EUR 0 .12 million)

will be paid once a building permit is obtained for development of the

land which is expected to be granted till the end of 2018 . In line with

the Company’s stated amended restructuring plan, 78% of the net

cash proceeds will be distributed to Plaza’s bondholders .

New payment structure for the sale of project in Bangalore, India

On 16 June 2017, further to its announcement on 15 November 2016,

that its jointly controlled subsidiary Elbit Plaza India Real Estate

Holdings Limited (in which Plaza holds effectively a 50% stake with

its joint venture partner, Elbit Imaging Ltd .) (“EPI”) signed a revised

agreement in relation to the sale of a 100% interest in a special

purpose vehicle which holds a site in Bangalore, India, to a local

investor (the “Purchaser”) . The Purchaser and EPI agreed that the

purchase price will be amended to INR 338 Crores (approximately

€44 .2 million) instead of the INR 321 Crores (approximately €42

million) agreed in the previous agreement . Refer to key highlight

since the period end regarding the dispute with the purchaser

followed by a further revised agreement .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

2017 highlights

Sale of Kielce Plaza, Poland:

Sale of Torun Plaza, Poland

On June 19, 2017, The Company announced that it has signed the

On 21 November 2017 one of the Company’s subsidiaries has

final sale agreement for the disposal of its 2 .47 hectare plot in the

completed the sale of Torun Plaza shopping and entertainment

centre of Kielce, Poland, for €2 .28 million (a down payment of

centre in Poland to a private investment fund .

€0 .47 million was received in 2016) . In line with the Company’s

The Company has received circa €28 .3 million . This net cash is

stated amended restructuring plan, 75% of the net cash proceeds

after the deduction of the bank loan (circa €43 .3 million), and other

was distributed to Plaza’s bondholders .

working capital adjustments in accordance with the balance sheet

of the SPV holding the Project . The above-mentioned sums do

Completed sale of Leszno plot in Poland:

not include the earn-out payments in an amount of € 0 .35 million,

In July 2017, The Company signed the final sale agreement for the

reduced by NAV adjustment of € 0 .2 million . The Company recorded

disposal of a 1 .8 hectare plot in the city of Leszno for €810,000 . In line

revenue of € 71 .6 million from the disposal and a loss of circa €1 .5

with the Company’s stated amended restructuring plan, 75% of the net

million (not including the earn-out payment mentioned) .

cash proceeds from the disposal distributed to Plaza’s bondholders .

78% of the net proceeds received from the disposal were distributed

to the Company’s bondholders during January 2018 .

Sale of plots in Timisoara and Constanta, Romania:

On 7 August, 2017 the Company completed the disposal of a plot

Sale of a plot in Belgrade, Serbia:

totalling approximately 32,000 sqm in Timisoara, Romania, for

Following the sale of “MUP” plot in Belgrade, Serbia, the Company

€7 .25 million . The Company also announced that it completed

was entitled to an additional contingent consideration of €0 .6 million

the sale of a plot totalling approximately 30,000 sqm in Constan-

once the purchaser successfully develops at least 69,000 sqm above

ta, Romania, for €1 .3 million . In line with the Company’s stated

ground . The consideration was received in September 2017 and is

amended restructuring plan, 75% of the net cash proceeds from both

recorded as revenue from disposal of trading properties .

disposals were distributed to Plaza’s bondholders .

Of the net proceeds, at least 75% were distributed to the Company’s

bondholders in October 2017, in line with the Company’s stated

Extension of long stop date regarding disposal of

Amended Plan .

Piraeus plot in Greece

Following the preliminary agreement regarding the disposal of a

Sale of a plot in Lodz, Poland:

plot in Piraeus, Greece, several amendments were signed during

On September 28, 2016, the Company completed the sale of a

2016-2017 the latest amendment deadline had expired on January

20,700 sqm plot of land in Lodz, Poland, to a residential developer,

20, 2018 . The last selling price of the share of the SPV holding the

for €2 .4 million in cash . Following this transaction, the Company

plot was set at EUR 3 .545 million . In order to secure the prolonged

owns a remaining 4,000 sqm site .

validity of the initial agreement, the purchaser has paid advance

payments in a total amount of EUR 0 .3 million non-refundable

The Company received €1 .44 million in 2016 in installments, and a

to Plaza . The completion of the transactions is expected to be

final installment of €0 .96 million was received in June 2017 .

concluded in 2018 as an asset deal (instead of the original agreement

In line with the Company’s stated restructuring plan, 75% of the

of share deal) with a lower sale price of EUR 3 .35 million .

net cash proceeds from the sale of the plot was distributed to the

Company’s bondholders .

Sale of land plot in Budapest, Hungary

On 2 October 2017 the Company concluded an agreement with an

Appointment of new auditor

international investor, NEPI Rockcastle, on the termination of land

On 29 June 2017, Plaza announced that, following the conclusion

use rights over a circa 21,788 sqm land plot adjoining Arena Plaza in

of a formal tender process led by the Company’s Audit Committee,

Budapest, Hungary, registered to a subsidiary of the Company, Ke-

the Board of the Company approved the appointment of Kost

repesi 5 Irodaépület Kft (“K5”) . The transaction also included the

Forer Gabbay & Kasierer, the largest accounting firm in Israel and

termination of the preliminary easement agreement, which provided

a member of Ernst & Young Global, as its new IFRS auditor . In

K5 with certain easement rights over the plot . NEPI Rockcastle is the

largest listed retail centre owner in CEE and recently acquired the
Arena Plaza shopping centre from a third party .
As a result of the agreement, K5 received a net sum of €2 .5 million .
At least 75% of the net proceeds received from the disposal were

addition, the Company’s general meeting of shareholders appointed
on 20 February 2018, Baker Tilly Berk N .V . as the Dutch statutory

auditor for the year 2017, who will audit the statutory annual

accounts (comprising stand-alone accounts and consolidated (IFRS)
accounts) .

distributed to the Company’s bondholders .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Standard & Poor’s credit rating update

To date, since the signing of the Agreement, the Purchaser has

On September 28 2017 Standard & Poor’s Maalot (“Maalot”),

paid non-refundable advance payments totalling INR 45 Crores (circa

the Israeli credit rating agency which is a division of International

€ 5 .9 million), out of the total consideration of INR 338 Crores (circa

Standard & Poor’s, reduced its credit rating of Plaza’s two series of

€44 .2 million) due under the Agreement .

Notes traded on Tel Aviv Stock Exchange from “ilCCC” to “ilCC” with

negative outlook on a local Israeli scale .

In March 2018, the Company signed a further revised agreement .

The Purchaser and Elbit Plaza India Real Estate (EPI) have agreed

Update regarding repayment to bondholders

that the total purchase price shall be increased to INR 350 Crores

On 21 December 2017 the Israeli Series A bondholders triggered

(approximately €45 .8 million) . By the end of March 2018, the

the immediate repayment of the entire outstanding debt under the

Purchaser will pay Elbit Plaza India Real Estate (EPI) INR 10 Crores

Series A trust deed, following the order of the Israeli court to allocate

(approximately €1 .3 million), in addition to the INR 45 Crores

the mandatory repayment amounts according to the ratios set out in

(approximately €5 .9 million) already paid since the period end .

the Company’s restructuring plan . On 27 December 2017 an initial

Further to this, a total of INR 83 Crores (approximately €10 .8 million)

agreement was reached among both Series of Israeli Bonds and the

will be paid by the Purchaser in monthly installments until the final

Company with respect to the allocation of funds between the 2 Series

close of the transaction . The Final Closing is now expected to take

of Israeli Bonds, from that day onwards . On 11 January 2018 the

place on 31 August 2019, when the final installment of circa INR 212

agreement became final and the Series A Bondholders withdrew their

Crores (approximately €27 .8 million) will be paid to EPI against the

request for immediate repayment .

transfer of the outstanding share capital of the SPV .

At the date of this announcement, the board and management

If the Purchaser defaults before the Final Closing, EPI is entitled to

estimate that there are significant doubts regarding the Company’s

forfeit certain amounts paid by the Purchaser as stipulated in the

ability to serve its entire debt according to the current repayment

revised agreement . All other existing securities granted to EPI under

schedule . Moreover, following the new payment structure agreed for

the previous agreements will remain in place until the Final Closing .

the sale of the project in Bangalore, India, which is detailed below,

it is expected that the Company will not be able to meet its entire

Motion to reveal and review internal documents

contractual obligations in the upcoming 12 months .

In March 2018, a Shareholder of the Company has filed a motion

Key highlights since the period end:

with the Financial Department of the District Court in Tel-Aviv to

reveal and review internal documents of the Company and of Elbit

Imaging Ltd ., with respect to the events surrounding that certain

In January 2018, Maalot has discontinued tracking the Plaza’s rating

agreements that were signed in connection with the Casa Radio Pro-

at the Company’s request .

ject in Romania and the sale of the US portfolio . Such events were

previously announced by the Company and are detailed in notes

Dispute with the purchaser of a plot in India and a revised agreement

8(6) and 27(d) of the financial statements . The Company is currently

On 19 January 2018, further to its press release dated June 19, 2017

examining the motion with its legal advisors and intend to respond in

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regarding the signing of a revised agreement for the sale of the100%

due course .

interest in an SPV (in which Plaza holds a 50% stake with its joint

venture partner, Elbit Imaging Ltd .), that holds property in Bangalore,

India, to a local investor (the “Agreement” and the “Purchaser”

Appointment of Acting CEO

respectively), that, due to a proposed change (initiated by the Indian

Following the announcement that Dori Keren will step down from

authorities) which could potentially impact the development of the

the Company at the end of March 2018, the Board appointed Avi

land, the Purchaser has given notice that all remaining payments

Hakhamov, who has been with the Company for more than 11

under the Agreement will be stopped until a mutually acceptable

years, as Acting CEO of the Company commencing 1 April 2018 . Avi

solution is reached .

Hakhamov joined in 2006 as financial controller in the headquarters

team of the Group and has been Acting CFO for the past two

On 21 February 2018 despite the notice by the Purchaser that

years . He has held past audit and professional advisory roles at

remaining payments under the Agreement will be stopped, the

accountancy firms, BDO, Arthur Andersen and KPMG Israel, and

Purchaser has paid the January installment totalling INR 5 Crores

holds an MBA degree in Accounting and Business as well as being a

(circa €0 .65 million) .

certified public accountant in Israel .

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Business Concept & Strategy

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Plaza business concept and strategy is to no longer
develop commercial centers, but to solve existing
bureaucratic or legal issues and dispose its real
estate assets.

It is clarified that the Settlement Agreement is a separate agreement

among the parties thereto with respect to the Company’s restructu-

ring plan, and as such has no effect on the Polish Bondholders .

On January 31, 2018 the Company paid the bondholders a total
amount of principal and interest of EUR 38 .5 millions .

Maintain liquidity and debt management

During 2017 the management’s focus has almost entirely been on

delivering the €183 million of disposals that we completed in the

12 months to 31 December, which produced €119 million in net

proceeds . Our commitment to this process has substantially reduced

our total assets from €322 million to €141 million as we progressed

our efforts to meet the obligations of the restructuring programme

and to our stakeholders .

Plaza ended the period with a consolidated cash position of €44 .8

million, compared to €12 .8 million at the end of 2016 .

As at December 31 2017 the Group’s outstanding obligation to

bondholders is €123 million after all bank loans were repaid or

disposed . The outstanding balance of the debt to bondholders

was €82 .2 million as of 29 March 2018 . In November 2016, the

Group agreed with its bondholders to amend the terms of the early

repayment requirement under the original debt restructuring plan

(the “Restructuring Plan”) . On March 15, 2017, the Group repaid

the required minimum early repayment to its bondholders and

thus obtained a deferral of one year for the remaining contractual

obligations of the bonds .

In January 2018, a settlement agreement was signed by and among

the Company and the two Israeli Series of Bonds (“Settlement

Agreement”) . In the Settlement Agreement it was agreed, inter alia,

to approve:

• New repayment ratios between the two Israeli Series of Bonds

Information concerning the Group’s obligations and commitments to
make future payments under contracts such as debt agreements in

the 15 months starting April 1, 2018 is aggregated in Note 2(c) of the

consolidated financial statements .

The board and management estimate that there are significant doubts
regarding the Company’s ability to serve its entire debt according

to the current repayment schedule . Moreover, following the new

payment structure agreed for the sale of the project in Bangalore,

India, which is detailed below, it is expected that the Company will

not be able to meet its entire contractual obligations in the upcoming

12 months .

As of December 31, 2017 the Company is not in compliance with

Coverage Ratio Covenant (“CRC”) as defined in the restructuring

plan . This may entitle the bondholders to declare that all or a part

of their respective (remaining) claims become immediately due and

payable .

In respect of credit rating downgrade followed by withdraw of credit

rating by Standard & Poor at the Company’s request refer to Note 15

(e) to the financial statements .

Plaza will continuing to reduce corporate level debts by early

repayments following sale of assets according to the Company’s debt

restructuring agreement .

Objectives

1. Development:

(new ratio: Bond A- 39%, Bond B- 61%);

Advancing related permits and approvals for the Casa Radio

• An increase in the level of the mandatory early repayments from

75% to 78% of the relevant net income;

project in Bucharest, Romania and exploring opportunities for

financing and/or partnerships for the development .

• New repayment schedule;

2. Sale of assets:

• An increase in the compensation to be paid to the Bondholders in

The Company remains focused on completing the disposal of the

the event of successful disposal of Casa Radio Project;

assets identified for sale and on delivering on its commitments to

• A waiver of claims to the Company and its directors and officers; and

its stakeholders .

• To waive the request for publication of quarterly financial reports

by the Company .

PLAZA CENTERS N.V. ANNUAL REPORT 2017

3. Debt:

Continuing to reduce corporate debt by early repayments following

sale of assets according to the Company’s debt restructuring agreement,

following the one year deferral achieved on March 15, 2017, and

subject to the settlement agreement signed by and among the

Company and the two Israeli Series of Bonds in 2018 .

4. General Expenses:

Continue with efficiency measures and cost reduction where

possible and continuing strongest cost control initiatives e .g .

reduction of manpower, cutting cost of suppliers, advisors etc .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Debt restructuring

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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 fulfilled .

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 .

from sale of real estate assets, as determined in the restruc-

turing plan (“Mandatory Repayment Amount”) to be allocated as

follows:

• To the Polish bondholders: 8.33% of the Mandatory Repayment

Amount – as per the ratio determined in the restructuring plan .

• To the Israeli series A bondholders: 21.23% of the Mandatory

Repayment Amount – as per the ratio determined in the

restructuring plan .

• To the Israeli series B bondholders: 31.16% of the Mandatory

Repayment Amount – the proportional amount that corresponds

to the ratio between the outstanding debts of the two Israeli series

of bonds .

The Company intended to deposit the reminder of the funds with

a third-party trustee for the benefit of both Israeli series of bonds

and subsequently approached the competent court in Israel for the

receipt of instructions with regard to the allocation of such reminder

amount .

On November 29, 2016, the Company’s bondholders approved a

postponement of the Early Prepayment date by up to four months

and the reduction of the total amount of the required Early Prepay-

ments to at least NIS 382 million (EUR 94 .5 million) (a reduction of

12% on the original amount) .

On October 4, 2017 the Company has received the consent of the

trustees of its Israeli series A bonds and series B bonds for the

allocation of certain funds received by the Company between the

Company’s series A bonds and series B bonds due for repayment of

such bonds as detailed above .

In addition, the Company agreed to pay to its bondholders, on March

31, 2018, a one-time consent fee in the amount of approximately

EUR 238 thousand (which is equal to 0 .25% from the Company’s

outstanding debt under the bonds at that time) (the “Consent Fee”) .

The consent Fee was paid to the Company’s bondholders on a pro

rata basis .

During first three months 2017, the Company paid to its bondholders

During December 2017, the Israeli court has instructed that the

mandatory repayment amounts due to the Israeli series A and series

B bondholders should be allocated according to the ratios set out in

the Company’s restructuring plan . The court has also acknowledged

that Plaza is not an interested party in this bondholder dispute and

has granted the Company a protective order from any claims in this

respect . The Israeli Series A bondholders triggered the immediate

repayment of the entire outstanding debt under the Series A trust

a total amount of NIS 191 .7 million (EUR 49 .2 million) as an early

redemption . Upon such payments, the Company complied with the

deed .

Early Prepayment Term (early redemption at the total sum of at least

NIS 382,000,000) and thus obtained a deferral of one year for the

remaining contractual obligations of the bonds .

In January 2018, a settlement agreement was signed by and among
the Company and the two Israeli Series of Bonds (“Settlement

Agreement”) .

On September 26, 2017 the Company announced that, further to

the resolutions of the Israeli series A bondholders and the series B

bondholders in connection with future bondholder repayments

(i .e ., repayments to series A bondholders, to series B bondholders

and to the Polish bondholders), the Company intends to repay a total

amount of circa €18,800,000, during October 2017, an amount which

represents 75% of the funds Plaza has received in the last quarter

The board and management estimate that there are significant
doubts regarding the Company’s ability to serve its entire debt

according to the current repayment schedule . Moreover, following

the new payment structure for the sale of the project in Bangalore,

India, it is expected that the Company will not be able to meet its
entire contractual obligations in the following 12 months .

PLAZA CENTERS N.V. ANNUAL REPORT 2017

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) .

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 . Refer to 2018 settlement agreement regarding an

increase in the level of the mandatory early repayments from 75% .

• 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

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

to the cumulative net cash flow 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 specific debt to banks) is no less than

€70 million, deducting the net cash flows received from previous

disposal events and deducting the net cash flow from the special

purpose disposal event . All four shopping malls sold as of

December 31, 2017 and €70 million threshold was met .

• 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 .

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

expressly provided for in the restructuring plan .

• 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 officers of the Group, all direct and

indirect shareholders of the Group were released 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 flow to be received by the Company following an exit

or the raising of new financial indebtedness, except if taken for

the purpose of purchase, investment or development of real estate

assets (“REA”) or refinancing 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

• 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 .
Refer to 2018 settlement agreement .

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

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

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

and divided by the aggregate amount of remaining plan claims

plus all other liabilities of the Group that rank pari passu with the
plan claims and that are not subordinated debt . The calculation
is based on known Group valuations reports and consolidated
financial information available at each reporting period .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

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

In addition to the above, the following terms were approved by the

in each reporting period .

bondholders:

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

a . Casa radio proceeds – If the Company shall sell the Casa radio

project located in Romania (hereinafter: the “Project”) to a third

by the Company’s management required to pay all administrative

party, including by way of selling its holdings in any of the entities

and general expenses and interest payments to the debentures

through which the Company holds the project (and said sale

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

shall be carried out before the full repayment of the debentures

proceeds from transactions that have already been signed (by

and until no later than December 31, 2019, and for an amount

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

which exceeds EUR 45 million net (i .e . after brokerage fees (if

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

any), taxes, fees, levies or any other obligatory payment due to

received during the following six months . Investments in new or

any authority in respect to the said sale) which shall actually be

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

received by the Company, then the holders of bonds shall be

investment the cash reserves are less than the minimum cash

eligible for a one-time payment (which shall come in addition

reserve and minimum CRC is not met .

• Negative pledge on REA of the Company – The Company

to the principal and interest payments in accordance with the

repayment schedule), in certain amounts specified in tranches .

undertakes that until the debentures have been repaid in full,

b . Registering of Polish bonds for trade – the Company has

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

committed to undertake best efforts to admit the Polish bonds for

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

trading on the Warsaw Stock Exchanges and proceeding in this

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

respect are ongoing .

subsidiary as additional security for financial indebtedness (“FI”)

incurred by such subsidiary which is secured by encumbrances on

assets owned by that subsidiary .

c . Deferred debt ratio of Series B debentures – were reduced to

68 .24% from 70 .44% following the cancellation of the treasury

bonds . The ratio has been changed for Series B debentures in

• Negative pledge on the REA of subsidiaries – The subsidiaries

order to maintain a distribution ratio between the three series .

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 .

In January 2018, a settlement agreement was signed by and among

the Company and the two Israeli Series of Bonds (“Settlement

Agreement”) . In the Settlement Agreement it was agreed, inter alia,

• Limitations on incurring new FI by the Company and the

to approve:

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

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

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

• New repayment ratios between the two Israeli Series of Bonds

(new ratio: Bond A- 39% Bond B- 61%);

• An increase in the level of the mandatory early repayments from

75% to 78% of the relevant net income;

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

• New repayment schedule;

development of a real estate asset;

• An increase in the compensation to be paid to the Bondholders in

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

the event of successful disposal of Casa Radio Project;

purchasing a new REA by such a subsidiary, provided that

• A waiver of claims to the Company and its directors and officers;

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

and

MCRC;

• To waive the request for publication of quarterly financial reports

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

by the Company .

of new FI is used for a mandatory early repayment of the Notes .

As a result of settlement agreement signing, Series A Bondholders

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

withdraw their request for immediate repayment .

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 .

It is clarified that the Settlement Agreement is a separate agreement

among the parties thereto with respect to the Company’s restructu-

ring plan, and as such has no effect on the Polish Bondholders .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Debt restructuring

History of corporate debt raisings and bond repayments by the Company

The Company raised debt in Israel by issuing marketable bonds and in Poland by private issuance as of March 31, 2018:

Bond raising

Series A

Series B

Polish Bonds

Israeli Bonds, NIS

EURO

401,850,451

1,483,126,346

15,085,058*

Interest accrued and capitalised 31/12/2013

6,652,927

16,055,759

665,575

Directly purchased by Plaza - Removed from the cycle

(8,253,378)

(108,993,111)

Bond raising, net

400,249,999

1,390,188,994

15,750,633

Principal payments over the years (until 31/03/2018)

(315,598,775)

(1,321,764,843)

(12,064,306)

Interest payments over the years (until 31/03/2018)

(161,044,151)

(469,181,026)

(6,910,385)

Total payments

(476,642,926)

(1,790,945,869)

(18,974,691)

Total payments over the years as percentage of total raising, net (%)

119.09%

128.83%

120.5%

* 60,000,000 PLN

Activities Following Approval of Restructuring Plan

Sales of assets since approval of the Restructuring Plan

In line with the Company’s stated restructuring plan, 75%* of the net cash proceeds from Plaza’s asset sales are distributed

to the Company’s bondholders as an early principal repayment .

Improving

Performance:

Continuing improvement of the occupancy levels and NOI of Torun Plaza, extending leases and establishing
performance .

September 2014: Completed the sale of a 31,500 sqm plot in Targu Mures, Romania, generating cash proceeds of €3 .5 million .

Completed the sale of Kragujevac Plaza Shopping and Entertainment centre in Kragujevac, Serbia for a total consideration

of €38 .6 million . The net cash proceeds from the sale were €12 .2 million .

December 2014: Completed the sale of a 41,000 sqm plot in Hunedoara, Romania generating cash proceeds of €1 .2 million .

February 2015: Completed the sale of part of a residential plot in Lodz, Poland for €0 .5 million .

May 2015:

Completed the sale of Koregaon Park Plaza Shopping and Entertainment Centre located in Pune, India for circa €35 million .
The net cash proceeds from the sale, circa €7 .4 million, were put towards Plaza’s future investments and used for general
corporate purposes . The mall was underperforming and created negative NOI, and circa €14 million of its bank loan was
with recourse to the parent company .
Completed the sale of a 17,000 sqm plot in Brasov, Romania generating cash proceeds of €0 .33 million .

June 2015: Completed the sale of a 46,500 sqm plot in Iasi, Romania generating cash proceeds of €7 .3 million .

September 2015: Completed the sale of an office building in Bucharest, Romania (823 sqm GLA) for €1 .1 million .

December 2015: Completed the transaction to waive the Company’s leasing rights to the Cina property in Bucharest, Romania, which has

been sold by its owner . The gross proceeds from the transaction were circa €2 .7 million .

January 2016:

Completed the sale of a 5,200 sqm residential plot in Lodz, Poland for €0 .7 million

March 2016:

Completed the sale of Liberec Plaza Shopping and Entertainment Centre in Liberec, Czech Republic for €9 .5 million .
Following net asset value adjustments the company received net €9 .37 million .
€8 .5 million of the proceeds from the sale was paid to a wholly owned subsidiary of Plaza on account of the bank loan of
Liberec Plaza it managed to buy in September 2015 for €8 .5 million .

* Following 2018 settlement agreement raised to 78% .

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March 2016:

Completed the sale of a 23,880 sqm plot in Slatina, Romania generating cash proceeds of €0 .66 million .

March 2016:

June 2016:

Signed a binding pre-agreement to sell the plot in Piraeus, near Athens, Greece for €3 .4 million . The long stop date of this
transaction has been extended a few times and the sum was updated to €3 .35 million . Plaza received €0 .3 million non-
refundable deposit; Currently Pending for the sale of the Plot .

Completed the sale of the wholly owned subsidiary, which holds the “MUP” plot and related real estate in Belgrade, Serbia,
for €15 .75 million, which was paid in a few instalments . An additional Contingent consideration of EUR 0 .6 million recieved
in 2017 once the purchaser successfully developed at least 69,000 sqm above ground .

July 2016:

Completed the sale of an 18,400 sqm plot in a suburb of Ploiesti, Romania for €280,000 .

September 2016: Completed the sale of a 20,700 sqm plot of a residential plot in Lodz, Poland, to a residential developer, for €2 .4 million

which had been received in few installments including H1- 2017 .

September 2016: Completed the sale of Riga Plaza shopping and entertainment centre in Riga, Latvia to a global investment fund .

The agreement reflects a value for the business of circa €93 .4 million .

September 2016: Signed a preliminary sale agreement for the disposal of a 1 .8 hectare plot in the centre of Leszno, Poland for €810,000 . In

June 2017, a final sale agreement signed and proceed received .

September 2016: Completed the sale of the shares in Zgorzelec Plaza . A Share Purchase Agreement has been signed with an Appointed

Shareholder nominated by the Bank, after which the remainder of the DRA process was completed, including delivery of the
Release Letters to the Company, and removing a mortgage over the asset of the Company in Leszno, Poland (valued at
€0 .8 million), as described in the announcement on 30 June 2016 .

Plaza recognised an accounting profit of circa €9 .2 million, stemming from the release of €23 .0 million of the outstanding
(and partially recourse) loan (including accrued interest thereof), against an outstanding asset valued at €12 .7 million .

February 2017: Completed the sale of Suwałki Plaza shopping and entertainment center for € 43 .1 million . The Company has received circa

€16 .5 million net cash, after the repayment of the bank loan (circa €26 .4 million), and other working capital adjustments .

February 2017: Completed sale of David House office building in Hungary for € 3 .2 million .

February 2017: Completed sale of Shumen Plaza plot in Bulgaria for € 1 million .

March 2017:

June 2017:

Completed the sale of the Belgrade Plaza shopping and entertainment centre . Upon completion of the transaction, the
Company received an initial payment of EUR 31 .7 million from the purchaser, further EUR 2 million has been received
following the opening, further payment of EUR 13 .35 million has been received during September 2017 and additional
payments are contingent upon certain operational targets and milestones being met . The Purchaser has provided a
guarantee to secure these future payments . The received consideration is after the deduction of the bank loan (circa
EUR 15 .4 million) . Belgrade plaza is the 34th shopping centre built by Plaza and its second scheme in Serbia .

Signed a preliminary sale agreement for the disposal of a 13,770 sqm plot at its second land holding in Lodz, Poland,
(representing 22% of this holding) to a retail developer, for €1 .2 million . As part of the agreement, the purchaser paid
an immediate installment of EUR 0 .035 million and the completion payment to make it totaling 10% of the sale price,
comprising an immediate installment already paid of EUR 0 .035 million followed by an installment of EUR 0 .085 million
shall be paid when the purchaser obtains environmental permit for investing in the access road to the plot . The remaining
balance minus 50% of the sum invested in the road (up to maximum amount of EUR 0 .12 million) will be paid once a
building permit is obtained for development of the land which is expected to be granted till the end of 2018 .

June 2017:

Completed the sale agreement for the disposal of a 2 .47 hectare plot in the centre of Kielce, Poland,for €2 .28 million . Plaza
received a down payment of €465,000 when the preliminary sale agreement was signed in October 2016 . Now that the final
agreement has been signed, the remaining €1,815,000 has been paid .

June 2017:

In June 2017, Elbit Plaza India Real estate (EPI) signed a revised sale agreement with the former partner (the “Purchaser”)
which was further amended in March 2018 . The Company signed an amended revised agreement as follows: The Purchaser
and EPI have agreed that the total purchase price shall be increased to INR 350 Crores (approximately €45 .8 million) .
Following the signing of the revised agreement and by the end of the current month, the Purchaser shall pay EPI additional
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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Debt restructuring

during the recent year . Additional INR 83 Crores (approximately €10 .8 million) will be paid by the Purchaser in unequal monthly
installments until the Final Closing . The Final Closing will take place on 31 August 2019 when the final installment of circa
INR 212 Crores (approximately €27 .8 million) will be paid to EPI against the transfer of the outstanding share capital of the SPV .

July 2017:

Completed the final sale agreement for the disposal of a 1 .8 hectare plot in Leszno, Poland for €810,000

August 2017:

Signed an agreement for the disposal of a plot totalling approximately 32,000 sqm in Timisoara, Romania, for €7 .25 million
and proceed were received .

August 2017:

Completed the sale of a plot totalling approximately 30,000 sqm in Constanta, Romania, for €1 .3 million

October 2017:

Signed an agreement with an international investor, NEPI Rockcastle, on the termination of land use rights over a circa
21,788 sqm land plot adjoining Arena Plaza in Budapest, Hungary, registered to a subsidiary of the Company, Kerepesi 5
Irodaépület Kft (“K5”) . The transaction also includes the termination of the preliminary easement agreement, which provided
K5 with certain easement rights over the plot ., K5 received a net sum of EUR 2 .5 million .

November 2017: Completed the sale of Torun Plaza shopping and entertainment center in Poland to a private investment fund . The Company
has received circa EUR 28 .3 million . This net cash is after the deduction of the bank loan (circa EUR 43 .3 million), and other
working capital adjustments in accordance with the balance sheet of the SPV holding the Project . The above-mentioned sums
do not include the earn-out payments in an amount of EUR 0 .35 million, reduced by NAV adjustment of EUR 0 .15 million,
to be received in 2018 .

Bank Loans- Refinancing and Discounts

As part of the Company’s plan to reduce its leverage, the following actions were taken:

February 2014: Following the sale of its airplane for US$1 .9 million, the Company reached a settlement with the airplane financing bank for a

reduced repayment of US$1 .1 million (out of the outstanding balance of US$1 .9 million) . The settlement generated a gain of

US$0 .81 million (€0 .6 million) in the Company’s books .

May 2015:

The Company concluded the sale of Koregaon Park Plaza in Pune, India, which eliminated a recourse component of the loan

of circa €14 million (the recourse would have matured 4 years from the restructuring approval – July 2018) .

June 2015:

The Company concluded the sale of an SPV holding a plot comprising a c . 1,200 sqm plot in Ploiesti, Romania for a total

consideration of €240,000 . The proceeds were used to repay an outstanding bank loan and no proceeds were obtained by

the Group . A waiver was obtained for the remainder of the unpaid bank loan facility, totaling €1 .4 million, and the Company

therefore recorded a gain, included as finance income in its consolidated financial statements .

September 2015: A subsidiary of the Company has won a tender to buy the loan of the wholly owned holding and operating company for

Liberec Plaza shopping and entertainment centre in the Czech Republic . Plaza has agreed to buy the €20 .4 million bank loan
(which was provided by two commercial banks) for €8 .5 million, reflecting a discount of 58% . The Company recorded a

profit on the discount (circa €12 million) in its consolidated financial statements for the second half of 2015 . The Liberec

loan was a full recourse loan (the recourse would have matured 4 years from the restructuring approval – July 2018) .

