BRACK CAPITAL PROPERTIES NV · 1083 HN Amsterdam The Netherlands Chamber of Commerce No. 34250659 ....

BRACK CAPITAL PROPERTIES NV

CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

IN THOUSANDS OF EUROS

Company address:

Brack Capital Properties NV

Barbara Strozzilaan 201

1083 HN Amsterdam

The Netherlands

Chamber of Commerce No. 34250659


INDEX

Page

Board of Directors’ Report 3

Consolidated Statements of Financial Position 46 - 47 Consolidated Statements of Profit or Loss and Other Comprehensive Income 48 Consolidated Statements of Changes in Equity 49 - 50 Consolidated Statements of Cash Flows 51 - 53 Notes to Consolidated Financial Statements 54 - 126 Appendix to Consolidated Financial Statements - List of Material Subsidiaries 127 - 128

Company Balance Sheet 130 Company Income Statement 131 Notes to the Company Financial Statements 132 - 133 Other information 134 Independent Auditors' Report 135 Appendix Dutch corporate Governance Code 136

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


3

BOARD OF DIRECTORS’ REPORT

Preamble

Brack Capital Properties NV (hereinafter: "the Company") hereby submits the Board of Directors' report for a

period of twelve months ending on December 31, 2015 (hereinafter: "the Reported Period" or "the Report Period.

These financial statements have been prepared for statutory purposes in the Netherlands. The company has issued

shares (ISIN NL0009690619) and debentures (ISIN IL0011228603, IL0011283475 and IL0011330409) which

are traded on the Tel Aviv Stock Exchange in Israel.

These financial statements do not constitute an offer to subscribe for, buy or sell the securities mentioned herein.

It cannot be used or relied on for purposes of making any investment decision with respect to any securities.

For more current information regarding Brack Capital Properties NV, please consult the press releases, annual

reports, regulatory filings, presentations and other documents available at www.tase.co.il.

The financial statements attached in this report are presented according to International Standards – the IFRS and

as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.

The company securities were listed for trade on the Tel-Aviv stock Exchange ("TASE") in December 2010. Due

to the registration the company must comply with the Israeli Securities Law of 1968 and Securities Regulations

("ISL")and part of the Israeli Companies Law of 1999 ("ICL"). The company and its advisors' opinion is that in

general the regulatory environment in Israel is far more detailed and restricted than the one the company needs to

comply under the Dutch corporate Governance Code ("DCGC") with respect to most material aspects. It should

be mention that the company is forbidden from marketing its securities in Holland and who ever is interested in

the Company's securities must refer to the Company's official publications which are made public in the Tel Aviv

Stock Exchange Ltd ("TASE") official announcements' web site at: http://maya.tase.co.il ("Maya").

For detailed analysis of the company compaly with the DCGC please refer to the DCGC appendix.

All the data in this report refer to the consolidated financial statements unless otherwise stated.

In this report:

"The report date or "the date of the report" – December 31, 2015.

"Report signing date" or "the date of signing the report" – August 22nd , 2016.

"The reported period" – the year of 2015.

Below are the Company's principal results for the year ended December 31, 2015.

1. Profitability – in 2015, the Company's net income attributed to the Company's shareholders amounted to

EUR 63.4 million compared to income of EUR 38 million in 2014. The following is the contribution of income

producing real estate and residential development activities to the Company's results:

- Income producing real estate – in 2015, the FFO amounted to EUR 24.3 million compared to EUR 19.9

million in 2014. In the fourth quarter of 2015, the FFO amounted to EUR 6.54 million grossing up an annual FFO

of EUR 26.2 million.

- Residential development activity- in 2015, the contribution to profit in the Grafental project amounted to

EUR 13.7 million (consolidated) from the completion of delivering Stage A (21 flats), delivery of 63 flats from

Stage B1 and delivery of Stage B2 in full (79 flats and 713 m2 of commercial spaces).


4

2. Operating segments – key operational data1.

a. Residential development – Grafental project2

Stage Number of

flats

Expected

revenues

(EUR in millions)

Expected

income

(EUR in

millions)

Entrepreneurial

profit

(in percentage)

Sales (in

percentage)

Revenue

recognition

until now

A 202 81.1 14.0 21% 100% 100%

B1 118 56.4 11.7 26% 99.8% 50%

B2 79 30.0 6.3 26% 100% 100%

B3 107 55.2 11.6 27% 86% 0%

Total 506 222.9 43.9 %25 96% 60%

b. Income producing real estate3

Zoning

Area

(square

meters)

Actual

Return of

rental fees4

ERV

Return5

Actual NOI

return4

NOI return

according to

ERV6

Occupancy

rate

Residential 551 7.3% 9.1% 6.6% 8.3% 96%

Commercial 377 7.0% 7.5% 6.4% 7.0% 96%

Total 948 7.1% 8.2% 6.5% 7.6% 96%

- Residential: in the fourth quarter of 2015, rental fees increased by 4.5% from identical assets and 10 % in

rental fees per square meter in new rentals compared to the corresponding quarter in 2014. Due to the increased

rental fees in the residential market in Germany, the actual rental fees are lower by 16% than the rental fees

prevailing in the market.

- Commercial: from the beginning of the year agreements were signed with new tenants with an average

increase of 18% in rental fees per square meter and with an average agreement term of 10 years. In addition, the

Company commenced the process of betterment of several commercial centers (including Kaufland which is an

anchor tenant) by using existing construction rights (about 12 thousand sq.m) gradually while securing in advance

long term commitments with tenants.

3. Balance sheet structure and financial solvency –

a. Equity and NAV: The equity attributed to the Company's shareholders amounted to approximately EUR

345.5 million and the NAV7 amounted to EUR 411.5 million as of the report date.

1 As of the signing date of the report 2 Data according to 100%, the effective corporation's share in the project is 83%; sales include reservations.

3Assets consolidated in the Company's financial statements including transactions after the balance sheet date.

4Data of February 2016 in annual terms divided by the carrying values.

5ERV –estimated rental value – the expected annual return provided that all of the assets are leased in full occupancy in return for the rental

fees prevailing in the market

6Actual NOI plus the difference between actual rental fees and the ERV divided by the carrying values.

7EPRA NAV – for information regarding the index and the calculation manner see section 5 of part A.


5

b. Debt ratios: the LTV ratio8 is 52.9% and the debt ratio to net CAP9 is 58.11% as of the date of the report.

The EBITDA ratio to interest expenses (only from the income producing portfolio, excluding operating income

from entrepreneurship activity) is 2.88 in the fourth quarter of 2015.

c. Liquidity: cash and liquid balances amounted to approximately EUR 80.8 million as of the report date.

Concise description of the Corporation and its business environment

Areas of activity

The Company, its subsidiaries and associates companies (hereinafter, collectively: "the Group")

have been operating in the field of real-estate in Germany, in four primary activity sectors: residential income

producing real estate, commercial income producing real estate, entrepreneurship residential real estate in

Düsseldorf and betterment of land in Dusseldorf. Below are the details on the major developments in said sectors

(as occurred) in the reported period and until the signing date of the report:

Residential income-producing real-estate – as of the report date, the Group owns 9,900 apartments, with a total

leasing area of approximately 571,000 m2.

Commercial income-producing real-estate – as of the report date, the Group owns 32 commercial income-

producing properties10 in the commercial segment (offices and commerce) with an overall leasing area of

approximately 377,000 m2.

Entrepreneurship Residential Real estate in Düsseldorf

For details regarding the marketing, sales and performance of stage B (304 units) of the project, see "Material events

during the reported period".

Betterment of land in Dusseldorf - the Company owns 2 land complexes in Dusseldorf, Germany, undergoing

advanced procedures for changing the zoning from offices to residential. For details regarding the Company's

progress in the zoning changes of the lands in Dusseldorf, see the section Material events during the reported

period".

Property financing

The Company consistently works for maximizing the return-risk profile for its shareholders by

means, inter alia, of optimization of the capital/debt structure, both on property level and on corporation level. To

that end the Company uses the following sources: bank loans, bonds raising in Israel etc. Below are the details on

updates in the aforesaid financing methods (as occurred) in the reported period and until the signing date of the

report:

Bank loans – the Company has bank loans amounting to EUR 571,878 thousand. As of the report date, the average

rate of interest of these loans is approximately 2.1%. The average duration of the loans is about 3.2 years.

Bonds – the Company has three series of bonds (non convertible to shares) rated by S&P Maalot Ltd. (Maalot)

with AA-ating as of the signing date of the report: Series A at a scope of approximately NIS 285,760 thousand par

value with an interest (linked) of approximately 4.8% per year with an average duration of approximately 2.2 years,

series B at a scope of approximately NIS 220,000 thousand par value with an interest (linked) of approximately

3.29% per year with an average duration of approximately 4.5 years and Series C at a scope of NIS 100,122

thousand par value with an interest (linked) of approximately 3.3% per year with an average duration of

approximately 7.5 years.

8Net debt to total balance sheet, net

9For details regarding the calculation manner, see part E – designated disclosure to the bondholders, section 4c, the CAP ratio calculation in

this report. 10 In addition, there is property of an associate spanning over an area of 7,000 m2 in the city of Chemnitz.


6

Activity environment

For details regarding the activity environment of the Company in Germany, see section 1.6 of Chapter A

"Description of the corporation's state of affairs" which is attached to this periodic report.

Material Events in the Report Period

Extending agreements with an anchor tenant – in February 2015, the Company entered into an

agreement with the anchor tenant Kaufland to extend the existing lease agreements until 203011 in 4 commercial

assets (Aschersleben ,Bad Aibling ,Borken and Glauchau).

Leasing an entire office building after the betterment process – in March 2015, the Company

entered into an agreement with a governmental tenant for leasing all premises of the office building

Schanzenstrasse in Dusseldorf for 10 years after the completion of a betterment process. The annual rental fees

according to the agreement is EUR 720 thousand compared to EUR 485 thousand generated by the asset in 2014.

Purchase of residential portfolio in Kiel, northern Germany – on May 29, 2015, the Company

(through a sub subsidiary) entered into a notarized sale agreement with a third party that is not related to the

Company and/or to its controlling shareholder (in this sub section only: the seller) under which the seller w-ill sell

the Company 430 residential units in northern Germany (in this sub section only: the acquired assets) for a total of

EUR 24.5 million (including related transaction costs). For the purpose of financing the purchase, the Company

(through a sub subsidiary) entered into a loan agreement with a German bank in the amount of EUR 17.6 million

under non-recourse terms which its final repayment date is 5 years from the date of extending the loan. On June

30, 2015 said transaction was completed12.

Approval of credit rating from Maalot – on July 19, 2015, the credit rating company Standard &

Poors Maalot approved for the Company and its bond series A, B and C the rating of ilA+ stable13. It is mentioned

Extending loan agreements for OBI assets - On August 20, 2015, the Company (through sub

subsidiaries) entered into agreements with a German bank to extend 2 existing loans; the first one is for the Titan

portfolio (6 assets) and the second for the Mars portfolio (2 assets). All of these assets are leased entirely to the

retail chain OBI (respectively, the agreements, loan 1 and loan 2). Loan 1 (at a total amount of EUR 49.5 million)

was extended until March 15, 2023 bearing now a lower interest margin of 1.39% per annum (instead of 1.57%)

(on the Euribor for 3 months) to be repayable at an annual rate of 3.75% where the interest and principal are

payable every quarter until the final repayment date in which the unsettled principal balance is paid.

Loan 2 (at a total amount of EUR 13 million) was extended until April 15, 2020 with an option for an additional

extension of 2 years bearing now a lower interest margin of 1.33% (instead of 1.54%) per annum (on the Euribor

for 3 months) to be repayable at an annual rate of 4.60% where the interest and principal are payable every quarter

until the final repayment date in which the unsettled principal balance is paid.

Purchase of an additional residential portfolio in Kiel, northern Germany - on December 18,

2015, the Company (through a sub subsidiary) entered into a notarized sale agreement with a third party who is

not related to the Company and/or to its controlling shareholders (only in this sub section: the seller) under which

the seller shall sell the Company 296 residential units in northern Germany (only in this sub section: the acquired

assets) for a total consideration of EUR 20.4 million (including related transaction costs). For the purpose of

financing the purchase, the Company (through a sub subsidiary) entered into an agreement with a German bank to

11In addition to 3 option periods of 5 years each.

12For additional information, see the Company's immediate reports dated June 2, 2015 and July 1, 2015 (references 037686-01-2015 and

061716-01-2015, respectively) which are brought in this report by way of reference.

13For additional information, see Maalot's rating activity report which was attached to the Company's immediate report dated July 19, 2015

(reference number 076179-01-2015) which is brought in this report by way of reference.


7

obtain a loan of EUR 14 million under non- recourse terms which its final repayment date is 5 years from the date

of extending the loan. On March 1, 2016, said transaction was completed14.

Progress with the development of the residential project in Düsseldorf

For details regarding the major developments in the development of the residential project in Düsseldorf in the

reported period and until the date of signing the report see section 1.9 of the "Description of the corporation's state

of affairs" which is attached to this periodic report. In addition, the Company wishes to draw attention to the

following major developments:

a. Forward sale in Stage B2

In July 2013, the Company entered into a contingent agreement with a German pension fund for forward sale of

Stage B2 of the project for a total consideration of EUR 30 million representing EUR 3,523 per m2 net (including

the consideration for the parking). For additional information regarding this transaction, see immediate reports

dated July 25, 2013 (Reference number 100557-01-2013 and 101022-01-2013) which are brought in this report by

way of reference15. The construction of Stage B2 commenced in April 2014 and delivering possession of the

buildings to the purchaser was carried out in October 2015. In the fourth quarter of 2015 the Company

recognized in its financial statements a profit of EUR 6.3 million from said stage.

b. Performance and marketing of stage B1 – the construction of Stage B1 commenced in April 2014 and

ended in the fourth quarter of 2015. The Company commenced the marketing of Stage B1 of the project in

September 2013, which includes 108 flats in multi-family construction and 10 townhouses (about 18,000 m2

gross) and until February 2016, all 118 apartments in this stage were marketed (signed agreements and

reservations) were marketed (about 99.85% of this stage, 4 parking spaces remained unsold) for a total

consideration of EUR 56.34 million. As of the report date and date of signing the report, advances of EUR 51.9

million and EUR 54.14 million, respectively, were received from apartment purchasers.

c. Delivery of apartments and profit recognition of Stage B1 – as of the report date, the Company delivered

63 apartments out of 108 apartments of the stage and the delivery of the remaining 45 apartments was carried out

in January – February 2016. Consequently, the Company recognized a profit of EUR 5.88 million in the last

quarter of 2015. An additional profit of EUR 4.4 million will be recognized by the Company in the first quarter of

2016 upon the delivery of the remaining apartments of the stage. The remaining profit for the stage of EUR 1.4

million will be recognized in the Company's financial statements upon delivering the 10 townhouses to be carried

out in the third quarter of 2016 upon completion of their construction.

d. Marketing and sales of Stage B3 – the marketing of stage B3 commenced in January 2015 and until the

date of signing the report 96 apartments were marketed (signed agreements and reservations) (about 86 % of this

stage) for a total consideration of EUR 47.5 million. As of the report date and the date of signing the report,

advances of EUR 12.1 million and EUR 16.76 million, respectively, were received from apartment purchasers.

e. Stage C – in June 2015, the Company filed an application for a building permit for Stage C which includes

109 flats and 125 parking spaces at a total scope of 16,000 m2 gross. The Company expects to start construction

of Stage C in the second quarter of 2016 immediately upon receiving the building permit.

f. Planning Stages D and E – the Company commenced the planning of Stages D and E that will include 110

flats each and 15 townhouses (10 in Stage D and 5 in Stage E) at a total scope of 32,000 m2, gross, intending to

file applications for building permits for these stages in the second half of 2016.

14For additional information see the immediate reports of the Company from December 20, 2015 and February 21, 2016 (references numbers:

183564-01-2015 and 030982-01-2016, respectively) which are brought in this report by way of reference.

15For additional information regarding this transaction, see immediate reports dated July 25, 2013 (Reference number 100557-01-2013 and

101022-01-2013) which are brought in this report by way of reference


8

For additional information on the performance and marketing status of the stages under construction of the

project, see the tables below.

Project marketing

Data according to 100% The

effective corporation's share in the

project – 83%)

2015 (Consolidated)

As of the report

signing date Quarter 4

As of the report

signing date Quarter 4

Stage B1 Stage B3

period:Cumulative agreements signed in the current

Flats )#( 118 116 89 66

Flats – total monetary consideration

(including for parking, EUR in

thousands)

56,338 54,891 44,092 31,889

Flats (square meters) 14,332 13,961 10,760 7,711

Average price per sq.m (EUR)

(including consideration for parking) 3,931 3,932 4,098 4,135

Apartment Reservations* as of the report signing date:

Flats )#( -

7



thousands)

- 3,445

Flats (square meters) - 825

Average price per sq.m - 4,177

Cumulative signed agreements and reservations until the report signing date:

Flats )#( 118

96



thousands)

56,338 47,537

Flats (square meters) 14,332 11,585

Average price per sq.m 3,931 4,103

Marketing rate of the project (%)

As of the report

signing date As of December 31,

2015 As of the report


2015

Marketing rate on the last date of the

period (- signed agreements) 99.8% 97.3% 79.9% 57.8%

Marketing rate on the last date of the

period (- signed agreements and

reservations) 99.8% 86.2%

Advances from tenants:

As of the report


2015 As of the report


2015

Advances from tenants (EUR in

thousands) 54,143 51,870 16,762 12,106

Rate of Advances from tenants (%) 96% 91.9% 30.4% 21.9%

Spaces in respect of which agreements and reservations were not signed as of the report signing date:

Flats )#( -

4 unsold parkings

11



thousands) 89 7,632

Flats (square meters) - 1,678

Average price per sq.m - 4,548


9

Total cumulative cost attributed to

spaces in respect of which binding

agreements were not yet signed in

the statement of financial position

(consolidated) (EUR in thousands)

65 2,984

*)Reservation is a process where a potential purchaser signs a document that includes a description of the apartment and its registered number,

number of purchased parking spaces and their registered numbers, amendments to specifications, if any, including the total price (apartment,

parking spaces, amendments to specifications) and payment terms. The purchaser deposits EUR 2,000 for the reservation. The reservation is

not legally binding and the purchaser may cancel such reservation without a penalty.


10

Forecast of revenues, costs and entrepreneurial profits of the stages in progress and planning (EUR in

thousands).

In accordance

with

accounting

principles,

the Company

recognizes

revenues,

costs and

gross profit

deriving from

the stages in

progress

upon

completion of

performance

and

delivering the

apartments to

the tenants.

The

following is a summary of expected revenue, cash flow and entrepreneurial profit, not yet recognized in the

financial statements of the Company, from stages in progress and from stages under the approved urban scheme

which its execution has not yet begun, in Grafental project:

From sold apartments (EUR in thousands)

16The performance and marketing of Stage C are expected to commence in May 2016 upon receiving the building permit.

17It is stressed that engineering completion rate is not identical to apartment delivery rate and profit recognition rate from delivering the

apartments that was carried out when the apartments were delivered. See Note 2v to the consolidated financial statements which is

attached in Chapter C of this periodical report.

18It is indicated that in the framework of Stage B1, in addition to the 108 apartments (all of which were delivered until early March 2016)

10 townhouses are in stages of construction which will be completed only in the third quarter of 2016 and the Company will recognize

the profit accordingly.

Stage B1 Stage B3

Stage C (in

planning)16

Total expected revenues 56,426 55,169 55,072

Advances from apartment purchasers as of the report date 51,870 12,106 0

Advances from apartment purchasers as of the date of

signing the report 54,143 16,762 0

Total cumulative costs invested 41,288 23,582 10,469

Total costs remaining for investment 3,487 20,001 33,333

Total expected cost (including land (EUR in thousands) 44,775 43,584 43,803

Completion rate (engineering/monetary)(excluding

land)(%)17 90.0% %41.8 %3.0

Total expected entrepreneurial profit 11,651 11,585 11,269

Total entrepreneurial profit recognized in the Company's

financial statements (consolidated) cumulatively as of the

report date

5,874 0 0

Rate of expected entrepreneurial profit (%) 26.0% %26.6 %25.7

Expected completion date and profit recognition

Fourth quarter

of 2015 and the

first and third

quarter of

201618

Fourth quarter

of 2016

Expected

marketing

commencement

and

performance in

the second

quarter of 2016.

Expected

completion date

– fourth quarter

of 2017.


11

Data according to 100%. The

corporation's effective portion in the

project – 83%

Revenue not yet

recognized

Cash flow not yet

recognized

Entrepreneurial

profit not yet

recognized

Stages in progress (stages b1, and b3) 75,490 27,929 15,741

From apartments that were not yet sold (EUR in thousands)

Data according to 100%. The

corporation's effective portion in the

project – 83%

Revenue not yet

recognized

Cash flow not yet

recognized

Entrepreneurial

profit not yet

recognized

Stages in progress (stages b1 and b3) 7,720 2,986 1,621

Stages C – E (under approved urban

scheme) not yet in progress 149,862 52,372 34,450

Total 157,582 55,358 36,071

Betterment of the land in Dusseldorf and changing the zoning to residence – the following are the

main developments in the betterment of lands in Dusseldorf in the reported period and until the date of signing the

report:

a. with respect to the remaining land in Grafental project that includes construction rights of 124.5 thousand

m2 for offices (the parcel of land): in the reported period, the Company with the Dusseldorf municipality,

advanced a new urban scheme for the complex such that it will be feasible to build on the entire parcel of land,

with the formal approval of the new urban scheme, which is in progress an additional 650 flats in addition to 850

flats that are included today in the valid urban scheme and (in total 1,500 flats). The Company estimates that if

the urban scheme is approved, the 300 flats out of the 650 flats deriving from changing the zoning will be

available for construction to commence in the second half of 2017 and the balance will be available for

construction to commence in 2018 19 21

b. Purchase of several office and residential buildings in Grafenberg neighborhood for betterment – in August

2014, the Company consummated the purchase of land spanning over 20,000 m2 erected thereon residential and

office buildings (generating annual income of EUR 220 thousand) in Grafenberg – one of the luxurious

neighborhoods of Dusseldorf – and adjacent to the Grafental project which is constructed by the Company in

Dusseldorf20. In the reported period, the Company advanced with the Dusseldorf municipality a new urban

scheme for the complex that will allow to construct a residential project on the land that will include 80 up to 100

flats (a constructed area of 20,000 m2, gross) (instead of the existing buildings). The Company estimates that said

plans will be approved, if at all, by the municipality until the end of 2016 and the land will be available for

construction (with the necessary approvals) until the beginning of 201721.

The following is a summary of expected revenue, cash flow and entrepreneurial profit expected from the

betterment of the land in Dusseldorf21

21The Company has not yet decided how to use the land under the change of zoning from offices to residence in Grafental and/or the land in

Grafenberg including the development of any of such parcels of land. The decision to develop the above lands or any of them is subject

to consummating the relevant approval procedures of urban scheme, the market conditions that shall prevail upon completing the urban

scheme, the ability to obtain financing for developing the project in the said lands, the availability of equity resources required to realize

said development plans, meeting financial ratios and more. The data shown in the table below were calculated under the assumption that

the Company shall elect to develop the land complexes and the rates of entrepreneurial profit and cash flow in future stages shall be

similar to the rates of the Grafental project that are in progress as of the report date (entrepreneurial profit of 25% - 26% and cash flows

of 35% - 40% of the scope of sales).

19For additional details see section 1.8.5 in the "Description of the Company's state of affairs" in the 2015 periodic report.

20For additional details on the transaction see the immediate report dated August 31, 2014 (reference 146337-01-2014) the information in

which is brought in this report by way of reference.


12

Data according to 100% (EUR in

thousands)

Revenue not yet

recognized

Cash flow not yet

recognized

Entrepreneurial

profit not yet

recognized

Parcel of land under the change of

zoning from offices to residence in

Grafental22

and the land in

Grafenberg

440,539 155,407 95,375

The information described above in connection with stage B3 in progress and stages C – E of the Grafental project

(which are included in the approved urban scheme) which their performance was not yet commenced and in

connection with the betterment of the lands for residence in Dusseldorf and the change of their zoning (including

the expected dates of completion) regarding the total expected sales ,the expected entrepreneurial profit and

expected cash flows before taxes ,is a forward looking information which is not under the full control of the

Company and the actual materialization of such change of zoning ,in whole or in part ,is uncertain.

The information is based on information possessed by the Company as of the report date, regarding: 1) demand for

residential spaces in Dusseldorf; 2) market prices of residential spaces in Dusseldorf generally and in the area of

the projects (including competing projects comparable with the Company's projects); 3) accumulated know how

and experience of the Company's management and project managers in the segment; 4) the Company's forecasts

and estimates regarding the costs of construction, development, marketing of projects based on the costs of the

stages that as of the report date are in progress; and other estimates of the Company.

It is uncertain whether the change of zoning will take place and/or consummated, if any, since its consummation is

subject to the planning and construction procedures required under German law, the consummation of which is not

controlled by the Company.

In addition ,even if the approvals are received and the Company will resolve to establish the projects independently

and the performance of the projects will be executed, change in circumstances (including without derogating from

the generality of the foregoing – decrease in demand for flats in Dusseldorf and/or decrease in market prices of

flats in Dusseldorf) or increase in construction costs (and other costs) and/or the formation of special conditions

that may significantly change the Company's estimates detailed above and have a material impact on the expected

revenues from the projects ,including their overall profitability.

22The corporation's effective portion in said parcel of land is 83%.


13

Part A – Board of Directors Explanations in regard to the State of the Corporations'

Businesses, the Results of its Activities, its Equity and Cash Flow;

(1) Financial Position

Assets As of

December

As of

December Explanation for the change

2015 2014

EUR in thousands

Current assets

Cash and cash equivalents 55,820 60,205 See details in the statement of cash flows

Balances receivable from banks

24,969 -

Gain from currency hedging transactions, for

immediate withdrawal

Restricted deposits and other receivables 12,031 15,505

Tenants 5,677 4,648

Other financial assets

499 10,365

The decrease derives from classification into balances

receivable from banks

Inventory of buildings under construction

59,589 64,901

On one hand, increase in inventory for progress in the

construction of the new stages and classification from

long term inventory of land to short term and on the

other hand, decrease in inventory due to delivery of

apartments in stages A and B.

Total current assets 158,585 155,624

Non-current assets:

Investments measured at equity 5,005 5,005

Inventory of real estate 25,591 37,576

The decrease derives from classification of inventory

to short term

Investment property – real estate rights 101,038 78,033

Revaluation profits, classification of assets for re-

development and investments.

Investment property 980,243 912,552

The increase in the reported period derives from

purchasing residential portfolio in northern Germany,

Capex investments in existing assets and revaluation

profits.

Restricted deposits for investments in

assets 175 2,035

Other accounts receivable and other

financial assets 1,481 703

Fixed assets 365 471

Deferred taxes 8,585 6,270

Total non-current assets: 1,122,483 1,042,645

Total assets 1,281,068 1,198,269


14

Liabilities As of

December 31

As of

December 31 Explanation for the change

2015 2014

EUR in thousands

Current liabilities:

Current maturities of loans from banks 68,491 14,223

The increase derives from the classification of loans

as current liabilities according to the original

amortization schedule. It is stressed that a refinance

agreement for 7 years of a loan that was classified as

a current maturity was signed in February 2016. For

information – see events after the balance sheet date.

Current maturities of debentures 16,623 15,302

Loans for financing inventory of buildings

under construction 3,500 9,500

Part of the short term loans in respect of the land was

attributed to stages in progress and therefore was

classified to short term. It is noted that the balance of

the construction loan in respect of the performance of

stages B1, B2 and B3 is zero.

Current maturities of other financial

liabilities 393 266

Accounts payable 20,073 15,740

The increase in the reported period mainly derives

from a provision for the completion of Stage B in

Granfental project.

Advances from apartment purchasers 35,687 43,446

144,767 98,477

Total current liabilities

Non-current liabilities:

Loans from banks and others 499,887 551,892

The main decrease in the reported period derives on

one hand - from the classification of loans as current

liabilities according to the original amortization

schedule and current principal repayments and on the

other hand – taking a loan to finance the purchase of

asset portfolio in northern Germany.

Debentures 127,076 129,470

The decrease in the reported period mainly derives

from principal payment of debentures according to

their original amortization schedule net of the effect

of exchange rate translation differences.

Other liabilities 3,148 3,155

Other financial liabilities 578 542

Deferred taxes 51,512 35,552

682,201 720,611

Total liabilities 826,968 819,088

Equity

Equity attributable to equity holders of the

company

345,523

279,596

Income for the period and proceeds from exercise of

options.

Non controlling interests 108,577 99,585

Total equity 454,100 379,181

Total liabilities and equity 1,281,068 1,198,269


15

(2) Activity Results

Year ended December 31,

2015


2014


2013

Explanation for the

change

EUR in thousands

Revenues from rental of properties 66,415 60,512 49,540 Purchase of new assets and

increase in rental fees in

identical assets Revenues from property management and others 26,277 22,119 18,185

Property management expenses (24,072) (21,401) (17,798)

Cost of maintenance of rental properties (8,105) (6,331) (5,363)

Rental and management revenues, net 60,515 54,899 44,564

Revenues from sale of apartments 68,372 70,933 - Delivery of apartments in

Stages A and B of the

residential project Cost of sale of apartments (54,637) (58,499) -

Gain from the sale of apartments 13,735 12,434 -

General and administrative expenses (11,090) (9,325) (8,104) Increase in the Company's

scope of activity

General and administrative expenses attributed

to inventory of apartments under construction

and inventory of real estate. (1,799) (2,082) (1,755)

selling and marketing expenses (242) (367) (707)

Cost of share based payment (1,525) (1,554) (1,132)

Increase in the value of investment property,

net 44,256 23,304 32,534

Operating profit 103,850 77,309 65,400

Financing income 82 291 315

Financing expenses excluding the effect of

exchange rate differences, CPI and hedging

transactions, net (21,162) (20,520) (16,672)

A result of an increase in

bank loans for financing the purchase of new assets

Effect of exchange rate differences, CPI and

currency hedging transactions, net 3,424 10,353 (5,040)

Change in the value of loans and interest rate

swap transactions, net 6,023 (13,949) (646)

Decrease in the interest

curve in Europe and

hedging transactions

Equity in losses of associates, net - - (1,675)

Income (loss) before taxes on income 92,217 53,484 41,682

Taxes on income (14,725) (6,029) (2,613)

Reported net income 77,492 47,455 39,069

Net income attributed to:

Company shareholders 63,439 37,954 25,838

Non-controlling interests 14,053 9,501 13,231


16

3) Cash flows

Access to financing sources – the Company evaluates its accessibility to financing sources as very high

in light of its financial strength, the stability of core activity, and the good relationships it has created with the

banks financing real-estate projects in Germany.

It is indicated that for the period of twelve months ended December 31, 2014, the Company has in its solo reports

(but not in the consolidated statements) negative cash flows from operating activity amounting to EUR 1,619

thousand and for the period of twelve months ended December 31, 2015, the Company has in its solo reports,

positive cash flows from operating activity deriving from the effect of exchange rate differences on cash balances

and therefore is not representative. The Board has determined, based on its examination, that this does not indicate

on liquidity difficulty since cash flows and liquid balances in the Company (solo) and unrestricted liquid balances

which can be distributed immediately in subsidiaries as of the signing date of the report amount to EUR 47 million

compared to current liabilities in the Company (solo) amounting EUR 19 million and an expected payment of

capital distribution of EUR 6 million23 so the Company (solo) has a working capital surplus of EUR 22 million

consisting of cash balances and liquid balances. The Board believes that the issue at hand is merely technical

whereas in view of the high liquid balances maintained by the Company (solo), the Company elected not to receive

management fees or distribute dividends from a wholly owned subsidiary (Brack German Properties B.V) and

therefore no current revenues were recorded under the separate activity of the Company (solo) in a manner that will

result in negative cash flows from operating activity of the solo company in said periods.

(4) FFO (Funds from Operations)

Calculating FFO – the FFO index is calculated as the net profit (loss) attributed to Company's shareholders from

the income generating activity only excluding the income from sale apartments in the Grafental project with

some adjustments for non-operating items, which are affected from the revaluation of the fair value of assets and

liabilities. It deals mainly with adjustments of the fair value of investment property, miscellaneous capital profits

and losses, miscellaneous amortizations, adjustment of expenses for management and marketing of the Düsseldorf

project (since the revenues in respect of this project are not taken into account in the FFO), changes in fair value

recognized for financial instruments, deferred taxes and non controlling interests for the above items.

The Company believes that the this index reflects more correctly the Company's operating results, without the

entrepreneurial project, and its publication will provide a more correct basis for comparing the Company's operating

results in a certain period with past periods, and will enable the comparison of the operating results with other real-

estate companies in Israel and in Europe.

The Company clarifies that the FFO index does not represent cash flows from operating activity according to

generally accepted accounting principles, does not reflect cash held by the Company and its ability to distribute it,

and does not replace the reported net profit (loss). In addition, it is clarified that these indices do not constitute data

audited by the Company's auditors.

