Valuation of certain assets and liabilities in accordance ...— Valuation or review of valuations of the fixed assets and real estate. We relied on information provided by the Company

21723982

AFI Europe NV Acquisition of Wilanow One Sp. z.o.o as of June 28, 2013 Valuation of certain assets and liabilities in accordance with IFRS3 for financial reporting purposes

August 2013 Reliance Restricted

A Member Practice of Ernst & Young Global

Dear Ariel,

In accordance with our engagement letter dated July 8, 2013, Ernst & Young (Israel) Ltd. is pleased to present the following report (the "Report") covering the identification and valuation of certain assets and liabilities of Wilanow One Sp. z.o.o (hereafter "Wilanow") acquired by AFI Europe NV (hereafter "AFI Europe") on June 28, 2013. Our work was performed giving consideration to applicable professional guidance and accounting standards, in particular consideration to IFRS 3 ‘Business Combinations’.

The Engagement was approved by Ariel Goldstein, CFO of AFI Europe NV.

The scope of our analysis included interviewing Management about the transaction; considering applicable economic, industry, and competitive environments; determining the cost of acquisition; identifying and allocating the assets and liabilities acquired in the transaction; selecting and implementing appropriate valuation methodologies in the analysis of the acquired assets; and preparing the following Report summarizing our recommendations of fair value, along with the data and significant assumptions on which these fair values were based. We have also provided, for illustrative purposes, an assignment of goodwill to the Acquirer.

EY prepared the Report solely for AFI Europe ("Client"). The Report is based solely on information provided by or on behalf of the Client. The Report is subject to limitations as provided in Appendix III hereunder. In particular, it should be noted that we have relied upon information provided by Management without carrying out any verification procedures. Any third party reliance on the Report would be on its own risk.

The members of our engagement team have no direct or indirect financial interest in the Company that is the subject of this assignment, nor do they have any direct or indirect personal interest with respect to the property or parties involved in the assignment. Neither our employment nor our compensation in connection with the report is in any way contingent on the recommendations reached or values estimated, and this report sets forth all of the assumptions and limiting conditions affecting the analysis, values, and recommendations contained herein.

We authorized Africa Israel Properties Ltd, the parent company of AFI Europe, to disclose this Report as part of its financial statements as of June 30, 2013.

We appreciate the opportunity to provide our valuation services to AFI Europe. Please do not hesitate to contact Einat Sperling at +972 (03) 568-7484 (e-mail: [email protected]) if you have any questions about this engagement or if we may be of any further assistance.

Yours sincerely;

Ernst & Young (Israel) Ltd.

Ernst & Young (Israel) Ltd. 3 Aminadav St. Tel-Aviv 67067, Israel

Reliance Restricted Mr. Ariel Goldstein, CFO AFI Europe NV Keizersgracht 604 , 1017 EP Amsterdam The Netherlands

August 2013

Abbreviations

Abbreviations

August 2013

AFI Europe or Company AFI Europe NV

AFI Properties Africa Israel Properties Ltd.

BS Balance Sheet

EY Ernst & Young (Israel) Ltd.

FS Financial statements

IAS International Accounting Standard

IFRS International Financial Reporting Standards

IFRS3 International Financial Reporting Standards No. 3, ‘Business Combinations’

Industry Residential real estate market in Poland

OPM Option Pricing Method

Management AFI Europe Management unless otherwise specified

MGPA or the Seller Macquarie Global Property Advisors investment fund

NAV Net Asset Value

NBP National Bank of Poland

PLN The Polish Zloty currency

PPA Purchase Price Allocation

Report This report, dated August 2013

Target or Wilanow Wilanow One Sp. z.o.o Transaction AFI Europe acquisition of Wilanow shares on June 28, 2013

EUR or € The Euro currency

Valuation Date or Acquisition Date June 28, 2013

Contents

Contents

August 2013

Executive summary 1

1. Valuation results ......................................................................................................................................... 2

2. Our Engagement ........................................................................................................................................ 3

Background 6

3. Transaction overview ................................................................................................................................. 7

4. Economic and industry analyses ............................................................................................................... 8

5. Business analysis ..................................................................................................................................... 11

6. Historical financial data ............................................................................................................................ 12

Purchase price allocation 13

7. Summary of values ................................................................................................................................... 14

8. Total consideration ................................................................................................................................... 15

9. Recognition process ................................................................................................................................. 18

10. Assets recognition .................................................................................................................................... 19

Appendices 20

11. I: General valuation approach ................................................................................................................. 21

12. II: Option Method Pricing ......................................................................................................................... 23

13. III: Limitations ............................................................................................................................................ 24

14. IV: Engagement team education details ................................................................................................. 27

Exhibits 28

15. A: Historical BS ......................................................................................................................................... 29

Executive summary

August 2013 AFI Wilanow PPA 080713 signed.docx

1

Executive summary

1. Valuation results

2. Our Engagement

Executive summary : Valuation results

Valuation results


2

We understand that on June 28, 2013, AFI Europe announced that it has entered into agreement to acquire the remaining 70% of Wilanow One Sp. z.o.o ("Wilanow") (the "Transaction"). As a result, AFI Europe gained control in Wilanow One, and currently owns 100% of Wilanow shares.