September 2016: Completed the sale of the shares in Zgorzelec Plaza . A Share Purchase Agreement has been signed with an Appointed

Shareholder nominated by the Bank, after which the remainder of the DRA process was completed, including delivery of the

Release Letters to the Company, and removing a mortgage over the asset of the Company in Leszno, Poland (valued at
€0 .8 million), as described in the announcement on 30 June 2016 . Plaza recognised an accounting profit of circa
€9 .2 million, stemming from the release of €23 .0 million of the outstanding (and partially recourse) loan (including

accrued interest thereof), against an outstanding asset valued at €12 .7 million .

December 2016: PC Enterprises (a subsidiary of the Company) has acquired a bank loan of circa €10 million, which was held against the

Company’s plot in Romania, for a total consideration of €1 .35 million . The transaction represents a discount of over 86 .5%

on the bank loan amount and the Lender has transferred all collateral associated with the project related to the loan to

Plaza, while also releasing the Company from its recourse loan . As part of the terms of the transaction, the Lender has been

granted a purchase option for a term of three years, to acquire the plot for €1 .1 million .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Our portfolio at a glance

Total of 9 assets located across CEE region and in India as of balance sheet date.

Portfolio composition – by country

Market value of the land and project (€m)

Under development/planning

Plots designated for sale

Poland

Serbia

Romania

Greece

India

Project

Casa Radio

India

Other pipeline projects

Total as at 31 December 2017

€m

200

160

120

52,5

22,4

4,3

0,6

3,3

Poland

Serbia

Romania

Greece

India

Market value on
completion (€m)1

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

633 .9

633.9

50 .4

22 .4

10 .3

83.1

1 External valuations by Jones Lang LaSalle were conducted for: Casa Radio and Lodz mall . The rest of the assets were valuated by the Company’s management . Value on completion was

calculated only for Casa Radio which was valued externally using the residual valuation method .

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Group NAV at 31 December 2017

Net Financial Debt**

Asset values

Operating assets

Development Assets*

Pipeline assets

Total

Other assets and liabilites

NAV

* Including 100% of Casa Radio due to the material shareholders’ loans .

** Excluding discount on Bonds in amount of €6 .2 million .

EUR Million (78)

80 .2

80.2

0 .3

2.5

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Development focus

In 2018 the Group continues to advance permits and approvals for the Casa Radio project in Bucharest, Romania
and explore opportunities for the development of the project.

Casa Radio
Romania
467,000 sqm GLA

Casa Radio will include a 90,000 sqm GLA shopping mall and in-

door leisure center, approximately 127,000 sqm GBA of offices,

hotel complex with conference center, Public Authority Building and

underground car parking spaces .

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Current portfolio

Asset/Project

Location

Nature

of asset

Size

sqm

Plaza’s

effective

(GLA)

ownership %

Status

Development Assets

Casa Radio

Pipeline Projects

Lodz Plaza

Lodz (Residential)

Bucharest,
Romania

Mixed-use retail
and leisure plus office

467,000
(GBA including
scheme parking spaces)

Plot Size (sqm)

In planning and
permitting phase

Lodz,
Poland

Retail & entertainment

61,500

100

Designated for sale

scheme

Residential scheme

4,017
(remaining following

three transactions)

100

Designated for sale

Csiki Plaza

Miercurea Ciuc,

Retail & entertainment

36,500

100

Designated for sale

Brasov

Romania

Brasov,

Romania

scheme

Retail & entertainment

67,000

100

Designated for sale

scheme

Krusevac

Krusevac,

Retail & entertainment

19,930

100

Designated for sale

Piraeus Plaza

Serbia

Athens,

Greece

scheme

Retail/Offices

15,000

100

Bangalore

Bangalore,

Residential Scheme

218,500

Chennai

India

Chennai,

India

Residential Scheme

302,400

Preliminary sale

agreement signed

Designated for sale

JDA signed

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Chief Executive Officer’s statement

Management statement

Results

During 2017 the management’s focus has almost entirely been on

During the year, Plaza recorded a €26.5 million loss attributable to

delivering the €183 million of disposals that we completed in the

the shareholders of the Company. This is a 43% decrease compared

12 months to 31 December, which produced €119 million in net

to the losses reported in 2017 (loss of €46.5 million).

proceeds. Our commitment to this process has substantially reduced

our total assets from €322 million to €141 million as we progressed

Revenue from the operating shopping centres was €8 million

our efforts to meet the obligations of the restructuring programme

(2016: €15.6 million), with the reduction, due to the disposal of

and to our stakeholders.

Suwalki Plaza in Poland in January 2017, and Torun Plaza in

November 2017. Currently the Company holds no operating assets.

The sale of key properties to reputable purchasers, including NEPI

Rockcastle and BIG Shopping Centers is testament to the quality

Total result of operations excluding the finance income and finance

of these assets, such as Torun Plaza, which was developed by the

cost was loss of €14.9 million in 2017 and €30.4 in 2016. Losses were

Company, and the high standard of the asset management under our

generated in both years mainly from write down of trading properties.

ownership. Belgrade Plaza was sold prior to the completion of its

construction.

The consolidated cash position as at 31 December 2017 was

€44.8 million (31 December 2016: €12.8 million) and the current

As a result of this activity, our total portfolio now comprises nine

cash position is circa €5.2 million.

assets in five countries, including two plots in Poland, one plot in

Serbia, three plots in Romania, one plot in Greece and two plots in

India (under JV with Elbit).

Over the coming months, the Company will maintain its focus on and

commitment to the portfolio rationalisation and the deleveraging of

the balance sheet.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Dori Keren
CEO

Liquidity & Financing

Plaza ended the period with a consolidated cash position of

€44.8 million, compared to €12.8 million at the end of 2016.

As at December 31 2017 the Group’s outstanding obligation to

bondholders is €123 million after all bank loans were repaid or

disposed. The outstanding balance of the debt to bondholders was

€82.2 million as of 29 March 2018.

Total Payment Due by period

(in TEUR)

Liquidity Requirements

Within 1 year 1-1.25 years

Bonds including current portion and interest* 23,700

36,700

General & administrative

Total liquidity requirements

Total Sources**

Total deficit

3,100

26,800

16,300

600

37,300

4,400

(10,500)

(32,900)

In November 2016, the Group agreed with its bondholders to amend

the terms of the early repayment requirement under the original

* An amount of Circa EUR 37.45 million was repaid (excluding interest) by the date of

debt restructuring plan (the “Restructuring Plan”). On March 15,

2017, the Group repaid the required minimum early repayment to

its bondholders and thus obtained a deferral of one year for the

remaining contractual obligations of the bonds.

approval of these consolidated financial statements following the balance sheet date.

** The Company expects to increase the amount of its liquid balances during the 15 months

starting April 1, 2018, by sale of plots of lands (including India) and others. Not including

cash balances as of the date of signing the financial statements.

In January 2018, a settlement agreement was signed by and among

The board and management estimate that there are significant doubts

the Company and the two Israeli Series of Bonds (“Settlement

regarding the Company’s ability to serve its entire debt according

Agreement”). In the Settlement Agreement it was agreed, inter alia,

to the current repayment schedule. Moreover, following the new

to approve:

payment structure agreed for the sale of the project in Bangalore,

India, which is detailed below, it is expected that the Company will

• New repayment ratios between the two Israeli Series of Bonds

not be able to meet its entire contractual obligations in the upcoming

(new ratio: Bond A- 39% Bond B- 61%);

12 months.

• An increase in the level of the mandatory early repayments from

75% to 78% of the relevant net income;

As of December 31, 2017 the Company is not in compliance with

• New repayment schedule;

Coverage Ratio Covenant (“CRC”) as defined in the restructuring

• An increase in the compensation to be paid to the Bondholders in

plan. This may entitle the bondholders to declare that all or a part

the event of successful disposal of Casa Radio Project;

of their respective (remaining) claims become immediately due and

• A waiver of claims to the Company and its directors and officers; and

payable.

• To waive the request for publication of quarterly financial reports

by the Company.

In respect of credit rating downgrade followed by withdraw of credit

rating by Standard & Poor at the Company’s request refer to Note 15

As a result of settlement agreement signing, Series A Bondholders

(e) to the financial statements.

withdrew their request for immediate repayment.

It is clarified that the Settlement Agreement is a separate

claims to become immediately due and payable, the Company would

agree-ment among the parties thereto with respect to the Company’s

not be in a position to settle those claims and would need to enter

restructuring plan, and as such has no effect on the Polish

to an additional debt restructuring or might cease to be a going

Bondholders.

concern. As at the date of these financial statements the bondholders

In the case that the bondholders would declare their remaining

On January 31, 2018 the Company paid the bondholders a total

amount of principal and interest of EUR 38.5 millions.

have not taken steps to assert their rights.

Strategy & Outlook

Information concerning the Group’s obligations and commitments to

At this point in time, the Company remains focused on completing

make future payments under contracts such as debt agreements in the

the disposal of the assets identified for sale and on delivering on its

15 months starting April 1, 2018 is aggregated in the following table:

commitments to its stakeholders.

Dori Keren

CEO

29 March 2018

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Operational review

Over the course of the year to date, Plaza has continued to make

The Company’s current assets are summarised in the table below:

good progress against its operational and strategic objectives.

The status of the nine projects is outlined in the table below.

Asset/Project Location

Nature of asset

Plot Size

Plaza’s

Status *

sqm

effective

ownership %

Casa Radio

Bucharest,

Mixed-use retail,

467,000

In planning and permitting phase

Romania

hotel and leisure plus

(GBA including

office scheme

parking spaces)

Lodz Plaza

Lodz, Poland

Retail & entertainment scheme

61,500

100

Designated for sale; Preliminary sale

Lodz
(Residential)

Csíki Plaza

Lodz, Poland

Residential scheme

4,000

100

agreement for part of the plot

Under sale process; Circa 29,000 sqm
was sold during 2015-2016

Miercurea Ciuc,
Romania

Retail & entertainment scheme

36,500

100

Designated for sale

Brasov

Brasov, Romania

Retail & entertainment scheme

67,000

100

Designated for sale

Krusevac

Krusevac, Serbia

Retail & entertainment scheme

19,930

100

Designated for sale

Piraeus Plaza Athens, Greece

Retail/Offices

15,000

100

A binding sale agreement was signed,
subject to certain conditions

Bangalore

Bangalore, India

Residential scheme

218,500

Amended sale agreement in place

Chennai

Chennai, India

Residential scheme

302,400

JDA was signed in August 2016

*Projects that are classified as “Under planning and permitting phase” also have potential to be sold as land.

Details of major activities by country are as follows:

Romania

Poland

Plaza holds a 75% interest in a joint venture with the Government of

Romania to develop Casa Radio (Dambovita), which is the largest

development opportunity in central Bucharest. A 467,000 sqm

Preliminary Sale Agreement of Plot in Lodz, Poland:

complex, including a 90,000 sqm GLA shopping mall, leisure cent-

On June 13, 2017, the Company announced that it has signed a

re, offices, a hotel and a convention and conference hall, is planned

preliminary sale agreement for the disposal of a 13,770 sqm plot

for the site. The Company has obtained a PUD (Detailed Urban

at its second land holding in Lodz, Poland, (representing 22% of

Permit) and a PUZ (Zonal Urban Plan) for the Dambovita Centre

this holding) to a retail developer, for €1.2 million. As part of the

Multifunctional Complex.

agreement, the purchaser paid an immediate installment of

EUR 0.035 million and the completion payment to make it totaling

Following the global financial crisis and to ensure that the

10% of the sale price, comprising an immediate installment already

development process was more aligned with the current market

paid of EUR 0.035 million followed by an installment of EUR 0.085

conditions, the Company initiated preliminary discussions with the

million shall be paid when the purchaser obtains environmental

Authorities (which are shareholders in the SPV and a party to the

permit for investing in the access road to the plot. The remaining

Public Private Partnership) regarding the future of the project. The

balance minus 50% of the sum invested in the road (up to maxi-

Company has also officially notified the Authorities that it will be

mum amount of EUR 0.12 million) will be paid once a building per-

seeking to redefine some of the terms in the existing PPP contract,

mit is obtained for development of the land which is expected to be

including the timetable, structure and project milestones. Refer to the

granted till the end of 2018.

Company’s financial statements section for additional information.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

India

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

The JV projects are as follows:

Bangalore
In June 2017, EPI signed a revised sale agreement with the former
partner (the “Purchaser”), which amended the purchase price to INR
338 Crores (approximately €44.2 million), an increase on the INR
321 Crores (approximately €42 million) previously agreed. As part of
the agreement, INR 110 Crores (approximately €14.4 million) was to
be paid by the Purchaser in installments up to the Final Closing, set
at September 1, 2018. Since the signing of the revised agreement,
the Purchaser has paid non-refundable advance payments totalling
INR 45 Crores (circa €5.9 million).

After the period end, in January 2018, the Purchaser notified EPI that,
due to a proposed zoning change initiated by the Indian authorities
which could potentially impact the development of the land, all
remaining payments under the Agreement would be stopped until
a mutually acceptable solution was reached on this matter. EPI
rejected the Purchaser’s claims, having no relevance to the existing
Agreement, and commenced an evaluation of its legal options.
In March 2018, the Company signed a further revised agreement.
The Purchaser and EPI have agreed that the total purchase price
shall be increased to INR 350 Crores (approximately €45.8 million).
By the end of March 2018, the Purchaser will pay EPI INR 10 Crores
(approximately €1.3 million), in addition to the INR 45 Crores
(approximately €5.9 million) already paid since the period end.
Further to this, a total of INR 83 Crores (approximately €10.8 million)
will be paid by the Purchaser in unequal monthly installments until
the final close of the transaction. The Final Closing is now expected
to take place on 31 August 2019, when the final installment of INR
212 Crores (approximately €27.8 million) will be paid to EPI against
the transfer of the outstanding share capital of the SPV.

If the Purchaser defaults before the Final Closing, EPI is entitled to
forfeit certain amounts paid by the Purchaser as stipulated in the
revised agreement. All other existing securities granted to EPI under
the previous agreements will remain in place until the Final Closing.

On May 4, 2016, the National Green Tribunal (“NGT”), an Indian
governmental tribunal established for dealing with cases relating to
the environment, passed general directions with respect to areas that
should be treated as “no construction zones” due to their proximity
to water reservoirs and water drains (“Order”). The restrictions are
applicable to all construction projects.

The government of Karnataka has been directed to apply the above
conditions to all construction projects in the city of Bangalore,
including the Company’s project which is adjacent to the Varthur Lake.

An appeal was filed before the Supreme Court of India against
the Order. The Supreme Court has stayed the operation of certain
portions of the Order. At this stage, it is difficult to predict the
expected timing of a decision from the Supreme Court of India on
the matter.

Chennai
On July 21, 2016 Chennai Project SPV signed a Joint Development
Agreement with a local developer (respectively the “JDA” and the
“Developer”) with respect to the Property. Under the terms of the
JDA, the Chennai Project SPV granted the property development
rights to the Developer who shall bear full responsibility for all
of the project costs and liabilities, as well as for the marketing of
the scheme. The JDA also stipulates specific project milestones,
timelines and minimum sale prices.

Development will commence subject to the obtainment of the
required governmental / municipal approvals and permits, and it is
intended that 67% of the Property will be allocated for the sale of
plotted developments (whereby a plot is sold with the infrastructure
in place for the development of a residential unit by the end
purchaser), while the remainder will comprise residential units fully
constructed for sale.

The Chennai Project SPV will receive 73% of the total revenues
from the plotted development and 40% of the total revenues from
the sale of the fully constructed residential units. In order to secure
its obligation, the Developer has paid a refundable deposit of INR
10 Crores (approximately €1.3 million) following the signing and
registration of the JDA.

The JDA may be terminated in the event that the required
governmental approvals for the construction of an access road to
the Property are not received within 12 months of the execution
date of the JDA. As at the date of this announcement, the required
approvals have not yet been obtained within the target period,
but the agreement remains in place. Should the agreement be
terminated, the Developer will be entitled to the refund of amounts
paid as a Refundable Deposit, as well as any other costs associated
with the access road project or the title over the Property. The JDA
may also be terminated by the Chennai Project SPV, inter alia, if the
Developer has not completed certain development milestones and /
or has breached the terms of the JDA. As a result, the SPV’s financial
statements include a provision for INR 30 Crores (€3.9 million) for
cost reimbursement, including the INR 10 Crores (€1.3 million)
advanced payment received.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Financial review

Results

Losses for the period amounted to €26.5 million in 2017, reflecting

basic and diluted losses per share of €3.87, a 43% reduction on the

2016 loss of €6.78 per share.

Revenue for the period derived from the disposal of trading

properties amounted to €193 million, compared to €29 million

in 2016, the increase being largely attributable to the sales of

Suwalki Plaza and Torun Plaza in Poland in January and November

respectively, and the disposal of Belgrade Plaza in Serbia in

January.

Due to these disposals, operating income from the shopping and

entertainment centres has decreased to €5.7 million in 2017 from

€10.7 million in 2016.

The write down of trading properties reduced from €40.8 million

in 2016 to €11.5 million in 2017. The 2017 write down is mainly

attributable to Casa Radio (€9.7 million, net) and Lodz Plaza (€1.2

million) projects.

During the year, administrative expenses decreased to €6.1 million

(2016: €6.5 million) and further reductions are targeted for 2018.

The decrease was offset by an increase in audit and other related

costs due to the 2016 re-audit and replacement of the IFRS financial

statements auditors and the cost of the new settlement agreement.

Finance income in 2017 was €0.6 million (2016: €18.6 million).

A gain of €17.6 million was recorded in 2016 due to settlement of

loans connected to a plot in Brasov, Romania and Zgorzelec Plaza.

Finance costs decreased considerably to €11 million in 2017, from

€34 million in 2016. The main components were:

• FOREX (NIS-EUR) – the effect on the debentures totalled €1.1

million (2016 – €5.5 million).

• Interest expenses booked on bank loans and debentures totalled

€10.7 million (2016: €17.3 million).

• €0.7 million recorded as non-cash income, associated with the

amortisation of the discount on debentures (2016: €13.7 million

expense).

• In 2017 no financial costs were capitalized (2016: €5.1 million).

Balance sheet and cash flow

The balance sheet as at 31 December 2017 showed total assets of
circa €141 million compared to total assets of €322 million at the

end of 2016, largely as a result of the implementation of the debt
reduction strategy through asset disposal.

The consolidated cash position as at 31 December 2017 increased to
€44.8 million (31 December 2016: €12.8 million) mainly due the sale
of Torun Plaza in November.

The value of the Company’s trading properties decreased from
€263.7 million as at 31 December 2016 to €73.5 million at the end
of 31 December 2017, following the disposals of Suwalki Plaza,
Belgrade Plaza and Torun Plaza, and the circa €10 million impairment
against the Casa Radio project in Romania.

Investments in equity accounted investee companies has decreased
to €19.5 million (31 December 2016: €30 million) mainly as a result
of impairment of the two projects in India in an amount of € 5.4
million (31 December 2016: € 11.6 million).

Due the sale of Belgrade Plaza, trade payables has decreased from
€7.4 million to €0.6 million.

There were no bank loan borrowings as of 31 December 2017 due
to the sale of Torun Plaza, Suwalki Plaza and Belgrade Plaza
(31 December 2016: €82.3 million).

Aside from bank financing, Plaza has a balance sheet liability
(including accrued interest) of €117 million (with an adjusted par
value of circa €123 million) from issuing bonds on the Tel Aviv Stock
Exchange and to Polish institutional investors. These bonds are
presented at amortised cost under current liabilities.

Provision was created with respect to the obligation connected to
Casa Radio project (Bucharest Romania) in the amount of €12.8
million (2016: €13.2 million) for the construction of the Public
Authority Building.

Disclosure in accordance with Regulation 10(B)14 of the Israeli

Securities Regulations (periodic and immediate reports), 5730-1970

1. General Background

According to the abovementioned regulation, upon existence of

warning signs as defined in the regulation, the Company is obliged

to attach to its report’s projected cash flow for a period of two years,

commencing from the date of approval of the reports (“Projected

Cash Flow”).

The Material uncertainty related to going concern was included in the

independent auditors’ report and in view of the management’s plans

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

for asset disposals and also in respect of material uncertainty related

(€94.5 million) (a reduction of 12% on the original amount).

to Casa Radio project, as described in Notes 2, 8 of these Financial

In addition, the Company agreed to pay to its bondholders, on

Statements in this press release.

March 31, 2018, a one-time consent fee (which is equal to 0.25%

from the Company’s outstanding debt under the bonds at that time).

With such warning signs, the Company is required to provide

The consent Fee shall be paid to the Company’s bondholders on a

projected cash flow for the period of 24 months following the

pro rata basis. During 2017, the Company paid to its bondholders

reporting period, and also provide explanations on differences

a total amount of NIS 191.74 million (€49.2 million) as an early

between previously disclosed estimated projected cash flows with

redemption. Upon such payments, the Company complied with the

actual cash flows.

2. Projected cash flow

Early Prepayment Term (early redemption at the total sum of at least

NIS 382,000,000) and thus obtained a deferral of one year for the

remaining contractual obligations of the bonds.

The Company has implemented the restructuring plan that was

In January 2018, a settlement agreement was signed by and among

approved by the Dutch court on July 9, 2014 (the “Restructuring

the Company and the two Israeli Series of Bonds (refer to section

Plan”). Under the Restructuring Plan, principal payments under the

“Liquidity and financing”).

bonds issued by the Company and originally due in the years 2013

to 2015 were deferred for a period of four and a half years, and

The materialisation, occurrence consummation and execution of the

principal payments originally due in 2016 and 2017 were deferred for

events and transactions and of the Assumptions on which the pro-

a period of one year.

jected cash flow is based, including with respect to the proceeds and

timing thereof, although probable, are not certain and are subject

The Restructuring Plan further provided that, if the Company does

to factors beyond the Company’s control as well as to the consents

not prepay an aggregate amount of at least NIS 434 million (€107.3

and approvals of third parties and certain risks factors. Therefore,

million) on the principal of the bonds on or before December 1,

delays in the realisation of the Company’s assets and investments

2016 (the “Early Prepayment”), the principal payments due under

or realisation at a lower price than expected by the Company, as

the Extended Repayment Schedule will be advanced by one year

well as any other deviation from the Company’s Assumptions

(the “Accelerated Repayment Schedule”). On November 29, 2016,

(such as additional expenses due to suspension of trading, delay in

the Company’s bondholders approved a postponement of the Early

submitting the statutory reports etc.), could have an adverse effect

Prepayment date by up to four months and the reduction of the total

on the Company’s cash flow and the Company’s ability to service its

amount of the required Early Prepayments to at least NIS 382 million

indebtedness in a timely manner.

In € millions

Cash - Opening Balance

Proceeds from selling trading and investment properties1

Total sources:

Debentures - principal

Debentures - interest

Compensation to Bondholders

Operational expenses

Total uses:

Cash - Closing Balance

2018

44.8

13.6

58.4

53.9

5.7

0.2

3.2

63.0

-4.6

2019

-4.6

43.3

38.7

64.1

4.3

1.5

2.0

71.9

-33.2

1 Comprised from the sale of plots: Piraeus, Lodz Residential, Lodz Plaza, Krusevac,

Mirecurea Ciuc, Brasov, Chennai and Bangalore (Company’s share 50%), 50% of Casa
Radio and additional installment for Torun Plaza, Riga Plaza and Belgrade Plaza.

2. Assuming EUR/NIS rate of 4.2 and EUR/PLN rate of 4.16. The repayment schedule takes
into consideration that in the case of a disposal of an asset, 78% of the proceeds are
used for the early prepayment of the Unsecured Debt in accordance with the terms of the
settlement agreement signed in January 2018.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Below is a summary table of the comparison between forecasted and actual cash flow, with explanations on the differences published for the

Forecast 2017

Actual 2017

2.5

115.3

6.7

122.0

88.8

1.4

1.7

106.8

17.7

-3.2

1.5

15.9

2.5

119.4

1.7

121.1

62.1

9.5

0.9

0.5

5.8

78.8

44.8

2.5

year ending 31 December 2017.

In € millions

Cash – Opening Balance

Proceeds from selling trading properties*

Cash flows from operating Activities1

Total sources:

Debentures – principal2

Debentures – interest

Bank loans – principal

Bank loans – interest

Operational expenses3

Total Uses

Cash – Closing Balance

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Income / Financing costs from Shopping Centres

Release from Shopping Centres

Cash – Closing Balance

* Including advanced payments for the sale of assets

1 The NOI from Torun Plaza is included in the proceeds from the sale.

2 The payment was made in January 2018 following the settlement agreement with the

bondholders

3 Increase as a result of unexpected audit and other related costs due to the 2016 re-audit

and replacement of the IFRS financial statements auditors and the cost of the new
settlement agreement.

Dori Keren

CEO

29 March 2018

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Financial review

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Valuation Summary

as at 31 December 2017 (in EUR)

Country

Project

name

Company’s

Market value of

Market value

land and project

upon completion

31 December

2016 (EUR M)

31 December

2017 (EUR M)

31 December

2016 (EUR M)

31 December

2017 (EUR M)

Hungary

Arena Plaza Extension 100%

David House

100%

Poland

Romania

Torun

Suwalki

Lodz

Lodz Residential

Kielce

Casa Radio

Timisoara

Ciuc

Constanta

Brasov

Greece

Helios

India

Varthur

Chennai

Bulgaria

Shumen

Serbia

TOTAL

Belgrade

Krusevac

100%

75%

100%

50%

100%

2.5

3.2***

76.3

42.3***

5.1

0.5**

2.2**

60.1

7.6

1.6

2.0

1.1**

3.3**

19.1

10.4

1.0***

72.1

1.1**

311.5

SOLD

3.9

0.4**

SOLD

50.4

SOLD

1.0**

SOLD

1.1**

3.3**

13.6

8.8

SOLD

0.6**

83.1

74.2

3.2

76.3

42.3

SOLD

comparable*

N/A

633.9

comparable*

12.1

6.4

N/A

comparable*

10.4

1.0

90.4

N/A

950.2

N/A

SOLD

633.9

SOLD

N/A

SOLD

N/A

comparable*

SOLD

N/A

633.9

All values represent the Company’s share, except of Casa Radio project, which represents 100% due to material shareholders loan.

All external valuation for 2017 were conducted by Jones Lang LaSalle, except of the Indian projects, which were valued by Cushman

and Wakefield.

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

** Management estimation.

*** Asset was sold in 2017 – value of 2016 represents sale price.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Management structure

Plaza Centers’ Board

Ron Hadassi
Chairman
Non-executive Director

Nadav Livni
Executive Director

David Dekel
Independent
Non-executive Director

Marco Wichers
Independent
Non-executive Director*

Senior Management

Dori Keren
CEO**

Avi Hakhamov
Chief Controller****

Uzi Eli
General Counsel

Monika Alicka
CEE Leasing Director***

Local Country Management

Dori Keren
Country Director
Poland and Latvia**

Rabia Shihab
Country Director
Serbia***

Luc Ronsmans
Country Director
The Netherlands, Romania,
Bulgaria and Greece*****

Resigned on September 12, 2017.

Resigned on March 31, 2018.

*** Resigned on January 30, 2018
**** Starting April 1st 2018, Acting CEO.
***** Until June 30th, 2017.

• 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

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Board of Directors and Senior
management

Chairman

Independent non-executive directors

Mr. Ron Hadassi, Non-executive director (male, 53, Israeli)

Mr. Ron Hadassi has broad experience in leading real estate firms.

Mr. Hadassi currently is the senior manager of Bronfman-Fisher

Group, engaged in industry, real estate, finance and retail and holds

various positions within the Bronfman-Fisher Group. He also serves

on the Board of Directors of the controlling shareholder and Carmel

Winery and he is the chairman of Elbit Medical Technologies Ltd.

Mr. Hadassi holds a BA in economics, political science, an LLB and

an MBA from the Tel Aviv University. Mr. Hadassi was appointed as

an executive director on 8 July 2014 and elected as chairman and

non-executive director on 28 November 2014 and re-elected on

30 June, 2016. Mr. Hadassi may periodically be re-elected by the

Annual General Meeting pursuant to article 23.6 of the Articles,

provided that Mr. Hadassi has expressed his availability for a

subsequent term of office.

Executive director

Mr. Nadav Livni, (male, 44, 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 qualified chartered accountant,

holds a Bachelor of Commerce (honours in economics), a Master

of Science (finance), 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 and

re-elected on 30 June, 2016. Mr. Livni may periodically be re-elected

by the Annual General Meeting pursuant to article 23.6 of the

Articles, provided that Mr. Livni has expressed his availability for a

subsequent term of office.

Mr. Marco Habib Wichers (male, 59, Dutch)*
Mr. Marco Habib Wichers is currently the chief executive officer 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 has
expressed his availability for a subsequent term of office.

Mr. David Dekel (male, 53, Dutch)
Mr. David Dekel is currently a non-executive director at Nanette
Real Estate Group N.V., a residential developer, operating in Central
Europe. He is the founder and chief executive officer of Endeavour
Enterprises N.V. from Amsterdam, the Netherlands and has several
other managerial functions. Mr. Dekel holds a BBA from the Delta
University in Utrecht, the Netherlands and an MBA from the University
of Teesside (the Hague extension) in the Hague, the Netherlands.
Mr. Dekel was appointed as a non-executive director on 8 July 2014.
Mr. Dekel may periodically be re-elected by the Annual General Meeting
pursuant to article 23.6 of the Articles, provided that Mr. Dekel has
expressed his availability for a subsequent term of office.

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* Mr. Wichers resigned his positing as a non-executive director on 12 June

2017 becoming effective on 12 September 2017.

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Senior management

Mr. Dori Keren (48) BA, MBA, BB in Accounting

Chief Executive Officer*

Mr. Dori Keren joined Plaza Centers in 2006 as financial director

of Poland and Latvia and was appointed Poland country director

in 2013. From April 2016 Mr. Keren serves as Acting CEO of the

Company. Prior joining to Plaza Centers Mr. Keren worked in Israel

for 10 years in variety of financial jobs in positions which accompany

business activity as economist, financial controller and CFO.

Mr. Keren holds BA in Economics and Political Sciences from the

Tel Aviv University, an MBA degree from the Ben-Gurion University,

and BB Post Degree in Accounting from College of Management

Academic Studies.

Mr. Uzi Eli (42) LLB, Attorney at Law (Isr), MBA

General Counsel and Compliance Officer

Mr. Uzi Eli joined the Company as general counsel and compliance

officer in 2007. Prior to joining the Company, he practised law in two

leading commercial law firms in Israel. His main practice concentrated

in commercial and corporate law, providing ongoing legal services

to corporate clients (mainly hi-tech and bio-tech companies and

venture capital funds) in all aspects of corporate governance, and

representation in various transactions, such as financing and M&A

transactions and other wide varieties of licensing and technology

transactions. Mr. Eli holds a LLB degree and an MBA degree from the

College of Management Academic Studies and he is an attorney at law.

Mr. Luc Ronsmans (67) 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 both the company and its group affiliates. Prior to

joining the Europe Israel Group, Mr. Ronsmans was active in the

banking sector, holding managerial positions with Manufacturers

Hanover Bank, Continental Bank (Chigaco), AnHyp Bank and Bank

Naggelmachers in Belgium.

* Resigned on 31 March 2018.

Effective 1 April 2018 Mr. Avi Hakhamov (44) MBA, CPA (Isr.)

was appointed as Acting CEO.

** Effective till 30 June 2017.

Mr. Rabia Shihab (39) BA, CPA, Czech Republic, Serbia

Country Director

Mr. Rabia Shihab joined Plaza Centers in June 2008 as financial

director of Romania and Bulgaria. From November 2011, he has been

serving as the financial 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 financial controller

for Tefron Ltd. Mr. Shihab holds Bachelor degree of economics from

the Hebrew University of Jerusalem.