Below is the calculation of the Company's FFO for the said periods:

23see events after balance sheet date

Year ended

December 31,

2015

Year ended

December 31,

2014

Year ended

December 31,

2013

Explanation for the change

EUR in thousands

Cash flows provided by operating

activities (Cash flows used in

operating activities)

80,048 70,484 35,606

Expansion of the Company's activity

and progress of the residential project

Cash flows provided by investing


investing activities)

(45,246) (133,530) (166,490)

Purchase of new assets

Cash flows provided by financing


financing activities)

(39,187) 89,291 107,346


17

As aforesaid, the FFO in the three months ended December 31, 2015 amounted to approximately EUR 6.54 million,

grossing up an annual FFO of EUR 26.2 million.

Three months

ended

December 31,

2015

Three months

ended

December 31,

2014

Year ended

December 31,

2015

Year ended

December 31,

2014

Net profit (loss) attributed to the Company's

shareholders 19,563 11,246 63,439 37,954

Adjustments for net profit (loss):

A. Adjustments for revaluations

Decrease (increase) in the value of investment property

and adjustments of liability value relating to investment

property

(10,978) (5,072) (38,575) (19,218)

Revaluation of loans and interest swap transactions at fair

value (62) (1,357) (6,385) 10,985

B. Adjustments for non cash flow items

Cost of share-based payment and changes in capital

reserves 347 361 1,734 1,567

Amortization of financing costs, indexing and non cash

currency hedging transactions 1,877 (2,111) (1,788) (9,514)

Interest component in hedging transactions 300 - 599 -

Deferred tax expenses (income) and taxes for past years 5,426 3,286 12,366 5,337

C. Unique items / new activities / ceased activities /

other

Depreciation and contributions, professional services and

onetime expenses (246) (468) 1,410 102

Expenses relating to project management and marketing in

connection with the establishment of residential project in

Düsseldorf and adjustments in respect of current leasing

activity in the project

512 860 2,862 3,002

Gain from sale of apartments (10,201) (1,281) (11,400) (10,320)

Total of adjustments to net profit (loss) (13,025) (5,782) (39,167) (18,059)

F.F.O 6,538 5,464 24,272 19,895


18

5) EPRA NAV Index – Net Asset Value (EUR in millions)

The EPRA NAV is an index purported to show the net asset value of the real estate company according to the status

paper of EPRA - European Public Real Estate Association. The EPRA NAV reflects the net asset value of the

Company assuming that assets are held for a long term and therefore certain adjustments are required such as

neutralizing deferred taxes deriving from revaluation of investment property and neutralizing the fair value of

derivative financial instruments. Furthermore, the adjustments made by the Company under this index include the

addition of profits that were not yet recognized in the statements in respect of apartments under construction that

were sold in Grafental project (stages A and B).

The Company believes that this index reflects more correctly the net asset value of the Company and its publication

will enable the comparison to other real estate companies in Israel and Europe.

The Company clarifies that the EPRA NAV index data do not represent a valuation nor they represent a substitute

to the data contained in the financial statements. It is further clarified that these data are not audited by the

Company's auditors.

The following is the calculation of the EPRA NAV index and the adjusted EPRA NAV index of the Company:

December 31, 2015

EUR in millions

December 31, 2014

EUR in millions

Equity attributed to the Company's shareholders 345.5 279.6

Plus deferred taxes for EPRA adjustments (net of non controlling interest) 57.2 36.4

Net of fair value of derivative financial instruments, net (net of non controlling

interest) 0.4 0.3

Plus profits that were not yet recognized in respect of apartments under

construction that were sold in stage B of the residential project 8.4 11.9

EPRA NAV –Net Asset Value 411.5 328.2


19

6) Events after the date of the report, affecting the Company's financial position

Capital distribution to shareholders – on January 11, 2016, the Company' general meeting of

shareholders approved to carry out a capital distribution to its shareholders in the total amount of EUR 6,041

thousand (out of the premium reserve on the Company's shares)24.

Purchase of land in Aachen, Germany - on February 26, 2016, the Company (through a sub

subsidiary) entered with a third party who is not related to the Company and/or its controlling shareholders (the

"Partner") into a notarized sale agreement with a third party who is not related to the Company and/or its

controlling shareholders (the seller) to acquire ownership rights to the land in the city of Aachen in Germany, on

which an old plant which is not in use is erected, for a total consideration of € 6 million, to be paid on the

completion date after the required conditions are met. The Company and the partner intend to work

collaboratively to change the zoning of the land into residential zoning such it would be feasible to construct 180-

220 residential units after demolishing the existing building. For the avoidance of doubt, it is clarified that the

Company has not yet made its final decision regarding the development of the project and its dates25.

Change in the ESOP3 conditions – on January 27, 2016 and February 4, 2016, the Company's

remuneration committee and the Board of Directors (respectively) approved a modification to the plans from

2013 for the allocation of options to employees (ESOP 3) (the existing plans) with respect to the acceleration of

the vesting dates as follows: the Company's competent organs may approve a mechanism for accelerating the

entitlement of all or any of the offerees with respect to all or any of the warrants that were not yet vested in case

the employee is dismissed (other than in circumstances where he is not entitled to severance pay as specified in

the Severance Pay Law – 1963) and/or upon transferring the control of the Company. The modification of the

plans and the approval of accelerating the entitlement dates for exercising non marketable ESOP 3 options issued

to joint CEOs and the VP of entrepreneurship and development of the Company are subject to the approval of the

Company's general meeting of shareholders which was called for March 21, 201626.

Purchase of additional assets in Kiel, northern Germany – on March 16, the Company (through a

sub subsidiary) entered into a notarized sale agreement with a third party who is not related to the Company

and/or to its controlling shareholders (only in this sub section: the seller) under which the seller shall sell the

Company 287 residential units in northern Germany (only in this sub section: the acquired assets) for a total

consideration of EUR 36 million (including related transaction costs). For the purpose of financing the purchase,

the Company (through a sub subsidiary) conducts negotiations with a German bank for an agreement to obtain a

loan of EUR 25 million under non-recourse terms which its final repayment date is 5 years from the date of

extending the loan. The transaction is expected to take place on July 1, 2016.

Refinance of Leipzig – on February 1, 2016, the Company entered into a refinance agreement for a

major portion of the Leipzig portfolio (about 2,790 residential units – not including Leipzig Am Zoo) for 7 years.

The new loan of EUR 57.5 million (similar to the unsettled principal balance of the loan from 2011) which

repayment date is April 30, 2023 bears a fixed interest for 5 years of 1.12% per annum with an annual principal

repayment of 2% of the original loan amount. Under the refinance, a credit facility of EUR 17.4 million was

approved for the Company until 2023 where is used it will bear a variable interest plus a margin of 1% per

annum.

Sale of an asset in Dusseldorf - on March 4, 2016, the Company (through a sub subsidiary) entered

into a notarized sale agreement with a third party who is not related to the Company and/or to its controlling

shareholders for the sale of rights in a building which is not occupied from 2013 which undergoes betterment

procedures in a total area of 3,985 m2 located in Dusseldorf. The consideration was set at EUR 5,050 thousand. It

24For additional information see the Company's immediate reports dated November 25, 2015 (2 reports) and January 11, 2016 (references

163464-01-2015, 163488-01-21015 and 007777-01-2016, respectively) which are brought in this report by way of reference.

25For additional information see the Company's immediate report dated February 28, 2016 (reference 035506-01-2016 which is brought in

this report by way of reference.

26For additional information see the Company's immediate report dated February 29, 2016 (reference 036805-01-2016 which is brought in

this report by way of reference.


20

is noted that the asset is not pledged and the consideration is expected to be received in full by the Company upon

the transaction completion date in July 2016.

Increase of credit rating from Maalot – on March 15, 2016, the credit rating company Standard &

Poors Maalot increased for the Company and its bond series A, B and C the rating of ilAA- stable13.

13For additional information, see Maalot's rating activity report which was attached to the Company's immediate report dated July 19, 2015

(reference number 076179-01-2015) which is brought in this report by way of reference.


21

Part B – Exposure to Market Risks and Way of Managing Them

Market risks to which the Company is exposed

Exchange rate effects – as of the report date, the Company's net currency exposure, net of the liabilities

for which the Company carried out currency hedging transactions is at a rate of 3.97% of its total scope of assets

as a result of the Company's liabilities due to the bonds (Series A, B and C) that were issued to the public in Israel

and are denominated in NIS. Other than that, the Company is not exposed to material changes in currency

exchange rates, as most of its activities, assets and liabilities are denominated in EUR. The Company reviews

from time to time, the possibility, and hedges its liabilities in NIS, partly or wholly, against future changes in the

EUR/NIS exchange rate.

The fair value of the Company's primary financial instruments

As at the report date, most of the Company's financial instruments are presented at their fair value.

Below are sensitivity tests for changes in the fair value of the Company's primary financial instruments, due to

changes in the interest (in EUR thousands):

The basic interest is 3-month Euribor.

December 31, 2015:

*) The fair value of the bonds is presented at its quoted value in the Tel Aviv stock exchange. The sensitivity tests

are performed based on the interest basis deriving from this value.

Below are sensitivity tests for changes in the fair value of the Group's primary financial instruments, due to

changes in the EUR-NIS exchange rate (in EUR thousands):

December 31, 2015:

-10% -5% Fair Value 5% 10%

)15,204( )7,602( )152,040( 7,602 15,204 Bonds (net of cash held in NIS)

-10% -5% Fair Value 5% 10%

(1,541) (767) (156,750) 760 1,512 Bonds )*

(83) (41) (152,291) 41 83 Fixed-interest loans

(56) (28) (970) 28 56

Interest rate swap transactions which

are not recognized as accounting

hedging

(3) (1) 19 1 3

Cap interest ceiling fixing transactions

which are not recognized as accounting

hedging

(1,683) (837) (309,992) 830 1,654 Total


22

Below are sensitivity tests for changes in the fair value of the Group's primary financial instruments, due to changes

in the EUR-dollar exchange rate (in EUR thousands):

December 31, 2015:

-10% -5% Fair Value 5% 10%

9,000 4,500 1,272 )4,500( )9,000( Hedging transaction

Below are sensitivity tests for changes in the fair value of the Group's primary financial instruments, linked to the

consumers' price index, due to changes in consumers' price index

December 31, 2015:

-4% -3% Fair Value 3% 4%

2,970 2,263 )156,751( 4,(103) )5,556( Bonds

The fair value of the investment properties is also affected by changes in the interest rate in the market. A permanent

increase / decrease (an increase forecast by the market as one which is not temporary, but rather characterizes a

medium/long-term trend) in market interest rates will lead to changes in the requested yields on real-estate

properties (although there is no full correlation between the change in market interest levels and the change in yield

on properties), and to a decrease / increase in their fair value, respectively. However, since only a change in market

interest levels forecast as being permanent will lead to a change in the fair value of the Company's properties, the

transmission between the change of interest in the market and the change in the fair value of the Company's

properties is "slow", and occurs over time (usually, a period of between 6 and 9 months is necessary before real-

estate prices in the market react to changes in market interest rates). Therefore, the effect of the increase in market

interest rates, which generally leads, after a certain period of time, to a decrease in the fair value of the Company's

properties, will be offset by the decrease in the fair value of the Company's financial liabilities, and vice-versa.

Linkage basis report

Apart from the payments due to the bonds issued by the Company to the public in Israel that are denominated in

NIS, the Company's entire activity as of the report date is performed in EUR, and therefore the Company's assets

and liabilities are affected mainly by the EUR currency. The payments of principal and interest due to the bonds

issued by the Company will be paid in NIS and linked to the consumers' price index. As at the Report Period, the

Company has no material exposure to other currencies except for the NIS.


23

Part C – Corporate Governance Aspects

The Company is a Dutch company and the provisions of the Companies Law, 5759-1999 (hereinabove and

hereinafter: "the Companies Law") do not apply thereto, with the exception of such sections of the Companies

Law which apply to a foreign company offering shares to the public in Israel, by virtue of Section 39A of the

Securities Law, 5728-1968 (hereinafter: "the Securities Law").

On February 17 ,2016 , the Securities Order came into force (replacing the fourth addendum of the law (- 2016

whereby the fourth amendment to the Securities Law has been replaced with the new fourth addendum which is

twofold :Part A ,which applies the provisions of corporate law which will apply to companies incorporated outside

Israel (below and only in this sub section "foreign companies which shares are offered to the public in Israel -

including applying the provisions of sections 311-301 of the Companies Law regarding a permitted distribution ,

dividends ,acquisition and prohibited distribution (hereinafter" :part A of the fourth addendum) and Part B which

applies the provisions of corporate law on foreign companies offering liability certificates to the public. It is clarified

that the fourth addendum will not apply to foreign companies offering shares or liability certificates to the public

prior to the legislative amendment (like the Company. Nevertheless, the amendment will apply to every foreign

company (including the Company) that will carry out an IPO of securities from the amendment date (February 17,

2016 onwards) including foreign companies (including the Company) which carry out a reissuance.

1) Financial Statement Approval Procedure

As of the report date, the Companies Regulations (Provisions and Conditions for Financial Statement Approval

procedure), 5770-2010 (the Financial Statement Approval Procedure )including the duty to appoint a "balance sheet

committee" and the composition of the members of such committee, do not apply to the Company. As aforesaid,

the Financial Statement Approval Procedure shall apply to the Company from the date it shall carry out an IPO

of securities based on a prospectus.

The organ charged with "overall supervision" in the Company is the Company's Board of Directors. The Company's

senior management headed by the CFO and under the supervision of the Co-CEOs, is responsible for the Financial

Statement preparation procedure. As part of the Company's Financial Statement approval procedure, the Financial

Statement draft and Board of Directors Report draft are sent to the members of the audit committee and the members

of the Board of Directors for their review, a week prior to the date of the meeting set for approving the reports.

Notwithstanding the foregoing (with respect to the absence of financial statement approval procedure on the

Company) the audit committee holds every quarter at least one meeting before the convening of the Board of

Directors to approve the quarterly/annual financial statements (as the case may be) in which the draft of the financial

statements is discussed elaborately. The review in the audit committee includes the following issues: valuations and

estimates made in connection with the financial statements; the internal controls relating to the financial reporting;

completeness and appropriateness of the disclosure in the financial statements; the accounting policy adopted and

the accounting treatment applied in material matters of the Company; valuations, including the underlying

assumptions and estimates on which the data of the financial statements are based. The auditor is invited to attend

all of the committee's meetings in connection with the financial statements and the internal auditor of the Company

receives notices regarding the convening of the committee's meetings in this regard and he may participate in such

meetings.

In the discussion, questions are raised regarding issues that were brought up in the course of the audit and whether

the financial statements represent truthfully the financial position of the Company. In addition, material issues in

financial reporting are reviewed and material estimates used as a basis to determine the values of the financial data.

The discussed questions and issues are answered as necessary, both by the Company's CFO and by the Company's

auditor who presents the key findings, if any, that were raised in the course of the audit process.


24

The committee forwards to the Board of Directors (namely to 3 additional Board members who are not the

committee's members, Messers Jan Van Der Meer, Ulrich Tappe and Mrs. Nansia Koutsu) its recommendations

with respect to the approval of the financial statements prior to the commencement of the meeting in the Company's

Board of Directors.

In the Board of Directors meeting in which the Financial Statements are discussed and approved, the joint

CEOs and the CFO review in a detailed manner the principal points of the Financial Statements, the material issues

in financial reporting, the financial results, financial position and cash flow of the Company, and present data on

the Company's activity, with a comparison to previous periods. The approval of the Financial Statements by the

Board of Directors is performed through a vote, and is made by a simple majority.

2) Details regarding the Corporation's internal auditor

Name of auditor Irena Ben Yakar, CPA

Term commencement date May 25, 2011

Meeting the internal audit conditions The Internal Auditor meets the conditions prescribed in

Sections 3A of the Internal Audit Law (5752-1992)(the

Internal Audit Law)

Designation of activities The Internal Auditor does not hold any other position

in the company other than serving as an internal

auditor. The internal auditor does not hold any other

position out of the company that results or may result

in conflict of interests with her position as an Internal

Auditor of the company.

Personal matter The internal auditor is not a related party in the

company does not hold a position in the company and

is not related to any of the above and does not serve as

an auditor or anyone on his behalf and does not provide

external services to the company, except for internal

auditing services.

Holding the company's securities The internal auditor, as per its notice, does not hold the

Company's securities nor it holds securities of an entity

related to the Company as defined by this term in the

fourth addition to securities regulations (periodic and

immediate reports) – 1970 (the reports' regulations)

Business/material relations with the

company

The Internal Auditor does not have any material

business relations with the company or other material

relations with the company nor does it have such

relations with an entity related to the Company as

defined by this term in the fourth addition to reports

regulations

Appointment of the internal auditor The internal auditor's appointment was approved by the

company's board of directors on May 25, 2011 based

on the recommendation of the company's audit

committee and based on its professional experience as

internal auditor in the area of internal audit.


25

The auditor's qualifications The auditor holds CPA license from 2003 and is a

partner in the CPA firm of Deloitte, Brightman,

Almagor Zohar. She possesses an extensive experience

in risk management and internal audit alongside rich

experience in preparing internal audit in public

companies.

The auditor as an external party The auditor provides internal audit services as an

external party, by her team from Brightman Almagor

Zohar & Co.

Scope of transaction The company's audit committee approved an audit plan

in a scope of 470 hours for 2015. Under this plan,

processes were examined in the Company including:

risk survey for renewing a multi-annual audit plan, the

process of delivering apartments and revenue recording

process revenue recognition in the residential project.

In 2014, the scope of the audit plan amounted to 500

hours. The audit plan is multi-annual and its cost is

based on a rate of NIS 210 per hour (on average)29

and

to the Company's best understanding, the scope of

remuneration does not affect the discretion of the

auditor.

The audit plan The audit plan is part of a multi-annual plan. The

planning of the audit tasks, setting priorities and audit

frequency are affected by the following:

The likelihood of managerial and administrative

defects, the exposure to risks of activities, issues

requiring an audit by the managing bodies, issues

required by law, pursuant to internal or external

procedures, the need to maintain cyclicality in issues

that were tested previously.

Setting the annual work plan of the internal audit in the

corporation was done in collaboration with the

company's joint CEOs, the chairman of the audit

committee and internal auditor and her team. The

annual work plan is approved by the Company's audit

committee at the beginning of each fiscal year.

Professional standards The internal auditor, by her notice, prepares the audit

according to International Audit Standards of the

International Institute of Auditors (IIA)

The organizational supervisor of the

auditor

Pursuant to the resolution of the company's board, the

responsible party is the chairman of the audit

committee.

29the rate of work hour for 2016 was updated to NIS 250.


26

Scope, nature and continuity of the

activity and work plan of the internal

auditor

To the best knowledge of the company ,the nature and

continuity of the activity and work plan of the internal

auditor are reasonable in the circumstances and they

are serving the purpose of fulfilling the internal audit

objectives in the company.

Free access for the internal auditor The internal auditor shall have free access as aforesaid

in the above section 9 of the internal audit law,

including continuous and direct access to the

company's information systems including financial

data.

The internal auditor report The internal auditor shall submit her reports in writing

to the audit committee and the Company's

management. The findings of the audit for 2015 were

delivered to the Company's management and audit

committee on various dates during 2015. On such dates

discussions were held in the audit committee and the

internal auditor shared the findings of the audit.

Remuneration Professional fees for internal audit services were

determined to the amount equivalent to NIS 210 per

hour on average.

3) Donations

In 2015, the Company contributed donations of EUR 85 thousand. On March 17, 2016, the Board of

Directors approved a donations budget of EUR 85 thousand for 2016.


27

3) Directors with accounting and financial expertise and independent directors

For information regarding the skills, education and experience of the Messers Jan Van Der Meer (the

chairman of the Board of Directors), Lambertus Van Der Heuvel (external director), Willem Van Hassel (external

director), Robert Israel (independent director) Ulrich Tappe (director and manager of the development division of

the Company) and Nansia Koutsu (director) in respect of which the Company views them as directors having

accounting and financial expertise , see regulation 26 in the chapter "Additional Information About the Corporation"

which is attached in chapter D to this periodical report.

6) Information on the external auditor

The following is the information on the professional fees of the auditor:

Name of the auditor in Israel: PKF Amit Halfon

2015

Hours Euro in thousands

thousands Audit services and audit related services 4,971 254

Other services - -

2014

PKF Amit, Halfon:


thousands Audit services and audit related services 4,256 226

Other services - -

The auditor's professional fees are determined based on work hours according to the rates approved by the

Company's Board of Directors.

Name of the auditor in the Netherlands: IUS Statutory Audits Coöperatie U.A.

2015

IUS Statutory Audits Cooperatie U.A.:


thousands Audit services and audit related services 250 20

Other services - -

2014

IUS Statutory Audits Cooperatie U.A.:


thousands Audit services and audit related services 258 20

Other services - -

Name of auditor in Germany: Fair Audit


28

The following is the information on the professional fees of the auditor:

2014


thousands Audit services and audit related services and tax services 1,934 217

Other services 1,289 158

7) The link between the remuneration granted pursuant to regulation 21 and the contribution of the remuneration

recipient to the corporation

The remuneration committee and the Board of Directors reviewed and found in their meetings dated January

27, 2016 and February 4, 2016 (respectively) that the remuneration to senior officers as specified in Regulation 21

in chapter D "Additional Information on the Company" which is attached to this periodic report conforms to the

remuneration policy of the Company30.

In addition ,the Board of Directors indicated that there is a correlation between the remuneration paid to

senior officers in 2015 and their contribution to the Company ,their activities ,powers ,skills ,experience ,expertise

and compliance with their job requirements and the terms of employment that were determined this year.

The remuneration committee and the Board of Directors estimate that the remunerations granted according

to Regulation 21 are in market conditions and they represent a fair and reasonable consideration, among others,

considering the financial position of the Company and its targets.

It is noted that prior to convening the meetings of said committee and the Board of Directors, the committee

members and the Board of Directors were presented with an economic market study (benchmark) that was prepared

by an external advisor hired by the Company for this issue. The remuneration committee determined that the sample

data base devised with the assistance of the external advisor for comparing the annual remuneration components

(with its elements) of the senior officers that contains 19 public companies with features similar to the Company,

is large enough in a manner assuring that the average and median data are not affected by extraordinary data which

would have been effected materially by a small sample of data.

30that was approved by the Company's remuneration committee and board of directors on January 27, 2016 and February 4, 2016, respectively

that was attached as appendix A to the summoning report from February 29, 2016, (reference number 036805-01-2016) and is subject to

the approval of the Company's general meeting of shareholders that was summoned for March 21, 2016 and all in accordance with the

provisions of section 267a of the Companies' Law.


29

Part D – Disclosure Provisions in Regard to the Corporation's Financial Reporting

Events after the date of the Statement of Financial Position

See chapter A, section 6 above.

Critical Accounting Estimates

Regarding critical accounting estimates see note 2 to the annual consolidated financial statements for 2015 which

is included in chapter C of this periodic report.

Disclosure on material and very material valuations and material appraisers

There were no material valuations or very material valuation in the fourth quarter of 2015 It should be noted that

the appraisers of the Company's main assets are JLL, NAI Apollo and DIWG .The rate of the assets assessed by

JLL, NAI Apollo and DIWG during 2015 is about 36%, 22% and about 19% of the asset value in the Company's

balance sheet (respectively (. JLL, NAI Apollo and DIWG do not depend on the Company.


30

Part E – Specific Disclosure for Bond Holders

1) Following are details regarding the liability certifications issued by the Company which are at the possession of the public as at the date of the report according to the

eighth addendum of the reports' regulations:

Bonds (Series A) Bonds (Series B) Bonds (Series C)

Is the series material (as this term is

defined in Regulation 10(B)(13)(a) of

the Reports' Regulations ?

Yes

Yes

Yes

Date of issue March 1, 2011 May 21, 2013 July 22, 2014

Date of expanding series June 19, 2012, November 6, 2012 February 4, 2014 NA

Par value on the date of issue (thousands

NIS)

200,000

175,000

102,165

Par value on the date of expanding

series (thousands NIS)

240,000; 400,000

240,000

NA

Par value as at 31.12.2015(thousands

NIS)

285,760

220,000

Approximately 102,122

Linked par value as at 31.12.2015

(thousands NIS) 298,215 220,613 Approximately 102,122

Sum of cumulative interest plus linkage

differentials (thousands NIS) as at

31.12.2015 6,613 0 1,472

Value in financial statements as at

31.12.2015 including interest payable

(thousands NIS)

300,138 218,022 100,162

Value at the stock exchange as at

31.12.2015 (thousands NIS) 326,824 235,620 103,246



31

Type and rate of interest

4.8% (annual, linked, fixed rate), subject

to adjustments in cases of changes in the

rating of the bonds (Series A) and/or non

compliance with the financial covenants

specified in Sections 2.7.12.8 and

2.7.12.9 of the shelf prospectus dated

May 24, 2012 as amended on May 9,

2013 and as amended on July 14, 2014

(the shelf prospectus)

3.29% (annual, linked, fixed rate),

subject to adjustments in cases of

changes in the rating of the bonds

(Series B) and/or non compliance with

the financial covenants specified in

Sections 2.8.4.12 and 2.8.4.13 of the

shelf prospectus

3.30% (annual, linked, fixed rate),

subject to adjustments in cases of

changes in the rating of the bonds

(Series C) and/or non compliance with

the financial covenants specified in

Sections 2.8.4.12 and 2.8.4.13 of the

shelf prospectus

Dates of paying principal

Payable in 7 annual installments on July

14 of each of the years 2014 to 2020

(inclusive) such that each of the first six

installments will constitute 14.28% of the

principal of the total par value of the

bonds (Series A), and the last installment

will constitute 14.32% of the total par

value of bonds (Series A).

Payable in 12 unequal annual

installments on December 31 of each of

the years 2013 to 2024 (inclusive) such

that each of the first seven installments

will constitute 4% of the principal of

the total par value of the bonds (Series

B), and each of the last five

installments will constitute 14.4% of

the principal of the total par value of

bonds (Series B); the first principal

payment will be on December 31, 2013.

Payable in 12 unequal annual

installments on July 20 of each of the

years 2015 to 2026 (inclusive) such that

each of the first nine installments will

constitute 2% of the principal of the

total par value of the bonds (Series C),

the tenth payment will constitute 17%

of the principal of the total par value of

bonds (Series C); and each of the last

two installments will constitute 32.5%

of the principal of the total par value of

bonds (Series C); the first principal

payment will be on July 20, 2015.

Dates of paying interest Will be paid on July 14 and January 14 of

each of the years 2011 to 2020

(inclusive).

Payable on December 31 and June 30

of each of the years 2013 to 2024

(inclusive) effective December 31,

2013. The last interest installment will

be paid on December 31, 2024.

Payable on January 20 and July 20 of

each of the years 2015 to 2026

(inclusive) effective January 20, 2015.

The last interest installment will be paid

on July 20, 2026.



32

Linkage base (principal and interest)

Linked (principal and interest) to the

consumers' price index published on

February 15, 2011 in respect of January

2011.



May 15, 2013 in respect of April 2013.



July 15, 2014 in respect of June 2014.

Are they convertible? No No No

Company's right to perform early

redemption or forced conversion

The Company may (but is not obligated

to), at any time and at its sole discretion,

make an early redemption of some or all

of the bonds (Series A), as it chooses,

until the date of the final repayment of

the bonds (Series A), everything

according to the decisions of the

Company's Board of Directors. For

further details, please see Section 2.7.3 of

the shelf prospectus.


to), at any time and at its sole

discretion, make an early redemption of

some or all of the bonds (Series B), as it

chooses, until the date of the final

repayment of the bonds (Series B),

everything according to the decisions of

the Company's Board of Directors. For

further details, please see Section

2.8.15 of the shelf prospectus.


to), at any time and at its sole

discretion, make an early redemption of

some or all of the bonds (Series C), as it

chooses, until the date of the final

repayment of the bonds (Series C),

everything according to the decisions of

the Company's Board of Directors. For

further details, please see Section

2.8.15 of the shelf prospectus.

Was a guarantee provided for the

payment of the Company's liabilities

under the deed of trust? No No No


33

2) Details on the trustee

Bonds (Series A)

(A) Name of trust company: Reznik Paz Nevo Trust Ltd. (B)

Name of person responsible for the series of bond certificates in the trust company:

Yosi Reznik, CPA

(C)

Contact details:

Tel: 03-6399200 Fax: 03-6389222 Email: [email protected]

(D)

Mailing address for documents:

14 Yad Harutzim Street, Tel-Aviv

Bonds (Series B)



Yosi Reznik, CPA

(C)

Contact details:


(D)



Bonds (Series C)



Yosi Reznik, CPA

(C)

Contact details:


(D)




34

3) Rating

Bond series A

Name of rating company Maalot

Bonds' rating Issuer's rating

Rating of the issuer and bonds on the

date of initial issue (March 2011)

A3 (Midroog)31

Rating of the issuer and bonds – April

2012

ilA ilA, stable


date of expanding the series – June

2012

ilA ilA, stable


date of expanding the series –

November 2012

ilA ilA, stable

Rating of the issuer and bonds – April

2013

ilA+ ilA+, stable

Rating of the issuer and bonds – June

2014

ilA+ ilA+, stable

July 2015 ilA+ ilA+, stable

Rating of the issuer and bonds as of

the date of the report (March 2016)

ilAA- ilAA-, stable

Bond series B


31On May 7, 2012, the Company notified Midroog on the discontinuance of the agreement between the Company and Midroog for rating the bonds (series

A) of the Company and on May 13, 2012, Midroog announced the discontinuance of the rating activity of the Company's bond series A


35



date of initial issue (May 2013)

ilA+ ilA+, stable


date of expanding the series –

February 2014

ilA+ ilA+, stable

Rating of the issuer and bonds – June

2014

ilA+ ilA+, stable




ilAA- ilAA-, stable

Bond series C




date of initial issue (July 2014)

ilA+ ilA+, stable




ilAA- ilAA-, stable


36

4) Compliance with terms and liabilities according to the deed of trust

To the Company's best knowledge, as of the report date and over the reported year, the Company has complied with all

the terms and liabilities according to the deeds of trust, including as at the end of the Report Period the Company complied

with all the financial covenants prescribed in the deed of trust of February 24, 2011 between the Company and Reznik

Paz Nevo Trust Ltd, the trustee for the bond holders (series A) and in the deed of trust dated May 9, 2013 between the

Company and Reznik Paz Nevo Trust Ltd, the trustee for the bond holders (series B) and in the deed of trust for bond

holders dated July 14, 2014 (Series C) (the trustee and the deed of trust, respectively) including the following financial

covenants:

A. The ratio of the Company's equity at the end of each quarter to its financial debt, net, according to solo

reports for that date, will not be under 187.5%32:

The Company's equity, which is attributed to the majority shareholders as at the Report Period, namely, as at

December 31, 2015, is EUR 345,523 thousand.

The financial debt, net, according to solo reports of the Company as at the same date is EUR 137,171 thousand.

Therefore, the ratio of the Company's equity to the financial debt, net, according to solo reports as at the end of the

Report Period, namely, as at December 31, 2015, is approximately 252%. It is indicated that as of December 31,

2015 the Company (solo) has closed and liquid financial transactions (On call) in the amount of EUR 24,949

thousand which under generally accepted accounting principles are not presented in cash and therefore were not

taken into account in calculating the financial ratio although according to their economic substance the transactions

can be realized immediately and in absolute value. In weighting these transactions, the ratio between the

Company's equity and the net financial debt (solo) is 308%.

B. The ratio of the charged share value to net debt will not be less than the basic ratio (as defined hereunder).

With respect to the bond holders (Series A):

"The Basic Ratio": the ratio of the charged share value to a net debt of 175%.

"Net debt": the balance of the bonds' principal (series A) (plus accumulated linkage differentials and interest that

were not yet paid).

The number of charged shares of Brack Capital German Properties B.V., a subsidiary (100%) of the Company

(hereinafter: "BGP") as of December 31, 2015– 943,804.

The total issued share capital of BGP as of December 31, 2015 and as of the signing date of the report – 1,978,261.

The rate of charged shares out of the issued capital share of BGP as of December 31, 2015– 47.7%.

BGP's equity which is attributed to its shareholders, as appears in the Company's financial statements as of December

31, 2015– EUR 458,450 thousand.

The EUR/NIS representative exchange rate known, as of the report signing date, as published by the Bank of Israel

- NIS 4.3521

32The requirement to meet this ratio is relevant only to series A and B bond holders.


37

The value of the charged shares – NIS 951,895 thousand.

Net debt – NIS 304,827 thousand.

Accordingly ,the ratio between the charged share value to net debt, as at the end of the Report Period, is approximately

312% and therefore, the Company meets this ratio as well.

With respect to the bond holders (Series B):


"Net debt": the ratio of the bonds' principal (series B) (plus accumulated linkage differentials and interest that were

not yet paid).

The number of charged shares of BGP as of December 31, 2015– 640,027.

The total issued share capital of BGP as of December 31, 2015 and the signing date of the report – 1,978,261.

The rate of charged shares out of the issued capital share of BGP as of December 31, 2015- 32.4%.


31, 2015– EUR 458,450 thousand.


- NIS 4.3521

The value of the charged shares – NIS 645,513thousand.




With respect to the bond holders (Series C):


"Net debt": the ratio of the bonds' principal (series C) (plus accumulated linkage differentials and interest that were

not yet paid).

The number of charged shares of BGP as of December 31, 2015– 394,430.

The total issued share capital of BGP as of December 31, 2015 and the signing date of the report – 1,978,261.