We further understand that as a result of this transaction, AFI Europe Management is required to allocate the purchase price paid to the assets acquired, and liabilities assumed from Wilanow giving consideration to IFRS 3 and IAS 38.

The objective of our engagement was to provide recommendations of fair value for the acquired assets and assumed liabilities as of the Valuation Date to assist Management with its allocation of purchase price.

Based on our analysis, our recommended fair values as of the Valuation Date assigned to the assets acquired from Wilanow are presented in the table below: Summary of values Currency: €000 Fair Value Comments Consideration paid 1,000 AFI Europe's previous ownership 5,078 Total consideration 6,078 Equity and shareholders loan 10,128 (1) FV assets adjustments Inventory step up 243 (1) Equity, adjusted 10,371 Implied goodwill (4,292) Total consideration 6,078 Source: Intangible assets valuation Ref: Additional Annual - Section SV - Summary of Values

(1) Provided by Management

Our valuation was based on information and financial data provided by Management and is subject to the attached Statement of Limiting Conditions Appendix III.

Executive summary : Our Engagement

Our Engagement


3

Objective and Purpose At the request of AFI Europe Management, EY performed an allocation of the excess purchase price paid in the acquisition of Wilanow’s shares by AFI Europe.

We understand that the transaction will be accounted for by the Company management as a business combination. Consequently, we understand that the result of our analysis will be used solely for the purpose of assisting the Companies management in its allocation of the total purchase price among the assets acquired for the financial accounting purposes in accordance with IFRS 3 (Business Combinations).

The purpose of our work is to identify and value of Wilanow's assets and liabilities, following its acquisition by AFI Europe, according to IFRS 3 ‘Business Combinations’, unless otherwise mentioned. Scope The scope of our engagement included:

� Interviews with management of AFI Europe to understand the rationale for completing the Transaction;

� Consideration of the industry, as well as the economic and competitive environments in which Wilanow operates, including relevant historical and future estimated trends;

� Determining the cost of acquisition;

� Valuation and analysis of the intangible assets acquired, giving consideration to the methods and techniques we consider appropriate under the circumstances;

� Preparation of a narrative report summarizing the methodologies employed in our analysis, the assumptions on which our analysis were based, and our recommendations of fair value of the Intangible Assets and deferred revenues ("Report").

We have excluded the following items from the scope of our engagement:

� Valuation or review of valuations of the fixed assets and real estate. We relied on information provided by the Company (see "sources of data" section").

� The computation of deferred-tax liabilities arising from the fair value adjustment.


Our Engagement


4

Standard, premise and definition of value According to IFRS 3, the premise of value to be used in the application of purchase accounting rules is fair value. According to definition in IFRS 13, fair value is defined as:

'The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.'

In addition, IFRS 3 specifies that fair value should reflect market expectations about the probability that the future economic benefits associated with the asset will flow to the acquirer. Therefore, any analysis should generally reflect assumptions which would be common to any market participant if it were to buy or sell each identified asset on an individual basis.

Thus, the fair value should be determined with reference to ‘market participants’ in general, but exclude synergistic values that are unique to a particular buyer. In this context, market participants would include potential buyers that have an ability to acquire and would take an active part in managing the acquired company. Such ability would be evaluated in the context of financial ability as well as a plausible post-combination operating strategy.

In accordance with this definition of fair value, all financial projections used in the valuations should exclude acquirer-specific synergies but include those common to market participants.

Sources of data

We considered financial information, contracts and other documents pertaining to this transaction in our valuation analysis. We also held conversations with several members of Management during the course of our engagement. With respect to documentation about AFI Europe, we inquired about, and gave consideration to press releases; web site content; and industry reports; and other documentation (such as public disclosure filings).

The primary sources of information on which our analysis was based include the following:

� Conversations held with Management.

� Wilanow's unaudited financial statements, as of December 31, 2012.

� Wilanow's unaudited financial statements, as of June 28, 2013.

� Valuation of real estate prepared by CBRE Sp. z o.o., as of June 28, 2013

� Other information provided by Management.

� Other public information


Our Engagement


5

Limitations In accordance with our engagement letter and the transmittal letter that accompanies this Report, our analysis is subject to the limiting conditions contained in Appendix III. Additionally, this Report, the conclusions contained herein and the associated exhibits and appendices should not be read or utilized in any way without consideration of these limiting conditions.