Ms. Monika Alicka (33) MA, CEE Leasing Director

Ms. Alicka joined the company in 2013 as Leasing Manager

of Plaza Centers Poland.

Since 2015 she was additionally acting as Leasing Director Serbia

responsible for the leasing process of Belgrade Plaza Shopping

Center. In September 2016 she was appointed CEE Leasing Director

for the Plaza Centers Group. Ms. Alicka holds a Master’s Degree in

Law & Administration from the University of Gdansk.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Directors’ report

Principal activities and review of business

Plaza Centers N.V. is a 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 first company to develop western-style shopping and
entertainment centers in Hungary. This followed its early recognition
of the growing middle class and increasingly affluent consumer base
in such markets.

Since then, it has expanded its CEE operations into Poland, the
Czech Republic, Latvia, Romania, Serbia, Bulgaria and Greece.
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 22 years. To date, the
Group has developed, let and opened 34 shopping and entertainment
centers of which 34 were sold with an aggregate gross value of circa
€1.55 billion. 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 representing
circa 20% of all real estate transactions completed in Hungary in
2007, 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. In 2015 Plaza sold its Indian mall located in Pune and in
March 2016 its mall in Liberec, Czech Republic, in March 2017 Plaza
announced the successful completion of the sale of Belgrade Plaza
shopping and entertainment centre to a subsidiary of BIG Shopping
Centers Ltd, a publicly traded company in Tel Aviv Stock Exchange.
Belgrade Plaza (Visnjicka) has been the largest development
underway in Serbia and in November 2017 plaza completed the
sale of its last operating mall – Torun Plaza in Poland to a private
investment fund.

For a more detailed status of Plaza’s main focus in 2017 and
current activities and projects, the directors refer to the Executive
Officer’s statement on pages 18 to 19 as well as to the following
chapters: Overview, Business Review and Management and
Governance.

For an overview of events after the reporting period refer to note 29
to the consolidated financial statements.

Portfolio progress

During 2017 and up to date , Plaza received net proceeds of

€119.4 million from sales transactions and price adjustments.

The disposals form part of the Company’s ongoing strategy to reduce

the Company’s debt. At this point in time, the Company remains

focused on completing the disposal of the assets identified for sale

and on delivering on its commitments to its stakeholders.

Going Concern

The consolidated financial statements have been prepared on a going

concern basis, which assumes that the Group will be able to meet the

mandatory repayment terms of the banking facilities and debentures,

and other working capital requirements, as disclosed in notes 2c and

15 of the consolidated financial statements.

The Board of Directors has analysed the following major risks

associated with the preparation of the financial 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 2017, which is the base for important

disclosures included in the Company’s 2017 financial reports.

2. Extensive review and assessment of the features of the debt

restructuring plan as amended in November 2016 and the

settlement agreement signed by and among the Company and

the two Israeli Series of Bonds (“Settlement Agreement”) in

January 2018 regarding early prepayment requirements, including

prospective cash outflow, covenants and comply with these

elements, and especially the planned repayment of minimum

early repayment to its bondholders in order to obtain a deferral

of one year for the remaining contractual obligations of the

debentures, the breach of certain financial covenants in 2017, the

initial agreement in December 2017 reached among both Series

of Israeli Bonds and the Company with respect to the allocation

of funds between the 2 Series of Israeli Bonds, from that day

onwards followed by final agreement on January 2018, and the

significant doubts regarding the Company’s ability to serve its

entire debt according to the current repayment schedule.

3. Exposure to foreign currency risk derived from borrowings

denominated in currency other than the functional currency of the

Group, more specifically, a further devaluation of the EUR against

the NIS can significantly increase the remaining contractual

obligation to bondholders.

4. As of December 31, 2017 the Company is not in compliance with

The Company currently has a land bank of 9 plots, across the CEE

Coverage Ratio Covenant (“CRC”) as defined in the restructuring

and in India.

plan. This may entitle the bondholders to declare that all or a part

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

of their respective (remaining) claims become immediately due

applicable law shall apply to dividend distributions in an aggregate

and payable.

amount up to 50% of such additional capital injection.

The Company’s financial statements as of December 31, 2016 in-

clude an auditor’s opinion with emphasis of matter to going concern

Directors’ interests

uncertainty as well as auditor’s review report on IFRS interim

The directors have no interests in the shares of the Company, other

financial statements as of June 30, 2017 include the same. As a

than the directors’ share options as given on page 50 of this report.

result, there is a risk that the bondholders could argue that there

exists a substantial suspicion with respect to the Company’s ability

to repay its obligations that entitles them to immediate repayment.

Directors and appointments

The following served as directors of the Company at

In addition, based on trust deeds in case of material deterioration

31 December 2017:

in the Company’s business and substantial suspicion exists that

the Company will not be able to repay the bonds on time, the

bondholders may declare immediate repayment of bonds.

In respect of credit rating downgrade followed by withdraw of

credit rating by Standard & Poor at the Company’s request refer to

Note 15 (e) to these consolidated financial statements.

In the case that the bondholders would declare their remaining

claims to become immediately due and payable, the Company

would not be in a position to settle those claims and would need

to enter to an additional debt restructuring or might cease to be

a going concern. As at the date of these financial statements the

bondholders have not taken steps to assert their rights.

Based on and considering the above assessments, done for the

period of 15 months following the signature of these reports, the

Board of Directors estimate that there are significant doubts

regarding the Company’s ability to serve its entire debt according

to the current repayment schedule. Moreover, following the new

payment structure for the sale of the project in Bangalore, India,

it is expected that the Company will not be able to meet its entire

contructual obligations in the following 12 months.

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.

Ron Hadassi, Chairman, Non-executive director

Nadav Livni, Executive director

David Dekel, Independent non-executive director

Marco Wichers*, Independent non-executive director

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.

Substantial shareholdings

As of the balance sheet date, Davidson Kempner Capital LLC**

held approximately 26.3% and York Capital Management Global

Advisors held approximately 3.59% 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.

Employee involvement

The Company has employees and other persons providing similar

services. At the end of 2017 the Group had 18 employees and other

persons providing similar services. The management expects further

changes in the development of the number of employees due to

reduction of activities.

Notwithstanding the aforesaid, in the event an additional capital

* Until 12 September 2017.

injection of at least €20 million occurs, then after one year following

the date of the additional capital injection, no restrictions other

** 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%

than those under restructuring plan as specified on page 9 and the

directly.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Annual General Meeting (AGM)

Article 10 of Directive 2004/25

The annual general meeting of shareholders is held every year within

With regard to the information referred to in the resolution of Article

six months from the end of the financial year in order to discuss and

10 of the EC Directive pertaining to a takeover bid which is required

approve the annual report and adopt (vaststellen) the Dutch statutory

to be provided according to the Dutch law, the following can be

annual accounts, discharge of the directors from their liability for

reported:

the conduct of business in the preceding year and any other issues

mentioned below.

• There are no special restrictions on the transfer of the shares of

The main powers of the general meeting of shareholders relate

• There are no special statutory rights related to the shares of the

to the appointment of members of the Board, the adoption of the

Company.

annual financial statements, declaration of dividend, release the

• There are no restrictions on the voting rights on the Company’s

the Company.

Board’s members from liability and amendments to the Articles of

shares.

Association.

The annual general meeting of shareholders was held at the

• There are no agreements between the shareholders which are

Company’s registered address in the Netherlands on 31 July 2017.

known to the Company and may result in restrictions on the

• Information on significant shareholding can be found above.

transfer of securities and/or voting rights.

In this AGM, inter alia, the following resolutions were proposed to

• The applicable provisions regarding the appointment and

the shareholders:

(i) Report by the board of managing directors of the Company

(the “Board”) of the 2016 financial year and consideration of the

Company’s Dutch statutory annual accounts and the annual report

for the year ended 31 December 2016.

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 significant agreements to which the Company is a

(ii) Report on remuneration in the year ended 31 December 2016.

party and which take effect alter or terminate upon a change of

(iii) Proposal to adopt (vaststellen) the Company’s Dutch statutory

annual accounts for the financial year ended 31 December 2016.

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

(iv) Proposal to not distribute any dividend in respect of the year

or are made redundant without valid reason or if their employment

ended 31 December 2016.

ceases because of a takeover bid.

(v) Proposal to discharge the directors of the Company from their

liability for the conduct of business for the financial year ended

31 December 2016.

(vi) Proposal to appoint Grant Thornton Accountants en Adviseurs

B.V. as the external auditor for the 2017 financial year.

(vi) Proposal to reappoint as a non-executive director, Mr. David

Dekel, who is retiring by rotation and may be reappointed under

Article 23 paragraphs 6 and 9 of the Articles of Association.

All proposed resolutions were passed.

• Other information can be found in the notes to the financial

statements (please see note 17 – Equity).

Forecast

The focus of the last 12 months has very much been centered on
our extensive disposal programme, as we continued with our efforts
to decrease the Company’s debt and to meet the demands of the
restructuring programme. While it has been challenging, Plaza is
pleased with the progress made, having divested €183 million of
assets (including an office building) during the course of the year.

During 2017 and to date, Plaza received net proceeds of
€119.4 million from sales transactions and price adjustments.
The disposals form part of the Company’s ongoing strategy to
reduce the Company’s debt.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Directors’ report

Over the coming months, the Company will maintain its focus on and
commitment to the portfolio rationalization seeking potential buyers
for selected assets which have become less fit for development by us
and the deleveraging of the balance sheet.

Plaza’s focus is in completion of preliminary signed assets’ sale
agreements, unlocking the value of land through developments
where possible, reducing debt levels, continue to handle reducing
costs, and delivering on behalf of bondholders and shareholders.

On the debt side, Plaza will continue to reduce corporate debt
by early repayments following sale of assets according to the
Company’s debt restructuring agreement, following the one-year
deferral achieved on March 15, 2017 and the settlement agreement
signed on January 2018 with Israeli bondholders. For important
information in regards to Plaza’s negative cash flow projections
please refer to Note 2(c) in the consolidated financial statements.

Plaza will Continue with efficiency measures and cost reduction
where possible. The general and administrative expenses for 2018
shall be reduced to circa €3.1 million and starting 1 April 2018 a
new phase starts which is forecasted to have G&A per annum of
circa €2.6 million continuing strongest cost control initiatives e.g.
reduction of manpower, cutting cost of suppliers, advisors etc
(excluding non-recurring items).

The number of the Group’s employees changed significantly over
recent years and following the approval of the restructuring plan as
amended on November 2016, material changes occurred. Manpower
as reduced from 62 employees and board members in 2016 to
11 employees and board members as at April 2018. During 2017
Plaza has closed its offices in Serbia, decrease board members
from four to three, releasing senior positions – General council
(outsourcing), Romania country’s manager and leasing Manager, Cee
leasing director, reducing Hungarian team from 11 to 3 persons and
centralization of IT systems and outsourcing bookkeeping.

In 2018 further reductions of headcount implemented and moving
to smaller and cheaper offices in the Netherlands and Romania and
Closing the offices in Poland are planned.

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Corporate governance

The Company was incorporated in The Netherlands on May 17,

who, in practice, functions as the “internal audit function” within

1993 as a private limited liability company (besioten ven-nootschap

the meaning of the Corporate Governance Code though, as, to the

met beperkte aansprakelijkheid). The Company was converted into

letter of the Corporate Governance Code, the Company does not

a public limited liability company (naamloze ven-nootschap) on

have an internal audit function, Best Practice Provisions 1.3.1 up

October 12, 2006, with the name “Plaza Centers N.V.”. The principal

to and including 1.3.5 have not been complied with in 2017.

ap-plicable legislation and the legislation under which the Company

and the Ordinary Shares in the Company have been created is book

• Best Practice Provision 1.5.2. stipulates that inter alios, the

2 of the Dutch Civil Code (Burgerlijk Wetboek).

internal auditor and the external auditor shall attend meetings of

Compliance

the audit committee. As the Company does not have an internal

audit function in place, this Best Practice Provision cannot apply

to it. From August 2017 onwards until February 2018, the Com-

During 2017, the new Dutch Corporate Governance Code of

pany did not have an external auditor.

8 December 2016 (the “Dutch Corporate Governance Code”) came

into effect in the Netherlands. For the full text of this code, reference

• Principle 1.7 deals with the performance of the external auditor’s

is made to www.commissiecorporategovernance.nl.

work. Whereas until August 2017, the Company had an external

auditor, from August 2017 there was no external auditor in place

The Dutch Corporate Governance Code aims to create a solid and

and therefore, during that period, Best Practice Provisions 1.7.1

transparent system of checks and balances at Dutch listed compa-

up to and including 1.7.6 have not been complied with.

nies and to regulate relationships between the Board and the (general

meeting of) shareholders. The Dutch Corporate Governance Code has

• Best Practice Provision 2.1.5. stipulates that a diversity policy

a statutory basis in the Dutch Civil Code (Burgerlijk Wetboek). The

shall be in place. Such diversity policy is not in place given the fact

Company is rendering account in this report vis-à-vis its compliance

that, due to the current status of the Company, it is not envisaged

with the Dutch Corporate Governance Code, which like the previous

that new employees or members of the Board will be attracted.

code is based on the principle of ‘apply or explain’.

For that reason, the topic of diversity has not been addressed in

The information required under the Code can be found in various

this Annual Report.

sections of this report for 2017.

The Company complies with most of the principles and best practice

September 2017, the Board comprised of one executive director

provisions of the Dutch Corporate Governance Code, with the

(Mr. Nadav Livni) and three non-executive directors (Messrs. Ron

exception of the Best Practice Provisions set out below. The limited

Hadassi, David Dekel and Marco Habib Wichers) out of whom

• Best Practice Provision 2.1.7 applies to a one-tier board. Until 12

number of Best Practice Provisions not complied with, are

considered not to be in the interests of the Company and its

stakeholder or are not practically feasible to implement.

Messrs. Wichers and Dekel were considered to be independent.

Mr. Marco Habib Wichers stepped down on 12 September 2017,

after which event the Board comprises one executive director

and two non-executive directors, out of whom one non-executive

The Board is committed to high standards of Corporate Governance,

director (Mr. David Dekel) is to be considered independent. There-

In order to maintain the trust of the Company’s shareholders and

fore, from 31 July 2017 onwards, the Company does not comply

other stakeholders. The Company has a one-tier board (as provided

with Best Practice Provision 2.1.7. Given the fact that at this mo-

for In the Dutch Civil Code and the Dutch Corporate Governance Code.

ment, there is no long-term scenario for the Company, engaging

Where possible, taking the aforesaid into consideration, the Company

also complies with the provisions of the UK Corporate Governance

• Best Practice Provision 2.1.10 stipulates (in conjunction with

new managing directors is not an issue.

Code, with the exception of the provisions set out below.

The deviations from the Dutch Corporate
Governance Code in 2017

• Principle 1.3. deals with the internal audit function. The Company

does not have an internal auditor itself, as part of the Elbit

Imaging Group the Company has a Quality Control Regulator,

Best Practice Provision 5.1.5) that the management report shall

contain an explanation as to the independence requirements for

directors, as set forth in the Dutch Corporate Governance Code.

Strictly speaking, in this Annual Report, there is no separate

paragraph in respect of the independence of directors, though this

section “Corporate Governance” contains, in the explanation re

Best Practice Provision 2.1.7 and Best Practice Provision 5.1.3.,

statements re the independence of directors.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

• Best Practice Provision 2.2.8 stipulates that the management

report shall contain information re the evaluation of the

performance of committees and board members. Given the limited

number of directors in function during 2017, a formal approach of

evaluation has not been deemed appropriate; the members of the

Board cooperate on a continuous basis.

• Best Practice Provision 2.3.5 contains requirement re the report

of committees. Given the limited composition of the management

board, in 2017, the Company did not have a remuneration

committee or a nomination committee in place.

• Principle 3.1. contains provisions addressed to the remuneration

committee. Given the limited number of managing directors with

the Company, in 2017 no remuneration committee was in place.

Remuneration issues are decided upon by the full Board,

pursuant to the remuneration policy and the Articles of

Association.

• Best Practice Provision 3.1.2. vii stipulates that share options

granted cannot be exercised during the first three years after

they have been awarded. 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 Option Schemes were drafted in accordance

with Elbit’s Share Option Scheme, in order to maintain the

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 2017:

• Code Provision A.2.1 states that the division of responsibilities

between the Chairman and Chief Executive should be clearly

established, set out in writing and agreed by the Board. Whilst

the Company does not possess such a document, it believes that

the division of responsibilities between the Chairman and Chief

Executive is sufficiently clear.

• Code Provision A.4.2 states that the Chairman should hold

meetings with the non-executive directors without the ex-ecutive

directors present and, led by the Senior Independent Director, the

non-executive directors should meet without the Chairman present

at least annually to appraise the Chairman’s performance and on

such other occasions as are deemed appropriate. Given the

limited number of members of the Board currently in function,

appropriate compliance with this provision is not feasible.

• Code Provision B.6.1 states that the Board should refer in the

annual report as to how performance evaluation of the Board, its

committees and its individual directors has been conducted. The

Company has not had committees in place in 2017.

incentive for all employees of the Elbit group based upon the same

• Code Provision B.6.3 states that the non-executive directors,

principles. It should be noted however that, in 2017, no options

were granted or exercised.

• Best Practice Provision 5.1.1. – in respect of the independent

directors, reference is made to the explanation with Best Practice

Provision 2.1.7.

• Best Practice Provision 5.1.3. stipulates that the chairman of

led by the Senior Independent Director, should be responsible

for performance evaluation of the Chairman, taking into account

the views of executive directors. In 2017, the Chairman and the

non-executive directors did not meet separately. However, at every

Board meeting, an assessment is made by each Board member

of his own performance and that of other members. The Board

is of the view that this course of action provides an appropriate

mechanism for the evaluation of the performance of Board

the Board shall be independent within the meaning of the Dutch

members.

Corporate Governance Code. Mr. Ron Hadassi, acting chairman,

is not to be considered independent as Mr. Hadassi also functions

• Code Provision C.2.3 states that the Board should, at least

as chairman of the board of directors of the Company’s major

shareholder Elbit Imaging Ltd.

• Best Practice Provision 5.1.5. requires an additional explanation

in respect of a number of Best Practice Provisions. The Company

deviated in 2017 from Best Practice Provisions 2.1.10, 2.2.8 and

2.3.5, the explanations in respect of which have been set forth

above.

annually, conduct a review of the effectiveness of the Company’s

risk management and internal control systems and should report

to shareholders that they have done so. The Board did not conduct

a review of the effectiveness of the Company’s risk management

and internal control systems in the year under review. However,

the Board has established a process for identifying and managing

the risks faced by the Company and both the Audit Committee

and the executive director regularly consider the effectiveness of

the Company’s internal controls and risk management procedures

as part of the on-going management of the Company. The Board

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confirms 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 incompati-bilities 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 (monistisch bestuursmodel) and a two-tier governance

quality control regulator who, in practice, functions as an internal

(dualistisch bestuursmodel, having a separate management board

auditor.

and a separate supervisory board). It is well established practice

for international active companies in the Netherlands to have a

• Code Provision E.2.3 states that the Chairman should arrange

one-tier structure in the management board (bestuur). Although all

for the Chairman of the Audit, Remuneration and Nomination

members of the management board are formally managing directors

Committees to be available to answer questions at the Annual

(bestuurders), the articles of association will provide that certain

General Meeting of Shareholders and for all directors to attend.

directors have executive tasks and obligations (executive directors,

In 2017, the Company did not have a remuneration committee

uitvoerend bestuurders) and certain directors have supervisory

and a nomination committee. Mr. Dekel, Chairman of the Audit

duties (non-executive directors, niet-uitvoerend bestuurders). In case

Committee attended at the general meetings of the shareholders.

of the Company, the Articles of Association do provide that some

Compliance with WSE Corporate
Governance Rules

The Code of Best Practice for WSE-Listed Companies (the “WSE

Corporate Governance Rules”) applies to companies listed on

the WSE, irrespective of whether such companies are Polish

Incorporated. The WSE Corporate Governance Rules consist

of general recommendations related to best practice for listed

companies (Part I) and best practice provisions relating to

management boards, supervisory board members and shareholders

(Parts II to IV). The WSE Corporate Governance Rules impose upon

the companies listed on the WSE an obligation to disclose in their

current reports continuous or incidental non-compliance with best

practice provisions (with the exception of the rules set forth in Part

I). Moreover, every yearm each WSE-listed company is required to

publish a detailed statement on any non-compliance with the WSE

Corporate Governance Rules (including the rules set forth in Part

I) by way of a statement submitted with a listed company’s annual

report. Companies listed on the WSE are required to justify non-

compliance or partial compliance with any of the WSE Corporate

Governance Rules and to present possible ways of eliminating the

potential consequences of such non-compliance or the steps such

com-pany intends to take to mitigate the risk of non-compliance

with such rule in the future. The Company complies, to the extent

practicable, with all the principles of the WSE Corporate Governance

Rules. However, the Company will only be in the position to comply

with certain principles insofar such is permitted by Dutch law.

Detailed information regarding non-compliance as well as additional

directors are responsible for the day-to-day management of the

Company (executive directors) and other directors are responsible

for supervising the day-to-day management of the Company (non-

executive directors). 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 members

of a one-tier board.

The Board is accountable to the General Meeting of Shareholders.

Composition and operation of the Board

From 1 January 2017 until 12 September 2017, the Company had

four directors – one executive director and three non-executive

directors, of whom two were independent. With the effect of 12

September 2017 Mr. Marco Habib Wichers resigned. Since the

resignation of the above director the Company has three directors –

one executive director and two non-executive directors, of whom one

is 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 Official List of the London Stock Exchange, which in essence

provides 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

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Corporate governance

acting in concert thirty percent (30%) or more of the votes in a

The prevailing share dealing code complies with the provisions of

General Meeting).

the Market Abuse Regulation (regulation (EU) No 596/2014 of the

European Parliament and of the Council) of 16 April 2014. The share

The Board meets regularly throughout the year, when each

dealing code is available on the Company’s website http://www.

director has full access to all relevant information. Non-executive

plazacenters. com/downloads/Dealing_Code_23_November_2016.

directors may if necessary take independent professional advice at

pdf).

the Company’s expense. From August 2016 onwards, due to the

reduction of the number of members of the Board, the Company has

had not remuneration committee and no nomination committee in

Group Global Compliance Policy

place. The Audit Committee, which has a statutory basis in Dutch

The Company operates a Group Global Compliance Policy, which

law, is still In function.

Audit Committee

ensure adherence to all applicable laws, regulations and policies and

to provide a mechanism for preventing and reporting any breach of

those laws or regulations. The Company aspires to conduct

business in an honest way, and without the use of unlawful or

The Audit Committee meets at least three times each financial year.

unethical practices including but not limited to bribery, unlawfully

The Audit Committee has the general task of evaluating and advising

limiting competition and/or violating economic sanctions.

the Board on matters concerning the financial administrative control,

the financial reporting and the internal and external auditing. Among

other matters, It must consider the integrity of the Company’s

financial statements, the effectiveness of its internal controls and

risk management systems, auditors’ reports and the terms of

appointment and remuneration of the auditor.

Composition*: Mr. Wichers, Mr. Dekel.

Chairman: Mr. Dekel.

Internal control/risk management

The Board has established a continuous process for identifying

Controlling shareholder and conflicts
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

issued share capital of the Company:

Number of

Percentage of

ordinary

issued share

capital/voting

rights

44.90%

26.30%

and managing the risks faced by the Company, and confirms that

Elbit Imaging Limited

3,078,474

any appropriate actions have been or are being taken to address

Davidson Kempner Capital

1,802,820

any weaknesses. It is the responsibility of the Audit Committee to

Management LLC

consider the effectiveness of the Company’s internal controls, risk

management procedures, and risks associated with individual de-

York Capital Management
Global Advisors LLC

246,423

3.59%

velopment projects.

Share Dealing Code

The Company operates a share dealing code, which limits the

freedom of directors and certain employees of the Company to

deal in the Company’s shares. The share dealing code imposes

restrictions beyond those that are imposed by law. The Company

takes all reasonable steps to ensure compliance by those parties

affected. The Company operates a share dealing code, particularly

relating to dealing during close periods, for all Board members

and certain employees, as is appropriate for a listed company. The

Company takes all reasonable steps to ensure compliance by those

parties affected.

The Board is satisfied 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 it has with the Elbit Imaging 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 AGM’s held in 2017 can be found on pages 32.

* Until 12 September 2017 Mr. Marco Whichers was a member of the Audit committee and

the Remuneration Committee and then was replaced by Mr. Ron Hadassi.

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The Board is committed to maintaining an open, honest and positive

dialogue with shareholders. To ensure that all its communications

Environment

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, interim and other reports, ensuring that they

present a balanced assessment of the Company’s position.

The Company regards compliance with environmental legislation

in every country where it operates as its minimum standard, and

significant levels of management attention are focused on ensuring

that all employees and contractors achieve and surpass both

regulatory and internal environmental standards.

The main channels of communication with shareholders are

the independent director, Chairman, CEO, CFO and our financial

PR advisers, although all directors are open to dialogue with

shareholders as appropriate. The Board encourages communication

with all shareholders at any time other than during close periods

(as referred to in the share dealing code) and is willing to enter

dialogue with both institutional and private shareholders.

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. Reference is made to the “Plaza Centers

Group Global Compliance Policy (http://www.plazacenters.com/

downloads/Plaza_Centers_Global_Policy_2016.pdf), which also

addresses sustainable entrepreneurship (including environment).

The Board also actively encourages participation at the AGM, which

Health and safety

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is the principal forum for a dialogue with private shareholders.

As well as presentations outlining the progress of the business,

the AGM includes an open question and answer session in which

individual interests and concerns may be addressed. Resolutions put

to vote and their results will be published following the meeting.

The Company’s website (www.plazacenters.com) contains

comprehensive information about the business, and there is a

dedicated “Investor Relations” section where detailed financial

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. Reference

is made to the „Plaza Centers Group Global Compliance Policy

((http://www.plazacenters.com/downloads/Plaza_Centers_Global_

Policy_2016.pdf), as described on page 37, which also addresses

compliance with foreign trade laws, sound working conditions and

no discrimination.

The Company regards compliance with environmental legislation

in every country where it operates as its minimum standard, and

significant 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. Reference is made to the “Plaza Centers

Group Global Compliance Poli-cy ((http://www.plazacenters.com/

downloads/Plaza_Centers_Global_Policy_2016.pdf),which also

addresses sound working conditions of employees.

Corporate governance declaration

This declaration is included pursuant to Article 2a of the Decree

further stipulations regarding the content of management reports

(Vaststellingsbesluit nadere voorschriften inhoud bestuursverslag) 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:

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Corporate governance

• Compliance with the provisions and best practice principles of the

Code (pages 34-35);

• Particulars of the risk management system: pages 40-49;

• The functioning of the general meeting of shareholders, its

primary authorities, the rights of shareholders and how they can

be exercised (page 32);

• The composition and functioning of the Board and the Audit

Committee (pages 36-37);

• The regulations regarding the appointment and replacement of

members of the Board (page 36);

• Information in respect of diversity with the Company (page 35).

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Risk management

The following section describes the Group’s risk management

and control system which forms an essential part of the business

operations and reporting, and aims to ensure with a reasonable

degree of certainty that the risks to which the group is exposed

are identified and controlled adequately within the margins of the

risk profile.

Business strategy and restructuring plan

Plaza is focused on its businesses in CEE region and India (emerging

markets). By nature, various aspects of the emerging markets are

relatively underdeveloped and unstable and therefore are often

exposed to risks arising from unforeseen changes, such as legal,

political, tax, regulatory, and economic changes.

Plaza mainly operates its business in emerging markets and therefore

it is exposed to a relatively high degree of inherent risk in such

activities. The Management Board is responsible for setting strategic,

financial, and operational objectives as well as for implementing risk

management according to these objectives.

In 2018, Plaza’s focus is in completion of preliminary signed assets’

sale agreements, unlocking the value of land through developments

where possible, reducing debt levels, continue to handle reducing

costs, and delivering on behalf of bondholders and shareholders.

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 monitor risks and adherence to limits. Risk

management policies are reviewed regularly to reflect changes in

market conditions and the Group’s activities.

The strategic risks largely pertain to the real estate projects and

geographical allocation, and to the timing of development, sales and

the corresponding financing arrangements. Operational risks include,

amongst other things, the selection of properties and lessees, the

technical condition of properties, tax-related risks, as well as the

performance of Plaza’s organisation and its systems. The financial

risks concern interest rate, liquidity and counterparty credit risks,

foreign currency exchange rates, level of gearing, debt arrangements

cross-defaults as well as secure finance or refinancing risks and

compliance with its debt restructuring plan and its amendments.

Plaza has an adequate risk management and internal control

system. An important element of the internal control system is a

management structure that can take decisions effectively and on the

basis of consultation. Strict procedures are followed for the regular

preparation of monthly, quarterly and annual figures based on the

Company’s accounting principles. Monthly meetings or conference

calls are held between the Management Board, Headquarter and local

managers to discuss the results per country versus budgets and the

long term financial planning. The internal management reporting

system is designed to follow developments in rental income, the

value of investments, rent arrears, vacancies, the progress of

development projects and to improve and dispose of its real estate

assets at optimal market conditions. The preparation of the financial

results for period in comparison with the budget. There are internal

information systems regulations which contain inter alia back-up,

recovery back up and management of disasters plan to ensure that

data will not be lost in case of emergencies.

The strategy is evaluated by the Management Board each year,

reformulated as necessary and established in a business plan and

a cash flow forecast. The strategy considers a period of two years,

taking into account the expected negative cash flows, with detailed

budget proposals elaborated in the first year. The strategy is then

translated into concrete tasks and actions. During this process,

opportunities and important business risks are identified, and the

Company’s objectives and strategy are evaluated and adjusted if

appropriate. The strategy is discussed with and approved by the

Management Board pursuant to the restructuring plan restrictions

and amendments and consulting with its bondholders.

In addition, to ensure knowledge and understanding of its business

environments, Plaza employs local employees and consultants, in a

minimum level adjusted to the company’s level of activities. In some

cases has entered into local partnerships.

Capital management

Pursuant to the approved restructuring plan, the Company will be

allowed to distribute dividends to its shareholders only if at least

75% of the unpaid balance of the bonds (excluding bonds that are

sold by a Company’s subsidiary) following the date the restructuring

plan will come into effect and shall bind all creditors which are

subject to it, have been repaid in full prior to such distribution and

provided that following such distribution a certain financial coverage

ratio is met, unless such distribution has been approved in a meeting

of the creditors that are subject to the restructuring plan by a majority

of at least 67% of the debt’s balance which is being held by the

creditors participating in such meeting and voting. Notwithstanding

the aforesaid, in case of an additional equity investment in the

Company of at least €20 million that occurs following the date the

restructuring plan came into force, the Company will be allowed

(subject to applicable law) to distribute a dividend to its shareholders

in an amount equal to 50% of the said additional equity investment

and such distribution will not be subject to the said limitations.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Plaza will continue with efficiency measures and cost reduction

willing to accept reasonable risks in a responsible way, taking into

where possible. At the end of 2018, G&A expenses will be reduced to

account our stakeholders’ interests.

circa EUR 3.1 million and foretasted adjusted G&A for the following

year starting April 2018 is EUR 2.6 million (excluding non recurring

With respect to other risk categories, the approach of the company

items) following stringent cost control initiatives, e.g. reduction of

towards risks could be qualified as conservative, with compliance

manpower, cutting cost of suppliers, advisors etc.

and financial reporting risks as most conservative categories.