The rate of charged shares out of the issued capital share of BGP as of December 31, 2015- 19.9%.


31, 2015– EUR 458,540 thousand.


- NIS 4.3521

The value of the charged shares – NIS 397,811 thousand.



38



In addition, the Company committed under the financial covenants set forth in the deeds of trust that:

a. Minimum equity - pursuant to the series A deed of trust -the equity attributed to the majority shareholders

shall not fall below EUR 80 million and pursuant to the series B and C deeds of trust- equity shall not fall

below EUR 150 million and EUR 190 million, respectively, whereas as of the report date, the equity attributed

to the majority shareholders is EUR 345.5 million.

b. Restrictions on dividend distribution - under series A deed of trust- not to distribute dividends and/or distribute

equity to its shareholders and/or repurchase its treasury shares or its convertible securities if it will result in

equity attributed to the majority shareholders that is lower than EUR 80 million, pursuant to the series A deed

of trust. As of the report date, the equity attributed to the majority shareholders is EUR 345.5 million.

Under series B and C deeds of trust - not to distribute dividends and/or distribute equity to its shareholders

and/or repurchase its treasury shares or its convertible securities if it will result in equity attributed to the majority

shareholders that is lower than EUR 160 million and EUR 200 million, respectively, and/or the debt ratio to

CAP (as defined below) that will exceed 70%. As of the report date, the equity attributed to the majority

shareholders is EUR 345.5 million and the debt ratio to CAP is 59.05% (as detailed below).

c. Maximum CAP ratio - the ratio between the net financial liabilities and its equity in addition to non-

controlling interests and other financial liabilities (CAP) shall not exceed 90% pursuant to series A deed of

trust and shall not exceed 75% pursuant to Series B and C deeds of trust.

The Company's net financial debt (consolidated)33 as of the report date, amounted to EUR 655,014 thousand

(consists of financial liabilities according to the Solo reports of EUR 143,699 thousand in addition to the net

financial liabilities of the subsidiaries of EUR 571,878 thousand minus cash and cash equivalents and deposits

of EUR 57,063 thousand minus debt in respect of inventory of apartments under construction of EUR 3,500

thousand);

33Net consolidated financial debt " – total liabilities of the company: a) for repayment of bank loans (recourse) (namely loans conferring the right of

recourse to the Company); b) for repayment of bonds (series A), bonds (series B) and other bonds from series C to F and convertible bonds of the

series G – K to be issued, as far as the Company will issue according to the shelf prospectus; c) and for the repayment of any other loan, the maturity

dates of which (principal and/or interest) are due prior to the final repayment of the bonds (series A), bonds (series B) or bonds (series C to F) or bonds

(series G to K) as far as issued and existing in the cycle; in addition d) the entire debt balance of BGP and BGP subsidiaries to a third party that is

secured by a charge on any asset of BGP and/or BGP's subsidiaries assets (but not more than the value of the charged asset) and all less: e) cash and

cash equivalents and deposits; and f) the debt in respect of inventory of apartments under construction


39

The CAP34amounted to EUR 1,109,144 thousand (according to equity that includes non controlling interests of

EUR 454,100 thousand in addition to net financial debt of EUR 655,014 thousand; it should be noted that the

value of sections b (deferred loans) and c (negative equity) for defining CAP as specified in the deed of bonds

is Zero. Therefore, the ratio is 59.05%, whereas according to the deeds of trust such ratio must be lower than

90% for Series A and lower than 75% for Series B and C.

It is indicated that as of December 31, 2015 the Company (solo) has closed and liquid financial

transactions (On call) in the amount of EUR 24,969 thousand which under generally accepted accounting

principles are not presented in cash and therefore were not taken into account in calculating the maximum CAP

ratio although according to their economic substance the transactions can be realized immediately and in

absolute value. In weighting these transactions, the CAP ratio is 58.11%.

5) Description of the charged properties for securing the Corporation's undertakings according to the liability certificates

The following are details regarding the charges for securing the Company's undertakings pursuant to the terms of the

Company's bonds (Series A, Series B and Series C) which are in force pursuant to any law and the Company's corporate

instruments, as at the date of issuing the report:

Bonds (Series A)

a) Charging BGP shares

To secure the liabilities of the Company toward the bond holders (Series A) and the trustee (including the repayment

of principal, interest and linkage differences) the Company charged, by first degree charge, in favor of the trustee

943,804 ordinary shares par value of EUR 0.01 of BGP (representing 47.7% of BGP's issued and outstanding share

capital).

For details on the value of the charged shares in the financial statements of the Company, see the above small section

3(b).

b) Negative pledge

As long as the bonds (Series A) are within the cycle (namely, as long as the bonds (Series A) have not been fully

repaid or settled in any way, including by way of self-acquisition and/or early redemption), the Company undertakes

that it shall not charge, mortgage, assign by way of charging, or provide as another security of any kind or as another

security (hereinafter together in this sub-section only: "the Security") to any of its charges or to the charges of others,

in favor of any third party, BGP shares, if after creating the Security, the Company is left with a number of BGP

shares which are free and clean, in an amount constituting 10% or less than the total number of the charged shares

(for securing the bonds (Series A), as shall be from time to time.

34Total equity and debt (CAP) – "the net consolidated financial debt" in addition to all the items below: a) the Company's equity (including minority

interests) as stated in the audited or reviewed consolidated statements of the Company; b) the Company's deferred loan balance (as defined below);

and – c) impairments recorded in the consolidated financial statements (as far as recorded) in respect of the charged assets to secure the loans in the

amount of the difference between the recourse and the loan carrying value in the Company's consolidated financial statements. "Deferred loans" – any

loan the Company received from any party, which under its terms is subordinate in the repayment level to bonds (series A), bonds (series B), bonds of

series C - F, or convertible bonds series G – K to be issued, as far as it will issue, according to the shelf prospectus and which cannot be repaid

(principal and/or interest) throughout the term of the aforementioned bonds.


40

Whenever the Company provides a security as stated in this Section above, the Company will forward a confirmation

to the trustee to the effect that it meets said condition, prior to providing the security35.

For details regarding the conditions set forth in the deed of trust for changing, releasing, replacing or cancelling said

liens, see Sections 2.7.12.10 – 2.7.12.12 of the shelf prospectus.

For details regarding the limitations in issuing additional liability certificates, see Section 2.7.12.33 of the shelf

prospectus.

As to the bonds (Series A), the Company declared and undertook, inter alia, that as long as there is a surplus of bonds

(Series A) in cycle, the Company will not take credit which shall be secured by charging the shares of any of the

companies held by BGP or the assets held by such companies.

Without derogating from the foregoing, the creation of the charge on the charged shares will not limit any action of

BGP or corporations it holds, including a limitation on charging shares which are held by BGP in other corporations

for securing non-recourse credit to BGP and/or put a limitation on charging assets by corporations held by BGP for

securing non-recourse credit to BGP.

For further details regarding the Company's liabilities towards the holders of bonds (Series A), see, inter alia, Section

2.7.12.12(D) of the shelf prospectus.

Bonds (Series B)

a) Charging BGP shares

To secure the liabilities of the Company toward the bond holders (Series B) and the trustee (including the repayment

of principal, interest and linkage differences) the Company charged, by first degree charge, in favor of the trustee


capital).


3(b). For additional information regarding said charge see section 5.6 of the modification and addendum number 1

dated May 9, 2013 of the deed of trust dated May 23, 2012, which was attached as an appendix to the shelf prospectus

report of the Company dated May 19, 2013 (Series B deed of trust).

35It is indicated that as of December 31, 2015, all BGP shares are charged in favor of the trustee for the bond holders (Series A – C) and therefore such

condition does not appear to have been met. Nevertheless, it is clarified and stressed that the number of BGP charged shares in favor of the trustee

for the bond holders (Series A) is greater by 78% than the minimum number of BGP shares the Company is required to charge to the trustee according

to the basic ratio and the ratio of the charged shares to the net debt exceeds 64% the ratio required to release the collaterals ( as defined in the Series A

deed of trust) and therefore the non fulfillment of the above condition will not harm the holders.


41

b) Negative pledge

As long as the bonds (Series B) are within the cycle (namely, as long as the bonds (Series B) have not been fully

repaid or settled in any way, including by way of self acquisition and/or early redemption), the Company undertakes




shares which are free and clean from any claim/demand and/or a right of any third party, in an amount constituting

10% or less than the total number of the charged shares to the trustee (for securing the bonds (Series B) and BGP

shares charged to the trustee for bonds (Series A) to secure the bonds (Series A) , as shall be from time to time.

It is stressed that this small section will not apply as long as the ratio of charged shares to the net debt will be

equal to the ratio required for releasing collaterals (as defined in the Series B deed of trust).


liens, see Section 5.5 of the Series B deed of trust.

For details regarding the limitations in issuing additional liability certificates, see Section 4 of the Series B deed of

trust.

As to the bonds (Series B), the Company declared and undertook, inter alia, that as long as there is a surplus of bonds

(Series B) in cycle, the Company will not take credit which shall be secured by charging the shares of any of the

companies held by BGP or the assets held by such companies. It was clarified that the creation of the charge on the

charged shares will not limit any action of BGP or corporations it holds, including a limitation on charging shares

which are held by BGP in other corporations for securing non-recourse credit to BGP and/or put a limitation on

charging assets by corporations held by BGP for securing non-recourse credit to BGP.

For further details regarding the Company's liabilities towards the holders of bonds (Series B), see, inter alia, Section

8 of the Series B deed of trust.

Bonds (Series C)

c) Charging BGP shares

To secure the liabilities of the Company toward the bond holders and the trustee (including the repayment of

principal, interest and linkage differences) the Company charged, by first degree charge, in favor of the trustee


capital).


3(b). For additional information regarding said charge see section 5.6 of the modification and addendum number 2

dated July 14, 2014 of the deed of trust dated May 23, 2012, which was attached as an appendix to the shelf prospectus

report of the Company dated July 20, 2014 (Series C deed of trust).


42

a) Negative pledge

As long as the bonds (Series C) are within the cycle (namely, as long as the bonds (Series C) have not been fully

repaid or settled in any way, including by way of self-acquisition and/or early redemption), the Company undertakes




shares which are free and clean from any claim/demand and/or a right of any third party, in an amount constituting

10% or less than the total number of the charged shares to the trustee for securing the bonds (Series C) BGP shares

charged to the trustee for securing the bonds (Series B) and BGP shares for securing the bonds( Series A), as shall

be from time to time.

It is stressed that this small section will not apply as long as the ratio of charged shares to the net debt will be equal

to the ratio required for releasing collaterals.


liens, see Section 5.5 of the Series C deed of trust.

For details regarding limitations in issuing additional liability certificates, see Section 4 of the Series C deed of trust.

As to the bonds (Series C), the Company declared and undertook, inter alia, that as long as there is a surplus of bonds

(Series C) in cycle, the Company will not take credit which shall be secured by charging the shares of any of the

companies held by BGP or the assets held by such companies. It was clarified that the creation of the charge on the

charged shares will not limit any action of BGP or corporations it holds, including a limitation on charging shares

which are held by BGP in other corporations for securing non-recourse credit to BGP and/or put a limitation on

charging assets by corporations held by BGP for securing non-recourse credit to BGP.

For further details regarding the Company's liabilities towards the holders of bonds (Series C), see,inter alia, Section

8 of the Series C deed of trust.

6) Attaching the financial statements of BGP

According to legal position No 29-103 of the Securities Authority" ("due diligence findings with respect to disclosure

regarding securities and/or liens granted by reporting corporations to secure the repayment of liability certificates)

in the case of pledging the investee's shares ,the corporation is required to attach audited/reviewed financial

statements, as the case may be, of the investee on a quarterly basis ,until the date of full repayment of the liability

certificates.

However, as of the report date, the only differences between the financial statements of the Company and the financial

statements of BGP, the 100% investee company whose shares are pledged to the bondholders (as described in section

5 above, the "pledged investee company ") is the amount of cash held by the Company itself on the part of the assets

and the bonds issued by the Company on the liabilities' part (as reflected in the Company's solo reports), and as a

result, the consolidated financial statements of the Company are virtually identical to those of the pledged investee

company (excluding cash held by the Company and the bonds it issued) and therefore the Company does not attach

separate financial statements of the pledged investee company.


43

The following are data as of December 31, 2015 and 2014 with respect to the assets and liabilities of the Group which

are not included in the consolidated financial statements of the pledged investee company compared to the assets and

liabilities of the pledged investee company and the total consolidated balance sheet:

ta as of December 31, 2015 Da

(EUR in thousands)

The Company

Consolidated

Assets/liabilities

In the pledged

company

Assets/liabilities

In unpledged

companies

Total assets 1,281,068 1,248,197 32,871

Current assets 158,585 125,714 *32,871

Noncurrent assets 1,122,483 1,122,483 0

Total liabilities 826,968 681,170 145,798

Current liabilities 144,767 126,045 **18,722

Noncurrent liabilities 682,201 555,125 ***127,076

Non- controlling interests 108,577 108,577 0

Total equity 345,523 458,450 (112,927)

Rate of assets out of the total assets in the balance

sheet 100% 97% 3%

Rate of liabilities out of the total liabilities in the

balance sheet 100% 82% 18%

Rate of equity out of the total equity in the balance

sheet 100% 133% 33%))

*) cash and liquid balances held by the Company (solo)

**) current maturity of bonds' principal (Series A – C) issued by the Company and interest payable for said

bonds;

***) balance of bonds' principal (Series A – C) issued by the Company

cember 31, 2014 Data as of De

(EUR in thousands)

The Company

Consolidated

Assets/liabilities

In the pledged

company

Assets/liabilities

In unpledged

companies

Total assets 1,198,269 1,162,451 35,818

Current assets 155,624 119,806 35,818*

Noncurrent assets 1,042,645 1,042,645 0

Total liabilities 819,088 672,165 146,923

Current liabilities 98,477 81,024 17,453**

Noncurrent liabilities 720,611 591,141 129,470***

Non- controlling interests 99,585 99,585

Total equity 279,596 390,701 (111,105)

Rate of assets out of the total assets in the balance

sheet

100% 97% 3%

Rate of liabilities out of the total liabilities in the

balance sheet

100% 82% 18%

Rate of equity out of the total equity in the balance

sheet

100% 140% (40%)

*) cash and liquid balances held by the Company (solo)

**) current maturity of bonds' principal (Series A – C) issued by the Company and interest payable for said

bonds;

***) balance of bonds' principal (Series A – C) issued by the Company

August 22nd , 2016


44

Names of signatories Position Signature

Jan Van Der Meer Chairman of the Board of Directors _________________

Ofir Rahamim Co-CEO _________________


- 45 -

CONSOLIDATED FINANCIAL STATEMENTS




- 46 -

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31,

2015 2014

Note Euros in thousands

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 3 55,820 60,205

Balances receivable from banks 3 24,969 -

Restricted deposits and other receivables 4 12,031 15,505

Tenants and trade receivables 5 677,5 4,648

Other financial assets 13 499 10,365

Inventory of buildings under construction and land 6 589,59 64,901

585,158 155,624

NON-CURRENT ASSETS:

Investments in companies accounted at equity 7 5,005 5,005

Inventory of real estate 6 25,591 37,576

Investment property – real estate rights 8 101,038 78,033

Investment property – income generating assets 8 980,243 912,552

Restricted deposits for investments in assets 175 2,035

Other accounts receivable and other financial assets 9,13 1,481 703

Fixed assets 365 471

Deferred taxes 16 585,8 6,270

483,1,122 1,042,645

068,1,281 1,198,269

The accompanying notes are an integral part of the consolidated financial statements.


- 47 -

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31,

5201 4201


LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current maturities of loans from banks 11 68,491 14,223

Current maturities of debentures 11 623,16 15,302

Loans for financing inventory of buildings under construction 11 3,500 9,500

Current maturities of other financial liabilities 13 393 266

Accounts payable 10 073,20 15,740

Advances from apartment purchasers 6 35,687 43,446

767,144 98,477

NON-CURRENT LIABILITIES:

Loans from banks and others 11 499,887 551,892

Debentures 11 076,127 129,470

Other liabilities 12 3,148 3,155

Other financial liabilities 13 578 542

Deferred taxes 16 512,51 35,552

201,682 720,611

Contingent liabilities, commitments and liens 17

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE

COMPANY: 18

Share capital 66 64

Share premium 74,689 71,807

Treasury shares (951) (951)

Other capital reserves 841,3 4,237

Statutory capital reserve 878,267 204,439

Retained earnings - -

Total equity attributable to equity holders of the company 523,345 279,596

Non-controlling interests 577,108 99,585

Total equity 100,454 379,181

068,1,281 1,198,269

August 22nd, 2016 Date of approval of the

financial statements Ian Van Der Mir

Chairman of the Board of Directors

Ofir Rahamim Joint CEO

Guy Priel CFO



- 48 -

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


2015 2014 2013


Revenues from rental of properties 66,415 60,512 49,540

Revenues from property management and others 26,277 22,119 18,185

Property management expenses (24,072) (21,401) (17,798)

Cost of maintenance of rental properties 19a (8,105) (6,331) (5,363)

Rental and management revenues, net 60,515 54,899 44,564

Revenues from sale of apartments 6 68,372 70,933 -

Cost of sale of apartments 6 (54,637) (58,499) -

Gain from sale of apartments 13,735 12,434 -

General and administrative expenses 19b (11,090) (9,325) (8,104)

General and administrative expenses relating to inventory of

buildings under construction and real estate inventory (1,799) (2,082) (1,755)

Selling and marketing expenses (242) (367) (707)

Cost of share based payment (general and administrative) (525,1) (1,554) (1,132)

Operating profit before change in value of investment property 594,59 54,005 32,866

Appreciation of investment property, net 8 44,256 23,304 32,534

Operating income 850,103 77,309 65,400

Finance income 19d 82 291 315

Finance expenses net of exchange rate effect, CPI and currency

hedging transactions 19e (21,162) (20,520) (672,16)

Exchange rate effect, CPI and currency hedging transactions,

net 3,424 10,353 (040,5)

Change in value of loans and interest-swap transactions, net 19f 023,6 (13,949) (646)

Company's share of losses of companies measured at equity - - (1,675)

Income before taxes on income 217,92 53,484 41,682

Taxes on income 16f (725,14) (6,029) (2,613)

Net income 492,77 47,455 39,069

Other comprehensive income: - - -

Total comprehensive income 492,77 47,455 39,069

Net and comprehensive income attributable to:

Equity holders of the Company 439,63 37,954 25,838

Non-controlling interests 053,14 9,501 13,231

492,77 47,455 39,069

Net earnings per share attributable to equity holders of the Company (in Euro): 20

Basic net earnings 68.9 5.97 4.17

Diluted net earnings 48.9 5.76 3.99



- 49 -

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share

capital

Share

premium

Treasury

shares

Other

capital

reserves

Statutory

capital

reserve (1)

Retained

earnings Total

Non-

controlling

interests

Total

equity

Euros in thousands

Balance as of January 1, 2013 61 66,834 (951) 3,034 140,647 - 209,625 77,609 287,234

Total net income and comprehensive income - - - - - 25,838 25,838 13,231 39,069

Total comprehensive income - - - - - 25,838 25,838 13,231 39,069

Classification in accordance with Dutch law - - - - 25,838 (25,838) - - -

Exercise of options into shares 1 1,191 - (452) - - 740 - 740

Cost of share-based payment - - - 1,132 - - 1,132 - 1,132

Adjustment of capital reserve in respect of

transactions with controlling shareholder - - - (77) - - (77) - (77)


Receipt of equity loans from non-controlling

interests - - - - - - - 12,503 12,503

Distribution to non-controlling interests - - - - - - - (3,712) (3,712)

Non-controlling interests from business

combination - - - 65 - - 65 (1,237) (1,172)

Balance as of December 31, 2013 62 68,025 (951) 3,702 166,485 - 237,323 98,394 335,717




Exercise of options into shares 2 3,782 - (1,032) - - 2,752 - 2,752



transactions with controlling shareholder - - - 13 - - 13 - 13

Receipt of equity loans from non-controlling

interests - - - - - - - 2,908 2,908

Dividend to non-controlling interests - - - - - - - (11,218) (11,218)


(1) See Note 18f.



- 50 -

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share

capital

Share

premium

Treasury

shares

Other

capital

reserves

Statutory

capital

reserve (1)

Retained

earnings Total

Non-

controlling

interests

Total

equity

Euros in thousands

Balance as of January 1, 2015 64 71,807 (951) 4,237 204,439 - 279,596 99,585 379,181




Exercise of options into shares 2 2,882 - (2,167) - - 717 - 717



transactions with controlling shareholder - - - 179 - - 179 - 179

Purchase of rights from non-controlling

interests - - - 67 - - 67 (265) (198)

Distribution to non-controlling interests - - - - - - - (796,4) (796,4)


(1) See Note 18f.



- 51 -

CONSOLIDATED STATEMENTS OF CASH FLOWS


5201 2014 2013

Euros in thousands

Cash flows from operating activities:

Net income 492,77 47,455 39,069

Adjustments to reconcile net income to net cash provided by

operating activities:

Adjustments to profit and loss:

Depreciation 210 143 110

Finance expenses, net 315,14 23,586 21,063

Appreciation of investment property, net (44,256) (23,304) (32,534)

Deferred taxes, net 478,14 5,838 2,627

Cost of share-based payment 525,1 1,554 1,132 Adjustment of capital reserve in respect of transactions with

controlling shareholder 179 13 (77) Adjustment of capital reserve in respect of transactions with non-

controlling interests 67 - -

Company's share of losses of companies measured at equity - - 1,675

(482,13) 7,830 (6,004)

Cash flows from operating activities before changes in asset and

liability items 011,64 55,285 33,065

Changes in operating asset and liability items:

Decrease (increase) in tenants, restricted deposits and other

receivables and related parties 687,3 (5,647) 603

Increase (decrease) in accounts payable 224 2,926 (1,160)

911,3 (2,721) (557)

Net cash provided by operating activities before decrease

(increase) in inventory of real estate and inventory of buildings under construction and advances from apartment purchasers 921,67 52,564 32,508

Increase (decrease) in advances from apartment purchasers (7,759) (96) 36,332

Decrease (increase) in inventory of buildings under construction 19,948 17,774 (28,185)

Decrease (increase) in inventory of real estate (62) 242 (5,049)

Net cash provided by operating activities 048,80 70,484 35,606



- 52 -



5201 2014 2013

Euros in thousands

Cash flows from investing activities:

Investment in fixed assets (104) (314) (47)

Investment in investment property (46,960) (132,022) (63,010)

Proceeds from sale of investment property 153 - -

Deferred payment for acquisition of investment property - - (1,981)

Acquisition of newly consolidated subsidiaries, net (a) - - (100,626)

Repayment (Grant) of loans to employees 2,929 2,200 (399)

Withdrawal (placement) of restricted deposits, prepaid transaction

costs and withdrawal (placement) of long-term deposits in

banks, net (1,328) (3,625) 5,736

Interest received and sale of derivatives 64 231 224

Loans granted to companies measured at equity - - (6,387)

Net cash used in investing activities (246,45) (133,530) (166,490)

Cash flows from financing activities:

Interest paid (348,19) (19,422) (15,799)

Exercise of options 717 2,752 740

Distribution to non-controlling interests (796,4) (11,218) (3,712)

Receipt of equity loans from non-controlling interests - 2,908 13,185

Receipt of long-term loans, net 17,404 238,105 183,360

Issuance of debentures, net - 36,972 36,447

Repayment of debentures (17,012) (15,057) (1,483)

Repayment of long-term loans (23,095) (142,331) (104,304)

Purchase of rights from non-controlling interests (198) - (1,172)

Repayment of SWAP transactions , transaction costs and sale of

derivatives, net 7,141 (3,418) 84

Net cash provided by (used in) financing activities (39,187) 89,291 107,346

Change in cash and cash equivalents (4,385) 26,245 (23,538)

Balance of cash and cash equivalents at the beginning of the year 60,205 33,960 57,498

Balance of cash and cash equivalents at the end of the year 55,820 60,205 33,960



- 53 -



5201 2014 2013

Euros in thousands

(a) Acquisition of newly consolidated subsidiaries

Assets and liabilities of consolidated subsidiaries as of date

of acquisition:

Investment property - - (108,719)

Working capital (excluding cash and cash equivalents) - - 248

Loans from banks, net - - 8,119

Deferred taxes, net - - (274)

- - (100,626)

(b) Material non-cash activities:

Payables with respect to acquisition of investment property - - 300



- 54 -

NOTE 1:- GENERAL

a. General description of the Company and its activity

Brack Capital Properties NV ("the Company") was incorporated in June 2006 and is a real

estate corporation residing in the Netherlands, which is engaged via investees in the

acquisition and management of investment properties in Germany, mainly in the area of

income-generating commercial and income-generating residential real estate. The

Company is also engaged in real estate betterment and development of residential complex

in Düsseldorf, Germany Regarding the Company's operating segments, see Note 21.

In 2010, the Company issued shares pursuant to an initial public offering on the Israeli

stock exchange

b. Definitions

In these financial statements -

The Company - Brack Capital Properties NV.

The Parent Company - Brack Capital First BV.

The Ultimate Parent

Company

- BCRE-Brack Capital Real Estate Investments BV.

The Brack Capital

Group

- Including the companies holding the Ultimate Parent

Company and their respective investees.

The Group - Brack Capital Properties NV and its investees

Subsidiaries - Companies controlled by the Company (as defined in the

IFRS 10) and the accounts of which are consolidated with

those of the Company.

Associates - Companies over which the Company has significant influence

and which are not subsidiaries and for which the Company's

investment therein is included in the Company's consolidated

financial statements at equity.

Jointly controlled

entities

- Companies owned by various entities that have a contractual

arrangement for joint control and the Company's investment

therein is included in the consolidated statements of the

Company using the equity method. (see Note 2d)

Investees - Subsidiaries, jointly controlled entities and associates.

Interested parties and

controlling shareholder -

As defined in the Israeli Securities Regulations (Annual

Financial Statements), 2010.

Related parties - As defined in IAS 24 (revised)


- 55 -

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

a. Basis of presentation of the financial statements

1. Basis of measurement

The Company's financial statements have been compiled based on cost, with the

exception of investment property and derivative financial instruments which are

measured at fair value through profit or loss. Likewise, the Company occasionally

designates loans from banking corporations to fair value through profit or loss.

The Company has elected to present its statement of comprehensive income

according to the operations attribute method.

2. Preparation format of the financial statements

The financial statements attached in this report are presented according to

International Standards – the IFRS and as adopted by the European Union and with

Part 9 of Book 2 of the Dutch Civil Code.

These standards include:

a) International Financial Reporting Standards (IFRS).

b) International Accounting Standards (IAS).

c) Interpretations issued by the IFRIC and by the SIC.

Furthermore, the financial statements have been prepared in accordance with the

Israeli Securities Regulations (Annual Financial Statements), 2010.

3. Consistent accounting policies

The accounting policies applied in the financial statements are consistent with those

of all periods presented.

b. Significant accounting judgments, estimates and assumptions used in the preparation of the

financial statements:

1. In the process of applying the significant accounting policies, the Group has made the

following judgments which have the most significant effect on the amounts recognized

in the financial statements:

- Acquisition of subsidiaries that are not business combinations:

According to IFRS 3, at the time of acquisition of subsidiaries and activities, the

Company considers whether the acquisition represents a business combination

pursuant to IFRS 3. The following criteria which indicate acquisition of a business

are considered: the number of assets acquired, the extent to which ancillary services

to operate the property are provided and the complexity of the management of the

property.


- 56 -

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

2. Estimates and assumptions

The preparation of the financial statements requires management to make estimates

and assumptions that have an effect on the application of the accounting policies and

on the reported amounts of assets, liabilities, revenues and expenses. These estimates

and underlying assumptions are reviewed regularly. Changes in accounting estimates

are reported in the period of the change in estimate.

The key assumptions made in the financial statements concerning uncertainties at

the end of the reporting period and the critical estimates computed by the Group that

may result in a material adjustment to the carrying amounts of assets and liabilities

within the next financial year are discussed below.

Investment property:

Investment property that can be reliably measured is presented at fair value at the

end of the reporting period. Changes in their fair value are recognized in profit or

loss. Fair value is determined by independent valuation experts using economic

valuations that involve valuation techniques and assumptions as to estimates of

projected future cash flows from the property and estimate of the suitable discount

rate for these cash flows. If applicable, the fair value is determined based on recent

real estate transactions with similar characteristics and location of the valued asset.

The fair value measurement of investment property requires valuation experts and

the Company's management to use certain assumptions regarding rates of return on

the Group's assets, future lease prices, occupancy rates, contract renewal terms, the

probability of leasing vacant areas, asset operating expenses, the tenants' financial

stability and the implications of any investments made for future development

purposes in order to assess the future expected cash flows from the assets. Any

change in the assumptions used to measure the investment property is liable to affect

fair value.

Inventories of real estate and apartments under construction:

The net realizable value is assessed based on management's evaluation including

expectations and estimates as to the amounts expected to be realized from the sale of

the project inventory and the construction costs necessary to bring the inventory to a

saleable condition. Further details are given in j.


- 57 -


Deferred tax assets:

Deferred tax assets are recognized for unused carryforward tax losses and temporary

differences to the extent that it is probable that taxable profit will be available against

which the losses can be utilized. Significant management judgment is required to

determine the amount of deferred tax assets that can be recognized, based upon the

likely timing and level of future taxable profits together with future tax planning

strategies. Further details are given in t.

Determining the fair value of an unquoted financial asset and financial liability:

The fair value of unquoted financial asset and unquoted financial liability in Level 3

of the fair value disclosure hierarchy of IFRS 13 is determined using valuation

techniques including projected cash flows discounted at current rates applicable for

items with similar terms and risk characteristics. The changes in projected future

cash flows and the discount rates estimate considering the inputs of risk evaluation

such as liquidity risk, credit risk and volatility may affect the fair value of these

assets. Further details are given in l and m.

c. Consolidated financial statements:

The consolidated financial statements comprise the financial statements of

companies that are controlled by the Company (subsidiaries). Control is achieved

when the Company is exposed, or has rights, to variable returns from its involvement

with the investee and has the ability to affect those returns through its power over

the investee. Potential voting rights are considered when assessing whether an entity

has control. The consolidation of the financial statements commences on the date on

which control is obtained and ends when such control ceases.

The financial statements of the Company and of the subsidiaries are prepared as of

the same dates and periods. The consolidated financial statements are prepared using

uniform accounting policies by all companies in the Group. Significant intragroup

balances and transactions and gains or losses resulting from intragroup transactions

are eliminated in full in the consolidated financial statements.

Non-controlling interests in subsidiaries represent the equity in subsidiaries not

attributable, directly or indirectly, to a parent. Non-controlling interests are presented

in equity separately from the equity attributable to the equity holders of the

Company. Profit or loss and components of other comprehensive income are

attributed to the Company and to non-controlling interests. Losses are attributed to

non-controlling interests even if they result in a negative balance of non-controlling

interests in the consolidated statement of financial position.


- 58 -


d. Investment in joint arrangements:

Joint arrangements are arrangements in which the Company has joint control. Joint

control is the contractually agreed sharing of control of an arrangement, which exists

only when decisions about the relevant activities require the unanimous consent of

the parties sharing control.

Joint ventures:

In joint ventures the parties that have joint control of the arrangement have rights to

the net assets of the arrangement. A joint venture is accounted for at equity

e. Investments accounted for using the equity method:

The Group's investments in associates and joint ventures are accounted for using the

equity method.

Under the equity method, the investment in the associate or in the joint venture is

presented at cost with the addition of post-acquisition changes in the Group's share

of net assets, including other comprehensive income of the associate or the joint

venture. Profits and losses resulting from transactions between the Group and the

associate or the joint venture are eliminated to the extent of the interest in the

associate or in the joint venture.

Goodwill relating to the acquisition of an associate or a joint venture is presented as

part of the investment in the associate or the joint venture, measured at cost and not

systematically amortized. Goodwill is evaluated for impairment as part of the

investment in the associate or in the joint venture as a whole.


- 59 -


The financial statements of the Company and of the associate or joint venture are

prepared as of the same dates and periods. The accounting policies applied in the

financial statements of the associate or the joint venture are uniform and consistent

with the policies applied in the financial statements of the Group.

Upon the acquisition of an associate or a joint venture achieved in stages when the

former investment in the acquiree was accounted for pursuant to the provisions of

IAS 39, the Group adopts the principles of IFRS 3 regarding business combinations

achieved in stages. Consequently, equity interests in the acquiree that had been held

by the Group prior to achieving significant influence or joint control are measured

at fair value on the acquisition date and are included in the acquisition consideration

while recognizing a gain or loss resulting from the fair value measurement.

Losses of an associate in amounts which exceed its equity are recognized by the

Company to the extent of its investment in the associate plus any losses that the

Company may incur as a result of a guarantee or other financial support provided in

respect of the associate. For this purpose, the investment includes long-term

receivables (such as loans granted) for which settlement is neither planned nor likely

to occur in the foreseeable future.

The equity method is applied until the loss of significant influence in the associate

or loss of joint control in the joint venture or classification as held-for-sale.

The Company continues to apply the equity method even in cases where the

investment in the associate becomes an investment in a joint venture and vice versa.

The Company applies the provisions of IFRS 5 to the investment or a portion of the

investment in the associate or the joint venture that is classified as held-for-sale. Any

retained interest in this investment which is not classified as held-for-sale continues

to be accounted for using the equity method.