Background


6

Background

3. Transaction overview

4. Economic and industry analyses

5. Business analysis

6. Historical financial data

Background : Transaction overview

Transaction overview


7

Context of our engagement On June 28, 2013, AFI Europe has entered into agreement to acquire the remaining 70% of Wilanow from MGPA. As a result, AFI Europe gained control in Wilanow, and currently owns 100% of Wilanow shares.

Transaction rationale We understand that the rationale for completing the transaction was based on an opportunity created, as of AFI Europe's best of knowledge, following MGPA's decision to terminate its business activities in Poland, and their decision to cease any additional funding of Wilanow.

Wilanow’s holdings structure Source: Management

AFI Europe

Wilanow

MGPA

30 % 70%

Wilanow

AFI Europe

100%

Pre - acquisition Post - acquisition

Background : Economic and industry analyses

Economic and industry analyses


8

Economic overview 1 Wilanow operates in developing and marketing residential units in Poland.

Poland – overview2

With an area of 312,679 km² Poland is the 6th largest country in the EU and 69th in the world. Poland is inhabited by 38.2 million people. 61% of the population lives in urban areas. The largest conurbations in Poland are the Upper Silesian Conurbation inhabited by 3.5 million people (Katowice with population of 0.3 million) and the Warsaw Conurbation with 3 million inhabitants (Warsaw – 1.7 million). The remaining major cities are Kraków (0.7 million), Łódź (0.7 million), Tricity (0.7 million), Wrocław (0.6 million) and Poznań (0.5 million).

After the shift to a market-based economy in the early 1990s, the Polish economy experienced nearly two decades of 5% annual growth. Unemployment fell dramatically from 19.9% in 2002, to 7.1% in 2007, and the Polish mortgage market exploded. Outstanding housing loans increased from 1.3% of GDP in 2000, to 16% of GDP in 2009. When Poland joined the European Union in April 2004, a massive house price boom was unleashed. Having been rather static, property prices suddenly surged in Warsaw by 23% in 2005, 28% in 2006, 45% in 2007, and 13% in 2008. Some other cities such as Wroclaw saw even larger house price rises. Joining the EU prompted purchases by foreigners, who are however limited to one dwelling each, and encouraged remittances by Poles working abroad. As the money flowed in, the Zloty gradually moved up against major currencies, encouraged also by lower inflation. From 2001 onwards, a large proportion of housing loans were foreign currency-denominated. The foreign currency-denominated proportion rose from 9% in 1999, to 50% in 20013.

Economic performance4 With 2010 GDP growth of 3.9% a year and of 4.5% for 2011, Poland boasted as a dynamic economy in the European Union. However, Poland's output growth slowed in 2012 as troubles in the euro zone and declining domestic demand weighted on an economy that has been one of Europe's most resilient.

The GDP real growth for 2012 was 1.9%. According to preliminary estimations of the Central Statistical Office of Poland, the GDP growth in 2013 will amount to 1.1%, the lowest figure since 1991. This downturn is largely driven by unfavourable developments in Europe, including massive debt problems.

The unemployment rate in 2012 was 10.1%, compared to 9.6% in 2011.

1 Source: Global Insight, updated to July 2013 2 Cushman & Wakefield., MARKETBEAT, "Polish real estate market report", H2 2012.

3 Global property guide – Europe Poland http://www.globalpropertyguide.com 4 Source: Inflation Report, National Bank of Poland, July 2013

Nominal Poland GDP Source: Global Insight, updated to July 2013

470516 490 499 513

593671

764

0

100

200

300

400

500

600

700

800

900

2010 2011 2012 2013 2014 2015 2016 2017

US$ B

Nominal GDP




9

The local currency5

The Zloty has been fairly volatile in the year 2012, attributed strongly to developments in Europe's debt crisis. In January 2012 the Zloty crossed the rate PLN4.5/EUR1. In December 2012 it approached to PLN4/EUR1, but this reflected more the Euro's weakness rather than the Zloty's strength. Since the beginning of March 2013 the nominal Zloty exchange rate has weakened by 5% against the Euro. In June 2013 the exchange rate was PLN 4.3/EUR1. According to NBP projections, the exchange rate of the Zloty will remain relatively stable in the medium and long terms.

Interest and inflation6

The inflation in 2012 was 3.7%, compare to 4.3% in 2011. Falling inflation and reduction of interest on mortgage loans following it, were key factors in the market environment in 2012. In April 2013, the interest on mortgage was 4.5%-5% in most banks, compared to 6%-7% twelve months earlier. Due to the fact that great majority of mortgages are taken in Polish Zloty, each reduction of interest rates means growth of creditworthiness.

Industry overview7 Residential projects

The major factor impacted the actions in the market in 2012 was the introduction of a new act on protection of the residential buyers' rights in April. The act aims at protecting the rights of purchasers, changing the relations between the developer, the client and the bank, including the usage of escrow accounts. In addition, at the end of 2012 the "Family on its own" program, a governmental mortgage loan subsidy program expired which also strongly impacted the buyers in the final months of 2012.