Management regularly reviews compliance with specified minimum

Compliance risks: we are committed to full compliance with relevant

cash reserve covenants which have to be greater than the amount

laws and regulations and have a zero tolerance approach to bribery

estimated to pay all administrative and general expenses and

and corruption, fraud and all other forms of (illegal) misconduct.

interest payments to the debentures holders falling due in the

following six months, minus sums of proceeds from transactions

Financial reporting risks: we have effective control frameworks

that have already been signed (by the Company or a subsidiary)

(Given the size and condition of the company) in place to minimize

and closed and, to the expectation of the Company’s management,

the risk of material misstatements and errors in our financial

have a high probability of being received during the following six

statements.

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 coverage ratio

Financing risk management

covenant (as defined in the restructuring plan) is not met, namely

Liquidity risk

below the threshold of 118%. As of December 31, 2017 the Company

In line with the debt restructuring plan agreed in 2014, Plaza repays

is not in compliance with Coverage Ratio Covenant (“CRC”) as

75% of proceeds from disposals to bondholders. In 2016, Plaza paid

defined in the restructuring plan. This may entitle the bondholders

€24.7 million to bondholders and, since the restructuring plan was

to declare that all or a part of their respective (remaining) claims

approved in 2014, a total of €93.1 million has been distributed as

become immediately due and payable.

well as 13.21% of shares in the Company. For background on this

Risk appetite

restructuring, please refer to pages 8-11.

Following the closing of the Company’s restructuring plan, the

Pursuing any business objective inevitably leads to taking risks.

consolidated financial statements include liabilities to bondholders

Risks can jeopardize those objectives in various ways.

for the aggregate principal amount of €123 million. The company

Each type of risk encountered is being dealt with in a manner

published cash flow forecast (as described on page 23) until H1-

and with the intensity that matches the nature and size of the

2020 in order to demonstrate the abovementioned repayments,

risk in relation to the risk appetite of the Board of Management.

as they fall due and to emphasize that the board and management

Risk appetite is the level of risk we deem acceptable to achieve

estimate that there are significant doubts regarding the Company’s

our objectives. The risk appetite per risk area is determined

ability to serve its entire debt according to the current repayment

annually by the Board of Management. These risk areas comprise

schedule. Moreover, following the new payment structure for the sale

themes such as financial, operational, strategic, compliance and

of the project in Bangalore, India, it is expected that the Company will

(information) security themes. Overall, Plaza’s risk appetite did not

not be able to meet its entire contractual obligations in the following

materially change compared to previous year.

12 months.

Effective risk management is a key success factor for realizing

As Plaza depends on external financing and has a high exposure to

our objectives. Risk areas with a low-risk appetite and thus, a low

CEE and India, Plaza bears the risks due to fluctuations in selling

acceptable residual risk requires strong risk management and

yield, interest rates, exchange rates, and other indices, its financial

strong internal controls. Risk areas with a high-risk appetite requires

assets and debt value, cash flows, covenants and cost of capital

relatively less risk management and internal control effort.

will be impacted, thereby affecting its ability to raise capital.

Plaza has a generally prudent risk appetite, which can be described

On September 28, 2017 Standard & Poor’s Maalot (“Maalot”),

per risk category as follows:

the Israeli credit rating agency which is a division of International

Standard & Poor’s, has reduced its credit rating of Plaza’s two series

Strategic risks: in the pursuit of our strategic objectives, Plaza is

of Notes traded on Tel Aviv Stock Exchange from “ilCCC” to “ilCC”

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

with negative outlook on a local Israeli scale. In January 2018,

Furthermore, Plaza used to monitor its currency exposure on a

Maalot has discontinued tracking Plaza’s rating at the Company’s

continuous basis and acts accordingly by investing in foreign

request.

currencies in certain cases when cash flows denominated in foreign

currency are needed according to project construction budget. As a

As a basis for and contribution to effective risk management and

policy, the Group does not invest in foreign currencies for speculative

to ensure that Plaza will be able to pursue its strategy even during

purposes. The consolidated financial statements include additional

periods of economic downturn, Plaza limits its financial risks by

information about and disclosure on Plaza’s use of financial

hedging these risks if and when expedient.

instruments and sensitivity analysis.

Interest rate risks

In view of Plaza’s policy to hold investments for the long term while

The Company’s top risks

exit yields are high, the loans used to fund this are also taken

The following risks and related key mitigants, where applicable, are

with long maturities. Plaza used interest-rate swaps to manage its

described below:

interest-rate risk. This policy regarding the hedging of interest-rate

risk is defensive in nature, with the objective of protecting itself

• Our business is subject to general business and macro and

against rising interest rates. The Group incurred certain floating

microeconomic risks

rate indebtedness and changes in interest rates may increase its

Risk description: The group is exposed to number of specific real

cost of borrowing, impacting on its profitability. On a project by

estate factors, including all of the risks inherent in the business

project basis, the Group considered hedging against interest rate

of developing, owning, managing and using real estate, changes

fluctuations or as sometimes required to hedge by the lending banks.

in laws and governmental regulations, property valuations and

Currently there is no hedge against interest fluctuations (including

fluctuations in the property markets generally and in the local

CPI on its ILS debentures).

Foreign currency exchange rates

markets where the group operates. if any of these factors were

to materialize and be adverse, they could have a material adverse

effect on the Group’s business, financial condition and prospects.

As Plaza’s functional currency is Euro, it is exposed to risk deriving

Liquidity of real estate assets differs substantially between

from changes in foreign currency exchange rates as some of its

markets, assets classes and between development and investment

purchases of services and construction agreements are conducted

and during the development stage. Many of the Group’s assets

in local currencies, or are affected by them. Its rental revenues

are less liquid due to their location (emerging markets), type

may also be denominated in local currencies. The Group sought

(requiring intensive management e.g. Casa Radio) and their stage

to minimise these risks by ensuring that its principal liabilities

of development (uncompleted projects). Such illiquid may affect

(financing and construction) and its principal sources of revenue

the Group’s ability to dispose of or liquidate some projects in a

(sale proceeds and rentals) are all denominated in the same

timely fashion and at satisfactory prices in response to changes

currency (namely Euro), or are linked to the rate of exchange of the

in the economic environment, the local real estate market or other

local currency and the Euro. In order to limit the foreign currency

factors. The competition in the real estate markets in the Poland

exchange risk in connection with the Notes, may enter into similar

where we had shopping mall affected sale price and occupancy

hedging arrangements (as necessary) in respect of each of the

and rental rates of the Group’s property.

series of Notes, subject to market conditions, although the Company

ceased the using of currency options effective October 2015 in order

The Group carries out continual high level reviews of the real

to avoid liquidity risk. The Company carries out hedging transactions

estate sector in the markets in which it is present to review

occasionally using derivatives subject to limitation set by the Board.

its existing portfolio in line with the market movements.

Regular updates are presented by the local teams to the senior

If the Company is not successful in fully hedging its foreign exchange

management to gauge economic trends and analyze its impact of

rate exposure, changes in currency exchange rates relative to the

the Group’s assets.

Euro may adversely affect the Group’s profit or loss, cash flows and

certain covenants. A devaluation of the local currencies in relation to

Risk mitigation: In reaction to slow economic recovery Plaza

the Euro, or vice versa, may adversely affect the Group’s results in

will continue with efficiency measures and cost reduction where

2018, mainly in Romania and India.

possible (e.g G&A expenses were reduced materially following

stringent cost control initiatives (excluding non recurring items)),

and focus on improvement and disposal of its real estate assets at

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Risk management

optimal market conditions. These measures have been and will be

Risk mitigation: The Company’s bondholders under the bond

pursued with vigor. Market developments will be closely watched

agreements (1) are entitled the bondholders to declare that all or

and additional measures will be taken if necessary.

a part of their respective (remaining) claims become immediately

due and payable, since the Company is not in compliance with

• Events of default under the Group’s debt arrangements may

Coverage Ratio Covenant (“CRC”) as defined in the restructuring

result in cross-defaults being triggered under other debt

plan at 2017 year-end (2) in case of material deterioration in

arrangements that the Group has in place

the Company’s business and substantial suspicion exists that

If an event of default were to subsist under one or more of

the Company will not be able to repay the bonds on time, the

the Group’s debt arrangements, that event of default may, in

bondholders may declare immediate repayment of bonds.

accordance with the cross-default provisions, constitute an event

Further, the note states that as at the date of authorisation of the

of default under the Group’s other debt arrangements. Upon an

consolidated financial statements the bondholders have not taken

event of default (whether due to cross-default or otherwise), the

steps to assert their rights.

relevant lenders would have the right, subject to the terms of the

relevant facility arrangements to, amongst other things, declare

Transparency and periodic update meetings with the Company’s

the borrower’s outstanding debts under the relevant facilities to

creditors help to understand the situation and decision making.

be due and payable and/or cancel their respective commitments

under the facilities, enforce their security, take control of certain

• The Group’s financial performance is dependent on local

assets or make a demand on any guarantees given in respect

realestate prices and rental levels

of the relevant facility. In respect of the bonds, the trustees

Risk description: There can be no guarantee that the real estate

representing holders of bonds (or a resolution of the holders of

markets in CEE region and India will continue to develop, or

bonds) may be able to claim, under circumstances where the

develop at the rate anticipated by the Group, or that the market

Company does not fulfil its obligations under the bonds (including

trends anticipated by the Group will materialise. Where yields

but not limited to payment obligations and financial statements

are high, such as some of the current market yields, the Group

publication) an immediate settlement, and declare all or any

will not be able to achieve substantial capital gains by selling the

part of the unsettled balance of the bonds immediately due and

commercial centers.

payable. In respect of the Polish bonds, each holder of the Polish

bonds has the right to ask for an early redemption of the Polish

Risk mitigation: Sale of yielding assets where value potential is or

bonds on the occurrence of an event of default by the Company

is close to being established and where sale price is appealing.

(including but not limited to payment obligations). A default and/

or acceleration of repayment of debt under the debt arrangements

• Real estate valuation is inherently subjective and uncertain

may affect the ability of the Group to obtain alternative financing

Risk description: The valuation of property is inherently subjective

in the longer term, either on a timely basis or on terms favourable

due to, amongst other things, the individual nature of each

to the Group, and the Group’s ability to pursue its strategic busi-

property, and furthermore valuations are sensitive to change in

ness plans. This may have an adverse effect on the Group’s busi-

market sentiment. As such, valuations are subject to uncertainty

ness, results of operations, financial condition and/or prospects.

and cash generated on disposals may be different from the

Whilst the use of borrowings is intended to enhance the returns

value of assets previously carried on the Group’s balance sheet.

on the Group’s invested capital when the value of the Group’s

There is no assurance that valuations of properties, (including

underlying assets is rising, it may have the opposite effect where

restricted marketing period assumption), when made, will reflect

the value of underlying assets is falling. Any fall in the value of

the actual sale prices even where those sales occur shortly after

any of the Group’s properties may have significantly reduce the

the valuation date. This may mean that the value ascribed by the

value of the Group’s equity investment in the member of the

Group to the properties held by it may not reflect the value realised

Group which holds such property, meaning that the Group may

on sale, and that the returns generated by the Group on disposals

not make a profit, may incur a loss on the sale or revaluation of

of properties may be less than anticipated. In addition, the value of

any such property and/or increase the likelihood of a member of

the Group’s properties may fluctuate as a result of factors such as

the Group breaching certain financial covenants in its existing

changes in regulatory requirements and applicable laws (including

debt arrangements resulting in an event of default under such

taxation and planning), political conditions, the availability of

arrangements. The occurrence of one or more of these factors

may have a material adverse effect on the Group’s business,

credit finance and the condition of financial markets, interest and
inflation fluctuations and local factors such as competition. Each

financial condition and/or results of operations.

of these factors may have an adverse effect on the Group’s busi-

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Risk management

ness, result of operations, financial condition and/or prospects.

• We may have difficulties exercising a full separation from our

The Company may from time to time publish such valuations.

partner in connection with our project in Bangalore, India which

Any decreases in the published value of the Group’s properties

may significantly affect our ability to dispose of such asset

may adversely affect the price of the ordinary shares.

and complete our strategy relating to our plots in India

Our strategy with respect to our plots in India is to dispose of

Risk mitigation: Plaza will rely on its extensive experience and

such assets under the most optimal market conditions. Due to

knowledge of managing retails assets and strong relationships

regulatory, physical and other limitations to develop our project

with local and international retailers while using estimates

in Bangalore, India, on December 2, 2015, we announced that

and associated assumptions. These estimates and underlying

EPI (JV with Elbit imaging) signed an agreement to sell 100%

assumptions, including sales under restricted marketing period,

of its interest in a special purpose vehicle which holds a site in

are closely reviewed on an ongoing basis by the Board members.

Bangalore, India to a local Investor. The transaction was subject

to certain conditions precedent which have not been met. As a

• The Group’s borrowing costs and access to capital markets

result, the local investor was required to carry out an agreed upon

depend significantly on the Company’s credit ratings and market

separation mechanism under which EPI obtained, from the Escrow

perception of the Company’s and the controlling shareholder’s

Agent, the transfer deeds for land plots covering approximately

financial resilience

8.3 acres which had been provided to us as guarantees under

Risk description: Reduction in the credit ratings of the Group

the agreement. Although the separation mechanism has been

or deterioration in the capital market perception of the Group’s

initiated, we have still not been able to achieve full separation due

financial resilience, could significantly increase its borrowing

to a lack of cooperation by the local investor. In order to complete

costs, limit its access to the capital markets and trigger additional

the separation process, the local investor is required to execute

collateral requirements in derivative contracts and other secured

documents transferring and duly registering its 10% undivided

funding arrangements. Therefore, any further reduction in

interest in the plot in EPI’s favor. Even if we are able to properly

credit ratings or deterioration of market perception could

execute the separation mechanism (in particular with respect to

materially adversely affect the Group’s access to liquidity and

the transfer of the local partner’s 10% undivided interest in our

competitive position and, hence, have a material adverse effect

favor) and/or exercise the guarantees placed by the local investor,

on the Group’s business, financial position and/or results of

there is no guarantee that we will be able to dispose of the land

operations. These material adverse effects could also follow

in the Bangalore project to a third party due to proprietary claims

from a reduction in the credit ratings of the controlling

to certain parts of the Bangalore project, and other third party

shareholder.

holdings on parts of the land within the Bangalore project thus

making the holdings in the land a non-contiguous property.

On September 28, 2017 Standard & Poor’s Maalot (“Maalot”),

In addition, legal and regulatory restrictions placed by local

the Israeli credit rating agency which is a division of International

authorities can materially impede our ability to dispose of the land

Standard & Poor’s, has reduced its credit rating of Plaza’s two

on optimal commercial terms which may materially adversely

series of Notes traded on Tel Aviv Stock Exchange from “ilCCC”

affect our ability to dispose of the land to third parties which may

to “ilCC” with negative outlook on a local Israeli scale. In January

jeopardize our business strategy, planning and operations, and

2018, Maalot has discontinued tracking Plaza’s rating at the

could cause severe delays in disposition of the plots and could

Company’s request.

have a material adverse effect on our operations, cash flow and in

turn, our ability to repay our debts in timely manner.

Risk mitigation: Implementing the amended restructuring plan

will resolve the Company’s liquidity situation. Plaza continues

• Our ability to generate short term cash flow from our

reviewing financing options available to the Company to achieve

Chennai project in the short term is limited

the most effective debt profile.

Our strategy in respect of our projects in India is to liquidate our

assets at the most commercially optimal prices. However, we

Plaza is actively pursuing sales opportunities to generate cash

have entered into JDA transaction with a local developer in order

which will contribute to the Company’s liquidity and reduce debt

to develop our project in Chennai, India. As per the terms of the

levels. The amended maturity schedule of debentures is detailed in

JDA, we are entitled to receive an agreed upon percentage of the

the restructuring plan on page 8-11.

proceeds from sales to third parties of villas and plots developed

by the local developer.

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Risk management

As of the date this current report, our estimations are that sales

• Casa Radio Project

in the Chennai, India project will commence in approximately

Risk description: The joint venture in relation to the Casa Radio

18-24 months, and the completion of the full-scale project

site in Bucharest is governed by the public-private partnership

(including obtaining all permits, construction works, marketing

laws of Romania pursuant to which no projects have yet been

and collections of sales proceeds) will occur within a period of

implemented in Romania. There is a risk that the legal structure

approximately 6 years.

of this partnership may be challenged in the future and that

the development and exploitation rights to be granted by the

As a consequence, our cash flow from the Chennai, India

Romanian government to the joint venture company are more

project in the near term is very limited. In addition, our ability to

restrictive than currently anticipated, leading to us being unable

sell the project to other third party developers is limited since

to obtain the development profits predicted for the project. Recent

new developers would likely ask that we terminated our JDA with

political changes in Romania have resulted in delays in receiving

the local developer, which is possible only under certain events

required communications, regulatory approvals and permits

detailed in the JDA.

from the Romanian government, which may affect our ability to

develop and sell our projects there. Furthermore, third parties

Additionally, we are fully dependent on the local developer’s

could challenge the Romanian government’s decision, following

skills and efforts to complete the Chennai, India project in the

the failure of the original partners to fulfill their obligations or to

most efficient way. If the local developer will not duly perform its

put the contract out to tender or to carry out a new site valuation.

obligations we may experience a delay in our expected cash flow,

A successful challenge on either count could result in us having

and may need to terminated the JDA and seek alternative exist

to enter a new tender process, which would lead to an increase in

strategies from the Chennai, India project which may not be on

associated expenses and uncertainty.

optimal terms.

In 2015, the Board and Management became aware of certain

• We rely on our local joint development partner’s performance,

issues with respect to certain agreements that were executed in

financial capability and reputation in our project in Chennai.

the past in connection with the Project. In order to address this

Any significant decline in the reputation of the local joint

matter, the Board appointed the chairman of the Audit Committee

development partner’s capabilities or the existence of conflicts

to investigate the matters and independent law firms to analyze

of interest could adversely affect our results of operation and

the available alternatives in this respect. The chairman of the

cash flow.

Audit Committee did not conclude the investigation as the person

Our project in Chennai, India is subject to a JDA with a local

with key information was not available to answer questions.

partner.The Chennai, India project is to be developed by the local

The Board, among other steps, implemented a specific policy in

partner who is responsible for the construction of the Chennai,

order to prevent the reoccurrence of similar issues and appointed

India project at its own costs, as well as marketing the Chennai,

the chairman of the audit committee to monitor the policy’s

India project to third parties buyers. Any significant decline in the

implementation by the Company’s management. In addition, it was

financial capabilities of the local partner might cause delays in the

decided that certain agreements will be brought to the Board’s

construction and marketing of the Chennai, India project by the

approval prior to signing.

local partner in the expected timeline. In addition, any significant

decline in the reputation of the local partner could cause delays

The Company has approached and is co-operating fully with the

in the marketing of the project to third parties buyers. Since the

relevant Romanian Authorities regarding the matters that have

local partner has another project in Chennai in close proximity

come to its attention and it has submitted its initial findings

to our Chennai, India project, there may be a conflict of interest

in March 2016 to the Romanian Authorities. The Company,

in the construction and marketing of our Chennai, India project

during this process has been verbally informed by the Romania

since the local partner may have other business interests that are

Authorities that it has received immunity from certain potential

inconsistent with ours.

criminal charges and received further verbal assurance that the

mentioned investigation should have no effect on the Company’s

Consequently, disputes or disagreements with the local partner

existing legal rights to the Project and the PPP Agreement. As this

could result in interruption to the business operations of our

process is still on-going, the Company in unable to comment on

project and may materially impact our financial condition, cash

any details related to this matter. Management is currently unable

flow, and results of operations.

to estimate any monetary sanctions in respect to the potential

irregularities.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

In addition, our Casa Radio project in Romania may be subject to

certain materials into the air or water from a property, including

governmental expropriation or monetary sanctions. The nature

asbestos, and such release can form the basis for liability to third

of the development and exploitation rights granted to the joint

persons for personal injury or other damages. Other laws and

venture company in relation to the Casa Radio site in Bucharest

regulations can limit the development of, and impose liability for, the

are for a period of only 49 years, and in the event that this term

disturbance of wetlands or the habitats of threatened or endangered

is not extended, the rights in relation to the site would revert to

species. Any environmental issue may significantly increase the cost

the Government of Romania. Additionally, there may be other

of a development and/or cause delays, which may have a material

regulatory risks relating to the Romanian government’s right to

adverse effect on the profitability of that development and the results

expropriate the rights to the Casa Radio Site in Bucharest or that

of operations of the Group.

they will impose sanctions on the Company with respect to the

property. Furthermore, these rights are subject to termination

There is an increasing awareness of environmental issues in

under certain circumstances by the Romanian government,

Central and Eastern Europe. This may be of critical importance in

such as in the event a delay in the project timetable, and any

areas previously occupied by the Soviet Army, where soil pollution

termination prior to the expiration of such rights may have a

may be prevalent. The Group generally insists upon receiving an

material adverse effect on our business.

environmental report as a condition for purchase, or alternatively,

Legal and regulatory risk

conducts environmental tests during its due diligence investigations.

Also, some countries such as Poland, Romania and the require that a

developer carries out an environmental report on the land before

Like all international companies, the Company is exposed to the

building permit applications are considered. Nevertheless, the Group

changing regulatory environment in the countries and regions where

cannot be certain that all sites acquired will be free of environmental

it conducts business. Many of the CEE countries in which the Group

pollution. If a property that the Group acquired turns out to be

operates or intends to operate are countries that until the last two

polluted, such a finding will adversely affect the Group’s ability to

decades were allied with the former Soviet Union under a communist

construct, develop and operate a shopping and entertainment cen-

economic system, and they are still subject to various risks, which

ter on such property, and may cause the Group to suffer expenses

may include instability or changes in national or local government

incurred in cleaning up the polluted site which may be significant.

authorities, land expropriation, changes in taxation legislation or

regulation, changes to business practices or customs, changes to

While the Group makes every effort to conduct thorough and reliable

laws and regulations relating to currency repatriation and limitations

due diligence investigations, in some countries where former

on the level of foreign investment or development. The Group will be

communist regimes carried out extensive land expropriations in

affected by the rules and regulations regarding foreign ownership of

the past, the Group may be faced with restitution claims by former

real estate and personal property.

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

The Group may be liable for the costs of removal, investigation

its ability to develop the land, which may have a material adverse

or remediation of hazardous or toxic substances located on or in

effect on the Group’s business, financial condition and/or results of

a site owned or leased by it, regardless of whether a member of

operations.

the Group was responsible for the presence of such hazardous or

toxic substances. The costs of any required removal, investigation

Relief from taxation available to the Group may not be in accordance

or remediation of such substances may be substantial and/or

with the assumptions made by the Company and/or may change.

may result in significant budget overruns and critical delays in

Changes to the tax laws or practice in the countries in which the

construction schedules. The presence of such substances, or the

Company operates or any other tax jurisdiction affecting the Group

failure to remediate such substances properly, may also adversely

could be relevant. Such changes could affect the value of the

affect the Group’s ability to sell or lease the development or to

investments held by the Company or affect the Company’s ability

borrow using the real estate as security. Additionally, any future sale

to achieve its investment objective or alter the post-tax returns to

of the development will be generally subject to indemnities to be

shareholders. The tax positions taken by the Group, including the tax

provided by the Group to the purchaser against such environmental

effect of transfer pricing and the availability of tax relief provisions,

liabilities. Accordingly, the Group may continue to face potential

are also subject to review by various tax authorities.

environmental liabilities with respect to a particular property even

after such property has been sold. Laws and regulations, as may

Under the Dutch participation exemption rules, income including

be amended over time, may also impose liability for the release of

dividends and capital gains derived by Dutch companies in respect

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Risk management

of qualifying investments in the nominal paid up share capital of

Group’s business, financial condition and/or results of operations.

resident or non-resident investee companies, are exempt from Dutch

corporate income tax provided the conditions as set under these

We may be exposed to liabilities under anti-bribery laws, and any

rules have been satisfied. The participation exemption rules and more

determination that we or any of our subsidiaries has violated the anti

particularly the statutory conditions thereunder have most recently

– bribery laws could have a material adverse effect on our business.

been amended with effect from 1 January 2010. Such amended

conditions require, among others, a minimum percentage of the

We are subject to compliance with various laws and regulations,

share capital in the investee company requires that the investee

including anti-corruption laws, which generally prohibit companies

company is not held as a passive investment (the “motive test’).

and their intermediaries from engaging in bribery or making other

If the motive test is not met, the participation exemption nevertheless

improper payments to foreign officials for the purpose of obtaining

applies provided that either the subject-to-tax-test or asset test is

or retaining business or gaining an unfair business advantage. Such

met. To benefit from the participation exemption regime during the

compliance regulations also require proper record keeping and

entire holding period, the requirements must be met throughout the

characterization of such payments in our reports.

entire holding period. Should the Company not be in compliance

with all participation exemption requirements or should the

While our employees and agents are required to comply with these

participation exemption rules be amended, this will affect its tax

laws, we operate in many parts of the world that have experienced

relief which could have an adverse effect on its cash flow position

governmental and commercial corruption to some degree and, in

and net profits.

certain circumstances, strict compliance with anti-bribery laws may

conflict with local customs and practices. Despite our commitment

The Company has provided in the past substantial amounts of

to legal compliance and corporate ethics, we cannot ensure that our

loans to its subsidiaries which are treated as hybrid loans and

policies and procedures will always protect us from intentional, reckless

exempt under the participation exemption. Most of these loans are

or negligent acts committed by our employees or agents. Violations of

not covered by a tax ruling confirming the treatment for Dutch tax

these laws, or allegations of such violations, could disrupt our business

purposes. Therefore, there is a risk that a discussion arises with the

and result in financial penalties, debarment from government contracts

Dutch tax authorities on the treatment thereof.

and other consequences that may have a material adverse effect on

our business, financial condition or results of operations. Regarding

Tax losses may be carried forward and set off against income of the

certain particular irregularities and co-operation with the Romanian

immediately preceding tax year and the nine subsequent tax years

Authorities see references to Note 8(6)(d).

and may be offset against any income of the companies currently

included in the fiscal unity as long as these remain part of the fiscal

The Company has been made aware that commission paid to an

unity. If losses are considered so-called “holding and/or financing

agent in connection with the disposal of the US portfolio in 2012 may

losses”, they may only be offset against income that is derived in

have benefited a former director of the Company, and it is probable

years that the Company also qualifies as “holding and/or financing

therefore that those arrangements should have been classified as a

company” within the meaning of art. 20 (4) of the Dutch Corporate

related party transaction under the Listing Rules. At the time of the

Income Tax Act 1969, provided that the net balance of intragroup

disposal, it appears that the Company was not aware that there was

receivables has not increased compared to the relevant loss

any potential related party interest with respect to the commission

making year (unless there are sufficient business reasons for

arrangements. The Company is currently discussing this matter

such increase).

with its Sponsor and the UKLA and seeking appropriate advice as

to whether any retrospective disclosures or other actions may be

If the Company were to be treated as having a permanent

required under the Listing Rules.

establishment, or as otherwise being engaged in a trade or busi-

ness (including owning real estate outside the Netherlands), in any

In order to address this matter, Plaza’s Board has appointed, on

country in which it develops shopping and entertainment centers or

April 25, 2017, the chairman of the audit committee Mr. David

in which its centers are managed, income (positive and negative)

Dekel, to investigate and examine the issues raised as part of a

attributable to or effectively connected with such permanent estab-

joint committee together with a special committee formed for the

lishment or trade or business, is generally excluded from the Dutch

purpose by EI, and with the joint committee’s external legal advisors.

tax base. Specific conditions may apply based on the relevant double

The internal committees has concluded their examination of these

taxation treaty and Dutch domestic law. The occurrence of one or

matters and submitted their recommendations to the Company’s

more of these factors may have a material adverse effect on the

board of directors. The Company’s board of directors fully adopted

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Risk management

the committee’s recommendations, and is working to implement

Plaza’s internal control procedures aim to ensure:

them. Please also see Note 8 (6)(d) in this respect, with respect to

Elbit’s settlement with the SEC.

• the optimisation of operations and the smooth functioning of the

At this preliminary stage, the Company, based on legal advice

• compliance with current laws and regulations;

received, cannot estimate the potential consequences for the

• compliance with its Restructuring Plan;

Company as a result of this matter and no provision is recorded in

• the application of instructions and directions given by the

the books for any amounts which the Company may incur as a result

Management Board; and

of these issues.

• the reliability of financial information.

Groups internal processes;

Financial reporting

The system is based on the following key principles:

Plaza prepares an annual budget for each country, which is

• the involvement of and taking responsibility by all personnel: all

compared with the actual results. Investment budgets and cash flow

Group employees contribute to internal control procedures; each

forecasts are also prepared including strict follow-up and, to the

employee, at his or her level, should exercise effective control over

extent required, including creditor update meetings. The semi-

the activities for which he or she is responsible;

annual figures are reviewed by the external auditor prior to their

• the full extent of the scope covered by the procedures: the

publication by means of a press release. The financial statements are

procedures should apply to all entities (operational and legal).

audited by the external auditor, and half year figures are subjected

to a limited review by the external auditor.

The internal control procedures designed to address the objectives

described above cannot, however, ensure with certainty that these

Maintaining a sound financial control system over the financial

objectives will be achieved in full, since all procedures have inherent

reporting, setting up clear accounting policies within the Group

limitations. However, they aim to make a very significant contribution

and hiring professional finance staff can assist to reduce the risk

in this direction.

that the financial reporting does not include any errors of material

importance. In addition, the risk that trading properties are incorrectly

Components of internal control procedures

valued is mitigated by executing major project valuations by inter-

Permanent control is the responsibility of all Group employees.

nationally reputed external appraisers. Trading properties are being

It is linked directly to the functions and subsidiaries.

appraised at least once a year (mainly by external appraisers).

Country directors, aim to ensure compliance with the Group’s

Please note that the risks the company may incur are not limited to

internal control procedures, whose tasks are:

the risks in the Risk management section. For Further details, please

refer to the Company’s prospectus related to its Restructuring plan

• to ensure the methods chosen at Group level are coordinated and

dated May 27, 2014 and Company’s prospectus in respect of the

implemented by their teams;

proposed Rights offering dated October 16, 2014 as available on the

• to design and adapt the reporting procedures on a regular basis,

Company’s website at www.plazacenters.com.

giving the most appropriate indicators to obtain clear visibility of

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Internal control and risk management
procedures

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.

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.

The powers of the Group companies’ legal representatives are limi-

ted and subject to controls. Permanent control procedures require

several participants. 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;

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Risk management

• to coordinate the choice of methodologies and tools;

The production of accounting information and the application of the

• to monitor the development of the procedures in the

controls implemented to ensure the reliability of said information are

subsidiaries; and

primarily the responsibility of the Company’s Financial & Accounting

• to ensure all material agreements, and all brokerage fee

Department that submit information to the Group, and which

agreements ,are gathered and brought to the Board’s attention.

certify its compliance with the internal certification procedure. The

corporate and consolidated financial statements are prepared by the

The Group is careful to anticipate and manage major risks likely to

Financial & Accounting Department, which reports directly to the

affect the achievement of its goals and to compromise its compliance

Management Board. The department is charged with:

with current laws and regulations. These risks and risks appetite are

identified above in this section. The identification and evaluation of

• updating accounting rules in view of changes in accounting

risks is used as a reference to determine procedures and controls

regulations;

which, in their turn, influence the level of residual risk.