On the date of loss of significant influence or joint control, the Group measures any

remaining investment in the associate or the joint venture at fair value and recognizes

in profit or loss the difference between the fair value of any remaining investment

plus any proceeds from the sale of the investment in the associate or the joint venture

and the carrying amount of the investment on that date.

f. Functional currency and presentation currency:

1. The presentation currency of the financial statements is the Euro.

The Group determines the functional currency of each Group entity, including

companies accounted for at equity.


- 60 -


2. Transactions, assets and liabilities in foreign currency:

Transactions denominated in foreign currency are recorded upon initial recognition

at the exchange rate at the date of the transaction. After initial recognition, monetary

assets and liabilities denominated in foreign currency are translated at each reporting

date into the functional currency at the exchange rate at that date. Exchange rate

differences are recognized in profit or loss. Non-monetary assets and liabilities

denominated in foreign currency and measured at cost are translated at the exchange

rate at the date of the transaction. Non-monetary assets and liabilities denominated

in foreign currency and measured at fair value are translated into the functional

currency using the exchange rate prevailing at the date when the fair value was

determined.

3. Index-linked monetary items:

The Group has debentures that are linked to the Israeli Consumer Price Index

("Israeli CPI"). Monetary assets and liabilities linked to the changes in the Israeli

Consumer Price Index ("Israeli CPI") are adjusted at the relevant index at the end of

each reporting period according to the terms of the agreement.

g. Cash equivalents and balances receivable from banks:

Cash equivalents are considered as highly liquid investments, including unrestricted

short-term bank deposits with an original maturity of three months or less from the

date of acquisition or with a maturity of more than three months, but which are

redeemable on demand without penalty and which form part of the Group's cash

management. Balances receivable from banks are considered as highly liquid

investments including unrestricted bank deposits which form part of the Group's cash

management.

h. Short-term deposits:

Short-term bank deposits are deposits with an original maturity of more than three

months from the date of acquisition. The deposits are presented according to their

terms of deposit.

i. Allowance for doubtful accounts:

The allowance for doubtful accounts is determined in respect of specific debts whose

collection, in the opinion of the Company's management, is doubtful. The Company

also recognizes a provision for groups of customers that are collectively assessed for

impairment based on their credit risk characteristics. Impaired debts are

derecognized when they are assessed as uncollectible.


- 61 -


j. Inventories of apartments under construction and inventories of real estate:

Cost of inventories of apartments under construction and inventories of real estate

comprises identifiable direct costs of land such as taxes, fees and duties and

construction costs. The Company also capitalizes borrowing costs as part of the cost

of inventories of apartments under construction from the period in which the

Company commenced development of the land.

Inventories of inventories of apartments under construction and inventories of real

estate are measured at the lower of cost or net realizable value. Net realizable value

is the estimated selling price in the ordinary course of business less estimated costs

of completion and the estimated selling costs.

k. The operating cycle:

The Group has two operating cycles. The operating cycle of apartments under

construction is three years. The operating cycle of the remaining activities is one

year. Accordingly, the assets and liabilities directly attributable to inventory of

apartments under construction are classified in the statement of financial position as

current assets and liabilities based on the operating cycle.

l. Financial instruments:

1. Financial assets:

Financial assets within the scope of IAS 39 are initially recognized at fair value plus

directly attributable transaction costs, except for investments at fair value through

profit or loss in respect of which transaction costs are recorded in profit or loss.

a. Financial assets at fair value through profit or loss:

The Group has financial assets at fair value through profit or loss comprising

financial assets held for trading and financial assets designated upon initial

recognition as at fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired principally for

the purpose of selling or repurchasing in the near term, if they form part of a portfolio

of identified financial instruments that are managed together to earn short-term

profits or if they are derivatives not designated as hedging instruments. Gains or

losses on investments held for trading are recognized in profit or loss when incurred.

Derivatives, including separated embedded derivatives, are classified as held for

trading unless they are designated as effective hedging instruments.


- 62 -


The Group assesses whether embedded derivatives are required to be separated from

host contracts when the Group first becomes party to the contract. Reassessment only

occurs if there is a change in the terms of the contract that significantly modifies the

cash flows that would otherwise be required.

b. Loans and receivables:

The Group has loans and receivables that are financial assets (non-derivative) with

fixed or determinable payments that are not quoted in an active market. After initial

recognition, loans are measured based on their terms at cost plus direct transaction

costs using the effective interest net of impairment provision. Short-term credits are

measured based on their terms, normally at face value. Gains and losses are

recognized in profit or loss when the loans and receivables are derecognized or

impaired, as well as through the systematic amortization process. As for recognition

of interest income, see V.

2. Financial liabilities:

Financial liabilities are initially recognized at fair value. Loans and other liabilities

measured at amortized cost are presented less direct transaction costs.

After initial recognition, the accounting treatment of financial liabilities is based on

their classification as follows:

a. Financial liabilities measured at amortized cost:

After initial recognition, loans and other liabilities are measured based on their terms

at amortized cost less directly attributable transaction costs using the effective

interest method.

b. Financial liabilities at fair value through profit or loss:

Financial liabilities at fair value through profit or loss include financial liabilities

classified as held for trading and financial liabilities designated upon initial

recognition as at fair value through profit or loss.

In the event that a financial instrument contains one or more embedded derivatives,

the combined instrument can be designated, upon initial recognition, as a financial

liability measured at fair value through profit or loss.

Derivatives, including separated embedded derivatives, are classified as held for

trading unless they are designated as effective hedging instruments.


- 63 -


The Group assesses the existence of an embedded derivative and whether it is

required to be separated from a host contract when the Group first becomes party to

the contract. Reassessment of the need to separate an embedded derivative only

occurs if there is a change in the terms of the contract that significantly modifies the

cash flows that would otherwise be required. A liability may be designated upon

recognition to profit or loss subject to the terms set forth in IAS 39.

c. Offsetting financial instruments:

Financial assets and financial liabilities are offset and the net amount is presented in

the statement of financial position if there is a legally enforceable right to set off the

recognized amounts and there is an intention either to settle on a net basis or to realize

the asset and settle the liability simultaneously.

The right to set off must be legally enforced not only in the ordinary course of

business of the parties to the agreement but also in case of bankruptcy or insolvency.

In order for the right to exist, it should not be dependent on a future event or that in

certain periods of time it will not apply or that there will be events that will cause its

expiration.

d. Derecognition of financial instruments:

1. Financial assets:

A financial asset is derecognized when the contractual rights to the cash flows

from the financial asset expire or the Company has transferred its contractual

rights to receive cash flows from the financial asset or assumes an obligation

to pay the cash flows in full without material delay to a third party and has

transferred substantially all the risks and rewards of the asset, or has neither

transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset.

2. Financial liabilities:

A financial liability is derecognized when it is extinguished, that is when the

obligation is discharged or cancelled or expires. A financial liability is

extinguished when the debtor (the Group) discharges the liability by paying

in cash, other financial assets, goods or services; or is legally released from

the liability.

When an existing financial liability is exchanged with another liability from

the same lender on substantially different terms, or the terms of an existing

liability are substantially modified, such an exchange or modification is

accounted for as an extinguishment of the original liability and the recognition

of a new liability. The difference between the carrying amounts of the above

liabilities is recognized in profit or loss. If the exchange or modification is not

substantial, it is accounted for as a change in the terms of the original liability

and no gain or loss is recognized on the exchange.


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When evaluating whether the change in the terms of an existing liability is

substantial, the Company takes into account both quantitative and qualitative

considerations.

e. Impairment of financial assets:

The Group assesses at the end of each reporting period whether there is any objective

evidence of impairment of a financial asset or group of financial assets as follows.

Financial assets carried at amortized cost:

Objective evidence of impairment exists when one or more events that have occurred

after initial recognition of the asset have a negative impact on the estimated future

cash flows. The amount of the loss recorded in profit or loss is measured as the

difference between the asset's carrying amount and the present value of estimated

future cash flows (excluding future credit losses that have not yet been incurred)

discounted at the financial asset's original effective interest rate. If the financial asset

has a variable interest rate, the discount rate is the current effective interest rate. In a

subsequent period, the amount of the impairment loss is reversed if the recovery of

the asset can be related objectively to an event occurring after the impairment was

recognized. The amount of the reversal, up to the amount of any previous

impairment, is recorded in profit or loss.

m. Derivative financial instruments designated as hedges (hedging):

The Group enters into contracts for derivative financial instruments such as forward

currency contracts (Forward) and interest rate swaps (SWAP) and CAP transactions

to hedge risks associated with foreign exchange rates and interest rate fluctuations.

Any gains or losses arising from changes in the fair values of derivatives that do not

qualify for hedge accounting are recorded immediately in profit or loss.

n. Leases:

The criteria for classifying leases as finance or operating leases depend on the

substance of the agreements and are made at the inception of the lease in accordance

with the following principles as set out in IAS 17.


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The Group as lessee:

1. Finance leases:

Lease of land under investment property presented at fair value is accounted for as

finance where the leased asset at the commencement of the lease term is measured

at the lower of the fair value of the leased asset or at the present value of the minimum

lease payments.

After initial recognition, the leased asset is accounted for according to the accounting

policy applicable for this type of asset.

2. Operating leases:

Lease agreements are classified as an operating lease if they do not transfer

substantially all the risks and benefits incidental to ownership of the leased asset.

Lease payments are recognized as an expense in profit or loss on a straight-line basis

over the lease term.

The Group as lessor:

Operating leases:

Assets that are not transferred substantially all the risks and benefits incidental to

ownership of the leased asset are classified as operating leases. Rental receipts are

recognized as an income in profit or loss on a straight line basis over the lease term.

Initial direct costs incurred in respect of the lease agreement, are added to the

carrying amount of the leased asset and recognized as an expense concurrently with

recognition of rental income. Contingent rental receipts are recognized in profit or

loss upon the date the Company is entitled to receive such receipts.

o. Business combinations and goodwill:

Business combinations are accounted for by applying the acquisition method. Under

this method, the identifiable assets and liabilities of the acquired business are

recognized at fair value on the acquisition date. The cost of the acquisition is the

aggregate fair value of the assets transferred, liabilities incurred and equity interests

issued by the acquirer on the date of acquisition.


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Non-controlling interests are measured at proportionate share of fair value of the

acquiree's net identifiable assets on the acquisition date.

The direct costs relating to the acquisition are recognized as an expense in profit or

loss and do not represent part of the acquisition.

On the acquisition date, the assets acquired and liabilities assumed are classified and

designated in accordance with the contractual terms, economic circumstances and

other pertinent conditions that exist at the acquisition date, except for lease contracts

that have not been modified on the acquisition date and whose classification as a

finance or operating lease is therefore not reconsidered.

In a business combination achieved in stages, equity interests in the acquiree that

had been held by the acquirer prior to obtaining control are measured at the

acquisition date fair value and included in the acquisition consideration while

recognizing gain or loss resulting from the fair value measurement, including

realization of amounts that were recorded in other comprehensive income.

Contingent consideration is recognized at fair value on the acquisition date. If the

contingent consideration is classified as a financial liability in accordance with IAS

39, subsequent changes in the fair value of the contingent consideration are

recognized in profit or loss. If the contingent consideration is classified as an equity

instrument, it is measured at fair value on the acquisition date without subsequent

remeasurement. In any event, if the changes arise from adjustments made to the

interim PPA during the measurement period, they are recognized as goodwill

adjustment.

Acquisitions of subsidiaries that are not business combinations:

Upon the acquisition of subsidiaries and activities that do not constitute a business,

the consideration paid is allocated among the subsidiary's identifiable assets and

liabilities based on their relative fair values on the acquisition date without

attributing any amount to goodwill, and the non-controlling interests, if any,

participate at their relative share of the fair value of the net identifiable assets on the

acquisition date.

Upon the acquisition of non-controlling interests of subsidiaries, as above, that

occurred until December 31, 2009, the difference between the consideration paid and

the relative portion of non-controlling interests acquired on the date of acquisition is

attributed to assets and liabilities as described above. Upon the acquisition of non-

controlling interests of subsidiaries, as above, that occurred starting from January 1,

2010, the accounting treatment is in accordance with section c above ("consolidated

financial statements").


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p. Investment property:

An investment property is property (land or a building or both) held by the owner

(lessor under an operating lease) or by the lessee under a finance lease to earn rentals

or for capital appreciation or both rather than for use in the production or supply of

goods or services, for administrative purposes or for sale in the ordinary course of

business.

Real estate rights held by a lessee (the Group) under an operating lease are classified

as investment property provided that these rights are held in order to earn rentals or

for capital appreciation or both rather than for use in the production or supply of

goods or services, for administrative purposes or for sale in the ordinary course of

business. The Group uses the fair value model for these rights.

Investment property is measured initially at cost, including costs directly attributable

to the acquisition. After initial recognition, investment property is measured at fair

value which reflects market conditions at the end of the reporting period. Gains or

losses arising from changes in the fair values of investment property are included in

profit or loss when incurred. Investment property is not systematically depreciated.

Transfer of a property from investment property to inventories is made at the

inception of development with the intention of selling the property evidenced by

approval of the development plan, finalizing the architectural planning, management

resolution on commencing the project marketing, commencement of negotiations to

finance the project and preparing plans to build the sales office. These activities

indicate that the Company intends to develop the project rather than holding it as

investment property for the purpose of capital appreciation. In addition, these

activities are viewed by the Company as activities coupled with material costs. The

cost considered for accounting treatment on the transition date is the fair value at the

time of change on realization.

Investment property is derecognized on disposal or when the investment property

ceases to be used and no future economic benefits are expected from its disposal.

The difference between the net disposal proceeds and the carrying amount of the

asset is recognized in profit or loss in the period of the disposal.

The Group determines the fair value of investment property on the basis of valuations

by independent appraisers who hold recognized and relevant professional

qualifications and the necessary knowledge and experience and by the Company's

management having wide professional knowledge and by internal appraisers.


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q. Property, plant and equipment:

Property, plant and equipment are measured at cost, including directly attributable

costs, less accumulated depreciation, accumulated impairment losses excluding day-

to-day servicing expenses.

Depreciation is calculated on a straight-line basis over the useful life of the assets at

annual rates as follows:

%

Office furniture and equipment 33

The useful life, depreciation method and residual value of an asset are reviewed at

least each year-end and any changes are accounted for prospectively as a change in

accounting estimate. As for testing the impairment of property, plant and equipment,

see s below.

Depreciation of an asset ceases at the earlier of the date that the asset is classified as

held for sale and the date that the asset is derecognized

An asset is derecognized on disposal or when no further economic benefits are

expected from its use. The gain or loss arising from the derecognition of the asset

(determined as the difference between the net disposal proceeds and the carrying

amount in the financial statements) is included in profit or loss when the asset is

derecognized.

r. Borrowing costs in respect of qualifying assets:

The Group capitalizes borrowing costs that are attributable to the construction of

qualifying assets.

A qualifying asset is an asset that necessarily takes a substantial period of time to get

ready for its intended use or sale, comprising of tangible and inventories that require

a substantial period of time to bring them to a saleable condition.

The capitalization of borrowing costs commences when expenditures for the asset

are being incurred, borrowing costs are being incurred and the activities to prepare

the asset are in progress and ceases when substantially all the activities to prepare

the qualifying asset for its intended use or sale are complete.


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s. Impairment of non-financial assets:

The Company evaluates the need to record an impairment of the carrying amount of

non-financial assets whenever events or changes in circumstances indicate that the

carrying amount is not recoverable. If the carrying amount of non-financial assets

exceeds their recoverable amount, the assets are reduced to their recoverable amount.

The recoverable amount is the higher of fair value less costs of sale and value in use.

In measuring value in use, the expected future cash flows are discounted using a pre-

tax discount rate that reflects the risks specific to the asset. The recoverable amount

of an asset that does not generate independent cash flows is determined for the cash-

generating unit to which the asset belongs. Impairment losses are recognized in profit

or loss.

An impairment loss of an asset, other than goodwill, is reversed only if there have

been changes in the estimates used to determine the asset's recoverable amount since

the last impairment loss was recognized. Reversal of an impairment loss, as above is

limited to the lower of the impairment loss previously recognized (net of

depreciation or amortization) or its recoverable amount. The reversal of impairment

loss of an asset presented at cost is recognized in profit or loss.

Investment in associate or joint venture:

After application of the equity method, the Company determines whether it is

necessary to recognize any additional impairment loss with respect to the investment

in associates or joint ventures. The Company determines at each reporting date

whether there is objective evidence that the carrying amount of the investment in the

associate or the joint venture is impaired. The test of impairment is carried out with

reference to the entire investment, including the goodwill attributed to the associate

or the joint venture.

t. Taxes on income:

Current or deferred taxes are recognized in the statement of profit or loss except to

the extent that the tax arises from items which are recognized directly in other

comprehensive income or in equity.

1. Current taxes:

The current tax liability is measured using the tax rates and tax laws that have been

enacted or substantively enacted by the end of reporting period as well as

adjustments required in connection with the tax liability in respect of previous years.

2. Deferred taxes:

Deferred taxes are computed in respect of temporary differences between the carrying

amounts in the financial statements and the amounts attributed for tax purposes.


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Deferred taxes are measured at the tax rates that are expected to apply to the period when

the taxes are reversed in profit or loss, comprehensive income or equity, based on

tax laws that have been enacted or substantively enacted by the end of the reporting

period.

Deferred tax assets are reviewed at the end of each reporting period and reduced to the

extent that it is not probable that they will be utilized. Also, temporary differences

for which deferred tax assets have not been recognized are reassessed and deferred

tax assets are recognized to the extent that their recoverability has become probable.

In cases where the Company holds an asset company and the manner in which the Company

expects to sell its investment is by selling the shares of the asset company and not by

selling the asset itself, the Company is required to recognize deferred taxes while

taking into account the inside temporary differences deriving from the tax base of

the asset and its carrying value and taking into account the outside temporary

differences deriving from the tax base of the shares and the share of the company

holding the net assets of the subsidiary in the consolidated financial statements.

Taxes that would apply in the event of the disposal of investments in investees have not

been taken into account in computing deferred taxes, as long as the disposal of the

investments in investees is not probable in the foreseeable future. Also, deferred

taxes that would apply in the event of distribution of earnings by investees as

dividends have not been taken into account in computing deferred taxes, since the

distribution of dividends does not involve an additional tax liability or since it is the

Company's policy not to initiate distribution of dividends that would trigger an

additional tax liability.

Taxes on income that relate to distributions of an equity instrument and to transaction

costs of an equity transaction are accounted for pursuant to IAS 12.

Deferred taxes are offset if there is a legally enforceable right to offset a current tax

asset against a current tax liability and the deferred taxes relate to the same taxpayer

and the same taxation authority.

u. Share-based payment transactions:

The Company's employees are entitled to remuneration in the form of equity-settled share-

based payment transactions.


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Equity-settled transactions:

The cost of equity-settled transactions with employees is measured at the fair value of the

equity instruments granted at grant date. The fair value is determined using a standard

option pricing model; additional details are given in Note 18e. In estimating fair value, the

vesting conditions (consisting of service conditions and performance conditions other than

market conditions) are not taken into account. The only conditions taken into account in

estimating fair value are market conditions and non-vesting conditions.

The cost of equity-settled transactions is recognized in profit or loss, together with a

corresponding increase in equity, during the period which the performance and/or service

conditions are to be satisfied, ending on the date on which the relevant employees become

fully entitled to the award ("the vesting period"). The cumulative expense recognized for

equity-settled transactions at the end of each reporting period until the vesting date reflects

the extent to which the vesting period has expired and the Group's best estimate of the

number of equity instruments that will ultimately vest.

Expense in respect of grants that do not ultimately vest is not recognized, except for grants,

the vesting of which depends on market conditions which are accounted as grants that

vested regardless of market conditions assuming that all of the other vesting conditions

(service and/or performance) were met.

If the Company modifies the conditions on which equity-instruments were granted, an

additional expense is recognized for any modification that increases the total fair value of

the share-based payment arrangement or is otherwise beneficial to the employee at the

modification date.

v. Revenue recognition:

Revenues are recognized in profit or loss when the revenues can be measured reliably, it is

probable that the economic benefits associated with the transaction will flow to the

Company and the costs incurred or to be incurred in respect of the transaction can be

measured reliably.

The specific criteria for revenue recognition for the following types of revenues are:

Revenues from the rendering of services (including asset management fees):

Revenues from the rendering of services are recognized by reference to the stage of

completion at the end of the reporting period. Under this method, revenues are recognized

in the accounting periods in which the services are rendered. Where the contract outcome

cannot be measured reliably, revenue is recognized only to the extent that the expenses

incurred are recoverable.


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Revenues from the sale of residential apartments:

Revenues from the sale of residential apartments are recognized when the principal risks

and rewards of ownership have passed to the buyer. Revenues are recognized when

significant uncertainties regarding the collection of the consideration no longer exist, the

related costs are known and there is no continuing managerial involvement with the

residential apartment delivered. These criteria are usually met when construction has been

substantially completed, the residential apartment has been delivered to the buyer and the

buyer has paid the entire consideration for the apartment.

Rental income:

Rental income is recognized on a straight-line basis over the lease term. Where there is a

fixed increase in rent over the term of the contract, the aggregate amount of the increase is

recognized as revenues on a straight-line basis over the lease period.

Interest income:

Interest income on financial assets is recognized as it accrues using the effective interest

method.

Reporting revenues using gross basis or net basis:

In cases where the Group acts as an agent or as a broker without being exposed to the risks

and rewards associated with the transaction, its revenues are presented on a net basis.

However, in cases where the Group operates as a principal supplier and is exposed to risks

and rewards associated with the transaction, its revenues are presented on a gross basis.

According to the Group's activity, it bears the risks stemming from revenues from property

management and therefore, the Company recognizes its revenues on a gross basis.

w. Finance income and expenses:

Finance income comprises interest income on amounts invested .Changes in fair value of

financial assets at fair value through profit or loss also include revenues from dividends

and interest.

Finance expenses comprise interest expenses on loans received, changes in fair value of

financial assets and financial liabilities measured at fair value through profit or loss and

impairment losses of financial assets and losses on hedges recognized in profit or loss.

Borrowing costs that are not capitalized to qualifying assets are recognized in profit or loss

using the effective interest method.

Gains and losses on exchange rate differences are reported on a net basis.


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x. Operating segments:

An operating segment is a component of the Group that meets the following three criteria:

1. is engaged in business activities from which it may earn revenues and incur

expenses, including revenues and expenses relating to intragroup transactions;

2. whose operating results are regularly reviewed by the Group's chief operating

decision maker to make decisions about resources to be allocated to the segment and assess

its performance; and

3. for which separate financial information is available.

y. Earnings (loss) per share:

Earnings per share are calculated by dividing the net income attributable to equity holders

of the Company by the weighted number of Ordinary shares outstanding during the period.

Basic earnings per share only include shares that were actually outstanding during the

period. Potential Ordinary shares are only included in the computation of diluted earnings

per share when their conversion decreases earnings per share or increases loss per share

from continuing operations. Further, potential Ordinary shares that are converted during

the period are included in diluted earnings per share only until the conversion date and from

that date in basic earnings per share. The Company's share of earnings of investees is

included based on the earnings per share of the investees multiplied by the number of shares

held by the Company.

z. Provisions:

A provision in accordance with IAS 37 is recognized when the Group has a present

obligation (legal or constructive) as a result of a past event, 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. If the effect is material,

provisions are measured according to the estimated future cash flows discounted using a

pre-tax interest rate that reflects the market assessments of the time value of money and,

where appropriate, those risks specific to the liability.

Following are the types of provisions included in the financial statements:

Legal claims:

A provision for claims is recognized when the Group has a present legal or constructive

obligation as a result of a past event, it is more likely than not that an outflow of resources

embodying economic benefits will be required by the Group to settle the obligation and a

reliable estimate can be made of the amount of the obligation. Where the effect of the time

value of money is material, a provision is measured at its present value.


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aa. Advertising expenses:

Expenditures incurred on advertising, marketing or promotional activities, such as

production of catalogues and promotional pamphlets, are recognized as an expense when

the Group receives those services.

bb. Treasury shares:

Company shares held by the Company and/or subsidiaries are recognized at cost of

purchase and presented as a deduction from equity. Any gain or loss arising from a

purchase, sale, issue or cancellation of treasury shares is recognized directly in equity.

cc. Fair value measurement:

Fair value is 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.

Fair value measurement is based on the assumption that the transaction will take place in

the asset's or the liability's principal market, or in the absence of a principal market, in the

most advantageous market.

The fair value of an asset or a liability is measured using the assumptions that market

participants would use when pricing the asset or liability, assuming that market participants

act in their economic best interest.

Fair value measurement of a non-financial asset takes into account a market participant's

ability to generate economic benefits by using the asset in its highest and best use or by

selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for

which sufficient data are available to measure fair value, maximizing the use of relevant

observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities measured at fair value or for which fair value is disclosed are

categorized into levels within the fair value hierarchy based on the lowest level input that

is significant to the entire fair value measurement:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or

liabilities.

Level 2 - inputs other than quoted prices included within Level 1 that are observable

directly or indirectly.

Level 3 - inputs that are not based on observable market data (valuation techniques

which use inputs that are not based on observable market data).


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The Amendment is applied retrospectively commencing from the financial statements for

annual periods beginning on January 1, 2013, or thereafter. Accordingly, the Company

separated the amounts of other comprehensive income in the statement of profit or loss and

other comprehensive income.

IFRS 9 - Financial Instruments:

1. In July 2014, the IASB issued the full and final draft of IFRS 9, "Financial Instruments",

which replaces IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9

("the Standard") focuses mainly on the classification and measurement of financial assets

and it applies to all financial assets within the scope of IAS 39.

According to the Standard, all financial assets should be measured at fair value upon initial

recognition. In subsequent periods, debt instruments should be measured at amortized cost

only if both of the following conditions are met:

- The asset is held within a business model whose objective is to hold assets in order

to collect the contractual cash flows.

- The contractual terms of the financial asset give rise on specified dates to cash flows

that are solely payments of principal and interest on the principal amount outstanding.

Subsequent measurement of all other debt instruments and financial assets should be at fair

value. The standard distinguishes between debt instruments measured at fair value through

profit or loss and debt instruments measured at fair value through other comprehensive

income.

As to the derecognition of financial liabilities, the standard prescribes the same provisions

required under IAS 39 regarding derecognition and financial liabilities for which the fair

option was not chosen.

Under the standard, the amount of change in the liability's fair value – attributed to changes

in credit risk – will be recorded in other comprehensive income. All other changes in fair

value will be recorded in profit or loss.

The standard includes new requirements regarding hedge accounting.

The standard will be applied effective with the annual periods commencing January 1,

2018. Early adoption permitted.

The Company estimates that the amendments to IFRS 9 are not expected to have a material

effect on the financial statements.


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2. Amendments regarding derecognition and financial liabilities (Phase 2) were published.

According to those amendments, the provisions of IAS 39 will continue to apply to

derecognition and to financial liabilities for which the fair value option has not been elected

(designated as measured at fair value through profit or loss); that is, the classification and

measurement provisions of IAS 39 will continue to apply to financial liabilities held for

trading and financial liabilities measured at amortized cost.

Pursuant to the amendments, the amount of the adjustment to the liability's fair value that

is attributable to changes in credit risk should be presented in other comprehensive income.

All other fair value adjustments should be presented in profit or loss. If presenting the fair

value adjustment of the liability arising from changes in credit risk in other comprehensive

income creates an accounting mismatch in profit or loss, then that adjustment should also

be presented in profit or loss rather than in other comprehensive income.

The IASB did not set a mandatory effective date for IFRS 9. Early application is permitted

provided that the Company also adopts the provisions of IFRS 9 regarding the classification

and measurement of financial assets (the asset Phase). Upon initial application, the

amendments are to be applied retrospectively by providing the required disclosure or

restating comparative figures, subject to relives specified in the amendments.

.


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Amendments to IFRS 11, "Joint Arrangements", regarding the acquisition of interests in a

joint operation in which the activity constitutes a business as defined in IFRS :3

On May ,2014 ,6 the IASB issued amendments to IFRS 11, "Joint Arrangements ") " the

amendments") which prescribe the accounting treatment of the acquisition of interests in

a joint operation in which the activity constitutes a business as defined in IFRS .3

The amendments require the acquirer of interests in such a transaction to account for the

transaction as a business combination in accordance with IFRS 3 and with other relevant

IFRSs ,including the measurement of the identifiable assets and liabilities at fair value, the

recognition of deferred taxes arising from this measurement ,the accounting treatment of

the related transaction costs and the recognition of goodwill or bargain purchase gains.

The amendments are to be applied prospectively for annual periods beginning on or after

January 1, ,2016 Early adoption is permitted.

The Company estimates that the amendments are not expected to have a material effect on

the financial statements.

IFRS 15, "Revenue from Contracts with Customers":

In May 2014 , the IASB issued IFRS 15.

IFRS 15 replaces IAS ,18 "Revenue ", IAS " ,11 Construction Contracts" ,IFRIC13,

"Customer Loyalty Programs" ,IFRIC " ,15 Agreements for the Construction of Real

Estate", IFRIC " ,18 Transfers of Assets from Customers " and SIC-31, "Revenue - Barter

Transactions Involving Advertising Services."

The IFRS 15 introduces a five-step model that will apply to revenue earned from contracts

with customers:

Step :1 Identify the contract with a customer ,including reference to contract combination

and accounting for contract modifications.

Step 2 : Identify the separate performance obligations in the contract

Step :3 Determine the transaction price ,including reference to variable consideration ,

financing components that are significant to the contract ,non-cash consideration and any

consideration payable to the customer.

Step 4 : Allocate the transaction price to the separate performance obligations on a relative

stand-alone selling price basis using observable information ,if it is available ,or using

estimates and assessments.


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Step : 5 Recognize revenue when the entity satisfies a performance obligation over time

or at a point in time.

IFRS 15 is to be applied retrospectively for annual periods beginning on or after January

1, 2018. Early adoption is permitted IFRS 15 allows an entity to choose to apply a modified

retrospective approach ,according to which IFRS 15 will only be applied in the current

period presented to existing contracts at the date of initial application. No restatement of

the comparative periods will be required as long as the disclosures regarding prior periods

required by IFRS 15 are included.

The Company is evaluating the possible impact of IFRS 15 on the financial statements.

NOTE 3:- CASH AND CASH EQUIVALENTS AND BALANCES RECEIVABLE FROM BANKS

December 31,

2015 2014

Euros in thousands

Cash on hand (1) 43,115 29,365

Short-term deposits (2) 12,705 30,840

Balances receivable from banks (3) 24,969 -

80,789 60,205

(1) As of December 31, 2015, the Company's balance of approximately € 4,711 thousand denominated in NIS

(2014- approximately € 23,304 thousand denominated in NIS). The remaining deposits are denominated

in Euro.

(2) Short-term deposits bear average yearly interest of 0% - 0.2%.

(3) Closed hedge transactions, can be received from banks immediately (“On Call”).

NOTE 4:- RESTRICTED DEPOSITS AND OTHER RECEIVABLES

December 31,

2015 2014

Euros in thousands

Restricted bank accounts (1) 8,605 5,402

Trust deposit - 26

Prepaid expenses 1,251 82

Government authorities 1,355 6,429

Other receivables and debit balances 820 637

Loans to employees (2) - 2,929

12,031 15,505

(1) The balance bears annual interest of 0% - 0.1%.

(2) See Note 22b(1).


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NOTE 5:- TENANTS AND TRADE RECEIVABLES

December 31,

2015 2014

Euros in thousands

Open debts and income receivables 9,526 7,411

Less - allowance for doubtful accounts )3,849( )2,763(

Tenants and trade receivables, net 5,677 4,648

The following is the movement in allowance for doubtful accounts:

Euros in

thousands

Balance as of December 31, 2014 2,763

Allowance during the year 1,633

Recognition of bad debts that were written off )547(

Balance as of December 31, 2015 3,849

Of the total tenants and trade receivables, net, € 1,521 thousand are in arrears.

NOTE 6:- INVENTORY OF BUILDINGS UNDER CONSTRUCTION AND INVENTORY OF

REAL ESTATE

Inventory of apartments under construction and inventory of real estate includes a project in

Düsseldorf, Germany, to build approximately 1,000 residential units. Until December 31, 2015,

the Company delivered 344 residential units and 713 m2 for commercial use. As of December 31,

2015, the Company has 45 residential units that were not yet delivered other than parking spaces

in immaterial amounts. The delivery of the apartments was carried out until the signing date of

the financial statements.

The remaining apartments of the project are in various construction stages.

a. Composition of inventory of buildings under construction

December 31,

2015 2014

Euros in thousands

Cost of real estate 23,900 25,590

Cost of local business tax 3,228 1,371

Cost of construction 32,461 37,755

Capitalized borrowing costs - 185

59,589 64,901


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NOTE 6:- INVENTORY OF BUILDINGS UNDER CONSTRUCTION AND INVENTORY OF

REAL ESTATE (Cont.)

b. Composition of inventory of real estate

December 31,

2015 2014

Euros in thousands

Cost of real estate 518,21 30,946

Cost of local business tax 2,639 5,258

Cost capitalized to real estate 1,434 1,372

25,591 37,576

NOTE 7:- INVESTMENTS MEASURED AT EQUITY

Information on a jointly controlled company measured at equity

Name of company Country of

incorporation

Principal place of business

Nature of relationship

(1)

Brack capital (Chemnitz) BV

The Netherlands

Germany Ownership

(1) The Company has a joint control agreement with the partner. The Company holds 60% of the

shares of the jointly controlled company and 50% of the voting rights of the jointly controlled

company. The jointly controlled company holds a real estate asset in Germany.