The beginning of 2013 is characterized by a drop in the number of new dwellings released to the market, a minor decrease in sold units and dynamically shrinking offer.

Supply - six major polish metropolis

In 2012, six major primary residential markets launched sales in excess of 35,600 dwellings to the market, 5% less than in 2011 and 15% more than 2010. In Q1 2013 these cities launched sales of 4,700 dwellings which was the lowest figure since Q3 2009.

5 Source: Inflation Report, National Bank of Poland, July 2013 6 Source: REAS. Residential Market in Poland , Q1 2013 7 Source: REAS. Residential Market in Poland , Q4 2012 and Q1 2013

Statistics of residential constructions in Poland Source: GUS Central Statistical Off ice Of Poland

0

50

100

150

200

250

300

Num

ber o

f unit

s (00

0's)

Dwelings delivers Dwelings started Building permits




10

Reduced demand for housing was accompanied with a visible decline in the number of units introduced on the market. In the first five months of 2013, the number of granted building permits and the number of dwellings in which construction has begun decreased in 26% and 30%, respectively8.

Demand and prices - six major polish metropolis

In 2012, the aggregate sales in the six markets exceeded 30,600 units, an increase of 3% compared to 2011. In Q1 2013 the total number of transactions calculated for the six largest markets decreased relative to Q4 2012 by 11% and approached 7,400.

Nominal apartment prices continued to decline slowly. On the primary market, the average price of apartments in 2012 decreased by 0.8% to PLN 7,564 per sqm. On the secondary market, the average price of apartments decreased by 2% in 2012 to PLN 8,010 per sqm9.

The chart to the left presents the average prices in the six largest residential markets in Poland over the last nine quarters. Over this period the average price of a residential unit decreased by 6.3%.

8 Source: Central Statistical Office Of Poland 9 Source: Real Estate Market Report, OBER HAUS real estate advisors, 2013

Average prices of residential units in the market offer Source: REAS

:

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13

Aver

age P

rice (

PLN/

sqm)

Lodz Poznan Tri-City

Wroclaw Krakow Warsaw

Background : Business analysis

Business analysis


11

AFI Europe NV Africa Israel Properties Ltd engages in the initiation, construction, rental, and operation of industrial, office, and commercial buildings primarily in Israel. Africa Israel Properties is a public company listed on Tel Aviv stock exchange.

AFI Europe NV stands as the European branch of AFI Properties and engages in the development and investment of commercial and residential real estate projects in the Czech Republic, Serbia, Romania, Bulgaria, Germany, Latvia, and Poland. It operates office complexes, shopping malls, business and logistics parks, and residential projects. The company was founded in 2006 and is based in Netherlands.

Wilanow Wilanow is a real-estate development company operating a residential project in Warsaw. The project consists of two existing residential buildings and a development land designated for residential and retail uses, with an aggregated area of 183,832 sqm.

The exiting part of Wilanow complex consists of two buildings, with usable area of approximately 14,340 sqm and 6,214 sqm respectively. Existing buildings provide in total 275 apartments. Both phases were completed in 2009 and 2010, respectively.

The plot with an area of 168,633 sqm is designated to be developed with a residential estate with retail component. As of the Valuation Date, the plot is undeveloped.

Background : Historical financial data

Historical financial data


12

Historical financial data

The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

BS Inventory

The inventory includes a plot and the remaining inventory of 6 housing units.

Loans and borrowing

Wilanow is financed primarily through commercial banks and shareholders loans. The Loans and borrowings include a bank loan with an interest of WIBOR + 2.5% and shareholders loans from MGPA and AFI Europe with interest rates of 15% (senior loans), 5% and Euribor +3.0%.

Equity

The Company's equity decreased from EUR(13,850) thousand in December 31, 2012 to EUR(20,430) thousand in June 28, 2013.

Selected BS figures Currency: €000 31/12/2012 28/06/2013 Inventory of buildings 41,883 21,171 Working Capital 237 (1) Investment property under development - 15,009 Property and equipment 305 256 Loans and borrowings 27,200 26,308 Shareholders loans 29,913 30,558 Equity (13,850) (20,430) Source: Financial statement Ref: Basic Data - BS - Section BD - Basic Data

Shareholders loans as of the Valuation Date Currency: €000 AFI Europe MGPA Total Senior shareholders loans 4,888 4,082 8,970 Other shareholders loans 6,481 15,108 21,588 Total 11,368 19,190 30,558 Source: Financial statement Ref: Basic Data - BS - Section BD - Basic Data

Purchase price allocation


13

Purchase price allocation

7. Summary of values

8. Total consideration

9. Recognition process

10. Assets recognition

Purchase price allocation : Summary of values

Summary of values


14

Summary of values Based on our analysis, our recommended fair values as of the Valuation Date assigned to the assets acquired from Wilanow are presented in the table below: Currency: €000 Fair Value Comments Consideration paid 1,000 AFI Europe's previous ownership 5,078 Total consideration 6,078 Equity and shareholders loan 10,128 (1) FV assets adjustments Inventory step up 243 (1) Equity, adjusted 10,371 Implied goodwill (4,292) Total consideration 6,078 Source: Intangible assets valuation Ref: Additional Annual - Section SV - Summary of Values