• defining the various levels of accounting control to be applied to

The procedures provide a framework for the activity, in a more

the financial statement preparation process;

precise way where risks have been identified, and their application

• ensuring correct operation of the internal accounting control

provides a control mechanism.

environment within the Group;

The Management Board has overall responsibility for the Group’s

authorisation rules applying to the department; and

internal control systems. The Management Board is tasked with

• monitoring the implementation of recommendations made by

• preparing and updating the procedures, validation rules and

defining the general principles of the internal control system,

external auditors.

creating and implementing an appropriate internal control system

and associated roles and responsibilities, and monitoring its smooth

The management of financial risks, and in particular the financial

functioning in order to make any necessary improvements. Under

structure of the Group, its financing needs and interest rate and

the direction of the Management Board, the activities and functions

exchange rate risk management procedures, is provided by the

managers carry out the supervision of the internal control system

Financial & Accounting Department, which reports directly to the

with the support of the permanent control coordination function.

Management Board. At the end of each year, the Board validates

The Audit Committee meets at least three times per year (in 2017

the provisional financing plan for the following year, which sets out

the audit committee met four times), and Its work and conclusions

the broad outlines in terms of the balance and choice of resources,

are reported to the Management Board. The supervision is also

as well as interest rate and exchange rate hedges. During the year,

supported by the comments and recommendations of the

key financial transaction decisions are submitted individually for

statutory auditors and by any regulatory supervision which may

approval by the Board and Audit Committee, which also receives a

take place.

Internal control procedures relating
to accounting and financial information

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 defining the responsibilities of the individuals

responsible for accounting scopes and information system security.

Internal accounting controls aim to ensure:

• that published accounting and financial 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 sufficiently

reliable to contribute to processing accounting information.

summary of these transactions once they have been completed.

The processing and centralisation of cash flows, together with interest

rate and exchange rate hedging, are the responsibility of the Finan-

cial & Accounting Department, which keeps a record of commitments

and ensures that they are reflected in the accounting system.

Plaza’s consolidated financial statements 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 defined in the corresponding procedures. The Accounting

Department has set up a system of internal collection and verification

of country data and controls carried out. This system of control

covers all Group entities.

The clarity of financial information and the relevance of the

accounting principles used are monitored by the Audit Committee.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Remuneration report

As the Dutch Corporate Governance Code prescribes the

Board. Pursuant to the Articles of Association, the general meeting

establishment of committees only if more than four non-executive

of shareholders determines the remuneration policy. When the

directors are in function, the Remuneration Committee and the

remuneration policy needs changing, approval will be sought from

Nomination Committee are no longer in place as from August

the general meeting of shareholders of the Company.

2016 due to the reduction of the number of members of the

2017

Executive directors

Non-performance related remuneration

Mr. Nadav Livni

Total

Non-executive directors

Non-performance related remuneration

Mr. Ron Hadassi

Mr. David Dekel

Mr. Marco Wichers

Total

Total – all directors

* Resigned on 12 September 2017

Salary

and fees

€’000

Share
incentive plan1
€’000

Total non-performance

Total performance

related remuneration

€’000

191

39*

297

367

191

39*

297

367

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Service arrangements

The directors have specific terms of reference. Their letters of

appointment state an initial 12-month period, terminable by either

party on three months’ written notice. Save for payment during

respective notice periods, these agreements do not provide for

payment on termination.

The shareholder returns performance 2017*

250

(P)

200

150

100

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

* Source: Bloomberg, as of 31 December 2017. Past performance is not an indication of future returns.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Share options

The Company adopted its Share Option Scheme on October 26,

In 2017 none of the Board members has share options.

2006. At the same time, 26,108,602 non-negotiable options over

Mr. Dori Keren (CEO) had 118,889 options granted and unexercised.

Ordinary Shares were granted, the terms and conditions of which

The option fully vested with an exercise price of £43.

(except for the exercise price) are regulated by the Share Option

Scheme. Regarding the modification of Share Option Scheme and

For the exercise and forfeiture of options refer to the table below.

reverse split 1:100 refer to note 20 of the consolidated financial

statements.

Total pool

Granted

Exercised

Forfeited

Left for future grant

Amsterdam, 29 March 2018

The Board of Directors:

Number of options

as at 31 December

2017

478,345

471,951

(84,205)

(152,222)

158,616

Ron Hadassi

Nadav Livni

David Dekel

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Statement of the directors

The responsibilities of the directors are determined by applicable law

and International Financial Reporting Standards (IFRSs) as adopted

by the European Union.

The directors are responsible for preparing the annual report and the annual

financial statements in accordance with applicable law and regulations.

Netherlands law requires the directors to prepare financial

statements for each financial year that give, according to generally

acceptable standards, a true and fair view of the assets, liabilities,

financial position and profit or loss of the Company and the compa-

nies that are included in its consolidated accounts for that period.

Netherlands law requires the directors to prepare an annual report

that gives a true and fair view of the position as per the balance sheet

date, the course of business during the past financial year of the

Company and its affiliated companies included in the annual financial

statements, and that the annual report contains a proper description

of the principal risks the company faces.

Directors are required to abide by certain guidelines in undertaking

these tasks.

The directors need to select appropriate accounting policies and

apply them consistently in their reports. They must state whether

they have followed applicable accounting standards, disclosing and

explaining any material departures in the financial statements.

Any judgments and estimates that directors make must be both

reasonable and prudent. The directors must also prepare financial

statements on a “going concern” basis, unless it is inappropriate to

presume that the Company will continue in business. The directors

confirm that they have complied with the above requirements in

preparing the financial statements. Throughout the financial year,

the directors are responsible for keeping proper accounting records

which disclose at any time and with reasonable accuracy the financial

position of the Company. They are also responsible for ensuring that

these statements comply with applicable company law.

In addition, they are responsible for internal control systems

that help identify and address the commercial risks of being in

business, and so safeguard the assets of the Company. They are

also responsible for taking reasonable steps to enable the detection

and prevention of fraud and other irregularities.

The Company’s website may be accessed in many countries, which

have different legal requirements. The directors are responsible for

maintaining the accuracy of corporate and financial information on

the website, where a failure to update or amend information may

cause inappropriate decision making.

As required pursuant to Best Practice Provision 1.4.3. of the Dutch
Corporate Governance Code, the Board declares that this Annual
Report provides sufficient insights into any failings in the effective-
ness of the internal risk management and control systems in place
with the Company. The Board declares that the aforementioned
systems provide reasonable assurance that the financial reporting
does not contain any material inaccuracies and that, based on the
current state of affairs of the Company, it is justified that the financial
reporting is prepared on a going concern basis.

The Board further declares that this Annual Report states those
material risks and uncertainties that are relevant to the expectation
of the Company’s continuity for the period of twelve months after the
preparation of the report.

The financial statements fairly represent the Company’s financial
condition and the results of the Company’s operations and provide
the required disclosures.

The board and management estimate that there are significant
doubts regarding the Company’s ability to serve its entire debt
according to the current repayment schedule. Moreover, following
the new payment structure for the sale of the project in Bangalore,
India, it is expected that the Company will not be able to meet its
entire contructual obligations in the following 12 months.

It should be noted that the above does not imply that these
systems and procedures provide absolute assurance as to the
realisation of operational and strategic business objectives, or that
they can prevent all misstatements, inaccuracies, errors, fraud and
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
Financial Supervision (Wet op het financieel toezicht), the directors
hereby confirm that (i) the annual financial statements 2017, as
included herein, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and its affiliated
companies that are included in the consolidated financial statements;
and (ii) the annual report includes a fair review of the position at the
balance sheet date and the development and performance of the bu-
siness of the Company and its affiliated companies that are included
in the consolidated annual financial statements and that the principal
risks and uncertainties that the company faces are described.

The Board of Managing Directors

Ron Hadassi
Non-executive Director,
Chairman

David Dekel
Independent Non-executive
Director

Nadav Livni
Executive Director

29 March 2018

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Independent auditors’ report

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS

OF PLAZA CENTERS N.V.

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Plaza Centers N.V. and its subsidiaries (“the Company”), which comprise the

consolidated statement of financial position as at December 31, 2017 and the consolidated statements of profit or loss, comprehensive

income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary

of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position

of the Company as at December 31, 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended

in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those standards are further

described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of

the Company in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (“IESBA

Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw your attention to Notes 2(c) in the consolidated financial statements which disclose, amongst others, important information

regarding the Company’s cash flow projections for a period of fifteen months commencing April 1st 2018.

The board and management estimate that there are significant doubts regarding the Company’s ability to serve its entire debt according to

the current repayment schedule. Moreover, following the new payment structure for the sale of the project in Bangalore, India, it is expected

that the Company will not be able to meet its entire contructual obligations in the following 12 months. In addition, there is a risk that the

bondholders may demand the immediate repayment of the bonds due to the Company’s breach of a covenant in the trust deeds.

The combination of the abovementioned conditions indicates the existence of a material uncertainty that casts significant doubt about the

Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Emphasis of Matters

1. We draw your attention to Note 8(6)(d) which discloses potential irregularities regarding Casa Radio project in Romania and their potential

implications.

2. We draw your attention to Note 8(6)(c) which discloses the risk that the public authorities may seek to terminate the Public Private

Partnership Agreement (“PPP Agreement”) and/or relevant permits and/or could seek to impose delay penalties on the basis of perceived

breaches of the Company’s commitments under the PPP Agreement. In the event that the public authorities seek to terminate the PPP

Agreement and/or seek to impose penalties, the Company may incur penalties and/or recover less than the carrying amount of the Casa

radio asset recorded in the consolidated financial statements as at year end (€ 50.4 million).

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial

statements for the year ended December 31, 2017. In addition to the matter described in the Material Uncertainty Related to Going Concern

section, we have determined the matters described below to be the key audit matters to be communicated in our report. These matters were

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not

provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that

context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section

of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our

assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the

procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

The Key Audit Matters we identified are:

Key Audit Matter

Our Response

Valuation of trading properties

Our procedures in relation to the management’s fair value

We have identified the measurement of trading properties at net

assessment of trading properties included:

realizable value as a significant audit matter due to their size and

• Evaluation of the objectivity, independence, expertise of the

the complexity and judgement required in the valuation of trading

external valuators;

properties. The valuations of these properties as of December 31,

• Reviewed the reports prepared by the external valuators and

2017, involved significant judgements and assumptions such as

held discussions with them in order to gain an understanding of

capitalization and discount rates, and forecasts of future rents,

their methodology and the key assumptions which they used in

occupancy levels, construction costs and developer profits, made

performing the valuations.

by management, in reliance on external valuators. In the context

• Using our own real estate specialists to assess the methodologies

of properties which are not yet developed, these estimates contain

used the assumptions that were made and the appropriateness of

further risks in regards to success in obtaining permits, market

the key estimates used in the calculation of the fair value of the

condition and political environment, required to forecast all

trading properties based on their knowledge of the local economic,

circumstances through and beyond project completion.

legal, political environment, and other specific circumstances,

The Company’s accounting policies regarding trading properties

• Checked on a sample basis, the appropriateness and consistency

are disclosed in Notes 2(d) and 8(7) to the consolidated financial

with other information available to us of the inputs used by

statements. The significant estimates involved in the valuation are

the valuators. We also assessed the appropriateness of the

used to analyze the appropriateness of valuations.

disclosed in Note 8(8)-(9).

Casa radio existence and measurement

disclosures relating to the assumptions, as we consider them

important to users of the financial statements.

As disclosed in Note 8(6) to the consolidated financial statements,

• Our procedures in relation to the Casa radio project included:

the Company in 2006 entered into an agreement to acquire a 75%

• We obtained a valuation of the Casa radio project prepared by an

interest in a company which is under a public-private partnership

external valuator as of December 31, 2017.

(PPP) agreement with the Government of Romania to develop the

• We involved our real estate specialist to review the valuation

Casa radio site in central Bucharest. The Company is currently

report including assessing the assumptions used by external

in a breach of the PPP agreement mainly due to delays in the

valuator and Company’s assessment on the fair value of the

development works timelines.

project as reflected in the financial statements.

• We read the PPP agreement and Additional Act and considered the

The preparation by management of estimates of potential future

provisions therein.

claims, penalties or sanctions arising from breach of contract and

• We consulted with our legal department as to management’s

the possible impact on the existence and measurement of the Casa

assessment of the possible consequences of the breach of the

radio property is complex and involves significant judgment and

PPP agreement.

uncertainties. Accordingly, the accounting for the Casa radio project

was considered a key audit matter.

• We held meetings with the Company’s management and the
chairmen of the Board of directors, which are involved in the

discussion with government representatives.

Based on management’s analysis as described in Note 8(6)(c) the

• We have obtained management assessment with respect to

likelihood of the PPP agreement being terminated is unlikely.

the breach of the PPP agreement and its possible effect on the
existence of the property.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Independ ent auditors’ report

Key Audit Matter

Laws and regulations

Our Response

Our procedures included:

As described in Note 8(6) to the consolidated financial statements,

• We obtained a legal opinion from the Company’s external

during 2015 the Company became aware of certain issues with

Romanian legal counsel dealing with the criminal aspects of the

respect to certain agreements that were executed in prior years in

payments performed under certain agreements and the self-

connection with the Casa radio project that may contain potential

disclosure process.

violation of requirements of laws and regulations and, which were

• We obtained and read Board of Directors Special Committee

reported to the Romanian Authorities in March 2016.

reports indicating actions performed by management to avoid

occurrence of illegal payments and search for additional

In addition, Concerns were raised in regards to an agreement

indications of agreements and payments done by the group, which

between Elbit imaging Ltd (the parent Company, “Elbit”), the

might be consider as illegal or indicates of a breach of any law or

Company and Linkserve Finance Ltd. The Linkserve Agreement

regulation the group is subject to.

appointed the Agent as an agent for the sale of assets in the USA,

held together by Elbit and Plaza.

• We involved internal risk management specialists to further assess
the implementation of Special Committees’ recommendations.

• The audit team performed, on a sample basis, test of costs

invested during the year, costs paid to agents involved in sale
transactions of the Company’s properties in order to identify

suspicion for illegal payments.

• We reviewed the Company’s assessment based on the assessment

of external legal advisors of the likelihood of potential future
claims, penalties or sanctions arising from the alleged illegal acts.

Responsibilities of Management and the Board of Directors for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International

Financial Reporting Standards, as adopted by the EU, and for such internal control as management determines is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going

concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management

either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The board of directors is responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with International Standards on Auditing, we exercise professional judgment and maintain professional

scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may

involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Independ ent auditors’ report

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by

management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,

whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue

as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related

disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company

to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the

consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to

express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the

group audit. We remain solely responsible for our audit opinion.

We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit

findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding independence,

and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where

applicable, related safeguards.

From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit of the

consolidated financial statements for the year ended December 31, 2017, and are therefore the key audit matters. We describe these matters

in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefits of such communication.

The partner in charge of the audit resulting in this independent report is Mr. Itay Bar-Haim.

March 29, 2018

Tel Aviv, Israel

KOST FORER GABBAY & KASIERER

A member of Ernst & Young Global

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Consolidated statement of
financial position

ASSETS

Cash and cash equivalents
Restricted bank deposits
Trade receivables
Other receivables
Prepayments

Total current assets

Trading properties
Equity - accounted investees
Property and equipment
Related parties receivables
Long term receivables
Prepayments

Total non-current assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing loans from banks
Bonds at amortized cost
Trade payables
Related parties’ liabilities
Derivatives
Other liabilities

Total current liabilities

Provisions
Deferred taxes
Long term payables

Total non-current liabilities

Share capital
Translation reserve
Other reserves
Share based payment reserve
Share premium
Retained losses

Total equity

Total equity and liabilities

Note

December 31, 2017
€’000

December 31, 2016
€’000

4
5
6
7a
7b

2, 8
10
9
28
10
7c

11
15
12
13

8(5)
16

17
17

44,844
-
-
670
131

45,645

73,569
19,530
178
1,753
-
-

95,030

140,675

-
116,914
584
87
-
1,878

119,463

12,849
-
-

12,849

6,856
(28,800)
(19,983)
35,376
282,596
(267,682)

8,363

140,675

5,646
7,174
6,645
1,614
624

21,703

263,695
30,160
2,400
1,720
699
1,747

300,421

322,124

82,275
178,370
7,443
206
453
2,906

271,653

13,244
116
488

13,848

6,856
(27,103)
(19,983)
35,376
282,596
(241,119)

36,623

322,124

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

29 March 2018
Date of approval of the
financial statements

Dori Keren
Chief Executive
Officer

David Dekel
Director and Chairman of the
Audit Committee

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Consolidated statement of
profit or loss

Year ended

December 31, 2017

December 31, 2016

Note

€’000

Revenues and gains

Revenue from disposal of trading properties

8(5)(a-j)

Total revenues

Gains and other

Rental income

Share in results of equity-accounted investees, net of tax

Other income

Total gains

Total revenues and gains

Expenses and losses

Cost of Trading properties disposed

Cost of operations

Write-down of Trading Properties

Share in results of equity-accounted investees, net of tax

Administrative expenses

Other expenses

Finance income

Finance costs

Loss before income tax

Income Tax expense

Loss for the year

)

Loss attributable to:

Equity holders of the Company

Earnings per share

Basic and diluted loss per share (EUR)

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

192,958

7,908

757

8,665

201,623

(188,868)

(2,231)

(11,487)

(7,177)

(6,146)

(657)

(216,566)

577

(11,196)

(227,185)

(25,562)

(1,001)

(26,563)

29,395

15,611

4,274

375

20,260

49,655

(25,883)

(4,886)

(40,810)

(6,506)

(1,922)

(80,007)

18,642

(34,096)

(95,461)

(45,806)

(711)

(46,517)

8(5)(a-j)

(26,563)

(46,517)

(3.87)

(6.78)

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Consolidated statement of
comprehensive income

Loss for the year

Other comprehensive income

Items that are or may be reclassified to profit or loss:

Foreign currency translation differences – foreign operations (Equity accounted investees)

Other comprehensive loss for the year, net of income tax

Total comprehensive loss for the year

Total comprehensive loss attributable to:

Equity holders of the Company:

Non-controlling interests

Total comprehensive loss for the year

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

Year ended

December 31, 2017

December 31, 2016

€’000

(26,563)

(46,517)

(1,697)

(28,260)

272

(46,245)

(46,202)

(43)

(46,245)

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Consolidated statement of
changes in equity

Attributable to the equity owners of the Company

Capital

reserve from

acquisition

of non-

based

payment

Translation

controlling

Retained

capital

premium

reserves

reserve

interests

€’000

losses

€’000

Total

€’000

Non-

controlling

interests

€’000

Total

€’000

Balance at January 1, 2016

6,856

282,596

35,376

(27,418)

(20,706)

(194,602)

82,102

766

82,868

Transaction with Non-controlling

interests

Comprehensive income for the year

Net loss for the year

Foreign currency translation differences -

Total comprehensive loss for the year

315

723

(723)

(46,517)

315

(43)

272

(46,517)

(46,202)

(43)

(46,245)

Balance at December 31, 2016 6,856

282,596

35,376

(27,103)

(19,983)

(241,119)

36,623

Comprehensive income for the year

Net loss for the year

Foreign currency translation differences -

Total comprehensive loss for the year

(1,697)

(26,563)

(1,697)

(26,563)

(28,260)

Balance at December 31, 2017 6,856

282,596

35,376

(28,800)

(19,983)

(267,682)

8,363

36,623

(26,563)

(1,697)

(28,260)

8,363

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

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Consolidated statement of
cash flow

Cash flows from operating activities
Loss for the year
Adjustments necessary to reflect cash flows used in operating activities:
Depreciation and impairment of property and equipment
Net finance costs
Share of loss (gain) of equity-accounted investees, net of tax
Gain from sale of subsidiaries
Income tax expense

Changes in:
Trade receivables
Other receivables
Provision
Trading properties
Trade payables
Other liabilities, related parties liabilities and provisions

Interest received
Interest paid
Taxes paid

Net cash used in operating activities

Cash from investing activities
Proceeds from sale of property and equipment
Proceeds from sale of subsidiaries (Appendix A)
Changes in restricted cash
Distribution received from Equity Accounted Investees

Net cash provided by investing activities

Cash from financing activities
Proceeds from hedging activities through sale of forwards
Proceeds from bank loans
Acquisition of bank loan
Repayment of debentures
Repayment of interest bearing loans from banks

Net cash used in financing activities

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Increase (decrease) in cash and cash equivalents during the year
Effect of movement in exchange rate fluctuations on cash held
Cash and cash equivalents as at January 1st

Cash and cash equivalents as at December 31st

Non-cash movements
Receivable due to sale of plot

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

Year ended
December 31, 2017
€’000

Year ended
December 31, 2016
Restated* €’000

Note

9
24
10

15
11

(26,563)

(46,517)

18
10,619
7,177
(2,900)
1,001

67
15,454
(4,274)
(3,512)
711

(10,648)

(38,071)

(3,102)
2,914
(395)
23,694
(500)
(1,586)

21,025

-
(10,739)
(41)

(403)

3,127
89,814
3,189
2,560

98,690

-
4,029
-
(62,179)
(939)

(59,089)

39,198
-
5,646

44,844

277
(1,438)
1,667
17,560
5,327
144

23,537

34
(15,801)
(189)

(30,490)

16
22,046
(2,588)
19,337

38,811

630
11,530
(1,300)
(24,656)
(4,532)

(18,328)

(10,007)
(6)
15,659

5,646

4,449

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Appendix A – Proceeds from sale of investments in previously consolidated subsidiaries:

The subsidiaries assets and liabilities at date of sale:

Working capital (excluding cash and cash equivalents)

Trading Properties

Bank loans

Gain from sale of subsidiaries

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

Year ended

December 31, 2017

December 31, 2016

Note

€’000

6,307

166,432

(85,365)

2,440

89,814

(5,701)

24,430

3,317

22,046

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

Notes to the consolidated
financial statements

NOTE 1 - PRINCIPAL ACTIVITIES AND OWNERSHIP

Plaza Centers N.V. (“the Company” and together with its subsidiaries, “the Group”) was incorporated and is registered in the Netherlands. The Company’s
registered office is at Prins Hendrikkade 48-S, 1012 AC, Amsterdam, the Netherlands. In past the Company conducted its activities in the field of establishing,
operating and selling of shopping and entertainment centers, as well as other mixed-use projects (retail, office, residential) in Central and Eastern Europe (starting
1996) and India (from 2006). Following debt restructuring plan approved in 2014 the Group main focus is to reduce corporate debt by early repayments following
sale of assets and to continue with efficiency measures and cost reduction where possible.

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

The Company is listed on the premium segment of the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange
(“LSE”), the Warsaw Stock Exchange (“WSE”) and on the Tel Aviv Stock Exchange (“TASE”).

The Company’s immediate parent company is Elbit Ultrasound (Luxembourg) B.V. / S.à r.l. (“EUL”), which holds 44.9% of the Company’s shares, as at the end of
the reporting period (December 31, 2016 – 44.9%). The Company regards Elbit Imaging Limited (“EI”) as the ultimate parent company (refer to Note 28 for more
details). For the list of the Group entities, refer to Note 32.

NOTE 2 - BASIS OF PREPARATION

a. Statement of compliance

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

These consolidated financial statements are not intended for statutory filing purposes. The Company is required to file consolidated financial statements prepared
in accordance with The Netherlands Civil Code. At the date of approving these financial statements the Company had not yet submitted consolidated financial
statements for the year ended December 31, 2017 in accordance with the Netherlands Civil Code.

The consolidated financial statements were authorized for issue by the Board of Directors on March 29, 2018.

b. Functional and presentation currency

These consolidated financial statements are presented in EURO (“EUR”), which is the Company’s functional currency. All financial information presented in EUR
has been rounded to the nearest thousand, unless otherwise indicated.

c. Going concern and liquidity position of the Company

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet the mandatory repayment
obligations of its bonds and other working capital requirements.

The Group’s primary need for liquidity is to repay its debts and fund general corporate purposes. The Group has incurred losses and experienced negative
operating cash flows for the past several years, and accordingly, it has taken a number of actions to continue to support its operations and meet its obligations.

As at December 31, 2017 the Group’s outstanding obligations to bondholders are EUR 123.2 million.

In November 2016, the Group agreed with its bondholders to amend the terms of the early repayment requirement under the original debt restructuring plan (the
“Restructuring Plan”). On March 15, 2017, the Group repaid the required minimum early repayment to its bondholders and thus obtained a deferral of one year for
the remaining contractual obligations of the bonds. In January 2018, a settlement agreement was signed by and among the Company and the two Israeli Series of
Bonds including a new repayment schedule (refer to Note 15 (b) (3)).

Information concerning the Group’s obligations and commitments to make future payments under contracts such as debt agreements in the 15 months starting
April 1, 2018 is aggregated in the following tables.

PLAZA CENTERS N.V. ANNUAL REPORT 2017

Liquidity Requirements

Bonds including current portion and interest*
General & administrative

Total liquidity requirements
Total Sources **

Total deficit

Total Payment Due by period (in TEUR)
Within 1-1.5 years

Within 1 year

23,700
3,100

26,800
16,300

36,700
600

37,300
4,400

(10,500)

(32,900)

* An amount of Circa EUR 37.45 million was repaid (excluding interest) by the date of approval of these consolidated financial statements following the balance sheet date.

** The Company expects to increase the amount of its liquid balances during the 15 months starting April 1, 2018, by sale of plots of lands (including India) and others. Not including cash

balances as of the date of signing the financial statements.

The board and management estimate that there are significant doubts regarding the Company’s ability to serve its entire debt according to the current repayment
schedule. Moreover, following the new payment structure for the sale of the project in Bangalore, India, it is expected that the Company will not be able to meet its
entire contructual obligations in the following 12 months.

Management acknowledges that the above expected cash flows are based on forward-looking plans and estimations which rely on the information known to
management at the time of the approval of these financial statements. The materialization of the above forecast is not certain and is subject to factors beyond the
Company’s control. Therefore, delays in the realization of the Group’s assets and investments or realization at lower price than expected by management could
have an adverse effect on the Group’s liquidity position and its ability to meet its contractual obligations on a timely manner.

Management further acknowledges that the Company is exposed to foreign currency risk derived from borrowings denominated in currency other than the
functional currency of the Group, more specifically a further devaluation of the EUR against the NIS can significantly increase the remaining contractual obligation
to bondholders.

As of December 31, 2017 the Company is not in compliance with Coverage Ratio Covenant (“CRC”) as defined in the restructuring plan. This may entitle the
bondholders to declare that all or a part of their respective (remaining) claims become immediately due and payable.

The Company’s financial statements as of December 31, 2016 include an auditor’s opinion with emphasis of matter to going concern uncertainty as well as
auditor’s review report on interim financial statements as of June 30, 2017 include the same. As a result, there is a risk that the bondholders could argue that there
exists a substantial suspicion with respect to the Company’s ability to repay its obligations that entitles them to immediate repayment.

In addition, based on trust deeds in case of material deterioration in the Company’s business and substantial suspicion exists that the Company will not be able to
repay the bonds on time, the bondholders may declare immediate repayment of bonds.

In respect of credit rating downgrade followed by withdraw of credit rating by Standard & Poor at the Company’s request refer to Note 15 (e) to these consolidated
financial statements.

In the case that the bondholders would declare their remaining claims to become immediately due and payable, the Company would not be in a position to settle
those claims and would need to enter to an additional debt restructuring or might cease to be a going concern. As at the date of these financial statements the
bondholders have not taken steps to assert their rights.

A combination of the abovementioned conditions indicates the existence of a material uncertainty that casts significant doubt about the Company’s ability to
continue as a going concern.

d. Investment property vs. trading property classification

The Group has designated all its properties for sale. The Company is actively seeking buyers and does not hold the properties with the intention to gain from
capital appreciation. Therefore, management also believes that these are appropriately classified as trading properties.

e. Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS as adopted by the EU requires management to make judgments, estimates and

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is
revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Information
about other critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial
statements is included in the following notes:

• Note 8 – Judgements used in determining the net realisable value of trading properties

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

• Notes 8 – key assumptions used in determining the net realisable value of trading properties;
• Note 8, 27 – recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.

Functional currency

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

Operating cycle determination

The Group is unable to clearly identify its actual operating cycle with respect to trading properties. As such, the Group’s operating cycle relating to trading
properties and corresponding liabilities is 12 months. Trading properties and liabilities associated therewith are presented as non-current assets and non-current
liabilities, respectively.

Despite of the above, where a sale and purchase agreement exists as of the end of the reporting period, the asset and related liabilities are reclassified as current.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017NOTE 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 financial and non-financial assets and liabilities.

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

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived

from prices).

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

Further information about the assumptions made in measuring fair values is included in the following notes:

• Note 26 – Financial instruments

NOTE 4 - CASH AND CASH EQUIVALENTS

Bank deposits and cash denominated in

EUR – bank balances

Romanian Lei (RON)

United States Dollar (USD) – bank balances

New Israeli Shekel (NIS)

Polish Zlotys (PLN)

Other currencies

Total

* The balances are not bearing interest.

The Group’s sensitivity analysis for financial assets and liabilities are disclosed in Note 26.

NOTE 5 - RESTRICTED BANK DEPOSITS

Short-term restricted bank deposits

In EUR

In PLN

Total short-term

December 31, 2017

December 31, 2016

€’000

11,654

586

32,039

418

147

44,844

€’000

2,309

143

2,29

763

5,646

December 31, 2017

December 31, 2016

€’000

6,626

548

7,174

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 6 - TRADE RECEIVABLES

Trade receivables1

Less – Allowance for doubtful debts

Total

1 2016 – Includes EUR 5.6 million from sale of plots.

December 31, 2017

December 31, 2016

€’000

7,429

(784)

6,645

NOTE 7 - OTHER ACCOUNTS RECEIVABLES, PREPAYMENTS AND ADVANCES

a. Other receivables:

VAT and tax receivables

Others

Total

b. Prepayments and advances:

Advanced payments to suppliers

Prepaid expenses

Total

c. Non-current Prepayments:

Prepaid expenses (Belgrade Plaza)

December 31, 2017

December 31, 2016

€’000

133

537

670

131

1,392

222

1,614

526

624

1,747

NOTE 8 - TRADING PROPERTIES

December 31, 2017

December 31, 2016

Balance as at 1 January

Construction costs and other1,2

Write-down of trading properties, net3

Trading properties disposed5

Balance as at 31 December

Trading properties under development4

Trading properties designated for sale

Total

€’000

263,695

1,514

(11,487)

(180,153)

73,569

€’000

317,758

26,041

(42,477)

(37,626)

263,695

55,998

207,697

263,695

1 2017 and 2016 – mainly due to construction activities in Serbia.

Includes EUR 0 million of non-specific borrowing costs capitalized, using a capitalization rate of 13% in 2017 (in 2016 – EUR 5.1 million).

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 6,7,8

3 Breakdown of write-downs of trading properties is presented in the table below.

Project name (location)

Helios Plaza (Athens, Greece)

Krusevac (Krusevac, Serbia)

Lodz Plaza (Lodz, Poland)

Kielce (Kielce, Poland)

Casa radio (Bucharest, Romania)

Constanta (Constanta, Romania)

Ciuc (Ciuc, Romania)

Timisoara (Timisoara, Romania)

Arena Plaza extension (Budapest, Hungary)

Other, aggregated

Change in provision in respect to PAB*

Total write-downs

* See also (6)(e) below.

The year ended

December 31, 2017

December 31, 2016

€’000

400

1,200

10,095

187

11,882

(395)

11,487

€’000

740

200

400

1,100

33,908

852

950

2,600

927

800

42,477

(1,667)

40,810

The 2017 write-downs were caused mainly due to the following factors:

• EUR 1.2 million of write-down in Lodz Plaza project, Poland, which reflects a discount rate of 30% on the market value under special assumption that the

marketing period is limited to 12-15 months.

• EUR 9.7 million of write-down (net of change in provision in respect to PAB) in Casa Radio project, Romania due to the following: a slight increase in

construction cost, a slight decrease in financing interest rate, prolongation of lead-in period in half a year and an increase in the discount factor for restricted
marketing period from 25% to 35%. As compared to 2016, deals take longer to exchange as the level of due diligence and scrutiny is heightened domestically
and internationally. As a consequence a restricted marketing period would have a marked impact on the realizable value as a greater discount would be sought
by a purchaser.