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NOTE 8:- INVESTMENT PROPERTY AND REAL ESTATE RIGHTS

a. Composition and movement

December 31,

2015 2014

Euros in thousands

Balance at the beginning of the year 990,585 835,259

Additions during the year

Purchases and additions during the year (f) 960,46 132,022

Transfer to inventory (367) -

Realization of investment property (153) -

Fair value adjustment 44,256 23,304

Balance as of December 31 1,081,281 990,585

Investment property consists of commercial and residential real estate projects leased to

third parties, and lands designated for betterment.

Presentation in the statement of financial position

December 31,

2015 2014

Euros in thousands

Investment property – real estate rights 101,038 78,033

Investment property – residential real estate 980,243 912,552

Balance as of December 31 1,081,281 990,585

b. Investment property is stated at fair value, as determined in valuations generally performed

by independent outside appraisers who hold recognized and relevant professional

qualifications and who have extensive experience in the location and category of the

property being valued. Valuations are occasionally carried out by management. The fair

value was determined based on estimated future cash flows from the property. In estimating

cash flows, their inherent risks and limitations of rental fees are taken into account and they

are capitalized at a rate of return that reflects the risks entailed in the cash flows, which is

determined taking into account the market rate of return, whilst adapting it to the specific

characteristics of the property and the level of risk of the revenues expected from it. Where

it is not possible to rely on transactions recently executed with reference to similar real

estate in a similar locations, in valuing real estate owned by the Company, the value

estimates are carried out using a salvage approach, as deemed correct by the value

appraiser. Determining this value is based on an estimate of future revenues expected from

the completed project, using rates of return that are adapted to the relevant significant risks

entailed in the construction process, including building and rental risks, which are higher

than the current return on similar investment real estate the construction of which has been

completed. In few occasions, where the management expects to realize the real estate in

asset companies by means of a shares transaction, as is practiced in the market in which it

operates, the expected mode of realization is taken into account in making the fair value

calculations and the value adjustments required in these cases.


- 82 -

NOTE 8:- INVESTMENT PROPERTY AND REAL ESTATE RIGHTS (Cont.)

c. Significant assumptions (based on weighted averages) that were used in valuation

estimated are as follows:

Income-generating residential real estate

December 31,

2015 2014

Discount rate (%) (*) 5.97 6.00

Cap rate (%) (*) 5.40 5.50

Long-term vacancy rate )%( 2.40 2.10

Representative monthly rental fees per sq. m. (in Euros) 5.73 5.41

Income-generating commercial real estate (**)

December 31,

2015 2014

Discount rate (%) (*) 6.43 6.80

Cap rate (%) (*) 6.46 6.80

Representative monthly rental fees per sq. m. (in Euros) 8.47 8.26

Land for betterment, Düsseldorf, Germany (***)

December 31,

2015 2014

Discount rate (%) - 9.00

Representative monthly rental fees for offices per sq. m. (in

Euros) - 14.50

Expected construction costs per sq.m (in Euro) - 1,300

Lands for betterment, Düsseldorf, Germany ***

December 31,

2015 2014

Discount rate (%) 6.00 -

Representative monthly rental fees for residential per sq. m.

(in Euros) 14.54 -

Expected construction costs per sq.m (in Euro) 2,477 -


- 83 -


(*) It is noted that according to the methodology applied in the valuations, the estimated

cash flow for the first 10 years are capitalized based on the Discount Rate basis. Cash

flows effective from the eleventh year onwards are capitalized based on the Cap Rate

basis.

(**) It should be noted that according to the methodology of the valuation based on

discounted cash flows method vacancy rate of non- occupancy coveted assets

reflected in free cash flow.

(***) The valuation as of December 31, 2014 was based on the assumption of office

development, while the valuation as of December 31, 2015 was based on the

assumption of residential development. It should be noted that the Company still

haven’t decided on the actual purpose of development of the land.


- 84 -


d. Fair value adjustment of investment property (level 3 in the fair value hierarchy):

Residential

buildings

Commercial

buildings

Land for

betterment Total

Euros in thousands

Balance as of January 1, 2015 411,594 500,958 78,033 990,585

Remeasurement recognized in profit or

loss 9,948 13,423 20,885 44,256

Sales (153) - - (153)

Classifications to inventory (367) - - (367)

Purchases and additions 37,683 7,157 2,120 46,960

Balance as of December 31, 2015 458,705 521,538 101,038 1,081,281

Sensitivity analysis

The following is a sensitivity analysis of investment property at capitalization rate based

on standardized NOI:

Based on NOI of € 61 million (standardized NOI) any change of 25 points at the

capitalization rate over fair value adjustment is € 39 million.

e. Regarding liens see Note 17a.

f. Purchase of investment property during the year

1. Purchase of a residential portfolio in Kiel, northern Germany - on May 29, 2015, the

Company (through a sub subsidiary) entered into a notarized sale agreement with a third

party who is not related to the Company and/or to its controlling shareholders (the seller)

under which the seller shall sell the Company 430 residential units in Kiel, northern

Germany for a total consideration of EUR 24.5 million (including related transaction

costs).

2. Purchase of an additional residential portfolio in Kiel, northern Germany - on December

18, 2015, the Company (through a sub subsidiary) entered into a notarized sale agreement

with a third party who is not related to the Company and/or to its controlling shareholders

(the seller) under which the seller shall sell the Company 296 residential units in Kiel,

northern Germany (the acquired assets) for a total consideration of EUR 20.4 million

(including related transaction costs). On March 1, 2016 the assets were legally handed

over to the company.

g. The Company owns an income generating residential real estate where all of its lease

agreements are shorter than one year. As of December 31, 2015, the Company has residential

lease agreements reflecting an annual rental income of € 33.3 million.

In addition, the Company has an income generating commercial real estate consisting of

assets leased to third parties. The future minimum rental fees receivable from existing tenants

in the income generating commercial real estate are as follows:


- 85 -


December 31

5201 2014 2013

Euros in thousands

First year 32,740 32,676 31,484 Second to the fifth year 104,871 109,065 104,199 Sixth year and thereafter 107,372 117,996 120,925

244,983 259,737 256,608

NOTE 9:- OTHER ACCOUNTS RECEIVABLE

December 31,

5201 4201

Euros in thousands

Restricted bank accounts 689 660

689 660

NOTE 10:- OTHER ACCOUNTS PAYABLE

December 31,

2015 2014

Euros in thousands

Expenses payable 7,794 4,760

Interest payable 2,478 2,488

Trade payables 2,057 2,517

Deposits from tenants 5,080 3,903

Government authorities 555 430

Prepaid income 1,766 1,487

Other payables 343 155

20,073 15,740


- 86 -

NOTE 11:- LOANS FROM BANKS AND DEBENTURES

a. Composition

Stated December 31,

interest rate 5201 4201

% Euros in thousands

Non-current bank loans:

Variable interest loans measured at fair

value (4-1 )

EURIBOR +

-1.5 1.9 93,223 164,363

Fixed interest rate loans measured at

fair value )*( -2.47 2.67 146,588 149,919

Beneficiary loans presented at fair value

(b) 0.86 5,698 6,148

Loans presented at amortized cost

EURIBOR +

1.33 – 2.35 326,369 255,185

Convertible debentures linked to CPI

(c) (d) (e) 3.29-4.3 143,699 144,772

715,577 720,387

Less - current maturities of loans (114,85) (29,525)

Less – loans from banks for repayment

over one year in the operating cycle (3,500) (9,500)

963,626 681,362

(*) As of December 31, 2015, a loan of € 7.5 million bears interest of 3.85%. Apart from this

loan, all of the loans bear fixed interest of 2.47% - 2.67%.


- 87 -

NOTE 11:- LOANS FROM BANKS AND DEBENTURES (Cont.)

Additional information on loans taken in the reported period:

1. As stated in Note 8(f), on May 29, 2015, the Company (through a sub subsidiary)

entered into a notarized sale agreement with a third party that is not related to the

Company and/or to its controlling shareholder (in this sub section only: the seller)

under which the seller will sell the Company 430 residential units in Kiel, northern

Germany. For the purpose of financing the purchase, the Company (through a sub

subsidiary) entered into an agreement with a German bank for receiving 2 loans in the

amount of EUR 17.6 million under non-recourse terms which its final repayment date

is 5 years from the date of extending the loan. The first loan of € 14 million bears an

annual interest of 1.85% payable in each quarter. The second loan of € 3.6 million

bearing annual interest of Euribor for 6 months plus a margin of 1.5% payable in each

quarter. Both loans will be repaid in each quarter at annual rate of 2.2% until the final

repayment date in which the unsettled principals' balance is paid.

2. On August 20, 2015, the Company (through sub subsidiaries) entered into agreements

with a German bank to extend 2 existing loans; the first one is for the Titan portfolio

(6 assets) and the second for the Mars portfolio (2 assets). All of these assets are leased

entirely to the retail chain OBI (respectively, the agreements, loan 1 and loan 2). Loan

1 (at a total amount of EUR 49.5 million) was extended until March 15, 2023 bearing

now an interest margin of 1.39% per annum (on the Euribor for 3 months) to be

repayable at an annual rate of 3.75% where the interest and principal are payable every

quarter until the final repayment date in which the unsettled principal balance is paid.

Loan 2 (at a total amount of EUR 13 million) was extended until April 15, 2020 with

an option for an additional extension of 2 years bearing an interest margin of 1.33%

per annum (on the Euribor for 3 months) to be repayable at an annual rate of 4.60%

where the interest and principal are payable every quarter until the final repayment date

in which the unsettled principal balance is paid.

3. As stated in Note 8(e), on December 18, 2015, the Company (through a sub subsidiary)

entered into a notarized sale agreement with a third party who is not related to the

Company and/or to its controlling shareholders (only in this sub section: the seller)

under which the seller will sell the Company 296 residential units in Kiel, northern

Germany (only in this sub section: the purchased assets) for a total consideration of

EUR 20.4 million (including related transaction costs). For the purpose of financing

the purchase of the asset in northern Germany, the Company (through a sub subsidiary)

entered into an agreement with a German bank for receiving a loan in the amount of

EUR 14.0 million under non-recourse terms which its final repayment date is 5 years

from the date of extending the loan. On March 1, 2016, the above transaction was

completed.


- 88 -


a. Movement:

December 31,

5201 2014

Euros in thousands

Balance as of January 1 720,387 588,751

Receipt of loans and debentures 18,479 275,077

Repayments (40,107) (157,388)

Cost of receiving loans and amortizations 153 736

Exchange differences 15,795 1,272

Fair value adjustment 870 11,939

Balance as of December 31 715,577 720,387

b. The Company has low-interest subsidized long-term loans received from a public

banking corporation in return for the Company's commitment to maintain rental rates

below market rates for some of the Company's income -generating residential real

estate for part of the loan term.

c. In 2011 and 2012, the Company issued NIS 400 million of debentures (Series A) par

value NIS 1 each by 2 IPOs and 1 private issuance. The debentures bear a yearly

average interest denominated at 4.8% linked to the Consumer Price Index and paid

every six months (effective interest of 5.53%). The debentures are payable in 7 equal

annual principal payments on July 14 of each of the years between 2014 and 2020

(inclusive). The Company has undertaken that so long as the debentures (Series A) are

still outstanding:

1. Equity attributable to Company shareholders shall not fall below €80 million.

2. No distribution of dividends, distribution of capital or share buy-back shall take place

if as a result the equity attributed to Company shareholders falls below €80 million.

3. The ratio between the equity attributed to the Company's shareholders at the end of

each quarter to the net financial debt (financial liabilities less cash, cash equivalents

and short-term investments) according to the financial statements attributed to the

Company (“Solo Reports”) shall not fall below 187.5%.


- 89 -


4. The ratio between the Company’s total net financial liabilities that are:

a. Company obligations for the repayment of loans with recourse.

b. The Company’s obligations for the repayment of debentures (Series A) and

other debentures, if any.

c. The Company’s obligations to repay other loans the repayment date of which

falls during the period of the debentures (Series A).

d. Any debt of the Company’s subsidiaries towards a third party is pledged by a

lien, but no more than the value of the pledged asset.

All less cash, cash equivalents and short-term investments, and the Company’s total

equity (including non-controlling rights) plus:

a. The Company’s total net financial liabilities (as defined above).

b. Any loan received by the Company from any party that according to its

conditions is subordinate in its repayment levels to the debentures (Series A) and

which cannot be repaid (principal and/or interest) over the course of the

debentures’ (Series A) period.

c. Reductions in value listed pursuant to the Consolidated Financial Statements (if

any) for the assets pledged to guarantee loans of sums exceeding the borrower’s

recourse right.

Shall not exceed 90%.

5. The ratio between the value of the shares of subsidiary BGP, pledged to guarantee

the repayment of debentures (Series A) calculated on the basis of the subsidiary's

equity (attributed to Company shareholders) and the Company's debts to the holders

of the debentures (Series A) defined as the balance of the debentures’ (Series A)

principal plus interest and linkage accumulated and not yet paid, shall not fall below

175%.

As of December 31, 2015, the Company is in compliance with said financial covenants.

d. On May 21, 2013, the Company issued to the public in Israel new series (series B) of

non convertible to shares debentures in a total amount of NIS 175,000,000 par value

by way of uniform offer according to a shelf prospectus report dated May 19, 2013 by

virtue of the Company's shelf prospectus dated May 24, 2012 (as amended in the

modified prospectus dated May 9, 2013). The debentures bear annual interest of 3.29%

(payable in semi annual payments in June and December effective December 2013)

and are linked to the CPI as of April 2013.


- 90 -


The debentures (series B) will be payable (principal) in unequal annual 12 installments

on December 31 in each of the years 2013 through 2024 (inclusive) such that each

payment of the first 7 payments will constitute 4% of the principal of the total par

value of the debentures (series B) and each payment of the last 5 payments will

constitute 14.4% of the principal of the total par value of the debentures (series B). In

addition, on January 27, 2014, the Company's Board of Directors approved a private

placement of 72,000,000 debentures (Series B) of NIS 1 par value, listed for trade, to

10 institutional investors (the offerees) by expanding the existing debenture series of

the Company (Series B) listed for trade ("the offered securities" and "the private

placement"). The Company has undertaken that so long as the debentures (Series A)

are still outstanding:



if as a result the equity attributed to Company shareholders falls below €160 million

and/or debt ratio to CAP (as detailed in section 3 below) will exceed 70%.



b. The Company’s obligations for the repayment of debentures (Series A and B)

and other debentures, if any.


falls during the period of the debentures (Series B).







conditions is subordinate in its repayment levels to the debentures (Series A) and

which cannot be repaid (principal and/or interest) over the course of the

debentures’ (Series B) period.



recourse right.



- 91 -



the repayment of debentures (Series B) calculated on the basis of the subsidiary's


of the debentures (Series B) defined as the balance of the debentures’ (Series B)


175%.


e. In July 2014, the Company completed the issuance to the public in Israel new series (series

C) of non convertible to shares debentures. Under the shelf prospectus report dated July 20,

2014 (July 2014 shelf prospectus report) by virtue of the shelf prospectus dated May 24,

2012 (as amended in the modified prospectus dated May 9, 2013 and the modified

prospectus dated July 14, 2014 (collectively: the prospectus), NIS 125,000,000 par value

of debentures (series C) with a duration of 8.5 years were offered to the public. The

debentures (series C) were offered by way of a uniform offer as prescribed in the securities

regulations (manner of offering securities to the public) – 2007 in 125,000 units by way of

tender on the annual interest rate to be borne by the debentures (series C). The annual

interest rate determined in the tender, which was held on July 21, 2014, is 3.3%.

The interest on the debentures (series C) will be paid in two semiannual installments on

January 20 and July 20 of each of the years 2015 – 2026 (inclusive) effective January 20,

2015. On July 22, 2014, the Company allocated according to the outcome of the issuance,

NIS 102,165,000 par value of debentures (series C). On July 24, 2014, trading has

commenced in the above securities in the Tel Aviv Stock Exchange (the Stock Exchange).

The debentures (series C) will be linked to the CPI and payable (principal) in unequal

annual 12 installments on July 20 in each of the years 2015 through 2026 (inclusive) such

that each payment of the first 9 payments will constitute 2% of the principal of the total par

value of the debentures (series C), the tenth payment will constitute 17% of the principal

of the total par value of the debentures (series C) and each payment of the last 2 payments

will constitute 32.5% of the principal of the total par value of the debentures (series C).

The Company has undertaken that so long as the debentures (Series C) are still outstanding:



if as a result the equity attributed to Company shareholders falls below €200 million.



b. The Company’s obligations for the repayment of debentures (Series A, B and

C) and other debentures, if any.


- 92 -



falls during the period of the debentures (Series C).







conditions is subordinate in its repayment levels to the debentures (Series C)

and which cannot be repaid (principal and/or interest) over the course of the

debentures’ (Series C) period.



recourse right.



the repayment of debentures (Series C) calculated on the basis of the subsidiary's


of the debentures (Series C) defined as the balance of the debentures’ (Series C)


175%.


f. All of the Group's loans are non-recourse, with the exception of debentures

1. Loans stated at fair value

The fair value of the loans is calculated as the present value of the future loan

payments, discounted at the market rate of interest for similar loans backed by

similar collaterals (see note 15e).

2. Financial covenants

In the context of credit framework agreements with banking corporations,

subsidiaries undertook to comply with a number of financial covenants, including a

loan to value (LTV) ratio between 70% and 80%, and interest coverage rate (ICR)

(must be higher than the range between 150% to 160%) and a debt service coverage

ratio (DSCR) (must be higher than the range between 120% to 145%).


- 93 -


2. Financial covenants (cont.)

All loans are non-recourse and therefore failure to comply with the terms of one of

the frameworks does not constitute violation of the other frameworks. As to the

financial covenants on debentures (Series A , B and C), see c d. and e above.

As of December 31, 2015, the Company complies with all of the financial covenants

as set forth.

NOTE 12:- OTHER NON-CURRENT LIABILITIES

December 31,

5201 4201

Euros in thousands

Liability due to lease (1) 3,184 3,186

Less - current maturities (36) (31)

3,148 3,155

(1) The Company leased an asset from a local authority until 2047 the following is information

on finance lease liabilities according to payment dates :

December 31, 5201

Minimum

future lease

payments

Interest

component

Present

value of

Minimal

lease

payments

Euros in thousands

First year 215 179 36

Second year to the fifth year 862 733 129

After the fifth year 5,710 2,727 2,983

6,787 3,639 3,148

NOTE 13:- OTHER FINANCIAL LIABILITIES

a. Composition

December 31,

2015 2014

Euros in thousands

Financial assets in respect of currency exchange transactions (*) 1,272 10,365

Financial assets in respect of cash flow hedging transactions 19 43

Financial liabilities in respect of interest swap transactions (**) (969) (808)

322 9,600

(*) A total of € 499 thousand and € 0 thousand as of December 31, 2015 and 2014,

respectively, are presented as short term asset.


- 94 -

NOTE 13:- OTHER FINANCIAL LIABILITIES (Cont.)

a. Composition (cont.)

(**) A total of € 107 thousand and € 266 thousand as of December 31, 2015 and 2014,

respectively, are presented as current maturities.

b. Subsidiaries in Germany that own investment properties took loans and signed interest rate

swap agreements. In these agreements, each subsidiary hedges its exposure to future

changes in variable interest rates on cash flows, by swapping it for a fixed interest rate. The

change in the fair value of the hedging instrument, not recognized as cash flow hedging for

accounting purposes, was recognized in profit or loss. As of December 31, 2015, the fixed

interest rate (with no margin) was 0.5% (see also Note 15f).

c. Subsidiaries in Germany that own investment properties and took out loans some of which

are with maximal interest ceiling. In addition, they entered into agreements to fix the

interest rate ceiling (CAP). In these agreements, each subsidiary hedges its exposure to

future changes in variable interest rates on cash flows, by fixing a ceiling rate for the

payment of interest. The change in the fair value of the instrument was charged directly to

the item of changes in the fair value of loans and interest swap transactions in profit or loss.

As of December 31, 2015, the ceiling interest rate was between 3% and 4.5% (see also

Note 15f).

NOTE 14:- FAIR VALUE MEASUREMENT

The following table presents the fair value measurement hierarchy for the Group's assets and

liabilities.

Quantitative disclosures of the fair value measurement hierarchy of the Group's assets and

liabilities as of December 31, 2015:

Valuation Fair value hierarchy

date Level 1 Level 2 Level 3 Total

Euros in thousands

Assets measured at fair value: Investment property (Note 8): Income generating commercial

real estate

At various dates

throughout 2015

- - 521,538 521,538

Income generating residential real

estate

At various dates

throughout 2015

- - 458,705 458,705

Land for betterment and real estate right

December 31, 2015

- - 101,038 101,038

Derivative financial assets (Note 13):

Foreign currency forward contracts – dollar

December 31, 2015

1,272 - - 1,272

CAP transactions

December 31, 2015

- 19 - 19


- 95 -

NOTE 14:- FAIR VALUE MEASUREMENT (Cont.)

There were no transfers from level 1 to level 2 during the period.

Valuation Fair value hierarchy

date Level 1 Level 2 Level 3 Total

Euros in thousands

Liabilities measured at fair value: Derivative financial liabilities

(Note 13):

Interest swap contracts

December 31, 2015

- (969) - (969)

Loans (note 11)

December 31, 2015

- - (245,509) (245,509)

Liabilities whose fair value is

disclosed (Note 15):

Debentures (note 11)

December 31, 2015

(156,751) - - (156,751)


- 96 -

NOTE 15:- FINANCIAL INSTRUMENTS

a. Classification of financial assets and financial liabilities

December 31,

5201 2014

Euros in thousands

Loans and receivables at amortized cost

Cash and cash equivalents 55,820 60,205

Balances receivable from banks 24,969 -

Restricted deposits and receivables (1) 10,780 15,423

Tenants and trade receivables 5,677 4,648

Other non-current receivables and restricted deposits 689 660

Loans to associates 5,005 5,005

102,940 85,941

Financial assets and liabilities measured at fair value through

profit or loss

Credit from banks and others (245,509) (320,430)

Derivative financial instruments (fair value)

Financial assets 1,272 10,408

Financial liabilities (969) (808)

303 9,600

Other financial liabilities at amortized cost

Debentures (143,699) (144,772)

Credit from banks and others (326,369) (255,185)

Other accounts payable (2) (15,059) (10,384)

Liability in respect of leasing (3,148) (3,155)

(488,275) (413,496)

(1) With the exception of prepaid expenses.

(2) With the exception of deposits from tenants and prepaid income.

b. Market risk

1. Foreign currency risk

The Company has debentures denominated in NIS and from time to time carries out

hedging transactions against the weakening of the Euro and accordingly, it is

exposed to exchange rate risk deriving from exposure to this currency. This risk

derives from recognized liabilities denominated in foreign currency which is other

than the operating currency.


- 97 -

NOTE 15:- FINANCIAL INSTRUMENTS (Cont.)

2. CPI risk

The Company has issued debentures that are fully linked to the changes in the CPI

in Israel.

3. Interest rate risk

The Group is exposed to risk resulting from changes in cash flows of loans bearing

variable interest rates because of changes in interest rates.

The Company hedges most of its financial liabilities by taking loans at fixed interest

rate or by entering into interest SWAP agreements or CAP agreements.

As a result, most of the Company's loans are hedged. The interest swap contract

conditions are suited to the base loans. As of the report date, approximately 74% of

the Company's loans and debentures are hedged.

c. Credit risk

Credit risk could arise from cash and cash equivalents, derivatives and deposits with

banking corporations and financial institutions, as well as from receivables, including

tenants' debit balances.

Management has a credit and credit exposure policy that is examined on a regular basis. In

principle, the Company does not provide credit to tenants. In cases in which tenants request

credit, the Company carries out a credit assessment for those customers. The Group holds

all or part of the tenants' deposits that are refundable until the tenants will settle their

payments or in other cases of breach of contract.

The Company estimates the need for making an allowance for doubtful accounts according

to the management's estimate of the balance's nature based on the cumulative experience

in managing the asset.

Credit risk could also arise from an engagement by a number of financial instruments with

a single entity. The Company holds cash and cash equivalents, short-term investments and

other financial instruments in various financial institutions with high credit ratings. The

Company's policy is to spread its investments among the various institutions.

As of the report date, there were no significant concentrations of credit risk. According to

management estimate, the balance in the financial assets of each of the financial assets

represents the maximum exposure to credit risk.


- 98 -


December 31,

5201 4201

Euros in thousands

Other financial assets which their redemption date has not

arrived yet and have no arrears collection

Restricted deposits and other receivables (except for prepaid

expenses and institutions) 9,425 8,994

Tenants (accrued income) 1,591 1,054

Restricted deposits and other non-current receivables 689 660

Loans to associates 5,005 5,005

d. Liquidity risks

Liquidity risk is the risk that the Group will have difficulty meeting obligations in respect

of a financial liability. Financial liabilities to banking corporations regarding interest

payments are guaranteed through rental payments regularly deposited in designated

accounts/collection accounts.

The Group's goal is to maintain a balance between the receipt of financing and the

flexibility in the use of bank loans and debentures. As of December 31, 2015, 15% of the

Group's debt will be redeemed within under a year (2014 – 4%) (see also Note 11).


- 99 -


The following table sets out the maturity dates of the Group's financial liabilities in

accordance with the contractual conditions in non-discounted sums (including interest

payments):

December 31, 2015

Up to From one to

From two to

From three to

From four to Over

one year

two years

three years

four years

five years

five years Total

Euros in thousands

Accounts

payable 10,749 - - - - - 10,749

Loans from

banking

corporations

(1)

82,975 44,021 327,288 69,502 29,532 54,014 607,332

Debentures (1) 22,741 21,973 21,206 20,439 19,889 67,374 173,622

Liability for

finance leasing 215 215 215 215 215 5,712 6,787

116,680 66,209 348,709 90,156 49,636 127,100 798,490

December 31, 2014

Up to From one to

From two to

From three to

From four to Over

one year

two years

three years

four years

five years

five years Total

Euros in thousands

Accounts

payable 7,893 - - - - - 7,893

Loans from

banking

corporations

(1)

26,725 144,391 40,708 330,583 65,436 14,586 622,429

Debentures 21,312 20,617 19,921 19,225 18,011 79,449 178,535

Liability for

finance leasing 215 215 215 215 215 5,927 7,002

56,145 165,223 60,844 350,023 83,662 99,962 815,859

(1) The balance of loans from banking corporations and debentures includes interest

payments, including the influence of interest swap agreements and interest fixing

agreements.


- 100 -


e. Fair value

The following table demonstrates the carrying amount and fair value of the groups of

financial instruments that are not presented in the financial statements at fair value:

As of December 31, 2015

Carrying amount in

the statement

of financial position

Fair value

Euros in thousands Financial liabilities

Debentures and interest payable on debentures 145,602 156,751


Carrying amount in

the statement

of financial position

Fair value

Euros in thousands Financial liabilities

Debentures and interest payable on debentures 146,860 157,908

Management estimated that the balance of cash and cash equivalents, short term deposits,

trade receivables, trade payables, overdrafts, and other current liabilities and bank loans

presented at amortized cost matches or approximates their fair value due to the short

maturity dates of these instruments.

The following are the methods and assumptions used to determine fair value:

- The fair value of marketable debentures is based on quoted prices as of the cut-

off date.


- 101 -


The fair value of financial instruments that are not quoted on an active market is determined

using valuation techniques. Valuation tools specific to financial instruments include:

- The fair value of interest swap contracts and interest CAP agreements is based on a

calculation of the present value of an estimate of future cash flows, using observable

return curves.

- The fair value of credit from banking corporations and debentures is based on a

calculation of discounted cash flows using the observed actual Euribor credit rate

plus a margin (See also note 11).

The following describes unobservable material data that are used in valuation:

Valuation technique

unobservable material data

Range (weighted

average ) Sensitivity of fair value to

change in data

Loans

DCF

Discount interest

Euribor for 3 months plus

2.5 – 2.05

2% increase/decrease in discount rate will result in increase/decrease in fair value up to € 9.5 million

Interest swap transactions

DCF

Payment curve

Euribor curve for transaction

period

2% increase/decrease in Euribor curve will result in increase/decrease in fair value up to € 3.3 million

As to the data of investment property fair value, see note 8.

f. Derivatives and hedging

December 31, 2015 December 31, 2014

Asset Liability Asset Liability

Euros in thousands

Fair value of swap agreements 19 (969) 43 (808)

Fair value of currency exchange

transactions (2) 1,272 10,365 -


- 102 -


f. Derivatives and hedging (cont.)

(1) Cash flow hedges:

As of December 31, 2015, the Group has an interest rate swap agreement (SWAP) in the

sum of € 58,750 thousand according to which the Group pays a fixed interest rate of 0.5%

and receives variable interest at a rate equal to Euribor for one month.

As of December 31, 2015, the Group has CAP options on loan principals in the amount of

approximately € 41,008 thousand to fix a Euribor interest rate between 1.9% - 2.5%.

In addition, as of December 31, 2015, the Group has CAP option to fix loan agreements

amounting to € 115,234 thousand such that the total interest will not exceed the range of

4.5% - 6%.

(2) Currency exchange transactions:

As of December 31, 2015, the Group has various agreements for a future sale of EURO

against future purchases of U.S dollar in the total amount of € 90 million and at average

forward rate of € 1.13 to the dollar.

g. Sensitivity tests relating to changes in market factors

December 31,

5201 4201

Euros in thousands

Sensitivity test to changes in interest rates Effect on profit and loss and other comprehensive income

For loans Interest increase of 200 base points 9,459 12,847 Interest decrease of 200 base points (*) (9,459) (12,847)

For swap and CAP transactions Interest increase of 200 base points 2,991 6,267 Interest decrease of 200 base points (*) (3,257) (372)

For debentures

CPI increase of 3% (4,103) (4,343) CPI decrease of 3% 2,263 4,343 EURO/NIS exchange rate increase of 5% (7,185) (7,239) EURO/NIS exchange rate decrease of 5% 7,185 7,239

For currency hedging transactions

EURO/Dollar exchange rate increase of 5% 4,500 5,500 EURO/ Dollar exchange rate decrease of 5% (4,500) (5,500)

(*) Decrease in Euribor was limited to Zero rate.


- 103 -


Sensitivity tests and principal working assumptions

The fluctuations chosen in the relevant risk variables were set in accordance with

management assessments regarding possible reasonable changes in these risk variables.

The Company has performed sensitivity tests of principal market risk factors that are liable

to affect its reported operating results or financial position.

The sensitivity tests present the profit or loss and/or the comprehensive income with respect

to each financial instrument for the relevant risk variable chosen for that instrument as of

each reporting date. The test of risk factors was determined based on the materiality of the

exposure of the operating results or financial condition of each risk with reference to the

functional currency and assuming that all the other variables are constant.

The Group is not exposed to changes in profit/loss due to interest risk with respect to long-

term loans at fixed interest.

In non-current variable-interest loans measured at amortized cost, the sensitivity test for

interest risk was only performed on the variable component of interest. In loans presented

at fair value, the sensitivity test for the interest risk was carried out on the variable

component of the capitalization interest, the market margin, as well as the variable

component of the payment interest.


- 104 -

NOTE 16:- TAXES ON INCOME a. Tax laws applicable to the Group companies

1. The Company has revenues from real estate investments in Germany. In accordance

with the tax treaty between Germany and the Netherlands, real estate revenues are only taxed at the location of the real estate.

2. The following are tax rates applicable to the Company and its key subsidiaries:

%

State The Netherlands 25 Germany (*) 15.825 – 31.225 Luxemburg 29.22 Cyprus 12.5

(*) Earnings from the sale of apartments are subject to a local business tax in Germany.

The corporate tax and the local business tax rate amount to 31.225%.

3. Earnings from the sale of the shares of a Dutch company, Luxembourgian company

and a German company by a Dutch company are tax-exempt in the Netherlands

subject to meeting the terms of exemption from participation set forth in Dutch law.

Earnings from the sale of a German company by a German company are taxable at

a 5% corporate tax rate on the taxable income.

Earnings from the sale of the shares of a Luxembourgian company by a Luxembourgian

company are tax-exempt in Luxemburg subject to meeting the terms of exemption

from participation set forth in Luxembourgian law which are minimal holding of

10% or investment of at least € 6 million for 12 consecutive months and both

companies (seller and sold) are subject to tax in Luxemburg (and pursuant to the

prescribed laws).


- 105 -

NOTE 16:- TAXES ON INCOME (Cont.)

b. Tax assessments

Final tax assessments

The Company was issued final tax assessments in Holland until and including 2012. Some

subsidiaries that are tax assessed in Holland were issued final tax assessments until and

including 2013 and some were issued final tax assessment from their establishment date.