(1) Provided by Management

Purchase price allocation : Total consideration

Total consideration


15

Consideration The total consideration is EUR6,078 thousand, consists of:

1 Cash consideration of EUR1,000 thousand paid on the closing date, and;

2 AFI Europe pre-acquisition ownership, valued at EUR5,078 thousand.

Pre acquisition ownership valuation method Valuation of Wilanow

� Since Wilanow is a project real estate company, out of the main three approaches to value Wilanow we based our analysis on the Cost Approach, specifically the Net Asset Value Method (NAV), where we valued at fair value Wilanow assets, less Wilanow liabilities.

� Inventory

– Inventory of land – Per Management, the book value of inventory of land is based on a preliminary sale agreement from July 4, 2013 and presented on its net fair value (after selling costs). The terms of the agreement were known as of the Valuation Date. The value is also supported by an appraisal provided by Management, prepared by CBRE Sp. z.o.o.

– Inventory of housing units – We relied on appraisal provided by Management as of June 28, 2013. We did not independently investigate or otherwise verified these appraisals. We received a real estate appraisal, prepared by CBRE Sp. z.o.o. The valuation method applied was the market approach. The appraiser took into account selling efforts.

� Investment property under development – The land under development is part of the land classified as inventory and its book value is based on the same sale agreement. The adjustment for net fair value of the investment property under development is the reduction of selling costs, based on Management assumptions.

� Loan from bank – Per Management, current quotes received from the bank for the same loan are at the same interest rate. Based on this information we estimated that the loan's book value is fairly represents the market value.

� Deferred tax liabilities – Wilanow has unused tax carry forward losses in a total amount of EURO3 million. Therefore, there is no liability arising from the inventory step up was estimated. Per Management, a deferred tax asset was not recognized since it was not probable that a taxable profit will be available. Therefore no tax asset was added to Wilanow's value.

Please refer to the table on the left for Wilanow NAV calculation.

Wilanow NAV Currency: €000 Fair Value Equity and Shareholders loan 10,128 FV assets adjustments Inventory step up 243 Investment property under development - Selling costs 1.5% (225) Wilanow NAV 10,146 Source: Intangible assets valuation Ref: Addit ional Annual - Section SV - Summary of Values

Inventory of housing units Currency: €000 Fair value Fair value 1,144 Book value 901 Difference 243 Source: Management Ref: Addit ional Annual - Section SV - Summary of Values


Total consideration


16

Valuation of AFI Europe ownership in Wilanow

AFI Europe signed a preliminary sale agreement to sell the remaining land. Per Management, the agreement is subject to an approval of the board and investment committee of the buyer. Since there is a probability AFI Europe will not complete the sale, the pre-acquisition ownership in Wilanow was valued considering two scenarios, sale and self development.

Scenario I – Sale

� The sale of the land is supposed to be completed in March 2014, if approved. Since the time to liquidation event is imminent, we based our analysis on the Current-Value Method.

� The Current-Value Method is allocation of the current company value to the various shareholders based on the liquidation order.

� The table to the left presents the shareholders loans. The loans include the interest that will be accumulated until March 2014.

� The value of AFI Europe previous acquisition ownership was calculated based on the net asset value of Wilanow of EUR10,146 and discounted to the Valuation Date utilizing Poland risk free rate, for 9 month of 2.8%.

Scenario II – Self development

� Since AFI Europe ownership in Wilanow includes shareholder loans and equity, and since shareholders loans were not on a pari passu basis between AFI Europe and MGPA, to value AFI Europe pre acquisition ownership in Wilanow, for the self development scenario we based our analysis on Option Pricing Method (OPM) (for a detailed description of the valuation method, please see Appendix II).

� OPM assumptions:

– The underlying asset for the model is the value of Wilanow of EUR10,146 thousands.

– Time to liquidation event – Based on Management estimation, liquidation will occur in September 2016, meaning 3.5 years, which represents the end of the development.

Shareholders loans as of March 2014 Currency: €000 AFI Europe MGPA Total

Senior shareholders loans 5,428 4,534 9,961 Shareholders loans 6,680 15,572 22,252 Total 12,108 20,106 32,213 Source: Consideration valuation Ref: Addit ional Annual - Section SV - Summary of Values


Total consideration


17

– Volatility is estimated based on stock volatilities of comparable companies. Volatilities of four public comparable companies in the residential real estate market in Poland10 were calculated based on daily information of traded share prices. We applied the median volatility of 50%.

– The risk-free rate of 3.3% is based on the yield of Poland government treasury bonds corresponding to the terms described above.