For detailed information with respect to valuation techniques and main assumptions, refer also to (7) in this Note.

4. 2016 – Including Belgrade Plaza (Visnjicka) in Serbia

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

5. Sale of assets in the reporting period:

a) Sale agreement of Suwalki Plaza:

In January 2017, the Company sold its SPV holding Suwałki Plaza shopping and entertainment center in Poland to an investment fund for EUR 16.7 million and
recorded a gain of EUR 0.8 million. The purchaser is an investment fund which is connected to a former employee of the Company. The received consideration is
after the deduction of the bank loan (circa EUR 26.4 million).

As a result, the Company recorded revenue of EUR 43.1 million from the disposal.

Out of the net proceeds, at least 75% were distributed to the Company’s bondholders in March 2017, in line with the Company’s stated amended restructuring
Plan.

b) Sale of Belgrade Plaza:

On January 26, 2017, the Company signed a binding share purchase agreement with BIG Shopping Centers Ltd., a publicly traded company listed in the TA 100
Index, for the sale of the SPV holding Belgrade Plaza shopping and entertainment center.

Upon completion of the transaction, the Company received an initial payment of EUR 31.7 million from the purchaser, further EUR 2 million has been received
following the opening, further payment of EUR 13.35 million has been received during September 2017 and additional payments are contingent upon certain
operational targets and milestones being met. The Purchaser has provided a guarantee to secure these future payments. The received consideration is after the
deduction of the bank loan (circa EUR 15.4 million).

The final agreed value of Belgrade Plaza, which comprise circa 32,300 sqm of GLA, will be calculated based on a general cap rate of 8.25% as well as the
sustainable NOI after 12 months of operation, which the Company estimates in the range of EUR 6.2-6.5 million per annum.

Further installments will be due to the Company during the first year of operation based on this 12-month figure. The NOI will be re-examined again after 24
months and 36 months of operation, which may lead to an upward adjustment of the final purchase price. The Company recorded a gain from the sale in amount
of circa EUR 3.2 million. Expected future purchase price adjustments are not included.

As a result, the Company recorded revenue of EUR 62.5 million from the disposal. At least 75% of the net proceeds received from the disposal were distributed to
the Company’s bondholders during 2017, and following the receipt of any future additional payments, in line with the Company’s stated Amended Plan, 78% will
be paid to the bondholders.

c) Sale of Shumen plaza project, Bulgaria:

On February 23, 2017, the Company announced that it had concluded the sale of a 26,057 sqm plot of land in Shumen, Bulgaria for circa EUR 1 million, which is
slightly above book value and recorded a gain of 0.2 EUR million.

The Company recorded revenue of EUR 1 million from the disposal.

Of the net proceeds, at least 75% were distributed to the Company’s bondholders in March 2017, in line with the Company’s stated Amended Plan.

d) Preliminary Sale of Plot in Lodz, Poland:

On June 13, 2017, the Company announced that it has signed a preliminary sale agreement for the disposal of a 13,770 sqm plot at its second land holding in
Lodz, Poland, (representing 22% of this holding) to a retail developer, for €1.2 million. As part of the agreement, the purchaser paid an immediate installment of
EUR 0.035 million and the completion payment to make it totaling 10% of the sale price, comprising an immediate installment already paid of EUR 0.035 million
followed by an installment of EUR 0.085 million shall be paid when the purchaser obtains environmental permit for investing in the access road to the plot. The
remaining balance minus 50% of the sum invested in the road (up to maximum amount of EUR 0.12 million) will be paid once a building permit is obtained for
development of the land which is expected to be granted till the end of 2018.

In line with the Company’s stated amended restructuring plan, 78% of the net cash proceeds will be distributed to the bondholders.

e) Final agreement for sale of Kielce Plaza, Poland:

On June 19, 2017, The Company announced that it has signed the final sale agreement for the disposal of its 2.47-hectare plot in the centre of Kielce, Poland, for
EUR 2.28 million. The Company received a down payment of EUR 0.465 million when the preliminary sale agreement was signed at 2016 and the remaining EUR
1.815 million has been paid to the Company during June 2017.
The Company recorded revenue of EUR 2.2 million from the disposal.
In line with the Company’s stated amended restructuring plan, 75% of the net cash proceeds were distributed to Plaza’s bondholders.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017NOTE 8

f) Completed sale of Plot in Leszno, Poland:

In July 2017, the Company has signed the final sale agreement for the disposal of a 1.8-hectare plot in the city of Leszno for EUR 0.81 million.
The Company recorded revenue of EUR 0.81 million from the disposal. In line with the Company’s stated amended restructuring plan, 75% of the net cash
proceeds from the disposal will be distributed to Plaza’s bondholders.

g) Sale of plots in Timisoara and Constanta, Romania:

On 7 August, 2017 the Company has completed the disposal of a plot totaling approximately 32,000 sqm in Timisoara, Romania, for EUR 7.25 million, which was
recorded as revenue from disposal.

The Company also announced that it has completed the sale of a plot totaling approximately 30,000 sqm in Constanta, Romania, for EUR 1.3 million.
The Company recorded revenue of EUR 1.3 million from the sale of the property.
In line with the Company’s stated amended restructuring plan, 75% of the net cash proceeds from both disposals were distributed to Plaza’s bondholders.

h) Land Plot in Budapest, Hungary:

On October 2, 2017 the Company announces that it has concluded an agreement with an nternational investor, NEPI Rockcastle, on the termination of land use
rights over a circa 21,788 sqm land plot adjoining Arena Plaza in Budapest, Hungary, registered to a subsidiary of the Company, Kerepesi 5 Irodaépület Kft („K5”).
The transaction also includes the termination of the preliminary easement agreement, which provided K5 with certain easement rights over the plot. As a result of
the agreement, K5 received a net sum of EUR 2.5 million.
The Company recorded revenue of EUR 2.5 million from the disposal.

At least 78% of the net proceeds received from the disposal were distributed to the Company’s bondholders during January 2018.

i) Sale of Torun Plaza:

On 21 November, 2017 one of the Company’s subsidiaries has completed the sale of Torun Plaza shopping and entertainment center in Poland to a private
investment fund. The Company has received circa EUR 28.3 million. This net cash is after the deduction of the bank loan (circa EUR 43.3 million), and other
working capital adjustments in accordance with the balance sheet of the SPV holding the Project. The above-mentioned sums do not include the earn-out
payments in an amount of EUR 0.35 million, reduced by NAV adjustment of EUR 0.2 million. The Company recorded revenue of EUR 71.6 million from the
disposal and a loss of circa EUR 1.5 million (not including the earn-out payment mentioned).

At least 78% of the net proceeds received from the disposal were distributed to the Company’s bondholders during January 2018.

j) Disposal of plot in Belgrade, Serbia

Following the sale of „MUP” plot in Belgrade, Serbia, the Company was entitled to an additional contingent consideration of EUR 0.6 million once the purchaser
successfully develops at least 69,000 sqm above ground. The consideration was received in September 2017 and is recorded as revenue from disposal of trading
properties.

k) Update on disposal of land plot in Greece

Following the preliminary agreement regarding the disposal of a plot in Piraeus, Greece, several amendments were signed during 2016-2017 the latest amendment
deadline had expired on January 20, 2018. The last selling price of the share of the SPV holding the plot was set at EUR 3.54 million. In order to secure the
prolonged validity of the initial agreement, the purchaser has paid advance payments in a total amount of EUR 0.3 million non-refundable to Plaza. The completion
of the transactions is expected to be concluded in 2018 as an asset deal (instead of the original agreement of share deal) with a lower sale price of EUR 3.35
million.

6.Casa radio note:

a) General:

In 2006 the Company entered into an agreement according to which it acquired 75% interest in a company (“Project SPV”) which is under a PPP agreement with
the Government of Romania to develop the Casa radio site in the center of 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 a third party private investor (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
(37 years remaining at the end of the reporting period). As part of its obligations under the PPP, the Project SPV has committed to construct a Public Authority
Building (“PAB”) measuring approximately 11.000 square meters for the Romanian Government at its own cost.

Large scale demolition, design and foundation works, financed by loans given to the Project SPV by the Company were performed on the construction site until
2010, when current construction and development was put on hold due to lack of progress in the renegotiation of the PPP agreement with the Authorities, as

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017discussed in subsection (c) below, and the global financial crisis. These circumstances (and mainly the bureaucratic deadlock with the Romanian Authorities to
deal with the issues specified below) caused the Project SPV not to meet the development timeline of the Project, as specified in the PPP. However, management
believes that it had legitimate reasons for the delays in this timeline, as discussed in subsection (c) below.

b) Obtaining of the Detailed Urban Plan (“PUD”) permit:

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

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

c) Discussions with Authorities on construction time table deferral:

Following the Court decision with respect to the PUZ, 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. The building permits have not been obtained.

However, due to substantial differences between the approved PUD and stipulations in the PPP agreement as well as changes in the EU directives concerning
environmental considerations in buildings used by public authorities the Project SPV attempted to renegotiate the future development of the Project with the
Romanian Authorities on items such as time table, structure and milestones as well as adaptation of the PAB development to the current EU requirements. Despite
many notifications sent to the Romanian Authorities expressing a wish to renegotiate the existing PPP agreement no major breakthrough could be achieved.
The Company can be subject to significant delay penalties under the terms of the PPP agreement if it is determined that the Company was at fault in causing the
delays.

Because of the failure of the public authorities to cooperate, negotiate and adjust the PPP agreement, the Project SPV was not able to meet its obligations under
the PPP. This resulted in a situation where the Project SPV could not „de facto” continue the execution of the Project and created a risk that the public authorities
could attempt to terminate the PPP agreement. In the event that the public authorities seek to terminate the PPP Agreement and/or seek to impose penalties, the
Company may incur penalties and/or recover less than the carrying amount of the Casa radio asset recorded in the consolidated financial statements as at year
end (€ 50.4 million). As of the date of approval of these consolidated financial statements the Project SPV did not receive any termination notification by the public
authorities.

The Company believes that although there is no formal obligation for the Romanian Authorities to renegotiate the PPP agreement, such obligation is implicitly
provided for the situation when significant unexpected circumstances arise and that the unresponsiveness of the authorities is a violation of the general
undertaking to support the Project SPV in the execution of the Project as agreed in the PPP agreement.

The Company believes that the risk that the public authorities may seek to terminate the PPP and/or relevant permits on the basis of the perceived breach of the
Company’s commitments and/or may seek to impose delay penalties on the basis of the PPP contract is unlikely given the public authorities have not sought to do
such since the perceived breach in 2012 and given the Company believes that it has basis for counter claims against the relevant public authorities.

In the case of termination for breach under the PPP agreement the relationship and compensation between the parties is to be decided by a competent court of
arbitrations. Management believe that, in the case of termination, the Company has a strong case to claim compensation for damages.

Since 2016 management has taken a number of steps in order to unblock the development of the project and mitigate the risk of termination of the PPP
agreement, including commencing a process to identify third party investors willing and capable to join the Group for the development of the project and/or
potential buyers for the Project. Management believes that reputable investors with considerable financial strength can enhance negotiation position vis-à-vis the
public authorities and assist in advancing an amicable agreement with the relevant authorities with respect to the development of the project.

Management considers the risk of termination of the PPP agreement and/or the imposition of penalties by the authorities to be unlikely and the consolidated
financial statements do not include any provision in respect to any potential future penalties in respect to the breach of the PPP agreement

d) Co-operation with the Romanian Authorities regarding potential irregularities

In 2015, the Board and Management became aware of certain issues with respect to certain agreements that were executed in the past in connection with the
Project. In order to address this matter, the Board appointed the chairman of the Audit Committee to investigate the matters and independent law firms to analyze
the available alternatives in this respect. The chairman of the Audit Committee did not conclude the investigation as the person with key information was not
available to answer questions. The Board, among other steps, implemented a specific policy in order to prevent the reoccurrence of similar issues and appointed
the chairman of the audit committee to monitor the policy’s implementation by the Company’s management. In addition, it was decided that in the future certain
agreements will be brought to the Board’s approval prior to signing.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 8

The Company has approached and is co-operating fully with the relevant Romanian Authorities regarding the matters that have come to its attention and it has
submitted its initial findings in March 2016 to the Romanian Authorities. The Company, during this process has been verbally informed by the Romania Authorities
that it has received immunity from certain potential criminal charges and received further verbal assurance that the mentioned investigation should have no effect
on the Company’s existing legal rights to the Project and the PPP Agreement. As the investigation by the Romanian Authorities is still on-going, the Company in
unable to comment further on any details related to this matter. Management is currently unable to estimate any monetary sanctions in respect to the potential
irregularities, consequently no provision has been recorded in connection with these matters.

Elbit, the Company’s parent company, announced in March 2016 that it appointed a special committee to examine these matters as they may contain potential
violation of the requirements of the U.S. Foreign Corrupt Practices Act (FCPA), including the books and records provisions of the FCPA, and that it has approached
and is co-operating fully with the US Securities and Exchange Commission (SEC). Following discussions with the SEC regarding the potential violation of the
requirements of the FCPA, Elbit submitted an Offer of Settlement (“Offer”). Solely for the purpose of the proceedings brought by or on behalf of the SEC and
without admitting or denying the findings in the Offer, Elbit consented to the entry of an order containing the SEC’s findings.

The SEC has determined to accept the Offer and ordered that: (i) Elbit cease and desist from committing or causing any violations and any future violations of
Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; and (ii) Elbit shall pay a civil money penalty in the amount of $500,000 to the SEC for transfer to the
general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). In determining to accept the Offer, the SEC considered remedial acts that
Elbit promptly undertook, its self-reporting, and its cooperation afforded to the SEC staff, including having conducted a thorough internal investigation, voluntarily
providing detailed reports to the staff, fully responding to the staff’s requests for additional information in a timely manner, and providing translations of certain
documents.

e) Provision in respect of PAB:

As mentioned in point a above, when the Company entered into an agreement to acquire 75% interest in the Project SPV it assumed a commitment to construct
the PAB at its own costs for the benefit of the Romanian Government. Consequently, the statement of financial position includes a provision in the amount of
EUR 12.8 million in respect of the construction of the PAB (December 31, 2016: EUR 13.2 million). During 2017, the Company recorded income in total amount
of EUR 0.4 million from change in PAB provision as part of write down of trading properties (in 2016 – EUR 1.7 million).

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

7. Write-down of trading properties:

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

Actual results could be significantly different than the Company’s estimates and could have a material effect on the Company’s financial results. Trading Properties
accumulated write-downs from cost as of December 31, 2017, amounted to EUR 171.8 million or 70% percent of outstanding trading properties original cost
(December 31, 2016 – EUR 170 million or 39% of gross trading property balance). These valuations become increasingly difficult as they relate to estimates and
assumptions for projects in the preliminary stage of development.

Management is responsible for determining the net realizable value of the Group’s trading properties. In determining net realizable value of the vast majority of
trading properties, management utilizes the services of an independent third party recognized as a specialist in valuation of properties (as at December 31, 2017,
91.3% of the value of trading properties was based on valuations done by the independent third-party valuation service (2016 – 81.2%).

The trading property Casa Radio was valued using the Residual technique and Lodz Plaza plot was valued using the comparable method. A description of each
approach is discussed below. The remaining properties were valued by reference to existing or preliminary sale agreements.

All trading properties carrying amounts equal their net realizable values.

The Company reviews annually (and in certain cases during the year), the valuation methodologies utilized by the independent third party valuator service for each
property. The main features included in each valuation are:

1. 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.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017
Where comparable development cannot be identified in the immediate area of the subject site or when sales information is not clearly available through common
channels of information (internet, newspapers, trade journals, periodic market research) it is necessary to look further out for suitable comparable and to make
necessary adjustments to the price in order to account for dissimilarities between the comparable development and the subject site. Such adjustments include, but
not limited to:

• Adjustment due to the time of the transaction. Market conditions at the time of the sales transaction of a comparable property may differ from those on the

valuation date of the property being valued. Factors that impact market conditions include rapidly appreciating or depreciating property values, changes in tax
laws, building restrictions or moratoriums, fluctuations in supply and demand, or any combination or forces working in concert to alter market conditions from
one date to another.

• Adjustment due to asking price and condition of payment. The special motivations of the parties to the transaction in many situations can affect the prices

paid and even render some transactions as non-market. Examples of special conditions of sale include a higher price paid by a buyer because the parcel has
synergistic, or marriage value; a lower price paid because a seller was in a hurry to conclude the sale; a financial, business, or family relationship 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, contiguous and surface area. Where the physical characteristics of a comparable property vary from those of the subject

property, each of the differences is considered, and the adjustment is made for the impact of each of these differences on value.

• Adjustment because of location. The locations of the comparable sale properties and the subject property are compared to ascertain whether location and

the immediate environment are influencing the prices paid. The better location a property is located in the more it is worth per square meter; and conversely
the worse location a property is in the less it is worth per square meter. An adjustment is made to reflect such differences based on the valuers’ professional
experience. Extreme location differences may indicate that a transaction is not truly comparable and are disqualified.

2. Residual method:

The residual method, in contrast, relies on an approach that is a combination of comparison and cost and it requires making a number of assumptions - any of
which can affect the outcome in varying degrees. Having established the development potential a residual valuation can be expressed as a simple equation: (value
of completed development) - (development costs + developers profit+ financing cost) = 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, finance costs and contingencies.
Larger schemes such as Casa radio in Romania is phased over time. Is such case the phasing is reflected in the cash flows as deferral of some of costs to a
date when it might be reasonable to expect them to be incurred. Similarly, not all proceeds occur simultaneously.

• Developer’s profit:

The nature of the development determines the selection of the profit margin,
or rate of return and the percentage to be adopted varies for each case. The developers profit is expressed as a percentage of the Gross Development Value
(GDV).

• Exit Yield represents the capital value of the property at the end of the period of analysis (exit value) expressed in percentage terms. The exit value is the net

amount which an entity expects to obtain for an asset at the end of the period of analysis after deducting the expected costs of disposal. Usually the estimation
is done through analyzing market evidence and then adjustments are made with regards to the individual property.

3. Fair value under the assumption of restricted marketing period – due to the financial condition of the Company, the fair value of two properties was based on the
assumption of marketing period restricted to a period which is lower than the normal one, but in any case not shorter than six months. In this case the valuator,
using commercial judgement, assumes a significant discount rate attributable to the fair value of the property. This conclusion is based on advice from brokers
who are actively participating in sale transactions with comparable assets.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 8

8. Significant estimates:

The following table shows the valuation techniques used in measuring the net realizable value of the main trading property:

Group of assets

Valuation technique

Significant unobservable inputs

Inter-relationship between key
unobservable inputs and fair value
measurement

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 profit for the potential
development; Restricted marketing
period.

• Estimated weighted average monthly
rental prices per sqm is EUR 26 for
the mall, EUR 16 for offices and
14.2 for Hotel/Conference Center
(2016: EUR 26 for the mall, EUR
16 for offices, EUR 14.2 for Hotel/
Conference Center).

• The Estimated Exit Yield is 8.75%
for the mall, 9.25 % for the office
component and 10.25% for Hotel/
Conference center including additional
1.5% yield to cover for several risks
related to the complexity and large
scale of the project (2016 – the same).

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 profit provision for the

project were lower (higher);

• the development finance provision for

the project were lower (higher);

• the estimated completion of the project

were shorter (longer);

• The construction hard costs of the

• the occupancy of the mall were higher

(lower);

• the characteristics of the project would

be changed;

• the discount to market value would

decrease (increase).

project are 760 EUR/sqm for the mall;
1,098 EUR/sqm for Hotel; 751 EUR/
sqm for the offices; 370 EUR/sqm for
parking (2016: 780 EUR/sqm for the
mall; 740 EUR/sqm for the offices;
1,010 EUR/sqm for Hotel, 370 EUR/
sqm for parking).

• The development finance rate is

5.25% (2016:5.5%).

• The scheme would compose the

following components: (i) retail; (ii)
offices; (iii) hotel & conference center;

• Developers profit -15% (2015: 15%).
• Discount to Market Value – 35%

(2016: 25%).

• Start of construction in 3.5 years

(2016: 3 years).

The following table provides sensitivity analysis on value of certain projects (in thousands of EUR), assuming the following changes in key inputs used in valuations:

Increase in exit yields

(base points)

Delay in construction

commencement day (months)

+15bps

+25bps

+40bps

+50bps

+12

+18

+24

Casa Radio

50,440

46,475

43,940

40,235

37,895

50,440

49,140

47,840

46,670

45,500

Construction costs

for all phases

Rental income

for all the phases

-10%

-5%

+10%

+5%

-10%

-5%

+10%

+5%

Casa Radio

68,695

59,670

50,440

41,145

31,850

26,780

38,610

50,440

62,205

73,970

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

9. Below is a summary table for main projects status:

Project

Location

year Rate (%) Nature of rights

Permit status

(sqm)

2017 (MEUR)

2016 (MEUR)

Purchase

Holding

Plot Size December 31, December 31,

Suwalki Plaza

Poland

2006

100

Ownership

Operating shopping

20,000 GLA*

SOLD

39.9

centre (starting Q2 2010)

Torun Plaza

Poland

2007

100

Ownership

Operating shopping

40,000 GLA*

SOLD

68.9

Carrying

amount

Lodz residential

Poland

2001

100

Ownership/

Planning permit valid

4,000

0.4

centre (starting Q4 2011)

Lodz plaza

Kielce Plaza

Leszno Plaza

Casa radio

Timisoara Plaza

Constanta Plaza

Poland

Romania

Miercurea Ciuc Plaza

Romania

2009

2008

2007

2009

2007

Perpetual usufruct

100

Perpetual usufruct

Planning permit pending

Perpetual usufruct

Planning permit valid

Perpetual usufruct

Planning permit valid

61,500

25,000

18,000

3.9

SOLD

Remained Lease

Detailed Zoning Plan 467,000 GBA**

***63.2

***73.2

period 37 years

(“PUD”) valid

100

Ownership

Building permit valid

Existing building

No valid permit

(Building Permit expired)

31,860

24,300

36,500

SOLD

1.0

7.0

1.3

1.0

0.5

5.1

2.2

0.8

Belgrade Plaza Visnjicka Serbia

2007

100

Ownership

Building Permit obtained 32,000 GLA*

SOLD

55.9

Shumen Plaza

Bulgaria

Arena Plaza Extension

Hungary

2007

2005

100

Ownership

Perpetual Land

Piraeus Plaza

Greece

2002

100

Ownership

use rights

– Under construction

Planning permit valid

Other plots, grouped

Total

* Gross Lettable area (sqm).

** Gross Building area (sqm).

26,000

22,000

15,000

****

SOLD

3.3

1.7

0.8

1.5

3.3

2.2

73.5

263.6

*** Represents gross value including commitment for PAB construction, which is presented as non-current provision in amount of EUR 12.8 million as of December 31, 2017.

**** An indirectly subsidiary of Plaza Centers, holding Brasov plot in Romania, granted to that previous financing bank of the project the right to purchase the property underconditions
of an option pact for 3 years starting December 6, 2016 for an amount of EUR 1.1 million free of encumbrances. The option pact is registered with the land book of the property.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 9,10

NOTE 9 - PROPERTY AND EQUIPMENT

Cost
Balance at January 1, 2016
Additions
Disposals

Balance at December 31, 2016

Additions
Disposals

Balance at December 31, 2017

Accumulated depreciation and impairment
Balance at January 1, 2016
Depreciation
Disposals

Balance at December 31, 2016

Depreciation
Disposals

Balance at December 31, 2017

Net carrying amounts
At December 31, 2017
At December 31, 2016

Land and
buildings
€’000

Equipment
€’000

Fixtures
and fittings
€’000

4,102
-
-

4,102

-
(4,102)

1,850
-
-

1,850

-
(1,850)

-
2,252

3,327
19
(293)

3,053

1
(568)

2,486

3,223
72
(266)

3,029

14
(611)

2,432

54
24

1,195
-
-

1,195

-
-

1,195

1,071
-
-

1,071

-
-

1,071

124
124

Total
€’000

8,624
19
(293)

8,350

1
(4,670)

3,681

6,144
72
(266)

5,950

14
(2,461)

3,503

178
2,400

* Sale of office building in Hungary:
On February 16, 2017, the Company signed an agreement for the sale of its SPV holding David House office building in Budapest to private investors for a gross amount of EUR 3.2

million and recorded a gain of circa EUR 0.46 million included in other income.

Out of the net proceeds, at least 75% were distributed to the Company’s bondholders in March 2017, in line with the Company’s stated Amended Plan.

NOTE 10 - EQUITY ACCOUNTED INVESTEES

a) The Group has the following interest (directly and indirectly) in the below joint ventures, as at December 31, 2017 and 2016:

Company name

Elbit Plaza USA II LP**
Elbit Plaza India Real Estate Holdings Ltd. (“EPI”)*

SIA Diksna (“Diksna”)

Country

USA
Cyprus

Latvia

Activity

Inactive
Mixed-use
large scale projects
Operating shopping
center sold in 2016

Interest of holding
(percentage) as at
December 31, 2017

Interest of holding
(percentage) as at
December 31, 2016

-
47.5%

50%
47.5%

50%

None of the joint ventures are publicly listed.

* 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.

** Liquidated during 2017.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

The movement in equity accounted investees (in aggregation) was as follows:

Balance as at 1 January

Distribution received from equity-accounted investees, net3

Share in results of equity-accounted investees, net of tax1

Effect of movements in exchange rates

Dissolving of Equity accounted investee

Classification to long term receivables

Balance as at 31 December2

1 Breakdown of the Group’s share of write-downs 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)*

Total

2017

€’000

30,160

(1,441)

(7,177)

(1,697)

(315)

19,530

2016

€’000

44,906

(18,638)

4,274

317

(699)

30,160

The year ended

December 31, 2017

December 31, 2016

€’000

(4,408)

(988)

(5,396)

€’000

(5,466)

(6,114)

(11,580)

* Refer to the below paragraphs b(1) and b(2) regarding the properties’ write downs

2 Other investment in equity accounted investees is through certain equity instruments to cover negative equity position considered part of the Group’s net investment in the investees.

3 Repayment of loan granted to EPI from proceeds received from the Partner in Bangalore property. See b (1) below.

b) Material joint ventures:

The summarized financial information of the material joint venture EPI (due to holding of major schemes in Bangalore and Chennai) is as follows:

Current assets*

Trading properties-non current

Other current liabilities

Net assets (100%)

Group share of net asset (50%)**

Carrying amount of interest in joint venture

* Including cash and cash equivalents in the amount of EUR 2,592 million.

** Refer to remark on EPI holding rate in section a above.

2017

€’000

2,794

45,060

(8,794)

39,060

19,530

2016
€’000

1,602

59,120

(1,036)

59,686

29,843

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 10

Write-downs of trading properties

Other income (expenses)

Total net profit (loss) and comprehensive income (100%)

Group share of Profit (loss) and comprehensive income (50%)

Total results from investees

1. Bangalore:

2017

€’000

(10,792)

(3,562)

(14,354)

(7,177)

2016
€’000

(23,160)

30,134

6,974

3,487

In March, 2008 EPI entered into a share subscription and framework agreement (the “Agreement”), with a third party local developer (the “Partner”), and a wholly
owned Indian subsidiary of EPI which was designated for this purpose (“SPV”), to acquire together with the Partner, through the SPV, up to 440 acres of land in
Bangalore, India (the “Project”) in certain phases as set forth in the Agreement. As of December 31, 2017, the Partner has surrendered sale deeds to the SPV for
approximately 54 acres (the “Plot”). In addition, under the Agreement the Partner has also been granted with 10% undivided interest in the Plot and have also
signed a Joint Development Agreement with the SPV in respect of the Plot.

On December 2, 2015 EPI has signed an agreement to sell 100% of its interest in the SPV to the Partner (the “Sale Agreement”). The total consideration upon
completion of the transaction was INR 3,210 million (approximately EUR 42 million) which should have been paid no later than September 30, 2016 (“Long Stop
Date”). On November 15, 2016, the Partner informed EPI that it will not be able to execute the advance payments.

As a result of the foregoing, the Company has received from the escrow agent the sale deeds in respect of additional 8.3 acres (the “Additional Property”) which
has been mortgaged by the Partner in favour of the SPV in order to secure the completion of the transaction on the Long Stop Date. The Additional Property has
not yet been registered in favour of the SPV. In addition, as per the Sale Agreement, the Company took actions in order to get full separation from the Partner with
respect to the Plot and specifically the execution of the sale deed with respect of the 10% undivided interest, all as agreed in the Sale Agreement.

As a result of the failure of the Partner to complete the transaction under the Sale Agreement and in accordance with the provisions thereto, EPI has 100% control
over the SPV and the partner is no longer entitled to receive the 50% shareholding.

New payment structure for sale of Project in Bangalore, India:

In June 2017, EPI signed a revised sale agreement with the former partner (the “Purchaser”).

The Purchaser and EPI have agreed that the purchase price will be amended to INR 338 Crores (approximately Euro 44.2 million) instead of the INR 321 Crores
(approximately Euro 42 million) agreed in the previous agreement. As part of the agreement, INR 110 Crores (approximately Euro 14.4 million) will be paid
by the Purchaser in instalments until the Final Closing. The Final Closing will take place on September 1, 2018, when the final instalment of INR 228 Crores
(approximately Euro 29.8 million) will be paid to EPI.

If the Purchaser defaults before the Final Closing, EPI is entitled to forfeit certain amounts paid by the Purchaser as stipulated in the revised agreement. All other
existing securities granted to EPI under the previous agreement will remain in place until the Final Closing.

In January 2018, the Purchaser has notified EPI that due to a proposed zoning change (initiated by the Indian authorities) which could potentially impact the
development of the land, all remaining payments under the Agreement will be stopped until a mutually acceptable solution is reached on this matter. EPI has
rejected the Purchaser’s claims, having no relevance to the existing Agreement, and started to evaluate its legal options.

Since the signing of the revised agreement, the Purchaser has paid non-refundable advance payments totaling INR 45 Crores (circa € 5.9 million).

In March 2018, the Company signed an amended revised agreement as follows: The Purchaser and EPI have agreed that the total purchase price shall be
increased to INR 350 Crores (approximately €45.8 million). Following the signing of the revised agreement and by the end of the current month, the Purchaser
shall pay EPI additional INR 10 Crores (approximately €1.3 million) further to the INR 45 Crores (approximately €5.9 million) that were already paid during the
recent year. Additional INR 83 Crores (approximately €10.8 million) will be paid by the Purchaser in unequal monthly installments until the Final Closing. The Final
Closing will take place on 31 August 2019 when the final installment of circa INR 212 Crores (approximately €27.8 million) will be paid to EPI against the transfer
of the outstanding share capital of the SPV.

If the Purchaser defaults before the Final Closing, EPI is entitled to forfeit certain amounts paid by the Purchaser as stipulated in the revised agreement. All other
existing securities granted to EPI under the previous agreements will remain in place until the Final Closing.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Environmental update on Bangalore project – India:

On May 4, 2016, the National Green Tribunal (“NGT”), an Indian governmental tribunal established for dealing with cases relating to the environment, passed
general directions with respect to areas that should be treated as „no construction zones” due to its proximity to water reservoirs and water drains (“Order”).
The restrictions in respect of the „no construction zone” are applicable to all construction projects.

The government of Karnataka had been directed to incorporate the above conditions in respect of all construction projects in the city of Bangalore including the
Company’s project which is adjacent to the Varthur Lake and have several storm-water crossing it.

An appeal was filed before the Supreme Court of India against the Order. The Supreme Court has stayed the operation of certain portions of the Order. At this
stage, it is difficult to predict the amount of time that the Supreme Court of India will take to decide on the matter.