Most of the companies that are tax assessed in Germany were issued tax assessments until

and including 2010 or that these assessments are deemed final due to the statute of

limitations. These tax assessments may be changed until the end of 2015.

c. Losses carried forward for tax purposes and other temporary differences

The Group has business losses and capital losses for tax purposes carried forward for tax

purposes on the coming years, totaling as of December 31, 2015 approximately € 104,444

thousand. In respect of these losses, deferred tax assets have been recognized in the

financial statements in the amount of approximately € 23,035 thousand. Deferred taxes on

losses carried forward were not created for losses in amount of € 13,308 thousand.

d. Deferred taxes Statements of financial

position

December 31,

5201 4201

Euros in thousands

Deferred tax liabilities Inventory of buildings under construction, inventory of real

estate and investment property (56,992) (38,389)

Non-current liabilities (489) (661)

Revaluation of financial derivatives (8,044) (3,114)

Debentures (437) -

(65,962) (42,164)

Deferred tax assets

Losses carried forward for tax purposes 23,035 12,037

Debentures - 845

23,035 12,882

Deferred tax liabilities, net (42,927) )29,282)

Deferred taxes are presented in the statement of financial

position as follows:

Non-current assets 8,585 6,270

Non-current liabilities (51,512) (35,552)

(42,927) (29,282)


- 106 -


Statements of profit or loss


5201 2014 2013

Euros in thousands

Deferred tax liabilities Inventory of buildings under construction,

inventory of real estate and investment property 18,603 7,040 4,683

Non-current liabilities (172) (1,327) 25

Revaluation of financial derivatives 4,930 3,114 -

23,361 8,827 4,708

Deferred tax assets

Losses carried forward for tax purposes (11,018) (2,738) (2,143)

Revaluation of financial derivatives - 594 62

Debentures 1,302 (845) -

(9,716) (2,989) (2,081)

Deferred tax expenses, net 13,645 5,838 2,627

The deferred taxes are computed at an average tax rate of 15.825% (2014 and 2013 -

15.825%) based on the tax rates expected to apply on realization. Deferred taxes in respect

of inventory of apartments under construction and inventory of real estate are calculated at

a tax rate of 31.225%. Deferred taxes in respect of carry forward tax losses in Holland are

calculated at a tax rate for these losses to be utilized.


- 107 -


e. Taxes on income included in the statements of profit or loss

Statement of profit or loss


5201 2014 2013

Euros in thousands

Deferred taxes, see also d. above 13,645 5,838 2,627

Current taxes in respect of previous years 1,080 191 (14)

Tax expenses 14,725 6,029 2,613

f. Theoretical tax

The following is the reconciliation between the tax expense, assuming that all revenues and

expenses, gains and losses in the statement of profit or loss had been taxed at the statutory

tax rate in Holland and the amount of taxes on income charged in the statement of profit or

loss:


5201 2014 2013

Euros in thousands

Income before taxes on income 92,217 53,484 41,682

Statutory tax rate in Holland 25% 25% 25%

Tax calculated using statutory tax rate 23,054 13,371 10,420

Tax-exempt income - - 510

Balances for which deferred taxes were not

recognized (2,479) - (4,426)

Company's share of losses of associates - - 265

Deferred tax assets created in other tax rate (5,850) (7,342) (3,547)

Taxes for previous periods and others, net - - (609)

Taxes on income 14,725 6,029 2,613


- 108 -

NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND LIENS

a. Commitments, liens and collaterals

1. As collateral for non-recourse loans from banking corporations, liens have been

registered on investment properties and also on the bank accounts into which rental

fees are received, rights in respect of insurance policies, a lien on the shares of the

company holding the asset etc. (see Note 11). Each property is owned by a

consolidated SPV company. In respect of some of the properties, a cross-guarantee

secures credit facilities taken for acquisition of the properties.

Some of the loan agreements contain "negative lien" provisions, whereby the

borrowers are prohibited from creating additional liens on the encumbered assets and

revenues, without receiving the prior explicit consent of the lender.

2. As part of the loan agreement signed in November 2013 with a German bank for the

purpose of obtaining € 101.4 million for financing Stage B of the project in

Dusseldorf, the Company extended a guarantee of € 12.4 million, out of which an

autonomous guarantee of € 8.9 million is in favor of the local authority to secure the

liabilities of the project companies according to the development agreement with the

local authority. The guarantee balance of € 3.5 million will be used for issuing

guarantees to performing contractors. The annual interest of the guarantee is 1.25%

and is calculated only in respect of the amount actually extended as guarantee. The

balance of guarantee as of December 31, 2015 amounted to € 6.9 million.

3. Regarding the pledge provided in respect of debentures, see Note 11c - e.

4. The balances of secured liabilities are as follows:

December 31,

2015 2014

Euros in thousands

Non-current liabilities (including current maturities), see Notes 11 and 12 725,972 732,391


- 109 -

NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND LIENS (cont.)

5. Within the framework of two agreements for the acquisition of three residential

properties, the acquiring subsidiary companies gave an undertaking to the sellers (a

government housing corporation), inter alia, not to sell more than 25% of the

acquired apartments over a period of 10 years (and not more than 2.5% per year), to

fulfill capital investments in the acquired properties of a minimum of € 8.5-€ 11 per

sq. meter per annum over a period of 10 years, to meet certain limitations regarding

rent increases for residents living in the property on the acquisition date, this being

in order to uphold the terms of sale determined by the federal government controlling

the seller. These undertakings are secured by a guarantee given by the Ultimate

Parent Company, in the amount of approximately € 10 million.

On November 18, 2010, the Company granted indemnification letter to the ultimate

parent company under which the Company shall compensate the ultimate parent

company for any demand to exercise the above guarantees, if at all.

6. As part of the development of the inventory of buildings under construction for Stage

A (see Note 6), the Company entered into a contract with the contractor. As of

December 31, 2015 the construction work was finalized by the contractor. In the

finalization of the contract, the contractor requested additional payment from the

Company in the amount of € 12.5 millions. The company rejected the arguments of

the contractor and demanded that the contractor will compensate the company for an

amount (which is still not final) of € 4 million due to various breaches of the contract

by the contractor. The Company estimation and the , and opinion of its legal counsel

is that the likelihood that the Company will be required to bear any extra payment to

the contractor is low.

b. Claims

Lawsuits have been filed against the Group totaling some € 64 thousand. In the estimation

of Group management, relying inter alia on the opinions of its legal counsel, the provisions

contained in the financial statements are sufficient to cover the possible exposure, if any,

as a result of these lawsuits.

c. Commitments

With respect to some of the Company's assets, the Company entered into agreements with

various investors (the investors) for the purpose of investments in joint ventures such that

the Company's share in the joint ventures amounts to 51% - 57% and the investors' share

amounts to 43% - 49%. To the best knowledge of the Company, these investors are

members of the "investors' club" that was established by the ultimate parent company and

some of the investors are related parties in the Company.

The following are the main terms of the joint venture commitment:

1. The Company shall be, at anytime, the managing partner and the controlling

shareholder in the joint venture.


- 110 -

NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND LIENS (cont.)

c. Commitments (cont.)

2. The joint venture shall pay the Company management fees of 2.5% of the rental

income.

3. The Company shall be entitled to 20% of the investors' share in the profit after the full

return of their investment plus an annual yield of 8% on their investment.

4. For their relative share in the joint ventures, the investors shall pay the Company their

relative share of the total purchase cost.

The share of the investors is presented in non controlling interests and their investment

balance, as of December 31, 2015, amounts to € 90.4 million.

NOTE 18:- EQUITY

a. Composition of share capital

December 31, 2015 December 31, 2014

Authorized Issued and

paid-up Authorized Issued and

paid-up

Ordinary shares of € 0.01par value each

22,500,000 6,597,569 22,500,000 6,442,552

b. Movement in share capital in the reported period and the previous year

1. With respect to exercise of options by the Company's employees, see e2 below.

2. The movement in issued and outstanding share capital in the report period:

Number of

shares

Euro par value in

thousands

Balance as of January 1, 2015 6,442,552 64,426

Issue of shares (exercise of stock options) 155,017 1,550

Balance as of December 31, 2015 6,597,569 65,976


- 111 -

NOTE 18:- EQUITY (Cont.)

c. Capital management in the Company

The Company acts in order to guarantee a capital structure allowing the Company to

support its channels and maximize value to its shareholders. The Company manages the

structure of its capital and makes changes in accordance with changes in the environment

in which the Company operates.

d. Treasury shares - shares of the Company held by the Company

The holdings of the Company in the Company shares are as follows:

December 31,

2015 2014

Percentage of issued share capital 0.6% 0.6%

e. Employee options

1. On July 8, 2013 and July 17, 2013, the members of the Remuneration Committee and

the Board of Directors (respectively) approved the Employee Stock Option Plan to

employees who are not Israeli residents that are employed by the Company (2013 Plan)

and an Employee Stock Option Plan to employees who are Israeli residents pursuant to

section 102 to the Income Tax Ordinance (New Version) – 1961 ("the Ordinance") in

capital gain track (102/2013 Plan, 2013 Plan and 102/2013 Plan will be called

collectively – the Plans or the New Plans) under which, subject to obtaining all required

approvals, a total of 441,524 non marketable options (ESOP3) exercisable into 441,524

of the Company's shares will be allocated to the Company's officers, including joint

CEO's and the CEO of a subsidiary who serves also as a director in the Company. In

those dates the members of the Remuneration Committee and the Board of Directors

(respectively) further approved several modifications of the existing option plans to the

Company's employees and officers (ESOP2) (the existing plans). These modifications

are subject, among others, to approval of the shareholders' general meeting. On October

29, 2013, the general meeting of the Company's shareholders approved the aforesaid

resolutions.

The fair value of the warrants, which is calculated based on the binomial model, as of

the grant date, is approximately €13.329 on average for each warrant and in the

aggregate amounts to about € 5,883 thousand. The fair value of the warrants was

calculated as a derivative of the Company's value based on an annual standard

deviation at the range of 21% - 26% and based on Euro risk free interest rate at a range

from 1.19% - 2.78%.


- 112 -


2. At different times during the reporting period the Group's employees and officers

exercised a total of 237,278 options for 155,017 shares. The exercise price received

upon the exercise of options sum to amount of € 717 thousands.

3. Expense recognized in the financial statements

The expense recognized in the general and administrative expense line item in the

financial statements for services received from the Company's employees is

presented in the following table:


5201 2014 2013

Euros in thousands

1,525 1,554 1,132

4. Movement during the year

The following table features the number of options for shares, the weighted average

of their exercise price and the changes made to the employee option plans during the

current period:


2015 2014 2013

Number of

options

Weighted

average

exercise

price

Number

of

options

Weighted

average

exercise

price

Number

of

options

Weighted

average

exercise

price

Euro Euro Euro

Share options at

beginning of year 678,802 29.03 882,820 25.77 553,734 16.14

Share options granted

during the year - - 8,727 - 441,524 33.44

Share options

forfeited during the

year - - (8,727) - - -

Share options

exercised into

shares during the

year (*) (237,278) 22.74 (204,018) 13.45 (112,438) 6.68

Share options at end

of year 441,524 37.65 678,802 29.03 882,820 25.77

Share options

exercisable at end

of year - - 237,278 20.83 441,386 18.1

(*) Average share price in 2015 is € 55.85 per share.


- 113 -


f. Classifications according to Dutch law - statutory capital reserve

In accordance with Dutch law provisions applicable to the Company, gains from fair value

adjustments, which have not been realized, cannot be distributed as dividends. In addition,

earnings of investees cannot be distributed as dividends, unless distributed by the

subsidiaries themselves. At the same time, according to Dutch law, these earnings can be

distributed only after their conversion into share capital and a reduction in equity as a result

of the dividend distribution.


- 114 -

NOTE 19:- SUPPLEMENTARY INFORMATION TO ITEMS OF STATEMENT OF PROFIT OR

LOSS AND OTHER COMPREHENSIVE INCOME


2015 2014 2013

Euros in thousands

a. Cost of maintenance of rental properties:

Salaries, electricity, water and gas 1,513 1,144 922

Maintenance and repairs 2,956 2,868 2,267

Land taxes 632 553 540

Insurance 127 160 155

Doubtful accounts and bad debts 1,633 819 934

Marketing 1,241 786 534

Others 3 1 11

8,105 6,331 5,363

b. general and administrative expenses

Property management, salary expenses and

others 7,751 6,787 5,620

Legal and other professional services 2,450 1,944 1,785

Travel expenses, rent and office maintenance

and others 889 594 699

11,090 9,325 8,104

c. Interest income, deposits and others 82 291 315


- 115 -

NOTE 19:- SUPPLEMENTARY INFORMATION TO ITEMS OF STATEMENT OF PROFIT OR

LOSS AND OTHER COMPREHENSIVE INCOME (Cont.)


5201 2014 2013

Euros in thousands

d. Financial expenses, net Interest, bank charges and others

Interest expenses on loans and debentures (956,18) (19,185) (15,227)

Bank charges, guarantee commission and

others (183) (144) (153)

Leasing finance expenses (206) (215) (139)

(534,19) (19,544) (15,519)

Linkage and CPI differences, amortization of

finance costs and others

Linkage differences on debentures 716 218 (2,145)

Amortization of financial costs on loans and

debentures (41,81) (977) (1,153)

(098,1) (759) (3,298)

(445,20) (20,303) (18,817)

e Effect of exchange rate differences and

currency hedging transactions, net Loss from exchange rate differences in respect

of debentures and cash, net (13,169) (1,309) (2,414) Income (loss) from currency hedging

transactions 15,876 11,445 (481)

2,707 10,136 (2,895)

. Change in value of loans and interest rate

swap and currency hedging transactions, net Gain (loss) from revaluation of interest rate

swap, net 949,6 (2,010) 1,310 Gain (loss) from revaluation of loans

according to fair value, net (926) (11,939) (1,956)

023,6 (13,949) (646)


- 116 -

NOTE 20:- NET EARNINGS PER SHARE

Details of number of shares used in calculating net earnings per share


2015 2014 2013

Weighted

number of

shares

Net income

attributable

to equity

holders of

the

Company

Weighted

number of

shares

Net income

attributable

to equity

holders of

the

Company

Weighted

number of

shares

Net income

attributable

to equity

holders of

the

Company

In

thousands

Euros in

thousands

In

thousands

Euros in

thousands

In

thousands

Euros in

thousands

For the purpose of

calculating basic

net earnings 6,552 439,63 6,355 37,954 6,196 25,838

For the purpose of

calculating

diluted net

earnings 6,692 439,63 6,589 37,954 6,469 25,838

NOTE 21:- OPERATING SEGMENTS

a. General

Operating segments have been determined based on information reviewed by the Chief

Operational Decision Maker (CODM) for the purpose of making decisions with regard to

resource allocation and performance assessment (Company Board of Directors).

Accordingly, for management purposes, the Group consists of operating segments of

business units and has four operating segments, as follows:

Income generating

commercial real estate

- Leasing property for commercial purposes.

Income generating

residential real estate

- Leasing residential real estate.

Land for betterment and

value of construction

rights

-

Land undergoing betterment.

Residential development -

Inventory of apartments under construction and inventory

of real estate

The operating segments data are based on the accounting policy of the Company.

Segment revenues include rental revenues and revenues from property management.

The segment results reported to the operational decision maker include items that relate

directly to segment. Items not allocated include mainly general and administrative

expenses, financing costs, financing income, adjustment to fair value of financial

instruments and taxes on income, which are managed on a Group basis. See also Note 2V.


- 117 -

NOTE 21:- OPERATING SEGMENTS (Cont.)

Assets allocated directly to the segment represent the balance of investment property and

inventory of real estate and apartments under construction and financial derivatives relating

directly to the asset company, whilst liabilities allocated directly to the segment are loans

and derivatives relating directly to the asset company and also long-term liabilities that are

capable of being attributed specifically. The balance of assets and liabilities is not allocated

directly to segments.

b. Operating segment report

Income-

generating

commercial real

estate

Income-

generating

residential real

estate

Land for

betterment

Residential

development

Adjustments

Total

Euros in thousands

For the year ended December

31, 2015

Revenues from property rental 34,256 31,747 412 - - 66,415

Revenues from property

management and others

8,098 18,152 27 - - 26,277

Property management expenses (7,189) (16,856) (27) - - (24,072)

Rental property maintenance

expenses

(3,816) (4,051) (238) - - (8,105)

Total rental and management

revenues, net

31,349 28,992 174 - - 60,515

Revenues from sale of apartments

Cost of sale of apartments - - - 68,372 - 68,372

Gain from sale of apartments - - - (54,637) - (54,637)

- - - 13,735 - 13,735

General and administrative

expenses

(11,090)

Selling and marketing and general

and administrative expenses

attributed to inventory of

buildings under construction

and inventory of real estate

- - - (2,041) (2,041)

Cost of share based payment (1,525)

Appreciation of investment

property, net

13,423 9,948 885,20 - - 44,256

Financial expenses, net (633,11)

Income before taxes on income 217,92


- 118 -


Income-

generating

commercial real

estate

Income-

generating

residential real

estate

Land for

betterment

Residential

development

Adjustments

Total

Euros in thousands


31, 2014




7,202 14,862 55 - - 22,119



expenses

(3,282) (2,990) (59) - - (6,331)


revenues, net

31,170 23,455 274 - - 54,899

Revenues from sale of apartments - - - 933,70 - 933,70

Cost of sale of apartments - - - (58,499) - (58,499)

Gain from sale of apartments - - - 12,434 - 12,434


expenses

(9,325)

Selling and marketing and general

and administrative expenses

attributed to inventory of

buildings under construction

and inventory of real estate

- - - (2,449) - (2,449)


Appreciation of investment

property, net

9,086 10,540 3,678 - 23,304




- 119 -


Income-

generating

commercial real

estate

Income-

generating

residential real

estate

Land for

betterment

Residential

development

Adjustments

Total

Euros in thousands


31, 2013




6,507 11,628 50 - - 18,185



expenses

(2,587) (2,719) (57) - - (5,363)


revenues, net

28,021 16,099 444 - - 44,564


expenses

(8,104)

Selling and marketing and

general and administrative

expenses attributed to

inventory of buildings under

construction and inventory of

real estate

- - - (2,462) - (2,462)


Appreciation (impairment) of

investment property, gain

from negative goodwill and

other income, net

16,726 16,260 (452) - - 32,534

Company's share of earnings of

companies measured at

equity

(1,675)




- 120 -


Operating segment report

Income-

generating

commercial

real estate

Income-

generating

residential

real estate

Land for

betterment

Residential

development

Total

Euros in thousands

For the year ended

December 31, 2015

Capital investments 7,157 683,37 120,2 - 46,960

For the year ended

December 31, 2014

Capital investments 20,614 92,110 19,298 - 132,022

For the year ended

December 31, 2013

Capital investments 101,796 69,981 251 - 172,028


Segment assets 522,128 876,458 101,038 92,693 174,735,1

Unallocated assets 06,3331

Segment liabilities 308,589 249,213 13,081 40,799 611,682

Unallocated liabilities 215,286


Segment assets 958,505 411,594 78,033 102,477 062,1,093

Unallocated assets 207,105

Segment liabilities 314,083 236,991 17,353 54,631 623,058

Unallocated liabilities 196,030


- 121 -

NOTE 22:- BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES

a. Balances with interested and related parties


On the

matter of

terms

Controlling

shareholder

(the Parent

Company)

Key

management

personnel

Interested

parties and

other

related

parties

see Note Euros in thousands

Loans to associates - - 5,005

Highest loan balance and current

receivables during the year See b.below - 1,485 5,005


On the

matter of

terms

Controlling

shareholder

(the Parent

Company)

Key

management

personnel

Interested

parties and

other

related

parties

see Note Euros in thousands

Receivables b. below - 2,929 -

Loans to associates - - 5,005

Highest loan balance and current

receivables during the year - 2,564 5,005

b. Transactions with interested and related parties


2015 2014 2013

Euros in thousands

Financial income (1) 7 - -

Management fees and participation in the expenses

of related companies (2) - - 605


- 122 -


(Cont.)

Loans to employees

The Company has provided senior executives with non-recourse loans bearing

annual interest at a rate of Euribor + 1.3% (on the basis of 3-month Euribor), which

are repayable no later than November 30, 2015. As collateral for the loans, it was

determined that severance pay deposited in pension funds and advanced study funds

on behalf of the borrowers and future salary payments (including bonus payments)

would be used as collateral for the repayment of the debt; the borrowers did not

provide the Company with any additional collateral for the loans granted. It was also

agreed that, at their discretion, the borrowers may sell option warrants and/or shares

owned by them, and the proceeds will be used to repay the loan, insofar as it has not

been repaid on the date of sale. The balance of the loans as of December 31, 2015

and 2014 was € 0 thousand and € 2,929 thousand, respectively.

The joint managers of the Company are entitled to receive additional loans from the

Company under the same terms of the existing loans as long as the balance of the

loans in the future does not exceed 50% of their holdings in the Company and in

Beta, which owns the site in Düsseldorf; see also Note c. below.

c. Benefits for key management personnel employed by the Group:


2015 2014 2013

No.

of people

Amount - Euros in

thousands No.

of people

Amount - Euros in

thousands No.

of people

Amount - Euros in

thousands

Cost of share-

based payment and capital attribution in respect of transactions with controlling shareholder (excluding directors)

7 1,744 8 1,567 7 1,132

Short-term

employee benefits (excluding directors) 7 1,933 8 1,862 7 1,482


- 123 -


(Cont.)


2015 2014 2013

No.

of people

Amount - Euros in

thousands No.

of people

Amount - Euros in

thousands No.

of people

Amount - Euros in

thousands

Total benefits for

directors 7 249 6 146 4 119

Each of the joint CEOs of the Company, hold 0.5525% of Beta's shares (the Company's

subsidiary holding a land for investment and a land designated for residential

development).

NOTE 23:- DISCLOSURE ACCORDING TO IAS 1 FOR AMOUNTS EXPECTED TO BE SETTLED

OR EXTINGUISHED 12 MONTHS AFTER THE DATE OF STATEMENT OF

FINANCIAL POSITION

As stated in note 2k, the Group has two operating cycles. The operating cycle of apartments under

construction is three years. The operating cycle of the remaining activities is one year.

Accordingly, current assets and liabilities include items designated and expected to be

materialized during the Company's operating cycle.


- 124 -

NOTE 23:- DISCLOSURE ACCORDING TO IAS 1 FOR AMOUNTS EXPECTED TO BE SETTLED

OR EXTINGUISHED 12 MONTHS AFTER THE DATE OF STATEMENT OF

FINANCIAL POSITION (Cont.)

The following is a disclosure regarding assets and liabilities that are expected to be settled or

extinguished, at the most, before12 months after the date of statement of financial position and

assets and liabilities that are expected to be settled or extinguished, at the most, after12 months

after the date of statement of financial position.

December 31,

2015 2014

EUR in thousands

Assets that are expected to be settled, at the most, before 12 months after the date of statement of financial position 148,289 101,866 Assets that are expected to be settled, at the most, after 12 months after the date of statement of financial position 1,132,779 1,096,403

Total assets 1,281,068 1,198,269

Liabilities that are expected to be extinguished, at the most, before12 months after the date of statement of financial position 144,768 92,477 Liabilities that are expected to be extinguished, at the most, after12 months after the date of statement of financial position 682,200 726,611

Total liabilities 826,968 819,088

NOTE 24:- EVENTS AFTER THE REPORTING PERIOD

1. Purchase of land in Aachen, Germany - on February 26, 2016, the Company (through a sub

subsidiary) entered with a third party who is not related to the Company and/or its controlling

shareholders (the "Partner") into a notarized sale agreement with a third party who is not

related to the Company and/or its controlling shareholders (the seller) to acquire ownership

rights to the land in the city of Aachen in Germany, on which an old plant which is not in

use is erected, for a total consideration of € 6 million that was paid in April 2016. The

Company and the partner intend to work collaboratively to change the zoning of the land into

residential zoning such it would be feasible to construct 180-220 residential units after

demolishing the existing building.

2. Purchase of additional assets in Kiel, northern Germany - on December 18, 2015, the

Company (through a sub subsidiary) entered into a notarized sale agreement with a third

party who is not related to the Company and/or to its controlling shareholders (the seller)

under which the seller shall sell the Company 296 residential units in northern Germany for

a total consideration of EUR 20.4 million (including related transaction costs). For the

purpose of financing the purchase, the Company (through a sub subsidiary) entered into an

agreement with a German bank to obtain a loan of EUR 14 million under non-recourse terms

bearing fixed interest rate of 1.24% per annum and its final repayment date is 5 years from

the date of extending the loan. The transaction was completed on March 1, 2016.

3. Purchase of additional assets in Kiel, northern Germany - on March 16, 2016, the Company

(through a sub subsidiary) entered into a notarized sale agreement with a third party who is

not related to the Company and/or to its controlling shareholders (the seller) under which the


- 125 -

seller shall sell the Company 287 residential units in Kiel, northern Germany for a total

consideration of EUR 36 million (including related transaction costs). For the purpose of

financing the purchase, the Company (through a sub subsidiary) conducts advanced

negotiations with a German bank for an agreement to obtain a loan of EUR 25 million under

non-recourse terms which its final repayment date is 5 years from the date of extending the

loan. The transaction was completed on July 1, 2016.

4. Sale of an asset in Dusseldorf - on March 4, 2016, the Company (through a sub subsidiary)

entered into a notarized sale agreement with a third party who is not related to the Company

and/or to its controlling shareholders for the sale of rights in a building which is not occupied

from 2013 which undergoes betterment procedures in a total area of 3,985 m2 located in

Dusseldorf. The consideration was set at EUR 5,050 thousand. It is noted that the asset is not

pledged and the consideration was received in full by the Company upon the transaction

completion date in July 2016.

5. Refinance of Leipzig – on February 1, 2016, the Company entered into a refinance agreement

for a major portion of the Leipzig portfolio (about 2,790 residential units) for 7 years. The

new loan of EUR 57.5 million (similar to the unsettled principal balance of the loan from

2011) which repayment date is April 30, 2023 bears a fixed interest for the first 5 years of

1.12% per annum with an annual principal repayment of 2% of the original loan amount.

Under the refinance, a credit facility of EUR 17.4 million was approved for the Company

until 2023 where if used it will bear a variable Libor interest for 3 months plus a margin of

1% per annum.

6. Purchase of rights from non-controlling interests – in January 2016, the Company addressed

investors holding joint ventures offering to sell them the entire rights in these joint ventures.

Investors holding a total 17% of the joint ventures accepted the Company's proposal and in

the second quarter of 2016, said rights were acquired for EUR 8.65 million.

The transaction price derives from the fair value of the assets held by the joint ventures,

according to valuations of independent outside appraisers and the Promote calculation to

which the Company is entitled.

7. Capital distribution to shareholders – on January 11, 2016, the Company' general meeting of

shareholders approved to carry out a capital distribution to its shareholders in the total

amount of EUR 6,041 thousand ( a total of EUR 5,970 thousand net of treasury shares out of

the premium reserve on the Company's shares. As a result of the capital distribution, the

exercise price of the Company's non marketable warrants was adjusted; see Note 18d (1) of

the annual consolidated financial statements.

8. Change in the ESOP3 conditions – on January 27, 2016 and February 4, 2016, the Company's

remuneration committee and the Board of Directors (respectively) approved a modification

to the plans from 2013 for the allocation of options to employees (ESOP 3) (the existing

plans) with respect to the acceleration of the vesting dates as follows: the Company's

competent organs may approve a mechanism for accelerating the entitlement of all or any of

the offerees with respect to all or any of the warrants that were not yet vested in case the

employee is dismissed (other than in circumstances where he is not entitled to severance pay

as specified in the Severance Pay Law – 1963) and/or upon transferring the control of the

Company. The modification of the plans and the approval of accelerating the entitlement

dates for exercising non marketable ESOP 3 options issued to joint CEOs and the VP of

entrepreneurship and development of the Company received the approval of the Company's


- 126 -

general meeting of shareholders which was called for March 21, 2016.

9. Purchase of an asset in Hanover, Germany – on March 18, 2016, the Company (through a

sub subsidiary) entered into a notarized sale agreement with a third party that is not related

to the Company and/or to its controlling shareholder (the seller) under which the seller will

sell the Company residential, commercial and office building in Hanover, Germany for a

total of EUR 7.8 million (including related transaction costs). For the purpose of financing

the purchase, the Company (through a sub subsidiary) conducts negotiations with a German

bank regarding an agreement to obtain a loan in the amount of EUR 5.6 million under non-

recourse terms which its final repayment date is December 31, 2019. The transaction was

completed on July 1, 2016.

10. Purchase of an asset in Dortmund, Germany - on March 23, 2016, the Company (through a

sub subsidiary) entered into a notarized sale agreement with a third party that is not related

to the Company and/or to its controlling shareholder (the seller) under which the seller will

sell the Company 32 residential units in Dortmund, Germany for a total of EUR 2.375 million

(excluding related transaction costs). For the purpose of financing the purchase, the

Company entered into an agreement with a German bank to obtain a loan in the amount of

EUR 1,750 thousand under non-recourse terms which its final repayment date is 5 years from

the date of extending the loan bearing a variable interest based on the Euribor rate for 3

months plus a margin of 1.3% per annum. The transaction is expected was completed on

June 1, 2016

11. Expansion of Series C bonds - on April 4, 2016, the Company successfully completed the

issuance to the public of 60,058,000 bonds (Series C) of NIS 1 par value each listed for trade

by way of expanding the existing series of bonds (Series C) according to the shelf offering

report published on April 3, 2016 which is based on a shelf prospectus dated May 28, 2015.

The total gross consideration is NIS 61,319 thousand.

12. Purchase of an asset in the Dortmund area, Germany - on May 13, 2016, the Company

(through a sub subsidiary) entered into a notarized sale agreement with a third party that is

not related to the Company and/or to its controlling shareholder (the seller) under which the

seller will sell the Company a commercial asset in the Dortmund area, Germany for a total

of EUR 9.1 million (including related transaction costs). For the purpose of financing the

purchase, the Company negotiates (through a sub subsidiary) with a German bank to obtain

a loan in the amount of EUR 6.35 million under non-recourse terms which its final repayment

date is 5 years from the date of extending the loan. The transaction was completed on July

1, 2016.

13. Sale of an asset in the Bad Kreuznach, Germany - on May 13, 2016, the Company (through

a sub subsidiary) entered into a notarized sale agreement with a third party that is not related

to the Company and/or to its controlling shareholder for the sale of rights in a fully occupied

building at a total area of 3,602 sq.m located in the city of Bad Kreuznach. The consideration

was set at EUR 5,100 thousand. The consideration was fully received by the Company on

the transaction completion date at the end of July 2016 to be used for the full repayment of

the loan from the bank. .


- 127 -

APPENDIX TO CONSOLIDATED FINANCIAL STATEMENTS - LIST OF INVESTEES

Company name Country of December 31,

incorporation 5201 4201

% in equity

Brack German Properties BV The Netherlands 100 100 Brack European Management KFT Hungary 100 100 Brack Capital (Remscheid) BV The Netherlands 100 100 Brack Capital (Neubrandenburg) BV The Netherlands 100 100 Brack Capital (Chemnitz) BV (1) The Netherlands 60 60 Brack Capital (Hamburg) BV The Netherlands 100 100 Brack Capital (D-Rosssatrasse) BV The Netherlands 100 100 Brack Capital (D-Schanzenstrasse) BV The Netherlands 100 100 Brack Capital Germany (Gelsenkirchen) BV The Netherlands 99.8 99.8 Brack Capital (Ludiwgsfelde) BV The Netherlands 100 100 Brack Capital (Bad Kreuznach) BV The Netherlands 100 100 Brack Capital Germany (Netherlands) XIX BV The Netherlands 100 100 Brack Capital Beta BV The Netherlands 83 83 Brack Capital Germany XXVI BV (Netherlands) The Netherlands 83 83 Brack Capital Germany XXVII BV (Netherlands) The Netherlands 83 83 Brack Capital Germany XXX BV (Netherlands) The Netherlands 100 100 Brack Capital Germany XXI BV (Netherlands) The Netherlands 100 100

Brack Capital Alfa B.V. The Netherlands 52.3 52.3

Brack Capital Delta B.V. The Netherlands 52.3 52.3

Brack Capital Epsilon B.V. The Netherlands 100 100

Brack Capital Kaufland S.a.r.l. Luxemburg 100 100

TPL Augsburg S.a.r.l. Luxemburg 92 92

TPL Aschersleben S.a.r.l. Luxemburg 92 92

TPL Bad Aibling S.a.r.l. Luxemburg 92 92

TPL Borken S.a.r.l. Luxemburg 92 92

TPL Erlangen S.a.r.l. Luxemburg 92 92

TPL Geislingen S.a.r.l. Luxemburg 92 92

TPL Ludwigsfelde S.a.r.l. Luxemburg 92 92

TPL Vilshofen S.a.r.l. Luxemburg 92 92

TPL Biberach S.a.r.l. Luxemburg 92 92

TPL Glauchau S.a.r.l. Luxemburg 92 92

TPL Ludwigsburg S.a.r.l. Luxemburg 92 92

TPL Neckarsulm S.a.r.l. Luxemburg 92 92

TPL Wittenberg S.a.r.l. Luxemburg 92 92

BCP Leipzig B.V. The Netherlands 100 100

BCRE Leipzig Wohnen Nord B.V. The Netherlands 100 100

BCRE Leipzig Wohnen Ost B.V. The Netherlands 100 100

BCRE Leipzig Wohnen West B.V. The Netherlands 100 100

Brack Capital (Wuppertal) GMBH Germany 94.4 94.4


- 128 -

APPENDIX TO CONSOLIDATED FINANCIAL STATEMENTS - LIST OF INVESTEES (Cont.)