� The table to the left presents the liquidation order of the loans and equity. The loans include the interest accumulated until liquidation event.

Summary � Based on our analysis as follows, AFI Europe pre-acquisition ownership was valued at EUR5,078

thousand: Currency: €000 Probability Value Weighted value I - Sale 45% 5,370 2,417 II - Self development 55% 4,839 2,662 AFI Europe's previous ownership 5,078 Source: Consideration valuation Ref: Additional Annual - Section SV - Summary of Values

� The weighted average between the scenarios was based on Management assumptions.

� The table below presents the sensitivity analysis performed on AFI Europe pre-acquisition ownership considering different probabilities to the sale scenarios:

`Currency: €000 Probability for sale 35% 40% 45% 50%

5,025 5,052 5,078 5,105 Source: Consideration valuation Ref: Additional Annual - Section SV - Summary of Values

10 The comparable companies are Polnord Spolka Akcyjna, UNIBEP SA, Ronson Europe N.V. and Triton Development Spolka Akcyjna.

Liquidation order Currency: €000 Lower range Upper range Comment S1 - 14,630 Senior shareholders loans S2 14,630 39,501 Shareholders loans S3 39,501 Infinity Common shares Source: : Consideration valuation Ref: Consideration - Section SV - Summary

Purchase price allocation : Recognition process

Recognition process


18

Intangible asset definition The analysis of acquired intangible assets was performed in accordance with IFRS 3 and IAS 3811.

IAS 38 defines an intangible asset as ‘an identifiable non-monetary asset without physical substance’.

In order to determine which intangible assets should be recognized and valued in AFI Europe's consolidated financial statements, we have first listed the potential intangible assets of Wilanow based on our understanding of the facts and circumstances of the transaction, using as a basis IFRS 3 ‘Illustrative examples of items acquired in a business combination that meet the definition of an intangible asset’.

Identification criteria

An intangible asset can be recognized if it meets the identifiability criterion, as defined in IAS 38 paragraphs 11-12:

‘An asset meets the identifiability criterion in the definition of an intangible asset when it:

(a) is separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability; or

(b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations’.

Intangible assets not recognized � Trade names – The trade name "Wilanow One" has insignificant value, since Wilanow developed only

one project and sales volume is low in comparison to the total Polish residential market. � Customer relationships – Wilanow's existing customers are non-recurring and therefore were not

considered as an intangible asset.

Based on our analysis, we determine that no intangible assets arising from the acquisition as of the valuation date, as none of the intangible assets examined met the IFRS 3 and IAS 38 requirements.

11 IAS 38, paragraphs 8-17 - Definitions

Purchase price allocation : Assets recognition

Assets recognition


19

Tangible assets recognized According to IFRS3, allocation of purchase price should be measured at fair value, according to the assets and liabilities acquired.

Based on discussion with Management Wilanow’s financial assets and liabilities are presented at fair value as recorded in its balance sheet as of June 28, 2013, the following asset was revalue:

� Inventory of housing units – Please refer to total consideration section.

Appendices


20

Appendices

11. I: General valuation approach

12. II: Option Method Pricing

13. III: Limitations

14. IV: Engagement team education details

Appendices : I: General valuation approach

Appendix I - General valuation approaches


21

Overview Intangible and tangible assets should be valued based on the appropriate application of the Income, Market, and Cost Approaches. Although all three approaches should be considered in a valuation analysis, the fact pattern surrounding the acquisition, the nature of the assets, and the availability of data will dictate which approach—or approaches—are ultimately utilized to calculate the value of each intangible and tangible asset.

Market approach The Market Approach measures value based on what other purchasers in the market have paid for assets that can be considered reasonably similar to those being valued. When the Market Approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the comparable assets to compensate for differences between those assets and the asset being valued. The application of the Market Approach results in an estimate of the price reasonably expected to be realized from the sale of the asset.

In practice, sales prices, especially for intangible assets and specialized tangible assets, are rarely available since these are typically transferred as part of the sale of a business, not in piecemeal transactions. Furthermore, because many assets are often unique to a particular enterprise, a comparison between enterprises is difficult.

For these reasons, it is often problematic to apply the market approach for the valuation of intangible assets and many specialized tangible assets. It is however typically used for assets that are commonly traded in the market such as certain real property assets, general plant and equipment, motor vehicles, etc.

Income approach The Income Approach focuses on the income-producing capability of the identified asset. The underlying premise of this approach is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the asset. The steps followed in applying this approach include estimating the expected after-tax cash flows attributable to the asset over its life and converting these after-tax cash flows to present value through “discounting.” The discounting process uses a rate of return that accounts for both the time value of money and investment risk factors. Finally, the present value of the after-tax cash flows over the life of the asset is totaled to arrive at an indication of fair value.

Discounted cash flow and capitalization approaches are commonly used to determine the fair value of intangible assets and of income producing real property assets such as commercial office buildings, etc.