Net realizable value measurement of Bangalore project

As for December 31, 2017 and 2016 the Group measured the net realizable value of the project.

The plot in Bangalore is still in land stage and therefore the value of the plot has been derived using land comparable method. The valuation of the property
reflects the risk related to NGT order described above, the interest that the partner still holds in the plot (10% as described above), the size of the plot and the
non-contiguous land parcel. The decrease in the value during 2017 is attributable mainly to the proposed change in zoning regulations. The local authorities
have proposed a revised master plan for Bangalore under which it is proposed to change certain regulations pertaining to zoning of the plot which if given effect
might adversely affect the development prospects on the plot. The Company being aggrieved by the proposed change was entitled to and has filed the necessary
objections with the concerned authorities and believes that the current zoning regulations will be maintained. Management believes that the current discount rate
used towards this end is an appropriate estimation in the current circumstances.

The following parameters have been considered to arrive at the land value of the subject property:

Parameter

Accessibility

FSI permissible

Location and Neighborhood profile

Contiguous Land Parcel

Size

Negotiation (Trans/Quote)

Total Premium/Discount

Discount on account of NGT order and presence of Drain

Presence of minority shareholder

Discount on account of possible change in zoning (open space/parks)

2. Chennai:

Premium (Discount)

10%

-15%

-10%

-15%

-20%

-25%

In December 2007, EPI executed agreements for the establishment of a special purpose vehicle (“Chennai Project SPV”) together with a local developer in Chennai
(“Local Partner”). The Chennai Project SPV acquired 74.7 acres of land situated in the Sipcot Hi-Tech Park in Siruseri District in Chennai (“Property”).

On September 16, 2015, EPI has obtained a backstop commitment from the Local Partner for the purchase of EPI 80% shareholding in the Chennai SPV by
January 15, 2016, for a net consideration of approximately INR 161.7 Crores (EUR 21.1 million).

Since the Local Partner had breached its commitment, EPI exercised its rights and forfeited the Local Partner’s 20% holdings in the Chennai Project SPV.
Accordingly, EPI has 100% of the equity and voting rights in the Chennai Project SPV.

On July 21, 2016, Chennai Project SPV has signed a Joint Development Agreement with a local developer (“Developer” and “JDA”, respectively) with respect to
the Property.

Under the terms of the JDA, the Chennai Project SPV granted the property development rights to the Developer who shall bear full responsibility for all of the
project costs and liabilities, as well as for the marketing of the scheme. The JDA also stipulates specific project milestones, timelines and minimum sale prices.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 11

Development will commence subject to the obtainment of the required governmental/ municipal approvals and permits, and it is intended that 67% of the Property
will be allocated for the sale of plotted developments (whereby a plot is sold with the infrastructure in place for the development of a residential unit by the end
purchaser), while the remainder will comprise residential units fully constructed for sale.

The Chennai Project SPV will receive 73% of the total revenues from the plotted development and 40% of the total revenues from the sale of the fully constructed
residential units.

In order to secure its obligation, the Developer paid a refundable deposit of INR 10 Crores (approximately EUR 1.3 million) following the signing and registration
of the JDA.

The JDA may be terminated in the event that the required governmental approvals for establishment of access road to the Property has not been achieved within
12 months period from the execution date of the JDA. The required approvals have not yet been obtained at the target date, but none of the parties has cancelled
the agreement at this juncture. Upon such termination, the Developer shall be entitled to the refund of the relevant amounts paid as Refundable Deposit and any
other cost related to such access road or the title over the Property. The JDA may also be terminated by the Chennai Project SPV, inter alia, if the Developer has
not obtained certain development milestone and/or breached the terms of the JDA. Due to this fact, the financial statements of the SPV include a provision in an
amount of INR 30 Crores (EUR 3.9 million) for cost reimbursement, including INR 10 Crores (EUR 1.3 million) advanced payment received.

Net realizable value measurement of Chennai project

The valuation of the property is based on the comparable method.

The following parameters have been considered to arrive at the land value of the subject property:

Parameter

Accessibility

Discount for shape and contiguity

Location and Neighborhood profile

Size

Negotiation

Conversion

Topography

Additional cost to be incurred at the site due to illegal excavation

Total

Premium (Discount)

-12.5%

-20%

-5%

-10%

-5%

-58%

NOTE 11 - INTEREST BEARING LOANS FROM BANKS

Breakdown, terms and conditions of outstanding loans were as follows:

Nominal interest rate

Currency

Torun project secured bank loan*

Suwalki project secured bank loan*

Belgrade Plaza bank loan*

3M Euribor+3%

3M Euribor+1.65%

3M EURIBOR+5%

EUR

Total interest-bearing liabilities

Less current maturities

* Following the sale of the Company’s subsidiaries, the loans were derecognized (refer to Notes 8(5)(a), 8(5)(b), 8(5)(i)).

December 31,

Year of

maturity

2017

2020

2032

2017

€’000

2016

Carrying amoung

€’000

44,249

26,497

11,529

82,275

(82,275)

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 12 - TRADE PAYABLES

Construction related payables

Other trade payables

Total

NOTE 13 - RELATED PARTIES PAYABLES

EI Group – ultimate parent company – expenses recharged

Other related parties in EI group

Total

December 31, 2017

December 31, 2016

Currency

€’000

Mainly in PLN, EUR

545

584

€’000

6,352

1,091

7,443

Currency

EUR, USD

EUR

December 31, 2017

December 31, 2016

€’000

155

206

For payments (including share based payments) to related parties and related party receivables refer to Note 28.

NOTE 14 - OTHER LIABILITIES

Short term

Obligations to tenants

Government institutions and fees

Salaries and related expenses

Accrued expenses

Other1

Total

Currency

EUR

December 31, 2017

December 31, 2016

€’000

106

1,675

1,878

€’000

1,095

480

243

1,006

2,906

1 2017 – Including EUR 325 thousands prepayments in regards to plot sale in Greece, provision for audit costs in an amount of EUR 324 thousands and provision for liability in an amount

of EUR 1,015 thousands (refer to Note 27f). 2016 – Including payable due to refundable deposit received regarding the sale of Kielce in an amount of EUR 453 thousand and due to

Belgrade (MUP) in an amount of EUR 250 thousand.

NOTE 15 - BONDS

a. Composition:

Effective

interest rate

Contractual

interest rate

Principal

final maturity

Adjusted

Carrying amounts as at

par value

December 31, 2017

9.47%

13.48%

10.46%

CPI+6%

CPI+6.9%

6M WIBOR+6%

2020

2019

2018

47,911

70,150

5,099

45,963

65,832

5,119

123,160

116,914

Series A Bonds

Series B Bonds

Polish Bonds

Total

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 12,13,14,15

b. Mandatory repayments subsequent to the reporting date (without early repayments):

2018

2019

2020

Total

24,175

84,568

14,417

123,160

1 Pursuant to the Company’s Restructuring Plan, the Company will assign 75% of the net proceeds received from the sale or refinancing of any of its assets as early repayment.

2 Approved amendment to an early prepayment term under the Restructuring

The Company has implemented the restructuring plan that was approved by the Dutch court on July 9, 2014 (the “Restructuring Plan”).

Under the Restructuring Plan, principal payments under the bonds issued by the Company and originally due in the years 2013 to 2015 were deferred for a period of four and a half years,

and principal payments originally due in 2016 and 2017 were deferred for a period of one year.

The Restructuring Plan further provided that, if the Company does not prepay an aggregate amount of at least NIS 434 million (EUR 107.3 million) on the principal of the bonds on or

before December 1, 2016 (the “Early Prepayment”), the principal payments due under the Extended Repayment Schedule will be advanced by one year (the “Accelerated Repayment

Schedule”).

On November 29, 2016, the Company’s bondholders approved a postponement of the Early Prepayment date by up to four months and the reduction of the total amount of the required

Early Prepayments to at least NIS 382 million (EUR 94.5 million) (a reduction of 12% on the original amount).

In addition, the Company agreed to pay to its bondholders, on March 31, 2018, a one-time consent fee in the amount of approximately EUR 238 thousand (which is equal to 0.25% from

the Company’s outstanding debt under the bonds at that time) (the “Consent Fee”). The consent Fee shall be paid to the Company’s bondholders on a pro rata basis.

During first three months 2017, the Company paid to its bondholders a total amount of NIS 191.7 million (EUR 49.2 million) as an early redemption. Upon such payments, the Company

complied with the Early Prepayment Term (early redemption at the total sum of at least NIS 382,000,000) and thus obtained a deferral of one year for the remaining contractual obligations

of the bonds.

In addition to the above, the following terms were approved by the bondholders:

a) Casa radio proceeds – If the Company shall sell the Casa radio project located in Romania (hereinafter: the “Project”) to a third party, including by way of selling its holdings in any of

the entities through which the Company holds the project (and said sale shall be carried out before the full repayment of the bonds and until no later than December 31, 2019, and for

an amount which exceeds EUR 45 million net (i.e. after brokerage fees (if any), taxes, fees, levies or any other obligatory payment due to any authority in respect to the said sale) which

shall actually be received by the Company, then the holders of bonds shall be eligible for a one-time payment (which shall come in addition to the principal and interest payments in

accordance with the repayment schedule), in certain amounts specified in tranches.

b) Registering of Polish bonds for trade – the Company has committed to undertake best efforts to admit the Polish bonds for trading on the Warsaw Stock Exchanges and proceeding in

this respect are ongoing.

c) Deferred debt ratio of Series B bonds – were reduced to 68.24% from 70.44% following the cancellation of the treasury bonds. The ratio has been changed for Series B bonds in order

to maintain a distribution ratio between the three series.

As of the date of approval of these financial statements the Company repaid the bondholder the entire NIS 382 million.

3 Settlement agreement with Bondholders of Israeli Series of Bonds

On September 26, 2017 the Company announced that, further to the resolutions of the Israeli series A bondholders and the series B bondholders in connection with future bondholder

repayments (i.e., repayments to series A bondholders, to series B bondholders and to the Polish bondholders), the Company intends to repay a total amount of circa €18,800,000, during

October 2017, an amount which represents 75% of the funds Plaza has received in the last quarter from sale of real estate assets, as determined in the restructuring plan (“Mandatory

Repayment Amount”) to be allocated as follows:

• To the Polish bondholders: 8.33% of the Mandatory Repayment Amount – as per the ratio determined in the restructuring plan.

• To the Israeli series A bondholders: 21.23% of the Mandatory Repayment Amount – as per the ratio determined in the restructuring plan.

• To the Israeli series B bondholders: 31.16% of the Mandatory Repayment Amount – the proportional amount that corresponds to the ratio between the outstanding debts of the two

Israeli series of bonds.

The Company intended to deposit the reminder of the funds with a third-party trustee for the benefit of both Israeli series of bonds and subsequently approached the competent court in

Israel for the receipt of instructions with regard to the allocation of such reminder amount.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

On October 4, 2017 the Company has received the consent of the trustees of its Israeli series A bonds and series B bonds for the allocation of certain funds received by the Company

between the Company’s series A bonds and series B bonds due for repayment of such bonds as detailed above.

During December 2017, the Israeli court has instructed that the mandatory repayment amounts due to the Israeli series A and series B bondholders should be allocated according to

the ratios set out in the Company’s restructuring plan. The court has also acknowledged that Plaza is not an interested party in this bondholder dispute and has granted the Company a

protective order from any claims in this respect. The Israeli Series A bondholders triggered the immediate repayment of the entire outstanding debt under the Series A trust deed.

In January 2018, a settlement agreement was signed by and among the Company and the two Israeli Series of Bonds (“Settlement Agreement”). In the Settlement Agreement it was

agreed, inter alia, to approve:

• New repayment ratios between the two Israeli Series of Bonds (new ratio: Bond A- 39% Bond B- 61%);

• An increase in the level of the mandatory early repayments from 75% to 78% of the relevant net income;

• New repayment schedule;

• An increase in the compensation to be paid to the Bondholders in the event of successful disposal of Casa Radio Project;

• A waiver of claims to the Company and its directors and officers; and

• To waive the request for publication of quarterly financial reports by the Company.

As a result of settlement agreement signing, Series A Bondholders withdraw their request for immediate repayment.

It is clarified that the Settlement Agreement is a separate agreement among the parties thereto with respect to the Company’s restructuring plan, and as such has no effect on the Polish
Bondholders.

On January 31, 2018 the Company paid the bondholders a total amount of principal and interest of EUR 38,487 thousands.

4 The net cash flow received by the Company following an exit or raising new financial indebtedness (except if taken for the purpose of purchase, investment or development of real estate
asset) or refinancing of real estate assets after the full repayment of the asset’s related debt that was realized 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 till 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 78%
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 in bond purchase.

d. Covenants:

The bonds’ covenants are detailed in Note 27 (b).

In respect of the Coverage Ratio Covenant (“CRC”), as defined in the restructuring plan, as at December 31, 2017 the CRC was 103%, in comparison with 118%
minimum ratio required. As a result of covenants breach, the Company classified its bonds in the total amount of EUR 116,914 thousand as current liabilities in
the financial statements as of 31 December 2017.

e. Credit rating:

On September 28, 2017 Standard & Poor’s Maalot (“Maalot”), the Israeli credit rating agency which is a division of International Standard & Poor’s, has reduced
its credit rating of Plaza’s two series of Notes traded on Tel Aviv Stock Exchange from “ilCCC” to “ilCC” with negative outlook on a local Israeli scale. In January
2018, Maalot has discontinued tracking Plaza’s rating at the Company’s request.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 16

NOTE 16 - RECOGNIZED DEFERRED TAX ASSETS (LIABILITIES)

Deferred taxes recognized are attributable to the following items:

Assets/(liabilities) 2017

Property, equipment and other assets

Bonds

Tax value of loss carry-forwards recognized*

Deferred tax asset (liability), net

December 31,

Recognised in

2016

€’000

(116)

(2,024)

2,024

(116)

profit or loss 2017

€’000

463

(463)

Out of

Consoli-

dation

December 31,

2017

€’000

(1,561)

1,561

Assets/(liabilities) 2016

Property, equipment and other assets

Bonds

Tax value of loss carry-forwards recognized*

Deferred tax asset (liability), net

* Due to tax losses created at the Company level.

Unrecognized deferred tax assets

December 31,

Recognised in

December 31,

2015

€’000

406

(3,794)

3,794

406

Profit or loss 2016

€’000

(522)

1,770

(1,770)

(522)

2016

€’000

(116)

(2,024)

2,024

(116)

Deferred tax assets have not been recognized in respect of tax losses in a total amount of EUR 111,043 thousand (2016: EUR 119,346 thousand).

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the
Group can utilize the benefits there from. As of December 31, 2017, the expiry date status of tax losses to be carried forward is as follows:

Total tax losses carried forward

112,604

2018

789

2019

2020

2021

After 2022

6,262

11,434

13,306

25,294

55,519

Tax losses are mainly generated from operations in the Netherlands. Tax settlements may be subject to inspections by tax authorities. Accordingly, the amounts
shown in the financial statements may change at a later date as a result of the final decision of the tax authorities.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 17 - EQUITY

Authorized ordinary shares of par value EUR 1 each

10,000,000

Issued and fully paid

6,855,603

December 31, 2017

Remarks

Number of shares

December 31, 2016
Number of shares

Share based payment reserve

Share based payment reserve is in respect of Employee Share Option Plans (“ESOP”) in the total amount of EUR 35,376 thousand as of December 31, 2017
(2016 – EUR 35,376 thousand).

Translation reserve

The translation reserve comprises, as of December 31, 2017, all foreign currency differences arising from the translation of the financial statements of foreign
operations in India.

Restriction of dividend

The Company shall not make any dividend distributions, unless (i) at least 75% of the Unpaid Principal Balance of the Bonds (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 of up to 50% of such
additional capital injection.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 17,18,19

NOTE 18 - EARNINGS PER SHARE

The calculation of basic earnings per share („EPS”) at December 31, 2017 was based on the loss attributable to ordinary shareholders of EUR 26,563 thousand
(2016: loss of EUR 46,517 thousand) and a weighted average number of ordinary shares outstanding of 6,856 thousand (2016: 6,856 thousand).

The following number of shares and par values are adjusted to reflect the share consolidation as detailed on Note 17:

Weighted average number of ordinary shares (for both EPS and EPS from continuing operations)

In thousands of shares with a EUR 1 par value

Issued ordinary shares at 1 January

Weighted average number of ordinary shares at 31 December

December 31, 2017

December 31, 2016

€’000

6,856

€’000

6,856

The calculation of diluted earnings per share from continuing operations for comparative figures is calculated as follows:

Weighted average number of ordinary shares (diluted):

In thousands of shares with a EUR 1 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, 2017

December 31, 2016

€’000

6,856

€’000

6,856

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 19 - EMPLOYEE SHARE OPTION PLAN

On October 26, 2006 the Company’s Board of Directors approved the grant of up to 338,345 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. 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 200. Exercise of the options is subject to the following mechanism:

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Grant date / employees entitled

ESOP No.13

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.23

Total granted in 20112

Total granted in 20122

Total granted in 20132

Total share options Granted

Number

of options

Contractual life

of options1

132,180

18,585

150,765

10,161

7,638

3,916

1,200

44,790

8,600

8,450

235,520

15 years

10 years

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 – 1,000 share options; 2008 – 2,600 share options; 2009 – 733 share options; 2011– 32,250 share options (ESOP No. 2); 2012 – 4,500

share options; 2013 – 1,500 share options.

3 Vesting conditions – three years of service.

On the 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 324, the opening price shall be set at
GBP 324 (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

Forfeited during the period – back to pool**

Outstanding at the end of the year

Exercisable at the end of the year

Weighted average

exercise price* 2017

GBP

Number of

Weighted average

exercise price 2016

GBP

options

2017

235,520

Number of

options

2016

237,970

(2,450)

235,520

* The options outstanding at 31 December 2017 have an exercise price in the range of GBP 28 to GBP 54 (app. EUR 31.5 – EUR 60.8), and have weighted average remaining contractual life

of four years.

** The total accumulated share-based payment costs due to options exercise and forfeiture were 13,824 thousand as of December 31, 2017 and December 31, 2016.

The maximum number of shares issuable upon exercise of all outstanding options as of the end of the reporting period is 356,780. The estimated fair value of the
services received were measured based on a binomial lattice model.

During 2017 and 2016 there were no employee costs for the share options granted.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 20,21

NOTE 20 - RENTAL INCOME

Rental income from operating shopping centres1

Other income

Total

1 2017 – including two shopping centers (2016 – three shopping centers).

NOTE 21 - COST OF OPERATIONS

Operating shopping centers1

Other cost of operations2

Total

1 Refer to Note 20 above.

2 2017 and 2016 – Attributed to small scale costs on plots held by the Group.

Year ended

December 31, 2017

December 31, 2016

€’000

7,562

346

7,908

€’000

15,287

324

15,611

Year ended

December 31, 2017

December 31, 2016

€’000

1,588

643

2,231

€’000

3,816

1,070

4,886

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 22 - ADMINISTRATIVE EXPENSES

Salaries and related expenses

Professional services

Offices and office rent

Travelling and accommodation

Depreciation and amortization

Others

Total

NOTE 23 - OTHER INCOME AND OTHER EXPENSES

Other income1

Total other income

Other expenses

Total other expenses

1 Including EUR 460 thousands due to sale of an office building in Budapest (refer to Note 9).

Year ended

December 31, 2017

December 31, 2016

€’000

2,870

2,644

199

160

259

6,146

€’000

3,141

2,694

187

240

224

6,506

Year ended

December 31, 2017

December 31, 2016

€’000

Restated* €’000

757

657

375

1,922

(1,922)

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 22,23,24,25

NOTE 24 - FINANCE INCOME AND FINANCE COSTS

Recognised in profit or loss

Gain from settlement of bank debt

Finance income from hedging activities through sale of forwards

Interest income on bank deposits

Interest from loans to related parties

Other finance income

Finance income

Interest expense on Bonds

Interest expense on bank loans

Foreign currency losses on Bonds

Other finance expenses

Finance expenses capitalized to trading properties under development

Finance costs

Net finance costs

* Including an amount of EUR 2,076 thousands of interest expenses related to 2016

NOTE 25 - INCOME TAXES

Amounts recognized in profit or loss

Current year tax expenses

Adjustment in respect of previous years taxes (refer to note 27(f))

Tax benefit (deferred tax expense) (refer to Note 16)

Total

Deferred tax (expense) benefit

Origination and reversal of temporary differences

Year ended

December 31, 2017

December 31, 2016

€’000

221

334

577

*(8,627)

(1,339)

(1,186)

(44)

(11,196)

(10,619)

€’000

17,661

630

347

18,642

(27,416)

(3,619)

(7,536)

(646)

5,121

(34,096)

(15,454)

Year ended

December 31, 2017

December 31, 2016

€’000

(1,056)

(1,001)

€’000

(189)

(522)

(711)

Year ended

December 31, 2017

December 31, 2016

€’000

(522)

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Reconciliation of effective tax rate:

Year ended

December 31, 2017

December 31, 2016

Dutch statutory income tax rate

Loss from continuing operations before income taxes

Tax benefit at the Dutch statutory income tax rate

Recognition of previously unrecognized tax losses

Effect of tax rates in foreign jurisdictions

Adjustment in respect of previous years taxes

Current year tax loss and other timing differences for which no deferred taxes are created1

Non-deductible expenses (exempt income)

Tax Expense

1 2017 and 2016 – Mainly due to write-down of trading property not recognized for tax purposes.

The main tax laws imposed on the Group companies in their countries of residence:

€’000

25%

(25,562)

(6,390)

(229)

862

1,056

3,070

2,632

1,001

€’000

25%

(45,806)

(11,452)

(680)

2,332

10,500

711

The Netherlands

a. Companies resident in the Netherlands are subject to corporate income tax at the general rate of 25%. The first EUR 200,000 of profits is taxed at a rate of

20%. Tax losses may be carried back for one year and carried forward for nine years.

b. The Dutch participation exemption gives a full exemption from corporation tax applies to benefits such as dividends and capital gains derived from a qualifying
participation. The participation exemption generally applies if the parent Company holds at least 5 percent of the shares in the participation. The requirements
to meet the participation exemption are as follows:

1. The parent Company has an interest of at least 5 percent in the participation; and

2. At least one of the following three tests is met:

a) The parent Company’s objective with respect to its participation is to obtain a return that is higher than a return that may be expected from normal

active asset management (“Motive Test”); or

b) The participation is subject to a “reasonable taxation” according to Dutch tax standards (“Subject-to-Tax Test”); or

c) The direct and indirect assets of the participation generally consist of less than 50 percent of ‚low taxed free passive investments’ (“Asset Test”).

Poland

Companies resident in Poland are subject to corporate income tax at the general rate of 19%. (capital gains bear the same tax rate). Tax losses may be carried
forward for five years, with only 50% of the loss is deductible in each tax year. Withholding tax on Dividend is at a rate of 19%, however, the tax rate may be
reduced under the European Union regulations or Double Tax Treaties outstanding.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 26

NOTE 26 - FINANCIAL INSTRUMENTS

FINANCIAL RISK MANAGEMENT

Overview

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

• Credit risk
• Liquidity risk
• Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing
risk, and the Group’s management of capital.

The Board of Directors has established a continuous process for identifying and managing the risks faced by the Group (on a consolidated basis), and confirms
that it is responsible to take appropriate actions to address any weaknesses identified.

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
monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s
activities.

The 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 financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Group’s financial instruments held in banks and from other receivables.

Management had a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations were performed on all customers
requiring credit over a certain amount. The Group required collateral in the form of mainly deposit equal to three months of rent from tenants of shopping centers
(collected deposits from tenants totalled EUR 0 million and EUR 0.6 million as at December 31, 2017 and 2016, respectively).

Cash and deposits and other financial assets

The Group limits its exposure to credit risk in respect to cash and deposits, by investing mostly in deposits and other financial 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 financial obligations as they fall due. For detailed information refer to note 2(c).

c. Market risk

Currency risk

Currency risk is the risk that the Group will incur significant fluctuations in its profit 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 (Bonds 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 Company ceased the using of currency options effective October 2015 in order to avoid liquidity risk. The Company carries out hedging transactions
occasionally using derivatives subject to limitation set by the Board.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Interest Rate Risk (including inflation):

The Group’s interest rate risk arises mainly from short and long term borrowing (as well as Bonds). Borrowings issued at variable interest rate expose the Group
to variability in cash flows. Borrowings issued at fixed interest rate expose the Group to changes in fair value, if the interest is changing. In certain case, the Group
uses IRS to minimize the exposure to interest risk by fixing the interest rate. Regarding interest rate risk hedging of the Bonds and bank facilities, refer to Note 11.
As the Israeli inflation risk is diminishing to a level that management believes is acceptable (Israeli CPI 2017 0.4%; 2016 -0.9%), the Company has stopped using
hedging of CPI risk in 2012.

Shareholders’ equity management:

Refer to Note 18 in respect of shareholders equity components in the restructuring plan including dividend policy. 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 benefit of both the Company’s bondholders and shareholders.

Credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The vast majority of financial 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 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

Trade receivables, net

Related party receivables

Long term receivables

Total

Note

Credit quality

Mainly Baa3

Mainly BBB+

N/A

Carrying amount as

at December 31, 2017

at December 31, 2016

€’000

44,844

525

1,753

47,122

€’000

5,646

7,174

6,645

1,720

699

21,884

As of December 31, 2017, and 2016, all debtors without credit quality have a relationship of less than five years with the Group. At 31 December 2017, the aging
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

* 2016 – debtors due to sale of plots in Serbia and Poland.

Carrying amount

December 31, 2017

December 31, 2016

€’000

288

237

525

€’000

5,592

231

1,043

6,866

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 26

The maximum exposure to credit risk for the abovementioned table at the reporting date by type of debtor was as follows:

Banks and financial institutions

Tenants

Receivables for sold plots

Related party receivable

Other

Total

Liquidity risk

Carrying amount

December 31, 2017

December 31, 2016

€’000

44,844

1,753

525

47,122

€’000

12,820

970

5,675

1,720

699

21,884

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Carrying Contractual

6 months

6-12

amount

cash flows

or less*

months**

1-2

years

2-5

More than

years

5 years

December 31, 2017

Non-derivative financial liabilities

Secured bank loans

Bonds issued*

Trade and other payables

Related parties

116,914

(133,322)

(37,153)

(25,725)

(70,444)

190

(190)

(87)

(190)

(87)

Total

117,191

(133,599)

(37,430)

(25,725)

(70,444)

* Refer to Note 16(3).

December 31, 2016

Derivative financial liabilities

IRS Derivatives

Non-derivative financial liabilities

Secured bank loans

Bonds issued*, **

Trade and other payables

Related parties

Carrying Contractual

6 months

6-12

amount

cash flows

or less*

months**

1-2

years

2-5

More than

years

5 years

453

(1,257)

(634)

(623)

82,275

(88,600)

(1,904)

(46,225)

(2,454)

178,370

(212,602)

10,837

(10,837)

206

(206)

(51,835)

(10,349)

(206)

(4,665)

(140,898)

(488)

(25,925)

(15,204)

(12,061)

Total

272,141

(313,502)

(64,928)

(51,513)

(143,840)

(41,129)

(12,061)

* This Note assumes the minimum contractual payments on the bonds to achieve the deferral.

** Out of the total remaining amount of EUR 51.2 amount of EUR 2.7 million in respect of Belgrade Plaza and EUR 4.4 million of Suwalki were assigned to the purchasers of the shopping

centers and trade and other payables in the amount of EUR 1.1 million to be revolved.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Currency risk:

The Company’s main currency risk is in respect of its NIS denominated bonds. Following the discontinuance and full settlement of all currency options effective
October 2015, the Company is exposed to changes in EUR/NIS rate.

The following exchange rate of EUR/NIS applied during the year:

EUR

NIS 1

Reporting date

Average rate

Reporting date

Average rate

2017

0.246

2016

0.235

Reporting date

Spot rate

2017

0.241

Spot rate

2016

0.247

PLN denominated bonds – A change of 7 percent in EUR/PLN rates at the reporting date would have increased/(decreased) profit or loss by EUR 0.4 million, as a
result of having issued PLN linked bonds.

NIS denominated bonds – A change of 6 percent in EUR/NIS rates at the reporting date would have increased/(decreased) profit or loss by EUR 6.7 million, as a
result of having issued NIS linked bonds.

This effect assumes that all other variables, in particular CPI index, remain constant.

Interest rate risk:

Profile
As of the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Fixed rate instruments

Financial assets

Variable rate instruments

Bonds

Other financial liabilities

Carrying amount

2017

€’000

2016

€’000

12,820

(116,914)

(178,370)

(82,275)

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 27

NIS Bonds:

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 2016) would have increased (decreased) profit 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,

2017

2016

Fair values:

Carrying

amount of

debentures

111,796

162,722

Profit or loss effect

CPI

increase

effect

(3,354)

(5,034)

CPI

decrease

effect

3,354

5,034

Fair values measurement versus carrying amounts:

In respect to the Company’s financial 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 financial instruments liabilities:

For the Israeli bonds presented at amortized cost, the fair value would be the market quote of the relevant Israeli bond, had they been measured at fair value.

Statement of financial position

Bonds at amortized cost – Polish bonds

Bonds A at amortized cost – Israeli bonds

Bonds B at amortized cost – Israeli bonds

* The fair value is based on Level 1 in fair value hierarchy.

Carrying

amount

2017

5,119

45,963

65,832

Carrying

amount

2016

10,561

61,505

106,303

Fair

value

2017

4,022*

30,493*

49,536*

Fair

value

2016

9,964

50,727

90,008

NOTE 27 - CONTINGENT LIABILITIES AND COMMITMENTS

a) Contingent liabilities and commitments to related parties:

1. The Company entered into an indemnity agreements with all of the Company’s directors and senior management – the maximum indemnification 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 financial statements prior to such payment. No consideration was paid by the Company in this respect since the agreement was
signed.

2. The Company maintains Directors’ and Officers’ liability cover, presently at the maximum amount of USD 60 million for a term of 18 months commencing

on 1 November 1, 2017. Pursuant to the terms of this policy, all the Directors and senior manager are insured. The new policy does not exclude past public
offerings and covers the risk that may be incurred by the Directors through future public offerings of equity up to the amount of USD 50 million.

b) Contingent liabilities and Commitments to others:

1. As part of the completion of the restructuring plan (refer also to Note 15), the Group has taken the following commitments and collaterals towards the

creditors:

a) Restrictions on issuance of additional bonds – The Company undertakes not to issue any additional bonds other than as expressly provided for in the

Restructuring Plan.

b) Restrictions on amendments to the terms of the bonds – The Company shall not be entitled to amend the terms of the bonds, with the exception of purely

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

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 holders of all other series of bonds issued by the Company by ordinary majority Refer to Note 15 for recent amendments.

c) Coverage Ratio Covenant (“CRC”) – The CRC is a fraction calculated based on known Group valuation reports and consolidated financial information

available at each reporting period. The CRC to be complied with by the Group is 118% (“Minimum CRC”) in each reporting period. For December 31, 2017
the calculated CRC is 103.3% (also refer to Note 15 (d) regarding breach of covenant). In the event that the CRC is lower than the Minimum CRC, then as
from the first cut-off 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-off date, (b) investments in new REA’s; or
(c) an investments 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 first
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 bonds terms, and the Bondholders shall be entitled to declare that all or a part of their respective (remaining) claims become immediately due and
payable.

d) Minimum Cash Reserve Covenant (“MCRC”) – Cash reserve 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 bondholders 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 maintained as of December 31, 2017.

e). Negative Pledge on REA of the Company – The Company undertakes that until the bonds 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 financial 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 bonds 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 refinancing an existing FI
shall be excluded. The Group did not have cross-pledge as of December 31, 2017.