Country of December 31,

incorporation 2015 2014

% in equity

BCRE Kassel I B.V (former BCRE UK B.V) The Netherlands 100 100

Brack Capital Germany (Netherlands) XXII B.V. The Netherlands 100 100

BCRE Dortmund Wohnen B.V. The Netherlands 100 100

BCRE Duisburg Wohnen B.V. The Netherlands 100 100

BCRE Essen Wohnen B.V. The Netherlands 100 100

Brack Capital Germany (Netherlands) XXXVI B.V. The Netherlands 100 100

Admiralty Holdings Ltd Gibraltar 95 95

BCRE Eta B.V. The Netherlands 100 100

Brack Capital Labda B.V. The Netherlands 100 100

Hanse Holdings S.á r.l. Luxemburg 94.9 94.9

Graniak Leipzig Real Estate GmbH & Co. KG Germany 94.9 94.9

Brack Capital Germany (Netherlands) XXIV B.V The Netherlands 100 100

Brack Capital Germany (Netherlands) XXXV BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XXXVII BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XXXVIII BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XL BV The Netherlands 100 100

Parkblick Gmbh & Co. KG Germany 100 100

Capital Germany (Netherlands) XXXIX BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XLI BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XLII BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XLV BV The Netherlands 100 100

Brack Capital Theta B.V. The Netherlands 100 100

Brack Capital Germany (Netherlands) XLIII BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XLIV BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XLV BV The Netherlands 100 100

Brack Capital Germany (Netherlands) XXXVI BV The Netherlands 100 100

Brack Capital Germany (Netherlands) Hedging BV The Netherlands 100 -

(1) Jointly controlled


- 129 -

COMPANY

FINANCIAL STATEMENTS




- 130 -

COMPANY BALANCE SHEET

December 31,

2015 2014 (*)

Euros in thousands

ASSETS

CURRENT ASSETS:

Cash and cash equivalents (1) 5,150 24,356

Cash and cash equivalents in trust 1,378 1,042

Balance receivable from banks 24,969

Other receivables 600 55

Other financial assets 774 10,365

32,871 35,818

NON-CURRENT ASSETS:

Other accounts receivable - -

Investment in investee 458,450 390,701

458,450 390,701

491,321 426,519

Current Liabilities

Other accounts payable 2,099 2,151

Current maturity of debentures 16,623 15,302

18,722 17,453

Non-Current Liabilities

Debentures 127,076 129,470

Other financial liabilities - -

127,076 129,470

Equity

Share Capital 66 64

Premium on Shares 74,689 71,807

Treasury Shares (951) (951)

Other capital reserves 3,841 4,237

Statutory capital reserve 267,878 204,439

Total equity 345,523 279,596

491,519 426,519

The accompanying additional information is an integral part of the financial data and the separate financial information.

22nd of August, 2016

Date of approval of

the financial statements

Jan Van der Meer

Chairman of the Board

of Directors

Ofir Rahamim

Joint CEO

Guy Priel

CFO


- 131 -

COMPANY INCOME STATEMENT


5201 2014 2013

Euros in thousands

Administrative and general expenses (3,317) (2,722) (3,167)

Financial income (expenses), net 2,775 3,793 (10,481)

Other expenses -

Equity in earnings of investees 63,981 36,883 39,486

Net income 63,439 37,954 25,838

Other comprehensive income -

Total comprehensive income 63,439 37,954 25,838

The accompanying additional information is an integral part of the financial data and the separate financial

information


NOTES TO COMPANY FINANCIAL STATEMENTS

a. General

The consolidated financial statements are part of the 2015 financial statements of the company.

With regard to the company income statement, the company applies the exemption of article 2:402 BW.

If there is no further explanation provided to the items in the company balance sheet and the company statement of

income, please refer to the notes in the consolidated statement of financial position and statement of income.

The principles for the valuation of assets and liabilities and the determination of the result are the same as those

applied to the consolidated statement of income.

Subsidiaries are accounted for at fair value in accordance with IAS 27. Management has estimated that the net asset value of its

subsidiaries is a reliable indicator of the fair value.

As at 31 December 2015 the company has two direct 100% subsidiairies: Brack German Properties B.V. (The Netherlands) and

Brack European KFT (Hungary).

Brack Capital Properties N.V. forms a fiscal unity with Brack German Properties B.V. for the corporate income tax in the

Netherlands.

Shares of Brack German Properties B.V. are pledged as part of certain financing agreements.

b. Taxes on income

1. Tax laws applicable on the Company

The tax rate applicable on the Company is 25%. A gain deriving from sale of shares of a Dutch company by a Dutch

company is tax exempt subject to meeting the terms of the exemption from participation prescribed by the Dutch

law.

2. The Company received final tax assessments in Holland until 2012 tax year inclusive.

NOTE 25:- EMOLUMENTS OF DIRECTORS

The emoluments, as intended in Section 2:383(1) of the Netherlands Civil Code, which were charged in the

financial year to the Company and group companies, amounted to EUR 231 thousand for directors.

Total remuneration of

the directors in 2015

EUR in thousands

Nansia Koutsou 39

Lambertus van den Heuvel 52

Ulrich Tappe 26

Robert Israel 54

Willem van Hassel 32

Jan van der Meer 28

231


- 133 -

NOTE 26:- FEES OF THE AUDITOR

With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the financial year

have been charged by IUS Statutory Audits Coöperatie U.A. and other auditors to the Company, its subsidiaries

and other consolidated entities:

IUS Statutory

Audits

Other

auditors

Total

Euros in thousands

Audit and assurance services 20 254 274

Other services - - -

20 254 274


- 134 -

OTHER INFORMATION

Provisions of the Articles of Association for the appropriation of profits

Profits are appropriated in accordance with article 20 of the Articles of Association Brack Capital Properties N.V.

of which the text is stated below.

Article 19.

19.1 The allocation of profits accrued in a financial year shall be determined by the General Meeting. If the

General Meeting does not adopt a resolution regarding the allocation of the profits prior to or at latest

immediately after the adoption of the annual accounts, the profits will be reserved.

19.2 Distribution of profits shall be made after adoption of the annual accounts if permissible under the law

given the contents of the annual accounts.

19.3 Without prejudice to Article 20.5, the General Meeting may resolve to make interim distributions on

Shares and/or to make distributions on Shares at the expense of the freely distributable reserves of the

Company. In addition, the Board of Directors may decide to make interim-distributions on Shares.

19.4 Distributions on Shares shall be made payable immediately after the resolution to make the distribution,

unless another date of payment has been determined in the resolution.

190.5 Distributions may be made only up to an amount which does not exceed the amount of the

Distributable Equity and, if it concerns an interim distribution, the compliance with this requirement is

evidenced by an interim statement of assets and liabilities as referred to in Section 2:105, paragraph 4, of the

Dutch Civil Code. The Company shall deposit the statement of assets and liabilities at the office of the

commercial register within eight days after the day on which the resolution to distribute is published.

19.6 The General Meeting may resolve that a distribution of dividend on Shares shall not be paid in whole or

in part in cash but in Shares.

Appropriation of the results

In accordance with article 20, paragraph 2, the result for the year will be allocated to the statutory reserves.


INDEPENDENT AUDITOR’S REPORT

To: shareholders and board of directors of Brack Capital Properties N.V.

INDEPENDENT AUDITOR’S REPORT

Report on the financial statements

We have audited the accompanying 2015 financial statements of Brack Capital Properties N.V., Amsterdam, which

comprise the consolidated statement of financial position and company balance sheet as at December 31, 2015, the

consolidated and company statements of comprehensive income, changes in equity and cash flows for the year then

ended and notes, comprising a summary of the significant accounting policies and other supplementary information.

Management's responsibility

Management is responsible for the preparation and fair presentation of these financial statements in accordance with

International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the

Dutch Civil Code, and for the preparation of the board of director´s report in accordance with Part 9 of Book 2 of the

Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to

enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or

error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit

in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of

material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the financial statements.

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

opinion.

Opinion with respect to the financial statements

In our opinion, the financial statements give a true and fair view of the financial position of Brack Capital Properties

N.V. as at December 31, 2015 and of its result and its cash flows for the year then ended in accordance with

International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the

Dutch Civil Code.

Report on other legal and regulatory requirements

Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no

deficiencies to report as a result of our examination whether the board of director´s report, to the extent we can assess,

has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under

Section 2:392 sub 1 at b-h has been annexed. Further we report that the board of director´s report, to the extent we

can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code.

Amsterdam, August 22, 2016

IUS Statutory Audits Coöperatie U.A.

original signed by

R. Groen RA Ref: IUS-BCP-RG-WC-JR15-22/8/2016

No. Topic Best practice BCP N.V. Implementation Status Reference

I Compliance with and enforcement of the Code Compliance with and enforcement of the Code

I.1 Broad outline of the structure of the managing board

and the corporate governance structure of the

company shall be explained in a separate chapter of

the annual report

The broad outline of the corporate governance structure and the structure of the managing board of the

company shall be explained in a separate chapter of the annual report, partly by reference to the

principles mentioned in this code. In this chapter the company shall indicate expressly to what extent it

applies the best practice provisions in this code and, if it does not do so, why and to what extent it does

not apply them.

In the director's report that is published with the Dutch Chamber of commerce,

there is a separate chapter 'Corporate Governance Aspects' outlining the

corporate governance structure of BCP as well as its managing board structure

such as financial statement approval procedure, details regarding the

corporation's internal auditor, donations, directors with accounting and financial

expertise and independent directors, information to the external auditor, and the

link between the remuneration granted pursuant to regulation 21 and the

contribution of the remuneration recipient to the corporation. However, the

Hebrew version that is published on Maya is much more detailed, specifically

part D.

BOD report - Part C; YFS -

Chapter D

I.2 Substantial change in the corporate governance

structure of the company and in the compliance of

the company with this code shall be submitted to the

(annual) general meeting (of shareholders) for

discussion under a separate agenda item

Each substantial change in the corporate governance structure of the company and in the compliance of

the company with this code shall be submitted to the general meeting for discussion under a separate

agenda item.

Any significant changes will be reflected in the articles and as such will be

presented to the general meeting of shareholders for their approval.

n/a

II.1 The management board (BM) The management board (BM)

Role and procedure

II.1.1 Board members appointed for max of 4 years A management board member is appointed for a maximum period of four years. A member may be

reappointed for a term of not more than four years at a time.

BCP has a one-tier board structure. The company is managed by Board of

Directors, of which minimal 3 Non-External and minimal 2 External directors.

The External directors are independent and appointed for three (3) years,

which can be extended twice for another 3 years each time (i.e. - a maximum

term of tenure of nine (9) years).

AoA (Sections 11.2 and 11.5)

II.1.2 Submission of objectives and strategy by Board of

management member to Supervisory Board for

approval

The management board shall submit to the supervisory board for approval:

a) the operational and financial objectives of the company;

b) the strategy designed to achieve the objectives;

c) the parameters to be applied in relation to the strategy, for example in respect of the financial ratios;

and

d) corporate social responsibility issues that are relevant to the enterprise.

The main elements shall be mentioned in the annual report.

Management is submitting to the board a detailed yearly business plan which

the board approves during January of each calendar year in a written form. the

business plan outlay the strategic, financial and operative targets of the

company for the coming year. the board monitors the progress of the company

in comparison to the targets set by its business plan at the beginning of the year

in 4 separate board meetings (March, May, August and November) in each

year; the discussion of the board in regards to the business plan execution are

recorded within the board meeting minutes. A summary of the strategic,

financial and operative targets of the company are being disclosed in the yearly

financial reports . As for the corporate social responsibility, the company has

adopted a donation policy - for details see board report section c in the yearly

financial statements. In addition to it some subsidiaries of the company are

engaged in social projects that support the communities in which the properties

are located.

For the strategy disclosure see

the YFS Chapter A section D

that are published in the Maya.

Re Donation policy please refer

to the BOD report Part C.

II.1.3 Risk analyses of objectives of the company

Code of Conduct

Manual for financial administration

Internal report system

The company shall have an internal risk management and control system that is suitable for the

company. It shall, in any event, employ as instruments of the internal risk management and control

system:

a) risk analyses of the operational and financial objectives of the company;

b) a code of conduct which should be published on the company's website;

c) guides for the layout of the financial reports and the procedures to be followed in drawing up the

reports; and

d) a system of monitoring and reporting.

A. The company has an established internal risk management and control

system; the Co-CEO's of the company are responsible for analysing/mapping

the risk areas and quantify risk exposures (e.g., cash flow risk, refinancing risk,

interest rate risks, currency exposure and hedging risk, macro economics as

well as business sector risk, project budget cost overurn risk, litigation risks,

taxation, etc.); these are being discussed with the board at the yearly business

plan approval meeting (January each year, recorded in the yearly business plan

document in written form and within the board meeting minutes) and then being

monitored by the board at the 4 consecutive board meetings (March, May,

August, November) as well as recorded in the quarterly business plan status

update document in written form and within the board meeting minute; B. no

code of conduct exists, the company adopted Ethics code . C a layout for

financial report exists. D. an elaborate and detailed system of internal

monitoring and reporting is existing.

for a summary of the risk factors

- please refer to the YFS

Chapter A section D that are

published in the Maya

The company securities were listed for trade on the Tel-Aviv stock Exchange ("TASE") in December 2010. Due to the registration the company must comply with the Israeli Securities Law of 1968 and Securities Regulations ("ISL")and part of the Israeli Companies Law of 1999

("ICL"). The company and its advisors' opinion is that in general the regulatory environment in Israel is far more detailed and restricted than the one the company needs to comply under the Dutch corporate Governance Code ("DCGC") with respect to most material aspects. It

should be mention that the company is forbidden from marketing its securities in Holland and who ever is interested in the Company's securities must refer to the Company's official publications which are made public in the Tel Aviv Stock Exchange Ltd ("TASE") official

announcements' web site at: http://maya.tase.co.il ("Maya"). The following table demonstrates how the company complies with the different requirements of the DCGC, and explains, in light of the different regulatory requirements to which the company is obliged to comply, why the

Company's corporate procedures/operations differs from the DCGD's requirements

Different references are made to the yearly financial statements that were published in the Maya on 20th of March, 2016 (here and after: "YFS") , which you can find under:http://maya.tase.co.il/bursa/report.asp?report_cd=1024720. The YFS are audited by External audit firm and are

prepared with the guidance of external legal advisors. in addition - the company has a one-tier board structure and no supervisory board. Wherever in this survey a best practice for a supervisory board is mentioned the column ‘BCP Implementation Status’ mentions: “N.A.”.

However, with respect to the best practices under III.5 (composition and role of the three key committees of the supervisory board) BCP applies this chapter in accordance with best practice III.8.3 “the management board shall apply chapter III.5 of this Code”. For clarity’s sake with

respect to some N.A. best practices this survey provides for a short explanation of ISL and ICL.

II.1.4 Explanation of internal risk management and control

systems

In the annual report the management board shall provide:

a) a description of main risks related to the strategy of the company;

b) a description of the design and effectiveness of the internal risk management and control systems for

the main risks during the financial year; and

c) a description of any major failings in the internal risk management and control systems which have

been discovered in the financial year, any significant changes

made to these systems and any major improvements planned, and a confirmation that these issues have

been discussed with the audit committee and the supervisory

board.

See section II.1.3 above; in addition: 1) the company employ and internal

auditor (IA) which yearly work plan is approved by the board audit committee

(AC). The IA produce 2 reports each year on business risk areas which the AC

together with the IA identified; the reports are being submitted to the AC by the

IA and reported to the board by the AC; the IA also conduct a monitoring review

to check whether its recommendations were implemented by the company and

report its finding to the AC and BoD; 2) Internal controls: the company set

internal control which are based on SOX principles, those internal controls were

set in order to ensure reliable reporting. In order to strength the internal controls

the company engaged with Deloitte, starting from 2011 till today, in order to

support the company with establish and maintain those controls. In addition due

to ISA regulation, in which the Israeli External auditor need to certified that the

company marinated effective controls, the Israeli External auditor audit the

internal controls that were set by the company.

BOD report part C; for a

summary of the risk factors -

please see the YFS Chapter A

section D that are published in

the Maya. For details about the

internal controls and SOX

implementation please refer to

external audit opinion in the YFS

and to the company officers

declarations in the YFS.

II.1.5 Internal controls statement As regards financial reporting risks the management board states in the annual report that the internal

risk management and control systems provide a reasonable assurance that the financial reporting does

not contain any errors of material importance and that the risk management and control systems worked

properly in the year under review. The management board shall provide clear substantiation of this.

The Q4 2015 director's report includes a paragraph on Financial Statement

Approval Procedure; as for a statement regarding reasonable assurance and

effectiveness of internal risk management and control systems - please see

section II. 1.3 and II 1.4 above

BOD report part C

II.1.6 Analysis of sensitivity In the annual report, the management board shall describe the sensitivity of the results of the company to

external factors and variables.

The Q4 2015 director's report of the YFS includes a paragraph on exposure to

Market risks and Way of managing them including sensitivity tests

BOD report part B

II.1.7 Protection whistle-blower The management board shall ensure that employees have the possibility of reporting alleged irregularities

of a general, operational and financial nature within the company to the chairman of the management

board or to an official designated by him, without jeopardising their legal position. Alleged irregularities

concerning the functioning of management board members shall be reported to the chairman of the

supervisory board. The arrangements for whistle-blowers shall be posted on the company’s website.

The Company does not have a whistle-blower policy. The Management feels

that such policy does not represent the Company's atmosphere. The Senior

management has an "open door" policy and they are highly approachable.

II.1.8 Test supervisory board members of Board members A management board member may not be a member of the supervisory board of more than two listed

companies. Nor may a management board member be the chairman of the supervisory board of a listed

company. Membership of the supervisory board of other companies within the group to which the

company belongs does not count for this purpose. The acceptance by a management board member of

membership of the supervisory board of a listed company requires the approval of the supervisory board.

Other important positions held by a management board member shall be notified to the supervisory

board.

The Company comply with this regulation

II.1.9 Response time for request on agenda item If the management board invokes a response time within the meaning of best practice provision IV.4.4,

such period may not exceed 180 days from the moment the management board is informed by one or

more shareholders of their intention to put an item on the agenda to the day of the general meeting at

which the item is to be dealt with. The management board shall use the response time for further

deliberation and constructive consultation. This shall be monitored by the supervisory board.

The response time may be invoked only once for any given general meeting and may not apply to an item

in respect of which the response time has been previously invoked or meetings where a shareholder

holds at least three quarters of the issued capital as a consequence of a successful public bid.

The company comply with this regulation; Shareholders can request the board

of directors to place a matter on the agenda, which is duly motivated and

revived by the Company at least sixty (60) days prior to the date of the General

meeting concerned.

AoA (Section 23.3)

II.1.10 Involvement Supervisory board in takeover process If a takeover bid for the company’s shares or for the depositary receipts for the company’s shares is

being prepared, the management board shall ensure that the supervisory board is closely involved in the

takeover process in good time.

Not comply; the board of the company will take necessary steps to implement

this best practice procedure until the end of 2016

II.1.11 Discuss request of competing bidder with SB If the management board of a company for which a takeover bid has been announced or made receives

a request from a competing bidder to inspect the company’s records, the management board shall

discuss this request with the supervisory board without delay.

See section II.1.11 above;

II.2 Remuneration Remuneration

II.2.1 Analysis of possible outcome of the variable

remuneration

Before drawing up the remuneration policy and determining the remuneration of individual management

board members, the supervisory board shall analyse the possible outcomes of the variable remuneration

components and how they may affect the remuneration of the management board members

As the company is traded in TASE, it is subject to amendment 20 of the Israeli

corporate law. Under this amendment, the company has established a

remuneration committee (RC), which designed a remuneration policy applying

to the company officers and directors; the remuneration policy needs then to be

approved by the board of directors and by the shareholders assembly (GM)

every 3 years. the latest remuneration policy has been approved by the GM on

March 21st 2016; furthermore, the remuneration policy and the remuneration

terms of each executive are being reviewed by the RC at least once a year to

make sure the content, structure and levels of the remuneration of each

executive fit to his areas of responsibility, meets market standards, balance

correctly between short term and long term business targets of the company, tie

the long term interest of the executive with those of the company, deter

excessive risk taking, etc.; the review by the RC is carried out, among other,

based on a 3rd party benchmark peer group remuneration analysis re

remunerations in similar publicly traded companies; the remuneration policy is

being published at the TASE website as required under the ISL; the regulation

of the RC work and the remuneration policy are set in Section 34.1(B) of the

AOA.

See publication in Maya:

http://maya.tase.co.il/bursa/repor

t.asp?report_cd=1021399

II.2.2 Carry out scenario analysis The supervisory board shall determine the level and structure of the remuneration of the management

board members by reference to the scenario analyses carried out and with due regard for the pay

differentials within the enterprise

the company is complying with this regulation; See Section II 2.1 above and the

Remuneration Policy itself




II.2.3 Results, share price performance and non financial

indicators

In determining the level and structure of the remuneration of management board members, the

supervisory board shall take into account, among other things, the results, the share price performance

and non-financial indicators relevant to the long term objectives of the company, with due regard for the

risks to which variable remuneration may expose the enterprise.


Remuneration Policy itself




II.2.4 Three years vesting period of options If options are granted, they shall, in any event, not be exercised in the first three years after the date of

granting. The number of options to be granted shall be dependent on the achievement of challenging

targets specified beforehand


Remuneration Policy itself; furthermore - see the details of the stock option plan

No. 3 (ESOP 3) approved by the general meeting of the shareholders on 29th

of October 2013 ; a disclosure of the terms of ESOP 3 is included in note 18e of

the YFS

See publication in Maya:____,


t.asp?report_cd=1018029. note

18e in the financial statements

II.2.5 Lock-up shares from share regulations Shares granted to management board members without financial consideration shall be retained for a

period of at least five years or until at least the end of the employment, if this period is shorter. The

number of shares to be granted shall be dependent on the achievement of challenging targets specified

beforehand.

See Section II. 2.4 above See Section II. 2.4 above

II.2.6 Minimum exercise price share options The option exercise price may not be fixed at a level lower than a verifiable price or a verifiable price

average in accordance with the trading in a regulated market on one or more predetermined days during

a period of not more than five trading days prior to and including the day on which the option is granted.


II.2.7 No modification of option conditions Neither the exercise price of options granted nor the other conditions may be modified during the term of

the options, except in so far as prompted by structural changes relating to the shares or the company in

accordance with established market practice.


II.2.8 Dismissal fee no more than 1 time fixed annual salary The remuneration in the event of dismissal may not exceed one year’s salary (the ‘fixed’ remuneration

component). If the maximum of one year’s salary would be manifestly unreasonable for a management

board member who is dismissed during his first term of office, such board member shall be eligible for

severance pay not exceeding twice the annual salary.

the company is complying with this regulation; for details - see the remuneration

policy itself




II.2.9 No loans to board members and Supervisory board

members

The company may not grant its management board members any personal loans, guarantees or the like

unless in the normal course of business and on terms applicable to the personnel as a whole, and after

approval of the supervisory board.

No remission of loans may be granted.

According to the company remuneration policy, board members are only

entitled to a fee which is strictly set by the ICL, Sections No 244(a), 284 and

366 ; under this regulation, which has been adopted into the company

remuneration policy, Board Members of the company are not entitled to receive

loans from the company (as opposed to other executives - such as CEO's etc.);

B. All transactions of the Company with Directors and/or other Executives are to

be approved in accordance to approval procedures detailed in Sections 34.6-

34.13 of the AOA; any such transaction, is subject to special approval process

(approval by the remuneration committee, board of directors and in the case of

board members and CEO's - also approval of the shareholders assembly with a

special majority). Any addition to this information, if relevant, is detailed in the

BoD report.

See note 22 to the financial

statements. ICL, sections No

244(a), 284 and 366

II.2 Determination and disclosure of remuneration Determination and disclosure of remuneration

II.2.10 If unfair result adjust variable component If a variable remuneration component conditionally awarded in a previous financial year would, in the

opinion of the supervisory board, produce an unfair result due to extraordinary circumstances during the

period in which the predetermined performance criteria have been or should have been achieved, the

supervisory board has the power to adjust the value downwards or upwards.

The company is complying with this regulation; for details - see the

remuneration policy




II.2.11 Claw back clause The supervisory board may recover from the management board members any variable remuneration

awarded on the basis of incorrect financial or other data (clawback clause).

The company is complying with this regulation; for details - see the

remuneration policy as well as section 35 to the company AoA

AoA - Article 35; reference to the

remuneration policy

II.2.12 Remuneration report including overview of policy for

next few years

The remuneration report of the supervisory board shall contain an account of the manner in which the

remuneration policy has been implemented in the past financial year, as well as an overview of the

remuneration policy planned by the supervisory board for the next financial year and subsequent years.

The report shall explain how the chosen remuneration policy contributes to the achievement of the long-

term objectives of the company and its affiliated enterprise in keeping with the risk profile. The report

shall be posted on the company’s website.

See Section II 2.1 above

II.2.13 Information requirements remuneration report The overview referred to in best practice provision II.2.12 shall in any event contain the following

information:

a) an overview of the costs incurred by the company in the financial year in relation to management board

remuneration; this overview shall provide a breakdown showing fixed salary, annual cash bonus, shares,

options and pension rights that have been awarded and other emoluments; shares, options and pension

rights must be recognised in accordance with the accounting standards;

b) a statement that the scenario analyses referred to in best practice provision II.2.1 have been carried

out;

c) for each management board member the maximum and minimum numbers of shares conditionally

granted in the financial year or other share-based remuneration components that the management board

may member acquire if the specified performance criteria are achieved;

d) a table showing the following information for incumbent management board members at year-end for

each year in which shares, options and/or other share-based remuneration components have been

awarded over which the management board member did not yet have unrestricted control at the start of

the financial year:

i) the value and number of shares, options and/or other share-based remuneration components on the

date of granting;

ii) the present status of shares, options and/or other share-based remuneration components awarded:

whether they are conditional or unconditional and the year in which vesting period and/or lock-up period

ends; iii) the value and number of shares, options and/or other share-based remuneration components

conditionally awarded under i) at the time when the management board member obtains ownership of

them (end of vesting period), and

iv) the value and number of shares, options and/or other share-based remuneration components

awarded under i) at the time when the management board member obtains unrestricted control over

them (end of lock-up period);

The company is complying with this regulation to the extent relevant to its

executive remuneration packages

YFS chapter D regulation 21

e) if applicable: the composition of the peer group of companies whose remuneration policy determines in

part the level and composition of the remuneration of the management board members;

f) a description of the performance criteria on which the performance-related component of the variable

remuneration is dependent in so far as disclosure would not be undesirable because the information is

competition sensitive, and of the discretionary component of the variable remuneration that can be fixed

by the supervisory board as it sees fit;

g) a summary and account of the methods that will be applied in order to determine whether the

performance criteria have been fulfilled;

h) an ex-ante and ex-post account of the relationship between the chosen performance criteria and the

strategic objectives applied, and of the relationship between remuneration and performance;

i) current pension schemes and the related financing costs; and

j) agreed arrangements for the early retirement of management board members.

II.2.14 Immediate publication of important elements of Board

of management member employments contract at

appointment

The main elements of the contract of a management board member with the company shall be made

public after it has been concluded, and in any event no later than the date of the notice calling the general

meeting where the appointment of the management board member will be proposed. These elements

shall in any event include the amount of the fixed salary, the structure and amount of the variable

remuneration component, any agreed redundancy scheme and/or severance pay, any conditions of a

change-of-control clause in the contract with a management board member and any other remuneration

components promised to the management board member, pension arrangements and performance

criteria to be applied.

The company is complying with this regulation. In accordance to the Israeli

Securities Regulations that applies to BCP as a traded company in TASE, as a

reporting entity in Israel for securities of which are registered for trade on TASE,

BCP is required to file immediate reports in regards to convening GM re, inter

alia, approval of CEO and/or Directors' terms of office and employment. These

immediate report include description in detail of the different proposed

components of the remuneration to be discussed and approved by the GM. A

disclosure is also provided within the BoD report as well as the FYS part D

BoD report Part C section 7;

YFS Chapter D regulation 21

II.2.15 Explanation of special remuneration in remuneration

report

If a management board member or former management board member is paid severance pay or other

special remuneration during a given financial year, an account and an explanation of this remuneration

shall be included in the remuneration report.

See Section II 2.9 above; in addition, section D of the Annual Report

("Additional Details") contains full details in regards to the annual remuneration

of the top 5 executives. this includes information in regards to changes in their

remuneration in the said year.


II.3 Conflicts of interests Conflicts of interests

II.3.1 Board of management member does not: enter into

competition with the company, make material gifts to

family members, provide unjustified benefits to third

parties Board of management member, and does not

provide business opportunities to himself or his family.

A management board member shall:

a) not enter into competition with the company;

b) not demand or accept (substantial) gifts from the company for himself or for his wife, registered

partner or other life companion, foster child or relative by blood or marriage up to the second degree as

defined under Dutch law;

c) not provide unjustified advantages to third parties to the detriment of the company; and

d) not take advantage of business opportunities to which the company is entitled for himself or for his

wife, registered partner or other life companion, foster child or relative by blood or marriage up to the

second degree as defined under Dutch law.

The company is complying with this regulation; in accordance with ISL and ICL,

article 15 to the company Article of Association (AoA) provide for a very

detailed regulation for conflicts of interest

AoA- Article 15

II.3.2 Reporting arrangement conflicting interests A management board member shall immediately report any conflict of interest or potential conflict of

interest that is of material significance to the company and/or to him, to the chairman of the supervisory

board and to the other members of the management board and shall provide all relevant information,

including information concerning his wife, registered partner or other life companion, foster child and

relatives by blood or marriage up to the second degree as defined under Dutch law. The supervisory

board shall decide, without the management board member concerned being present, whether there is a

conflict of interest. A conflict of interests exists, in any event, if the company intends to enter into a

transaction with a legal entity:

i) in which a management board member personally has a material financial interest;

ii) which has a management board member who is related under family law to a management board

member of the company, or

iii) in which a management board member of the company has a management or supervisory position.

The company is complying with this regulation; see article 15.9 to the company

AoA

AoA- Article 15.9

II.3.3 Not participate in decisions regarding situations with

conflicting interest

A management board member may not take part in any discussion or decision-making that involves a

subject or transaction in relation to which he has a conflict of interest with the company.


AoA

AoA - article 15.3

II.3.4 Conflicting interests situations handled as customary

in industry

All transactions in which there are conflicts of interest with management board members shall be agreed

on terms that are customary in the sector concerned.

Decisions to enter into transactions in which there are conflicts of interest with management board

members that are of material significance to the company and/or to the relevant board members require

the approval of the supervisory board. Such transactions shall be published in the annual report, together

with a statement of the conflict of interest and a declaration that best practice provisions II.3.2 to II.3.4

inclusive have been complied with.


AoA

AoA - article 15.2

III.1 Supervisory Board Supervisory Board

Role and procedure Role and procedure

III.1.1 Division of duties Supervisory Board in regulations

placed on website

The division of duties within the supervisory board and the procedure of the supervisory board shall be

laid down in terms of reference. The supervisory board’s terms of reference shall include a paragraph

dealing with its relations with the management board, the general meeting and the central works council

or works council. The terms of reference shall be posted on the company’s website.

The Company has no supervisory board, but a one-tier board, hence this

regulation is not applicable.

III.1.2 Inclusion of Supervisory Board report in annual report The annual statements of the company shall include a report of the supervisory board.

In this report the supervisory board describes its activities in the financial year and which includes the

specific statements and information required by the provisions of this code.



III.1.3 Personal information Supervisory Board members The following information about each supervisory board member shall be included in the report of the

supervisory board:

a) gender;

b) age;

c) profession;

d) principle position;

e) nationality;

f) other positions, in so far as they are relevant to the performance of the duties of the supervisory board

member;

g) date of initial appointment; and

h) current term of office.


regulation is not applicable. However, the information required under this

regulation is disclosed in the the company yearly financial reports regarding its

Board members


III.1.4 Policy interim retirement Supervisory Board members A supervisory board member shall retire early in the event of inadequate performance, structural

incompatibility of interests, and in other instances in which this is deemed necessary by the supervisory

board.

Please refer to section II 1.1 above

III.1.5 Report of absence of Supervisory Board members Report of absence of Supervisory Board members The company provide details regarding the attendance and absence of all its

board members in the various board meetings as well as board committee

meetings as part of the Corporate Governance questionnaire which is published

once a year with the YFS. Furthermore, in regards to immediate reports re

approval of transactions with the controlling shareholder/with others in which the

controlling shareholder has a personal interest and/or transactions with CEO

and/or Directors re terms of office and employment - BCP is required to

provide within the immediate report the names of the Board members who

participated in each meeting.

See Corporate Governance

questionnaire in Chapter D of

the YFS.