Appendices : I: General valuation approach

Appendix I - General valuation approaches


22

The income approach is generally not considered to be appropriate to determine values for plant & equipment assets because it is not usually feasible to attribute income to an individual property unit or the units of equipment that constitute an operating entity, since the assets contribute to earnings only in concert with all other economic factors of the business.

Cost approach The Cost Approach is based on the premise that a prudent investor would pay no more for an intangible asset than its replacement or reproduction cost. The cost to replace the intangible asset would include the cost of constructing a similar intangible asset of equivalent utility at prices applicable at the time of the valuation analysis. This estimate may then be adjusted by losses in value attributable to obsolescence (physical, functional and/or economic).

Appendices : II: Option Method Pricing

Appendix II - Option pricing Method


23

The Option-Pricing Method The OPM treats common share and preferred share as call options on the enterprise’s value, with exercise prices based on the liquidation preference of the preferred share. Under this method, the common share has value only if the funds available for distribution to shareholders exceed the value of the liquidation preference at the time of a liquidity event (for example, merger or sale), assuming the enterprise has funds available to make a liquidation preference meaningful and collectible by the shareholders. The common share is modeled as a call option that gives its owner the right but not the obligation to buy the underlying enterprise value at a predetermined or exercise price. In the model, the exercise price is based on a comparison with the enterprise value rather than, as in the case of a “regular” call option, a comparison with a per-share share price. Thus, common share is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred share is liquidated. The OPM has ordinarily used the Black-Scholes model to price the call option. The OPM considers the various terms of the shareholder agreements, including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations, upon liquidation of the enterprise. In addition, the method implicitly considers the effect of the liquidation preference as of the future liquidation date, not as of the valuation date. Under the OPM, each class of share is modeled as a call option with a distinct claim on the enterprise value of the Company. The exercise price of the option represents the proceeds a security holder would receive at a distribution event of the firm. Typically, the exercise price occurs at the point where the allocation of firm value changes between the various securities holders. For example, a firm that has non-convertible preferred and ordinary equity would have only one exercise price, determined by the liquidation value of the preferred. Below value of liquidation of the preferred, all of the value of the firm would belong to the preferred holder, but any firm value above the liquidation value of the preferred would belong to the ordinary equity holder.

Appendices : III: Limitations

Appendix III - Limitations


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General limitations to our engagement � The valuation was provided to Management for the above purpose only and should not be used or

relied upon for any other purpose, nor should it be disclosed to, or discussed with, any other party (except relevant statutory authorities or professional advisers acting in that capacity provided that they accept that we assume no responsibility or liability whatsoever to them in respect of the contents) without our prior consent in writing.

� We have not independently investigated or otherwise verified the historical and forecasted data provided to us. We do not express an opinion or offer any form of assurance regarding the accuracy of data or its completeness. No audit, even limited, has been carried out. We have considered the information provided as reliable and accurate. We have assumed that the information provided to us presents a fair image of the Wilanow’s activities and the assets being valued at the acquisition date. Therefore, EY will accept no responsibility for any error or omission in the Report arising from incorrect information provided by Management or in respect of the failure of forecasts to be achieved.

� The financial information used in the preparation of the Report reflects Management's judgment, based on present circumstances, as to the most likely set of conditions and the course of action it is most likely to take. It is usually the case that some events and circumstances do not occur as expected or are not anticipated. Therefore, actual results during the forecast period will almost always differ from the forecasts and as such differences may be material. To the extent that our conclusions are based on forecasts, We express no opinion on the achievability of those forecasts.

� EY is not aware of any contingency, commitment or material issue which could materially affect Wilanow's economic environment and future performance and therefore, the fair value of Wilanow's assets and liabilities.

� The valuation date is June 28, 2013 therefore; the Report does not provide any guidance for the value of the assets at any other date.

Statement of limiting conditions 1. Subject to the other limitations set forth below, nothing has come to our attention to cause us to

believe that the facts and data set forth in this Report are not correct. 2. This Report is based on, and limited to, our knowledge and experience with the valuation and other

issues addressed herein. We did not conduct an audit, review or compilation of any historical or prospective financial information included in this Report in accordance with accounting standards. Accordingly, we do not express an opinion or offer any form of assurance as to such information. This Report is not a fairness opinion, investment advice, or legal advice. This Report is not




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intended to be used, and neither you nor any other taxpayer may use it, to avoid penalties that may be imposed under applicable tax laws.

3. We did not investigate title to the business or assets the subject of this Report. We have relied on representations of the owner with respect thereto and we may assume that (i) title is good and marketable, (ii) the business or assets are not subject to any liens or encumbrances, (iii) there is full compliance with all applicable. We assume no responsibility for any legal description of any property.