(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

refinancing. Any excess net cash flow generated from such refinancing, 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 flow 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 refinancing

an existing FI with new FI) until the outstanding bonds debt (as of November 30, 2014) have 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 flow resulting from the incurrence of new FI is used for a 75% early prepayment of the bonds. Subject to the terms of the

plan, the Group may also refinance existing FI if this does not generate net cash flow.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017
NOTE 27

h) No distribution policy – The Company’s ability to pay dividend is limited unless certain conditions as described in note 18 are met.

i) 75% mandatory early repayment – Refer to note 16 and to other sections in this note.

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 provided indemnities which are customary for such
transactions to the respective purchasers.

Such indemnifications are limited in time and amount. No indemnifications were exercised against the Group till the date of the statement of financial position.
The Company’s management estimates that no significant costs will be borne thereby, in respect of these indemnifications.

3. 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 fulfilment of certain conditions as stipulated in the agreement. In case Tesco leaves the mall before expiration of lease period the Company will be
liable to repay the remaining consideration in amount of EUR 1.9 million as of balance sheet date, unless the buyer finds another tenant that will pay higher
annual lease payment than Tesco. The management does not expect to bear a material loss.

c) Contingent liabilities due to legal proceedings:

The Company is involved in litigation arising in the ordinary course of its business. Although the final 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 material outflow of resources to settle them is remote, and
therefore no provision or disclosure is required.

d) Certain issues with respect to an agreement from 2011:

The Company has been made aware that commission paid to an agent in connection with the disposal of the US portfolio in 2012 may have benefited a former
director of the Company, and it is probable therefore that those arrangements should have been classified as a related party transaction under the Listing
Rules. At the time of the disposal, it appears that the Company was not aware that there was any potential related party interest with respect to the commission
arrangements. The Company is currently discussing this matter with its Sponsor and the UKLA and seeking appropriate advice as to whether any retrospective
disclosures or other actions may be required under the Listing Rules.

In order to address this matter, Plaza’s Board has appointed, on April 25, 2017, the chairman of the audit committee Mr. David Dekel, to investigate and
examine the issues raised as part of a joint committee together with a special committee formed for the purpose by EI, and with the joint committee’s external
legal advisors. The internal committees has concluded their examination of these matters and submitted their recommendations to the Company’s board of
directors. The Company’s board of directors fully adopted the committee’s recommendations, and is working to implement them. Please also see Note 8 (6)(d)
in this respect, with respect to Elbit’s settlement with the SEC.

As of the date of the approval of the financial statements and at this preliminary stage, the Company, based on legal advice received, cannot estimate the
potential consequences for the Company as a result of this matter and no provision is recorded in the books for any amounts which the Company may incur as
a result of these issues.

f) Contingent liability due to Tax

In respect of a subsidiary which holds a plot in the Europe region, certain tax aspects have been raised in respect to the past. The management decided,
following a thorough analysis and based on it tax advisor’s estimations, to record a provision in amount of EUR 1.1 million for potential losses which are
recorded in other losses in the profit or loss financial statements. In respect of a potential real estate tax claim, the group has been advised by its external
advisors that notwithstanding the overall ambiguities of the applicable framework and its implementation that could result to a possible tax dispute there
are good chances of success in case of litigation since the shares of the subsidiary are ultimately held by entities which shares are admitted for trading in
regulated Stock Exchanges and therefore the substantial requirements for the tax exemption are met. Accordingly, no provision for any liability has been made
in these financial statements.

Controlling shareholder

As for December 31, 2017 and 2016, EI held approximately 44.9% of PC’s share capital; Davidson Kempner Capital Management LLC (“DK”) held approximately
26.3% of the Company’s share capital and the rest is widely spread in the public. EI is of the opinion that based on the absolute size of its holdings, the relative
size of the other shareholdings and due to the fact that the company’s directors are appointed by a regular majority of the Company’s general meeting of
shareholders, EI have a sufficiently dominant voting interest to meet the power criterion, therefore EI has de facto control over the company.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 28 - 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.

Kochi project advanced payment settlement

In November 2013, the Company exercised the corporate guarantee in the amount of EUR 4.3 million including interest thereon up till such date (the
“Reimbursement Payment”) provided by EI to the Company in the framework of the Indian JV Agreement on the ground of EI’s failed to finalize and conclude
the transfer of the Kochi Project Rights to the Indian JV Vehicle. Due to uncertainty concerning the recovery of the receivable, the Company has impaired the
Reimbursement Payment in its 2013 financial statements.

In June 2015, the Company reached an agreement with EI, based on the mentioned JV

Agreement and its ancillary documents (including corporate guarantee issued by EI in favour of the Company), following which EI was obliged to repay the
Reimbursement amount in few instalments until mid-2018. As a result of the agreement reached, the Company recorded a gain of EUR 4.6 million in 2015. The
Group’s liabilities towards EI in the amount of EUR 0.8 million were offset from this balance, with repayment of EUR 1 million performed in late September 2015,
and EUR 1.2 million offset in December 2016 following Elbit assuming the Company’s liability to Klepierre (thus balance as of December 31, 2017 is EUR 1.75
million (including accrued interest on remaining balance).

Trading transactions

100

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
Compensation to key management personnel2
Performance linked benefits - management
Compensation to board members1, 2
Lease agreement for office in Bucharest

For the year ended
December 31, 2017
€’000

For the year ended
December 31, 2016
€’000

23.6
615
302
370
13

49
650
226
420
30

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

1 2017 – four board members (out of which one non-executive director resigned in September); 2016 – five board members (out of which one non-executive director resigned in June).

2 There was no change in the number of Company share options granted to key personnel in 2017. There are no other benefits granted to directors.

As of December 31, 2017, the Company identified York Capital Management Global Advisors, LLC (“York”) and Davidson Kempner Capital Management LLC
(“DK”) among the Company’s related parties.

DK holds 26.3% of the Company’s outstanding shares of the Company as of the reporting date, following the finalization of the Restructuring plan. DK has no
outstanding balance as of the reporting date with any of the Group companies. 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’s shares. There were no transactions with DK or York in the reporting period and there are no outstanding
balances with DK or York.

York is holding, as of December 31, 2017, 9.6% out of the total Israeli bonds debt of the Company. Interest paid on Bonds held by York at year-end were circa
EUR 0.5 million.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 28,29,30,31

NOTE 29 - EVENTS AFTER THE REPORTING PERIOD

a) Settlement agreement with the Bondholders

In January 2018, a settlement agreement has been reached and approved (and all the conditions precedent in the agreement fulfilled) between the holders of
two Series of Israeli Bonds and the Company regarding the allocation of funds, to be repaid by the Company, across the Israeli Bonds Series. As a result, the
agreement the Series A Bondholders shall withdraw their request for immediate repayment. In regards to Settlement agreement principles refer to Note 15 (3)

b) Retirement of Chief Executive Officer

On 11 January, 2018 the Company announced that the CEO, Dori Keren will retire from his position at the end of March 2018.

c) Ceasing of rating by S&P

On 18 January, 2018 S&P Maalot announced that it ceases updating the rating of the Company’s bonds following the Company’s request.

d) Dispute with the purchaser of a Plot in India.

In January 2018, the Purchaser of the100% interest in an SPV (in which Plaza holds a 50% stake with its joint venture partner, Elbit Imaging Ltd.), that holds
property in Bangalore, India, (the „Agreement” and the „Purchaser” respectively), has given notice that all remaining payments under the Agreement will
be stopped until a mutually acceptable solution is reached due to a proposed change (initiated by the Indian authorities) which could potentially impact the
development of the land. In February, despite the notice above, the Purchaser has paid the January instalment in the amount of INR 5 Crores (circa €0.65
million). To date, since the signing of the Agreement, the Purchaser has paid non-refundable advance payments totalling INR 45 Crores (circa € 5.9 million),
out of the total consideration of INR 338 Crores (circa €44.2 million) due under the Agreement.

101

The Company continues to reject the Purchaser’s claims and is constantly evaluating its options and considering its legal rights (refer also to Note 10 (b) (1)).

e) Motion to reveal and review internal documents

In March 2018, a Shareholder of the Company has filed a motion with the Financial Department of the District Court in Tel-Aviv to reveal and review internal
documents of the Company and of Elbit Imaging Ltd., with respect to the events surrounding that certain agreements that were signed in connection with the
Casa Radio Project in Romania and the sale of the US portfolio. Such events were previously announced by the Company and are detailed in notes 8(6) and
27(d). The Company is currently examining the motion with its legal advisors and intend to respond in due course.

NOTE 30 - BASIS OF MEASUREMENT

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis
on each reporting date

Derivative financial instruments

Fair value

NOTE 31 - SIGNIFICANT ACCOUNTING POLICIES

The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial 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 financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control commences until the date on which control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group

in the consolidated financial statements.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

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 significant influence, but not control or joint control, over the financial 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 financial statements include the Group’s share of the profit or loss and other comprehensive income of
equity-accounted investees, until the date on which significant influence or joint control ceases.

When the equity attributable to the owners of an associate changes as a result of the associate selling or buying shares of its subsidiaries (that are

consolidated in its financial statements) to third parties while retaining control in those subsidiaries, the balance of the investment in the associate that is
presented on the Company’s books on the equity basis changes. The Company has chosen the accounting policy of recognizing the change in the balance of
the investment in these cases directly in Profit or loss.

3. Non-controlling interests:

Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable 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.

102

4. Loss of control:

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of

equity.

Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

5. 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 profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency
are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss.

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 reclassified to profit 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.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 31

translation reserve related to that foreign operation is reclassified to profit 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 significant influence or joint control, the relevant proportion of the

cumulative amount is reclassified to profit 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 financial assets and financial 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 financial assets and financial
liabilities are initially recognised on the trade date.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial 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 financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group
derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

103

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a
legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Refer to note 27
for the list of Non-derivative financial assets and financial liabilities.

2. Non-derivative financial assets - measurement:

Cash and cash equivalents and restricted bank deposits

In the consolidated statement of cash flows, cash and cash equivalents includes bank deposits deposited for periods which do not exceed three months.
Restricted bank deposits are deposit 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 identified. 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.

Financial assets at fair value through profit or loss

A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Directly
attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and
changes therein, including any interest or dividend income, are recognised in profit or loss.

3. Non-derivative financial liabilities:

Other non-derivative financial liabilities

Non-derivative financial 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 financial liabilities: interest bearing
loans, bonds (refer to Note 15), trade payables, related parties and other liabilities at amortized cost.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating the interest expense over the relevant

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or, when
appropriate, a shorter period to the net carrying amount of the financial liability.

When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial liability (for example,

prepayment, call and similar options). The calculation includes all fees and points paid or received between parties to the contract that are an integral part of
the effective interest rate, transaction costs, and all other premiums or discounts.

When the Group revises its estimates of payments, it adjusts the carrying amount of the financial liability to reflect actual and revised estimated cash flows.
The Group recalculates the carrying amount by computing the present value of estimated future cash flows at the financial liability’s original effective interest
rate. The adjustment is recognised in profit or loss as a financial expense.

4. Derivative financial instruments:

The Group holds derivative financial 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 profit or loss as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally
recognised in profit or loss.

d) Share capital:

Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognized as a deduction

from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12. Costs attributable to listing existing
shares are expensed as incurred.

104

e) Trading properties:

Trading properties are being designated for sale in the ordinary course of business and as such are classified as trading properties (inventory) and measured
at the lower of cost and net realizable value.

Net realizable 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 write-down is reversed so that the new carrying amount is the lower of the cost and the revised net realisable value.

The amount of any write-down of trading properties to net realisable value and all losses of trading properties are recognised as a write-down of trading
properties expense in the period the write-down or loss occurs. The amount of any reversal of such write-down 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 capitalized 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 recognized as an expense in the
period in which they incurred.

Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditure and borrowing costs are being incurred.
Capitalization of borrowing costs may continue until the asset is substantially ready for its intended use (i.e. upon issuance of certificate 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-specific borrowing costs are capitalised to such qualifying asset, by applying a capitalization rate to the expenditures on such asset. The capitalization 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
specifically for the purpose of obtaining a qualifying asset.

The amount of borrowing costs capitalized during the period does not exceed the amount of borrowing costs incurred during that period.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 31

f) Property and equipment:

Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses (refer to Note 31(g)).
If significant 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.

Any gain or loss on disposal of an item of property and equipment is recognised in profit 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
profit or loss. Land is not depreciated.

The estimated useful lives of property for current and comparative periods and equipment are as follows:

Land – owned

Office buildings

Equipment, fixture and fittings

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.

105

g) Impairment:

1. Non-derivative financial assets:

Financial assets not classified as at fair value through profit 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 financial 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 flows from a group of financial assets

Financial assets measured at amortized cost:

The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant 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
identified. Assets that are not individually significant 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 flows discounted at
the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected 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 profit or loss.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

2. Non-financial assets and interests in equity accounted investees:

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than 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.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows 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 flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific 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 profit or loss. They are allocated first 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.

h) Provisions:

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

106

Construction costs

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of
resources embodying economic benefits 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 recognized 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.

i) Revenue and other income:

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 benefits will flow to the entity
and specific 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 the specifics of each arrangement.

Rental income

The Group leases real estate to its customers under leases that are classified as operating leases. Rental income from trading property is recognized in profit
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 amortized over the
related lease term. Lease incentives granted are recognized 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 recognized 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”).

Where rentals that are contingent upon reaching a certain percentage of the lessee’s gross sales, the Group recognizes rental revenue when the factor on which

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 31

the contingent lease payment is based actually occurs. Rental revenues for lease escalations indexed to future increases in the CPI are recognized only after
the changes in the index have occurred.

Revenues from selling of trading property

Revenue from selling of trading property is measured at the fair value of the consideration received or receivable. Revenues are recognized when all the

following conditions are met:

a) the Group has transferred to the buyer the significant 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 benefits associated with the transaction will flow to the Group (including the fact that the buyer’s initial and continuing

investment is adequate to demonstrate commitment to pay);

e) the costs incurred or to be incurred in respect of the transaction can be measured reliably; and
f) there are no remaining significant performance obligations.

Determining whether these criteria have been met for each sale transaction, requires certain degree of judgment by the Group management. The judgment is
made in determination whether, at the end of the reporting period, the Group has transferred to the buyer the significant 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 precedents which have to be fulfilled prior to delivery .Revenues are, therefore,
recognized when all the significant condition precedent included in the agreement have been fulfilled by the Group and/or waived by the buyer prior to the end
of the reporting period.

107

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 significant risks in respect of payment of the proceeds by the buyer.

j) Operating lease payments:

Payments made under operating leases (in respect of plots of land under usufruct) are recognized in profit or loss on a straight-line basis over the term of the
lease but are capitalized in relation to land used for the development of trading properties during the construction period (similar to borrowing costs).

k) Finance income and cost:

Interest income and expense which are not capitalized are recognized in the income statement as they accrue, using the effective interest method. For the
Group’s policy regarding capitalization of borrowing costs refer to Note 31(e).

l) Income tax:

Income tax expense comprises current and deferred tax. It is recognised in profit or loss.

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 financial reporting purposes and the

amounts used for taxation purposes.

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 profits 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 benefit will be realised. Such reduction is reversed when the probability of future taxable profits improved.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits 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.

m) Segment reporting:

Segment results that are reported to the Group’s Board of Directors (the chief operating decision makers) 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 office expenses, and tax assets and liabilities.

n) Employee benefits

1. Bonuses:

The Group recognizes 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 recognizes 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.

108

2. Share-based payment transactions:

The fair value of options granted to employees to acquire shares of the Company is recognized as an employee expense or capitalized 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 recognized as an expense is adjusted to reflect the actual number of share
options that vest.

Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional

expense is recognized for any modification, which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the
employees as measured at the date of modification. 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 recognized 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 recognized 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.

o) Standards issued but not yet effective:

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The
Group intends to adopt these standards, if applicable, when they become effective.

•

IFRS 9 Financial instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement
and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and
measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. Except for hedge accounting,
retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally
applied prospectively, with some limited exceptions.

The Group plans to adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Group has
performed a detailed impact assessment of all three aspects of IFRS 9. This assessment is based on currently available information and may be subject to
changes arising from further reasonable and supportable information being made available to the Group in 2018 when the Group will adopt IFRS 9. Overall,
the Group expects no significant impact on its statement of financial position and equity except for the effect of applying the impairment requirements
of IFRS 9. The Group expects an increase in the loss allowance resulting in a negative impact on equity as discussed below. In addition, the Group will
implement changes in classification of certain financial instruments.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 31

Loans are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. The
Group analyzed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortized cost measurement
under IFRS 9. Therefore, reclassification for these instruments is not required.

In addition, on adoption of IFRS 9, effective interest rate calculated on Company’s bonds at amortized costs, will be adjusted as necessary in order to
reflect the change in accounting policy related to modification of trust deeds terms. In summary, the impact of IFRS 9 adoption is expected to be, as
follows:

Impact on equity (increase/(decrease)) as of 31 December 2017:

Adjustments

Liabilities and shareholders’ equity

Bonds at amortized cost

Total liabilities

Net impact on equity, Including

Retained earnings

•

IFRS 15 Revenue from Contracts with Customers

€000

(1,385)

IFRS 15 was issued in May 2014, and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with
customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
transferring goods or services to a customer.

109

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified
retrospective application is required for annual periods beginning on or after 1 January 2018. The Group plans to adopt the new standard on the required
effective date using a modified retrospective method. During 2016, the Group performed a preliminary assessment of IFRS 15, which was continued with a
more detailed analysis completed in 2017.

1. Sale of goods

For contracts with customers in which the sale of trading property is generally expected to be the only performance obligation, adoption of IFRS 15 is
not expected to have any impact on the Group’s revenue and profit or loss. The Group expects the revenue recognition to occur at a point in time when
control of the asset is transferred to the customer, generally on delivery of the trading property. In preparing to adopt IFRS 15, the Group is considering
the following:

a) Variable consideration

One contract with a buyer provide a final agreed value depends on sustainable NOI following 12 months of operation of the mall, followed by re-

examined NOI again after 24 and 36 months of operation which may lead to an upward price adjustment. Currently, the Group recognizes revenue from
the sale of trading property measured at the fair value of the consideration received or receivable. If revenue cannot be reliably measured, the Group
defers revenue recognition until the uncertainty is resolved. Such provisions give rise to variable consideration under IFRS 15 and will be required to be
estimated at contract inception and updated thereafter.

IFRS 15 requires the estimated variable consideration to be constrained to prevent over-recognition of revenue. The Group does not expect that
application of the constraint will result in more revenue being deferred than undercurrent IFRS.

b) Warranty obligations

The Group generally provides for warranties for general repairs and does not provide extended warranties in its contracts with buyers. As such, most
existing warranties will be assurance-type warranties under IFRS 15, which will continue to be accounted for under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets, consistent with its current practice.

c) Presentation and disclosure requirements

The presentation and disclosure requirements in IFRS 15 are more detailed than under current IFRS. The presentation requirements represent a
significant change from current practice and significantly increases the volume of disclosures required in the Group’s financial statements. Many

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

of the disclosure requirements in IFRS 15 are new and the Group has assessed that the impact of some of these disclosures requirements will not
be significant. In particular, the Group expects that the notes to the financial statements will be expanded because of the disclosure of significant
judgements made: when determining the transaction price of those contracts that include variable consideration, how the transaction price has been
allocated to the performance obligations, and the assumptions made to estimate the stand-alone selling prices of each performance obligation. In
addition, as required by IFRS 15, the Group will disaggregate revenue recognized from contracts with customers into categories that depict how the
nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. In 2017 the Group continued testing of appropriate
systems, internal controls, policies and procedures necessary to collect and disclose the required information.

•

IFRS 16, “Leases”:

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating
Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model
similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ‚low-value’ assets
(e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will
recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term
(i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the
right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future
lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset.

110

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using
the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees
and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early
application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified
retrospective approach. The standard’s transition provisions permit certain reliefs.

In 2018, the Group will continue to assess the potential effect of IFRS 16 on its consolidated financial statements. Since the Company’s lease contracts
are not significant, the Company estimates that the adoption of the new Standard will not have a material impact on the Company’s assets and liabilities.
However, at this stage, the Company is unable to quantify the impact on the financial statements.

•

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not
apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain
tax treatments. The Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately;
• The assumptions an entity makes about the examination of tax treatments by taxation authorities;
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;
• How an entity considers changes in facts and circumstances.

An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The
approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning
on or after 1 January 2019, but certain transition reliefs are available. The Group will apply interpretation from its effective date. Since the Group operates
in a complex multinational tax environment, applying the Interpretation may affect its consolidated financial statements and the required disclosures. In
addition, the Group may need to establish processes and procedures to obtain information that is necessary to apply the Interpretation on a timely basis.

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 31

111

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017NOTE 32 - LIST OF GROUP ENTITIES

As of December 31, 2017, 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 és Vezetesi Kft.
Plaza Centers Establishment B.V.
Szombathely 2002 Ingatlanhasznosito es Vagyonkezelo Kft.
Tatabanya Plaza Ingatlanfejlesztesi Kft.
Plasi Invest 2007 kft.

Management company
Holding company
Inactive
Inactive
Inactive

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 – October 2017 concluded an
agreement on the termination of land use rights

POLAND

ACTIVITY

REMARKS

112

Directly wholly owned
Lodz Centrum Plaza Sp. z o.o.
Wloclawek Plaza Sp. z o.o.
O2 Fitness Club Sp. z o.o.
Leszno Plaza Sp. z o.o.

EDMC Sp. z o.o.
Plaza Centers (Poland) Sp. z o.o.
Bytom Plaza Sp. z o.o. w likwidacji
Gdansk Centrum Plaza Sp. z o.o. w likwidacji
Gorzow Wielkopolski Plaza Sp. z o.o. w likwidacji
Jelenia Gora Plaza Sp. z o.o. w likwidacji
Katowice Plaza Sp. z o.o. w likwidacji
Szczecin Plaza Sp. z o.o.
Legnica Plaza Spolka z ograniczona
odpowiedzialnoscia 1 S.K.A.
Płock Plaza Sp. z o.o. w likwidacji
Olsztyn Plaza Sp. z o.o. w likwidacji
Radom Plaza Sp.z.o.o.

Indirectly or jointly owned
Torun Centrum Plaza Sp. z o.o.w likwidacji

EDP Sp. z o.o.
Lublin Or Sp. z o.o.
Hokus Pokus Rozrywka Sp. z o.o.
Fantasy Park Sp. z o.o. w likwidacji
Fantasy Park Suwalki Sp. z o.o. w likwidacji
Fantasy Park Torun Sp. z o.o. w likwidacji
Fantasy Park Zgorzelec Sp. z o.o. w likwidacji
Fantasy Park Bytom Sp. z o.o. w likwidacji
Fantasy Park Poznań Sp. z o.o. w upadłońci likwidacyjnej
Fantasy Park Kraków Sp. z o.o.

Owns plot of land
Mixed-use project
Fitness
Inactive

Inactive
Management company
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

Inactive
Inactive
Inactive

Inactive

Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive
Inactive

Lodz (Residential) project
Lodz Plaza project
O2 Fitness Club project; Company under liquidation in 2018
Leszno Plaza project - Sold July 2017;
Company under liquidation in 2018
Company under liquidation in 2018
Company under liquidation in 2018
Company under liquidation
Company under liquidation
Company under liquidation
Company under liquidation
Company under liquidation

Company under liquidation in 2018

Company under liquidation
Company under liquidation
Under liquidation

100% held by Plaza Centers Administrations B.V.;
Company under liquidation
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 P.L.A.Z.A B.V.
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation
100% held by Mulan B.V.; Company under liquidation

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 32

LATVIA

ACTIVITY

REMARKS

Indirectly or jointly owned
Diksna SIA

Operating shopping centre –
Sold 2016

Equity accounted investee,50% held by Plaza Centers N.V.
50% held by JV partner Riga Plaza project.

ROMANIA

ACTIVITY

REMARKS

Directly wholly owned
S.C. North Gate Plaza S.R.L.
S.C Plaza Centers Management Romania s.r.l

Shopping center project
Inactive

Csiki Plaza (Miercurea Ciuc) project
Liquidated in 2018

Indirectly or jointly owned
S.C. Dambovita Center S.R.L.

Plaza Bas B.V.
Adams Invest S.R.L.

Mixed-use project

Holding company
Residential project

75% held by Dambovita Centers Holding B.V.
Casa Radio project
50.1% held by Plaza Centers N.V.
95% held by Plaza Bas B.V.
5% held by Plaza Centers Management B.V.
Valley View project

SERBIA

ACTIVITY

REMARKS

Directly wholly owned
Plaza Centers (Estates) B.V.

Plaza Centers Management D.O.O.
Plaza Centers Holding B.V.
Plaza Centers (Ventures) B.V.

Holding company

Management company
Inactive
Inactive

Krusevac Plaza project

CZECH REPUBLIC

ACTIVITY

REMARKS

Directly wholly owned
Plaza Centers Czech Republic S.R.O.

BULGARIA

Directly wholly owned
Shumen Plaza EOOD

Inactive

ACTIVITY

Inactive

Plaza Centers Management Bulgaria EOOD
Plaza Centers Development EOOD

Management company
Inactive

REMARKS

Shumen Plaza project - Sold 03/2017;
Company under liquidations in 2018
Company under liquidations in 2018
Company under liquidations in 2018

GREECE

ACTIVITY

REMARKS

Directly wholly owned
Helios Plaza S.A.

Shopping centre project

Pireas Plaza project

CYPRUS – UKRAINE

ACTIVITY

REMARKS

Directly wholly owned
Tanoli Enterprises Ltd.
PC Ukraine Holdings Ltd.
Plaza Centers Ukraine Ltd.

Inactive
Inactive
Inactive

100% held by PC Ukraine Holdings Ltd.

113

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

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.)
P.L.A.Z.A B.V.
Plaza Centers Polish Operations B.V.
Plaza Centers administrations b.v.
Plaza Centers Management B.V.
Plaza Centers Connections B.V.
Dambovita Centers Holding B.V.
Plaza Centers Engagements B.V.
Plaza Bas B.V.
Plaza Centers Foundations B.V.
Plaza Centers Logistic B.V.
S.S.S. Project Management B.V.
Obuda B.V
Plaza Cenetrs Establishment B.V.
Plaza Centers (Estates) B.V.
Plaza Centers Holding B.V.
Plaza Centers Investments B.V.
Plaza Centers (Ventures) B.V.

Holding company
Finance company
Holding company
Inactive
Holding company
Inactive
Holding company
Inactive
Holding company
Inactive
Holding company
Inactive
Inactive
Inactive
Inactive

Holding company
Inactive
Inactive
Inactive

100% held by Plaza Dambovita Complex B.V.
Holds Fantasy Park subsidiaries in CEE
100% held by Mulan B.V.

100% held by Plaza Centers Polish Operations B.V.

100% held by Plaza Centers N.V.

50.1% held by Plaza Centers N.V.

100% held by Obuda B.V.

114

CYPRUS – INDIA

ACTIVITY

REMARKS

Directly wholly owned
PC India Holdings Public Company Ltd.

Holding company

Indirectly or jointly owned
Permindo Ltd.
HOM India Management Services Pvt. Ltd.

Holding company
Management company

100% held by PC India Holdings Public Company Ltd.
99.99% held by PC India Holdings Public Company Ltd.

Elbit Plaza India Real Estate Holdings Ltd.

Holding company

Polyvendo Ltd.
Elbit Plaza India Management Services Pvt. Ltd.
Vilmadoro Ltd.
Kadavanthra Builders Pvt. Ltd.

Holding company
Management company
Holding company
Mixed-use project

Aayas Trade Services Pvt. Ltd.

Mixed-use project

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.
100% held by Elbit Plaza India Real Estate Holdings Ltd.
100% 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

UNITED STATES OF AMERICA

ACTIVITY

REMARKS

Indirectly or jointly owned
Elbit Plaza USA II LP (EPUS II)

Holding company

EPN REIT II

Inactive

Equity accounted investee: 50% held by Plaza Centers N.V.
50% held by Elbit Imaging Ltd.
Company under liquidation
100% held by Elbit Plaza USA II LP (EPUS II)
Company under liquidation

FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

NOTE 32

Entities disposed or dissolved in 2016 and 2017

HUNGARY

ACTIVITY

REMARKS

Plaza House Ingatlanfejelsztesi Kft.

Office building

David House - Sold 02/2017

POLAND

ACTIVITY

REMARKS

Suwalki Plaza Sp. z o.o.

Operating shopping center

Legnica Plaza - Sp. z o.o.

General Partner

Legnica Plaza Spolka z ograniczona
odpowiedzialnoscia S.K.A.
Bydgoszcz Plaza Sp. z o.o.

Fantasy Park Poland Sp. z o.o.

ROMANIA

Operating shopping center

Holding company

Inactive

ACTIVITY

S.C. Elite Plaza S.R.L.

Shopping center project

S.C. North Eastern Plaza S.R.L.

Shopping center project

S.C. Palazzo Ducale S.R.L.

Inactive

100% held by Plaza Centers Polish Operations B.V.
Suwalki Plaza project - Sold 01/2017
General Partner of Legnica Plaza Spolka z ograniczona
odpowiedzialnoscia S.K.A and Legnica Plaza Spolka z
ograniczona odpowiedzialnoscia 1 S.K.A - Sold 10/2017
100% held by Bydgoszcz Plaza Sp. z o.o.
Torun Plaza project – Sold 10/2017
100% held by Plaza Centers Polish Operations B.V. -
Sold 10/2017
Liquidated 01/2017

REMARKS

Timisoara Plaza project - sold August 2017;
Company dissolved
Constanta Plaza project - sold August 2017;
Company dissolved
Company dissolved

SERBIA

Accent D.O.O.
Leisure Group D.O.O.

ACTIVITY

REMARKS

Inactive
Shopping center project

Company dissolved
100% held by Plaza Centers (Estates) B.V.
Belgrade Plaza (Visnjicka) project - Sold 02/2017

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FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFinancial statemen tsPLAZA CENTERS N.V. ANNUAL REPORT 2017

Company’s offices

Plaza Centers The Netherlands

Plaza Centers Romania

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: office@plazacenters.ro

Plaza Centers India

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

Plaza Centers N.V.

Prins Hendrikkade 48-S

1012 AC Amsterdam

The Netherlands

Phone: +31 20 344 9560

E-mail: info@plazacenters.nl

www.plazacenters.com

Plaza Centers Hungary

Bajcsy-Zsilinszky út 48.

1054 Budapest

Hungary

Phone: 36 1 610 4521

E-mail: info@plazacenters.com

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

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

Ernst & Young
144 Menachem Begin Rd.,
Tel-Aviv 6492102,
Israel
www.ey.com

Corporate solicitors in the UK

Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
United Kingdom
http://www.blplaw.com/

Greg Stonefield
Partner | Corporate & Securities
KWM Europe LLP (King & Wood Mallesons )
Octagon Point, St Martins Court, 5 Cheapside,
London EC2V 6AA
www.kwm.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

Baker Tilly Berk N.V.
Entrada 303 1096 ED Amsterdam
P.O. Box 94124
1090 GC Amsterdam
The Netherlands
www.bakertillyberk.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

Atlas Tax Lawyers
Weteringschans 24,
1017 SG Amsterdam
The Netherlands
http://atlas.tax/en/

Link Asset Services London
65 Gresham Street
London EC2V 7NQ
United Kingdom
https://www.linkassetservices.com/

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PLAZA CENTERS N.V. ANNUAL REPORT 2017

PLAZA CENTERS N.V.Prins Hendrikkade 48-S1012 AC Amsterdam, The NetherlandsPhone: +31 20 344 9560www.plazacenters.com