4. This Report has been prepared solely for the purpose set forth in the applicable Statement of Work

and may not be used for any other purpose. Neither this Report, nor any portion, abstract or summary hereof, may be disclosed publicly through any other public (or private) media without our prior written consent.

5. Our recommendations of fair value are as of the effective date specifically set forth in this Report.

Changes in market conditions could result in substantially different valuations than those indicated at the effective date. We assume no responsibility for changes in market conditions after the effective date and we have no obligation to update the Report, or our recommendations, analyses, conclusions or other documents relating to our services after the effective date for any reason.

6. We assume no responsibility for the inability of the owner to locate a purchaser for its business or assets at the value set forth in this Report.

7. We have been provided with written and oral information, as well as data in electronic form,

relating to the business or assets that we analyzed. We have relied upon this information to prepare this Report and have no responsibility to verify independently its accuracy or completeness. We assume no responsibility for the completeness or accuracy of information furnished by others, including your management.

8. We may have derived certain historical financial data used in our valuation from audited and/or unaudited financial statements, which are the responsibility of management. Financial statements may include disclosures required by generally accepted accounting principles. We have not verified independently the accuracy or completeness of the data we derived and do not express an opinion or offer any form of assurance as to it or the underlying financial statements.

9. The estimates of cash flow data included herein are solely for use in the valuation analysis and are

not intended for use as forecasts or projections of future operations. We have not performed an examination or compilation, nor have we performed an agreed-upon procedures engagement, with




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respect to the cash flow data in accordance with any accounting standards and, accordingly, do not express an opinion or offer any form of assurance as to that data or their underlying assumptions. Furthermore, estimated and actual results will usually differ because events and circumstances frequently do not occur as expected, and those differences may be material.

10. We assume no responsibility for any financial or tax reporting judgments, which are the responsibility of management.

11. We are not required to furnish additional work or services, or to give testimony, or be in attendance

in court with reference to the business or assets we analyzed or this Report. 12. We have not made any determination whether there have been any violations of fraud and abuse

laws or regulations or any other law. We assume no responsibility to provide any legal advice and recommend that you consult your legal counsel with respect to legal matters.

Indemnity To the fullest extent permitted by applicable law and professional regulations, Africa Israel Properties Ltd and AFI Europe NV (together "AFI") shall indemnify EY, the other EY Firms and the EY Persons against all claims by third parties (including AFI affiliates) and resulting liabilities, losses, damages, costs and expenses (including reasonable external and internal legal costs) arising out of the disclosure of any Report (other than Tax Advice), or a third party’s use of or reliance on any Report (including Tax Advice). AFI shall have no obligation hereunder to the extent that EY have specifically authorized, in writing, the third party’s reliance on the Report.

Appendices : IV: Engagement team education details

Appendix IV - Engagement team education details


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Einat Sperling, Partner, Valuation and Business Modelling, TAS in Ernst & Young Israel. Einat is a Partner in the Valuation & business Modelling practice in Tel Aviv. Einat has been with Ernst & Young for 12 years at the Transaction Advisory Services group and has 14 years of experience.

Einat has served Ernst & Young’s clients in Israel and across the globe with Valuations, Modelling, Restructuring, and related financial advisory. Einat lead major valuation projects in the past few years for business, tax and accounting purposes including: Impairment tests, Purchase Price Allocation, ESOP according to IFRS and US GAAP. Einat was involved in transactions and valuation of businesses in different industries (Technology, Retail, Food and Beverages, Industrial products, Pharmaceuticals, Banking, Communications, Real Estate etc.) that resulted value of USD billions.

Einat has a BA in Economics and Administrative from the Technion – Israeli Institute of Technology, Haifa, and MBA from Recanati Business School in Tel-Aviv University. She is a Certified Public Accountant in Israel.

Exhibits


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Exhibits

15. A: Historical BS

Exhibits : A: Historical BS

Exhibit A - Historical BS


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Currency: €000 31/12/2011 31/12/2012 28/06/2013 Inventory of buildings held for sale-current 44,909 41,883 901 Trade and other receivables 6,742 3,713 3,763 Cash and cash equivalents 6 2 2 Investment property under development - - 15,009 Total current assets 51,658 45,598 19,675 Inventory of buildings held for sale- non current - 20,269 Property, plants and equipment 348 305 256 Deferred tax assets 1,553 836 - Total non-current assets 1,901 1,140 20,525 Total assets 53,559 46,739 40,200 Interest Bearing loans and borrowings 26,505 27,200 26,308 Shareholders loans 25,958 29,913 30,558 Trade and other payables 5,127 3,476 3,764 Total current liabilities 57,591 60,589 60,630 Total equity (4,032) (13,850) (20,430) Total equity and liabilities 53,559 46,739 40,200 Source: Financial statement Ref: Basic Data - BS - Section BD - Basic Data

Documents

Valuation of certain assets and liabilities in accordance ...— Valuation or review of valuations of the fixed assets and real estate. We relied on information provided by the Company