III.1.6 Supervising duties Supervisory Board The supervision of the management board by the supervisory board shall include:

a) achievement of the company’s objectives;

b) corporate strategy and the risks inherent in the business activities;

c) the design and effectiveness of the internal risk management and control systems;

d) the financial reporting process;

e) compliance with primary and secondary legislation;

f) the company-shareholder relationship; and

g) corporate social responsibility issues that are relevant to the enterprise.


regulation is not applicable. However the one tier board control the executive

management actions as describe under section II 1.2 above

III.1.7 General committee Supervisory Board The supervisory board shall discuss at least once a year on its own, i.e. without the management board

being present, its own functioning, the functioning of its committees and its individual members, and the

conclusions that must be drawn on the basis thereof. The desired profile, composition and competence of

the supervisory board shall also be discussed. Moreover, the supervisory board shall discuss at least

once a year without the management board being present both the functioning of the management board

as an organ of the company and the performance of its individual members, and the conclusions that

must be drawn on the basis thereof. The report of the supervisory board shall state how the evaluation of

the functioning of the supervisory board, the separate committees and the individual supervisory board

members has been carried out.



III.1.8 Meeting strategy and main business risks The supervisory board shall discuss at least once a year the corporate strategy and the main risks of the

business, the result of the assessment by the management board of the design and effectiveness of the

internal risk management and control systems, as well as any significant changes thereto. Reference to

these discussions shall be made in the report of the supervisory board.


regulation is not applicable. However board discuss and approve the company

business strategy as described in more details under section II 1.2 above

III.1.9 Provision of means of Supervisory Board for

performing its duties

The supervisory board and its individual members each have their own responsibility for obtaining all

information from the management board and the external auditor that the supervisory board needs in

order to be able to carry out its duties properly as a supervisory organ. If the supervisory board considers

it necessary, it may obtain information from officers and external advisers of the company. The company

shall provide the necessary means for this purpose. The supervisory board may require that certain

officers and external advisers attend its meetings.


regulation is not applicable; However the board and the audit & remuneration

committees of the company have full mandate to invited every relevant person,

among others the company officers, external auditor, internal auditor, legal

advisor, which are present in the board and audit committee meeting on a

regular base.

Company board and audit

committee minutes (internal

papers)

III.2 Independence Independence

III.2.1 All Supervisory Board members have to comply with

provision III.2.2 with the exception of not more than

one Supervisory Board member

All supervisory board members, with the exception of not more than one person, shall be independent

within the meaning of best practice provision III.2.2.

Not applicable to the company which has a one-tier board, hence this regulation

is not applicable. However, pursuant to section 12.2 of the AoA the board

should consist of at least two External Directors (which under the definitions of

ICL must be Independent Directors) and one Independent Director;

consequently, the company's board consist of three Independent Directors and

three non-independent directors

III.2.2. Supervisory Board member:

- has not been director or employee of the company

in last 5 years,

- does not receive other fee than for Supervisory

Board membership

- has not had business relationship with the company

before appointment

- is not a board member of a company of which a

board member of the company is Supervisory Board

member

- does not have interest of at least 10% in the

company

- is not director or Supervisory board member of a

legal entity that has at least 10% interest in the

company

- has not been temporary director of the company in

the past 12 months

A supervisory board member shall be deemed to be independent if the following criteria of dependence

do not apply to him. These criteria are that the supervisory board member concerned or his wife,

registered partner or other life companion, foster child or relative by blood or marriage up to the second

degree as defined under Dutch law:

a) has been an employee or member of the management board of the company (including associated

companies as referred to in Section 5:48 of the Financial Supervision Act (Wet op het financial toezicht /

Wft) in the five years prior to the appointment;

b) receives personal financial compensation from the company, or a company associated with it, other

than the compensation received for the work performed as a supervisory board member and in so far as

this is not in keeping with the normal course of business;

c) has had an important business relationship with the company, or a company associated with it, in the

year prior to the appointment. This includes the case where the supervisory board member, or the firm of

which he is a shareholder, partner, associate or adviser, has acted as adviser to the company

(consultant, external auditor, civil notary and lawyer) and the case where the supervisory board member

is a management board member or an employee of any bank with which the company has a lasting and

significant relationship;

d) is a member of the management board of a company in which a member of the management board of

the company which he supervises is a supervisory board member;

e) holds at least ten percent of the shares in the company (including the shares held by natural persons

or legal entities which cooperate with him under an express or tacit, oral or written agreement);

f) is a member of the management board or supervisory board - or is a representative in some other way

- of a legal entity which holds at least ten percent of the shares in the company, unless such entity is a

member of the same group as the company;

g) has temporarily managed the company during the previous twelve months where management board

members have been absent or unable to discharge their duties.

Not applicable to the company which has a one-tier board, hence this regulation

is not applicable. However, pursuant to section 12.2 of the AoA the board

should consist of at least two External Directors (which under the definitions of

ICL must be Independent Directors) and one Independent Director;

consequently, the company's board consist of three Independent Directors and

three non-independent directors

III.2.3 Statement of independence The report of the supervisory board shall state that, in the board’s view, best practice

provision III.2.1 has been fulfilled, and shall also state which supervisory board member is not considered

to be independent, if any.

There is no Supervisory Board but a one-tier board, hence this regulation is not

applicable. However the independence of the external board members is

disclosed in the board report; In accordance to section 11.13 of the AOA each

nominee as External Director has to fill out a Declaration which is to kept at the

office address of the Company and shall be open for inspection by any person.

In accordance to section 224 of the Israeli Companies Law of 1999 the

Declaration is to be published on Maya alongside the immediate report re

convocation of the GM for the appointment of the nominee as External Director.

BoD report Part C

III.3 Expertise and composition Expertise and composition

III.3.1 Profile Supervisory board and diversity The supervisory board shall prepare a profile of its size and composition, taking account of the nature of

the business, its activities and the desired expertise and background of the supervisory board members.

The profile shall deal with the aspects of diversity in the composition of the supervisory board that are

relevant to the company and shall state what specific objective is pursued by the board in relation to

diversity. In so far as the existing situation differs from the intended situation, the supervisory board shall

account for this in the report of the supervisory board and shall indicate how and within what period it

expects to achieve this aim. The profile shall be made generally available and shall be posted on the

company’s website.


regulation is not applicable. However, the Company believes that the various

background, expertise and business knowledge of its current board members

(real estate experience, corporate law, corporate finance, tax and audit) in

principle are fitting with its business profile; the information required under this

regulation regarding the company board members (background, expertise, past

experience, etc.) is disclosed in the the company YFS; Furthermore, once a

year prior to the convocation of the AGM all board members (apart from the

External Directors which do so once every three years, unless actively

approached by the Company) have to provide an up-to-date declaration re their

qualification to continue as board members - in accordance to section 224 of

the ICL.


III.3.2 Presence of financial expert At least one member of the supervisory board shall be a financial expert with relevant knowledge and

experience of financial administration and accounting for listed companies or other large legal entities.


regulation is not applicable; however all board members of the company are

complying with the requirements of this regulation

BoD report Part C

III.3.3 Presence of introduction programme After their appointment, all supervisory board members shall follow an induction programme, which, in

any event, covers general financial, social and legal affairs, financial reporting by the company, any

specific aspects that are unique to the company and its business activities, and the responsibilities of a

supervisory board member. The supervisory board shall conduct an annual review to identify any aspects

with regard to which the supervisory board members require further training or education during their

period of appointment. The company shall play a facilitating role in this respect.


regulation is not applicable; however the company has an internal procedure

under which the company CEO is responsible for the introduction of every new

board members to the company businesses, financial reporting, legal and

regulatory aspects, etc.

under section 26 of Part D of the

YFS there is a full description of

the Board members' resume, in

accordance to section 26(A) of

the Israeli Securities Regulations

(Immediate and Periodic

Reports), 1970]

III.3.4 Number of Supervisory board memberships of

Supervisory board members

The number of supervisory boards of Dutch listed companies of which an individual may be a member

shall be limited to such an extent that the proper performance of his duties is assured; the maximum

number is five, for which purpose the chairmanship of a supervisory board counts double.

Not applicable as the company is not listed in the Netherlands; however once a

year prior to the convocation of the AGM all board members (apart from the

External Directors which do so once every three years, unless actively

approached by the Company) have to provide an up-to-date declaration re their

qualification to continue as board members - in accordance to section 224 of

the Israeli Companies Law of 1999; the declaration also includes disclosure re

the other companies at which each board members serves as a directors

beside BCP's board

III.3.5 Maximum term Supervisory board members of 3

times 4 years

A person may be appointed to the supervisory board for a maximum of three 4-year terms. Not applicable to the company which has one tier board. With regard to the

term of an external board member please refer section II 1.1 above

III.3.6 Retirement schedule The supervisory board shall draw up a retirement schedule in order to avoid, as far as possible, a

situation in which many supervisory board members retire at the same time. The retirement schedule

shall be made generally available and shall be posted on the company’s website.

Not applicable to the company which has one tier board. With regard to the

term of an external board member please refer to section II 2.9 above

III.4 Chairman Supervisory board and company

secretary

Chairman Supervisory board and company secretary

III.4.1 The chairman of the supervisory board shall ensure

that: supervision of following introduction programme,

of timely receipt of information, of sufficient time for

discussion Supervision of functioning Supervisory

board committees, of assessment of Supervisory

board members and Board of management

members, and Guarantee contacts Supervisory

board and Board of management with works council.

The chairman of the supervisory board shall ensure that:

a) the supervisory board members follow their induction and education or training programme;

b) the supervisory board members receive in good time all information which is necessary for the proper

performance of their duties;

c) there is sufficient time for consultation and decision-making by the supervisory board;

d) the committees of the supervisory board function properly;

e) the performance of the management board members and supervisory board members is assessed at

least once a year;

f) the supervisory board elects a vice-chairman; and

g) the supervisory board has proper contact with the management board and the works council (or

central works council).

Not applicable to the company which has one tier board; however the

company's board is operating and function in accordance with this regulation

See section III 8.1.

III.4.2 Chairman Supervisory board is not former Board of

management member of company

The chairman of the supervisory board may not be a former member of the management board of the

company.


regulation is not applicable; however the company is complying with this

regulation

III.4.3 Guarantee of supervision by company secretary.

Secretary is appointed and dismissed by Board of

management after Supervisory board approval.

The supervisory board shall be assisted by the company secretary. The company secretary shall ensure

that correct procedures are followed and that the supervisory board acts in accordance with its statutory

obligations and its obligations under the articles of association. He shall assist the chairman of the

supervisory board in the actual organisation of the affairs of the supervisory board (information, agenda,

evaluation, training programme, etc.). The company secretary shall, either on the recommendation of the

supervisory board or otherwise, be appointed and dismissed by the management board, after the

approval of the supervisory board has been obtained.


regulation is not applicable; however although the company doesn’t have a

company secretary, its legal advisor fulfil significant parts of the requirement

under this regulation

III.4.4 Role and duties vice-chairman The vice-chairman of the supervisory board shall deputise for the chairman when the occasion arises. By

way of addition to best practice provision III.1.7, the vice-chairman shall act as contact for individual

supervisory board members and management board members concerning the functioning of the

chairman of the supervisory board.


regulation is not applicable

III.5 Composition and duties three core committees of

supervisory board

Composition and duties three core committees of supervisory board

III.5.1 Supervisory board draws up regulations for each

committee

The supervisory board shall draw up terms of reference for each committee. The terms of reference shall

indicate the role and responsibility of the committee concerned, its composition and the manner in which

it discharges its duties. The terms of reference may provide that a maximum of one member of each

committee may not be independent within the meaning of best practice provision III.2.2. The terms of

reference and the composition of the committees shall be posted on the company's website.


regulation is not applicable; however the board has nominated an audit

committee, balance sheet committee and remuneration committee; their

composition, responsibilities, duties and process of nomination are regulated by

the Israeli corporate and Securities laws and regulations which are applicable to

the company as its securities are traded on TASE as well as set in the company

AoA . The members of the different committees are all Independent Directors.

AoA - articles 16 and 33

III.5.2 Supervisory board reports states composition

committees, number of meetings and topics

discussed

The report of the supervisory board shall state the composition of the committees, the number of

committee meetings and the main items discussed.

see III 5.1. AoA - articles 16 and 33

III.5.3 Supervisory board receives committee reports The supervisory board shall receive from each of the committees a report of its deliberations and findings. The Company has no supervisory board, but a one-tier board, hence this

regulation is not applicable; however the company's committees provide to the

other board members reports on their deliberations and findings.

YFS corporate governance

questionnaire; all the

committees minutes are

distributed to the board on a

regular base

Audit Committee Audit Committee

III.5.4 Supervision by Audit Committee of the following

activities of management:

- risk control and ICT systems,

- financial information provision,

- follow-up recommendations external auditor,

- internal audit function

- tax planning

- relationship with external auditor

- Financing the company

- ICT applications

The audit committee shall in any event focus on supervising the activities of the management board with

respect to:

a) the operation of the internal risk management and control systems, including supervision of the

enforcement of relevant primary and secondary legislation, and supervising the operation of codes of

conduct;

b) the provision of financial information by the company (choice of accounting policies, application and

assessment of the effects of new rules, information about the handling of estimated items in the financial

statements, forecasts, work of internal and external auditors, etc.);

c) compliance with recommendations and observations of internal and external auditors;

d) the role and functioning of the internal audit function;

e) the policy of the company on tax planning;

f) relations with the external auditor, including, in particular, his independence, remuneration and any non-

audit services for the company;

g) the financing of the company; and

h) the applications of information and communication technology.

The company complies with this regulation AOA Article 16.5, BoD report

part C (1)

III.5.5 Audit committee is first point of contact for external

auditor

The audit committee shall act as the principle contact for the external auditor if he discovers irregularities

in the content of financial reporting.

The external auditor is invited to all the audit committee meetings and report to

the committee on its finding on a quarterly basis.

Audit committee minutes

III.5.6 Chairman audit committee is not chairman

Supervisory board or former Board of management

member of the Company

The audit committee may not be chaired by the chairman of the supervisory board or by a former

member of the management board of the company.

The company complies with this regulation

III.5.7 Audit committee has at least one financial expert At least one member of the audit committee shall be a financial expert within the meaning of best practice

provision III.3.2.

The company complies with this regulation BoD report Part C (5)

III.5.8 Audit committee decides who is present at its

meetings

The audit committee shall decide whether and, if so, when the chairman of the management board (chief

executive officer), the chief financial officer, the external auditor and the internal auditor, should attend its

meetings.

the company complies with this regulation; the committee has full mandate to

operate and invite company officers, external and internal auditor, the company

legal advisor and any other persons it deems required to facilitate its

discussions and fulfil its responsibilities and duties.


III.5.9 Audit committee meets at least once a year in

absence of Board of management

The audit committee shall meet with the external auditor as often as it considers necessary, but at least

once a year, without management board members being present.

The external auditor is invited to all the audit committees and reports to the

committee on its finding at least on a quarterly basis; the committee invites the

auditors on a regular base to report to the committee on any finding it may have

with the the management of the company not participating in these discussions.


Remuneration Committee Remuneration Committee

III.5.10 Remuneration Committee makes proposal to

supervisory board:

- about remuneration policy to be pursued,

- about remuneration of individual Board of

management member,

- and draws up remuneration report in accordance

with best practice provision 11.2.12

The remuneration committee shall in any event have the following duties:

a) making a proposal to the supervisory board for the remuneration policy to be pursued;

making a proposal for the remuneration of the individual members of the management board, for

adoption by the supervisory board; such proposal shall, in any event, deal with: (i) the remuneration

structure and (ii) the amount of the fixed remuneration, the shares and/or options to be granted and/or

other variable remuneration components, pension rights, redundancy pay and other forms of

compensation to be awarded, as well as the performance criteria and their application; and

preparing the remuneration report as referred to in best practice provision II.2.12.

The company complies with this regulation; as there is a one tier board, the

remuneration committee reports to the board

Remuneration committee

minutes

III.5.11 Chairman Remuneration Committee is not Chairman

Supervisory board, former Board of management

member of the company or Board of management

member of other listed company

The remuneration committee may not be chaired by the chairman of the supervisory board or by a former

member of the management board of the company, or by a supervisory board member who is a member

of the management board of another listed company.


III.5.12 No more than 1 Remuneration Committee member

is Board of management member of other Dutch

listed company

No more than one member of the remuneration committee may be a member of the management board

of another Dutch listed company.


III.5.13 Services external remuneration consultant If the remuneration committee makes use of the services of a remuneration consultant in carrying out its

duties, it shall verify that the consultant concerned does not provide advice to the company’s

management board members.

The company engaged with Deloite, one of the big 4 audit firms that serve as

internal auditor and consult for internal controls compliance (ISOX) to prepare a

yearly peer group remuneration analysis report . The company doesn't believe

there is a conflict of interest in this aspect due to the fact that separate teams

with in Deloite are providing these separate services to the company.

Remuneration policy, see

publication in Maya from

February 29 2016:



Selection and appointment committee Selection and appointment committee

III.5.14 Selection and appointment committee shall focus on:

- Draw up selection criteria and appointment

procedures SB and BM

- Evaluation size and composition SB and BM

- Assessment of functioning of SB and BM members

- Proposals for (re)appointments

- Supervision of Board of management policy

concerning appointment procedures senior

management

The selection and appointment committee shall in any event focus on:

a) drawing up selection criteria and appointment procedures for supervisory board members and

management board members;

b) periodically assessing the size and composition of the supervisory board and the management board,

and making a proposal for a composition profile of the supervisory board;

c) periodically assessing the functioning of individual supervisory board members and management

board members, and reporting on this to the supervisory board;

d) making proposals for appointments and reappointments; and

e) supervising the policy of the management board on the selection criteria and appointment procedures

for senior management.

There is no selection and appointment committee with the company board of

directors. Please note that ICL - which applies to BCP as it is registered for

trade in Israel - requires that BCP maintains three committees: Audit

Committee, Remuneration Committee and Financial Statements Committee;

the criteria/qualifications for a board members to be appointed to the AC are

regulated under the ICL which articles were adopted to the company's AoA

section 16, 33 & 34; it is to be noted that the Audit Committee may serve

instead of the other two committees as well - see sections 114 and 118A of the

Israeli Companies Law of 1999 and the Israeli Companies Regulations

(Financial Statements Review Committee) as is actually the case in BCP, hence

the selection criteria for the AC members apply also to the RC and balance

sheet committee members. However, The board of the company will take the

necessary steps to implement this best practice by the end of 2016.

ICL, sections No 244(a), 284

and 366

III.6 Conflicts of interests Conflicts of interests

III.6.1 Supervisory board member reports conflicting

interests immediately to Chairman Supervisory board

A supervisory board member shall immediately report any conflict of interest or potential conflict of

interest that is of material significance to the company and/or to him, to the chairman of the supervisory

board and shall provide all relevant information, including information concerning his wife, registered

partner or other life companion, foster child and relatives by blood or marriage up to the second degree

as defined under Dutch law. If the chairman of the supervisory board has a conflict of interest or potential

conflict of interest that is of material significance to the company and/or to him, he shall report this

immediately to the vice-chairman of the supervisory board and shall provide all relevant information,

including information concerning his wife, registered partner or other life companion, foster child and

relatives by blood or marriage up to the second degree as defined under Dutch law.

The supervisory board member concerned may not take part in the assessment by the supervisory board

of whether a conflict of interest exists. A conflict of interest exists in any event if the company intends to

enter into a transaction with a legal entity:

i) in which a supervisory board member personally has a material financial interest;

ii) which has a management board member who is related under family law to a member of the

supervisory board of the company; or

iii) in which a member of the supervisory board of the company has a management or supervisory

position.

The company comply with this regulation and due to ISA regulations need to

company with much broader regulations in scope and disclosure.

AoA - Article 15, BoD minutes.

III.6.2 Respective supervisory board member does not

participate in discussion and decision making

concerning conflicting interests

A supervisory board member may not take part in a discussion and/or decision-making on a subject or

transaction in relation to which he has a conflict of interest with the company.




III.6.3 Confecting of interests transactions made on

conditions customary in industry

All transactions in which there are conflicts of interest with supervisory board members shall be agreed

on terms that are customary in the sector concerned. Decisions to enter into transactions in which there

are conflicts of interest with supervisory board members that are of material significance to the company

and/or to the relevant supervisory board members require the approval of the supervisory board. Such

transactions shall be published in the annual report, together with a statement of the conflict of interest

and a declaration that best practice provisions III.6.1 to III.6.3 inclusive have been complied with.




III.6.4 Transactions with shareholders or at least 10% of

shares in the Company made on conditions

customary in industry and require Supervisory board

approval

All transactions between the company and legal or natural persons who hold at least ten percent of the

shares in the company shall be agreed on terms that are customary in the sector concerned. Decisions

to enter into transactions in which there are conflicts of interest with such persons that are of material

significance to the company and/or to such persons require the approval of the supervisory board. Such

transactions shall be published in the annual report, together with a declaration that best practice

provision III.6.4 has been observed.

The company comply with this regulation and due to ISA regulation need to

company with much broader regulation in scope and disclosure.


III.6.5 supervisory board regulations contain regulations on

conflicting interests and securities transactions

The terms of reference of the supervisory board shall contain rules on dealing with conflicts of interest

and potential conflicts of interest between management board members, supervisory board members

and the external auditor on the one hand and the company on the other. The terms of reference shall also

stipulate which transactions require the approval of the supervisory board. The company shall draw up

regulations governing ownership of and transactions in securities by management or supervisory board

members, other than securities issued by their ‘own’ company.

The company comply with this regulation and due to ISA regulation need to

company with much broader regulation in scope and disclosure.

ICL Sections 270-279, ISL

Sections 52A - 52N, AOA

Articles 14, 15 & 34

III.6.6 Delegated supervisory board member has no more

rights than supervisory board member

A delegated supervisory board member is a supervisory board member who has a special duty. The

delegation may not extend beyond the duties of the supervisory board itself and may not include the

management of the company. It may entail more intensive supervision and advice and more regular

consultation with the management board. The delegation shall be of a temporary nature only. The

delegation may not detract from the role and power of the supervisory board. The delegated supervisory

board member remains a member of the supervisory board.

Not applicable to the company that has one tier board.

III.6.7 Supervisory board member who takes no

management duties retires from supervisory board

A supervisory board member who temporarily takes on the management of the company, where the

management board members are absent or unable to fulfil their duties, shall resign from the supervisory

board.

Not applicable to the company that has one tier board.

III.7 Remuneration Remuneration

III.7.1 Supervisory board has no options on shares in the

Company

A supervisory board member may not be granted any shares and/or rights to shares by way of

remuneration.

Not applicable to the company that has one tier board. One board member,

which also serve as an executive/officer of the company, received as part of his

remuneration package shares/options to shares. The remuneration package is

subject to the remuneration policy, audit committee, board approval and share

holders. see as well section II 2.1. above

see section II 2.1 above

III.7.2 Shareholding in the Company is long-term investment Any shares held by a supervisory board member in the company on whose board he sits are long-term

investments.

See section III 7.1 above; furthermore, the option warrants were granted on a

long term basis as part of a 5 year vesting plan

III.7.3 The Company does not provide personal loans to

Supervisory board members

The company may not grant its supervisory board members any personal loans, guarantees or the like

unless in the normal course of business and after approval of the supervisory board. No remission of

loans may be granted.

See section II 2.9 above

III.8 One-tier management structure One-tier management structure

III.8.1 The chairman of the management board may not

also be or have been an executive director.

The chairman of the management board may not also be or have been an executive director. The chairman of the management board is not and has not been an executive

director. the chairman of the board checks the proper composition and

functioning of the entire board.

AOA section 13.4

III.8.2 The chairman of the management board shall check

the proper composition and functioning of the entire

board.

The chairman of the management board shall check the proper composition and functioning of the entire

board.

According to the ICL and regulations applicable to BCP as a traded company in

TASE (ICL Sections 239(A), 224(A), 114, 118A & 171(E)) It is the responsibility

of the Board of directors as a whole and each and every Director to make sure

the Board is dully composed - i.e. - includes minimum number of members,

including minimum number of External Directors, the members have the

required competencies and experience in line with the company businesses,

etc. Furthermore, the board has nominated an audit committee, balance sheet

committee and remuneration committee; their composition, responsibilities,

duties and process of nomination is regulated by the ICL and regulations which

are applicable to the company as its securities traded in TASE as well as set in

the company AoA (Section 16 & 33) in addition, once a year, prior to the

convocation of the AGM all board members (apart from the External Directors

which do so once every three years, unless actively approached by the

Company) have to provide an up-to-date declaration re their qualification to

continue as board members - in accordance to section 224 of the ICL; based

on these declarations, the board recommends to the AGM to

nominate/renominate board members; this process allows all the board

members to ensure that the board is duly composed

ICL Sections 239(A), 224(A),

114, 118A and 171(E), AOA

Sections 16 & 33

III.8.3 The management board shall apply chapter III.5 of

this code

The management board shall apply chapter III.5 of this code. The committees referred to in chapter III.5

shall consist only of non-executive management board member.

See implementation description in chapter III.5 above

III.8.4 The majority of the members of the management

board is not charged with daily activities

The majority of the members of the management board shall be non-executive directors and are

independent within the meaning of best practice provision III.2.2.

The majority of the members of the management board are non-executive

directors and half of the members are independent.

Article of association, Board

report Part C. additional details

chapter in the YFS regulation 26.

The Shareholders and the general meeting of

shareholders

The Shareholders and the general meeting of shareholders

IV.1 Powers Powers

IV.1.1 Amplified majority requirement binding nomination of

SB and BM member can be annulled by second

meeting of shareholders

The general meeting of shareholders of a company not having statutory two tier status (structuurregime)

may pass a resolution to cancel the binding nature of a nomination for the appointment of a member of

the management board or of the supervisory board and/or a resolution to dismiss a member of the

management board or of the supervisory board by an absolute majority of the votes cast. It may be

provided that this majority should represent a given proportion of the issued capital, which proportion may

not exceed one third. If this proportion of the capital is not represented at the meeting, but an absolute

majority of the votes cast is in favour of a resolution to cancel the binding nature of a nomination, or to

dismiss a board member, a new meeting may be convened at which the resolution may be passed by an

absolute majority of the votes cast, regardless of the proportion of the capital represented at the meeting.

The company doesn't comply with this regulation; this regulation is contradictory

to Israeli Companies Law re appointment and dismissal of External Directors -

BCP's controlling shareholder has undertaken to prevent (using his voting

power) any resolution re appointment/dismissal of External Directors which is

not in compliance with Israeli Companies Law of 1999]. Undertaking Controlling

Member - The Controlling Member, Mr. Shimon Weintraub ("Weintraub")

undertakes towards the Company, on his behalf and on behalf of all

shareholders of the Company that are controlled, either directly or indirectly by

him (together – the "Controlled Entities"), that he and the Controlled Entities, will

participate in the general meeting of shareholders of the Company (if such

meeting will indeed take place) on the agenda of which is a resolution to either

dismiss or suspend an External Director (the "Resolution"), and shall vote

against the Resolution unless such dismissal is in accordance with Sections

233, 246 and 247 of the Companies Law (whereas the Controlling Member may

utilize his voting rights according to his own discretion). Furthermore, Weintraub

undertakes towards the Company, that in case of a transfer of either (part of)

his direct holdings in the Company and/or (part of) the holdings of the Controlled

Entities (either directly or indirectly) to someone who, according to legal advice

obtained by the Company prior to such transfer, as a result of such transfer

shall become a "Controlling Member", will as a condition to such transfer, be

subjected to a similar undertaking (including in regards to future transfers).

Sections 233, 246 and 247 of

the ICL

IV.1.2 Voting rights attaching to financing preference shares

based on the real value of the capital contribution

The voting right attaching to financing preference shares shall be based on the fair value of the capital

contribution. This shall in any event apply to the issue of financing preference shares.

There are no preference shares, therefore this principle is not applicable.

IV.1.3 Publication of position of BM if private bid is made for

substantial part of the business

If a serious private bid is made for a business unit or a participating interest and the value of the bid

exceeds the threshold referred to in Article 2:107a, paragraph 1 (c), of the Netherlands Civil Code, and

such bid is made public, the management board of the company shall, at its earliest convenience, make

public its position on the bid and the reasons for this position.

The decision about this topic is subject to board judgment.

IV.1.4 Dividend policy shall be separate item on the agenda The policy of the company on additions to reserves and on dividends (the level and purpose of the

addition to reserves, the amount of the dividend and the type of dividend) shall be dealt with and

explained as a separate agenda item at the general meeting.

The company didn’t adopt a dividend policy. In accordance with section 19 of

the company's AoA, any decision to distribute capital (dividend/share

premium/capital reduction) requires a board decision and GM approval; In

accordance with the ICL guidelines, a company may effect a distribution only

out of its profits (hereinafter “the Profit Test”), provided that there is no

reasonable concern that such distribution might deprive the company of its

ability to pay its existing and anticipated debts when the time comes for so

paying (hereinafter “the Solvency Test")

ICL Section 302

IV.1.5 Proposal to pay dividend shall be separate item on

the agenda

A resolution to pay a dividend shall be dealt with as a separate agenda item at the general meeting. See section IV 1.4 above AOA Article 19

IV.1.6 Discharge of MB and SB shall be separate item on

the agenda

Resolutions to approve the policy of the management board (discharge of management board members

from liability) and to approve the supervision exercised by the supervisory board (discharge of

supervisory board members from liability) shall be voted on separately in the general meeting.

Compliance with the Code shall be accounted for as part of the annual report.


IV.1.7 The company sets registration date for voting rights

and access to general meeting

The company shall determine a record date for the exercise of the voting rights and the rights relating to

meetings.

The Company publishes to the public in the Netherlands and in Israel the details

about its shareholders' meeting, including the record date and the voting

process. As the shares are traded on TASE, the voting rights are administered

by the official electronic voting platform that enables every shareholder to cast

his vote electronicky up to 6 hours prior to the GM; in addition, the company

provides for voting by proxies sent to its offices up to 4 hours prior to the GM

ICL Regulations and AOA

Articles 25, 26 and 30

IV.1.8 Chairman responsible for proper conduct of business

at AGM

The chairman of the general meeting is responsible for ensuring the proper conduct of business at

meetings in order to promote a worthwhile discussion at the meeting.

The company complies with this regulation AOA Article 24

IV.2 Depositary receipts for shares Depositary receipts for shares

IV.2.1 The Board of Trustees of foundation has the

confidence of depositary receipt holders and is

independent of the company

The management of the trust office shall enjoy the confidence of the depositary receipt holders and

operate independently of the company which has issued the depositary receipts. The trust conditions

shall specify in what cases and subject to what conditions holders of depositary receipts may request the

trust office to call a meeting of holders of depositary receipts.

Not applicable.

IV.2.2 The Board of Trustees of foundation shall be

appointed by the Board of Trustees

The managers of the trust office shall be appointed by the management of the trust office. The meeting

of holders of depositary receipts may make recommendations to the management of the trust office for

the appointment of persons to the position of manager. No management board members or former

management board members, supervisory board members or former supervisory board members,

employees or permanent advisers of the company should be part of the management of the trust office.

Not applicable.

IV.2.3 Maximum term for appointment of Board of Trustees

members is 3 times 4 years

A person may be appointed to the management of the trust office for a maximum of three 4-year terms. Not applicable.

IV.2.4 The board of Trustees shall be present at AGM The management of the trust office shall be present at the general meeting and shall, if desired, make a

statement about how it proposes to vote at the meeting.

Not applicable.

IV.2.5 In exercising its voting rights, the trust office shall be

guided primarily by the interests of the depositary

receipt holders

In exercising its voting rights, the trust office shall be guided primarily by the interests of the depositary

receipt holders, taking the interests of the company and its affiliated enterprise into account.

Not applicable.

IV.2.6 Board of Trustees reports on activities The trust office shall report periodically, but at least once a year, on its activities. The report shall be

posted on the company’s website.

Not applicable.

IV.2.7 Report must be fulfil a number of requirements The report referred to in best practice provision IV.2.6 shall, in any event, set out:

a) the number of shares for which depositary receipts have been issued and an explanation of changes in

this number;

b) the work carried out in the year under review;

c) the voting behaviour in the general meetings held in the year under review;

d) the percentage of votes represented by the trust office during the meetings referred to at c);

e) the remuneration of the members of the management of the trust office;

f) the number of meetings held by the management and the main items dealt with in them;

g) the costs of the activities of the trust office;

h) any external advice obtained by the trust office;

i) the positions of the managers of the trust office; and

j) the contact details of the trust office.

Not applicable.

IV.2.8 The foundation shall issue proxies to depository

receipt holders at their request.

The trust office shall, without limitation and in all circumstances, issue proxies to depositary receipt

holders who so request. Each depositary receipt holder may also issue binding voting instructions to the

trust office in respect of the shares which the trust office holds on his behalf.

Not applicable.

IV.3 Provision of information to and logistics of the

general meeting

Provision of information to and logistics of the general meeting

IV.3.1 Analysts' meetings and press conference are

announced in advance and can be followed via

webcasting or conference call

Meetings with analysts, presentations to analysts, presentations to investors and institutional investors

and press conferences shall be announced in advance on the company's website and by means of press

releases. Provision shall be made for all shareholders to follow these meetings and presentations in real

time, for example by means of webcasting or telephone. After the meetings, the presentations shall be

posted on the company’s website.

The company securities are traded only at TASE and the company is prevented

from market them outside of Israel; consequently, the interface with the

company and the capital markets is regulated by ISA rules. The company is

maintaining equity analysts coverage of its shares by 2-3 Israeli equity analysts

and debt rating coverage of its corporate debentures by S&P Israel; the

company is meeting on a periodical basis with these analysts upon their request

to facilitate their analyst work; once the analyst are publishing their reports, such

reports are being published (in Hebrew) at the various financial website in

Israel; there are no requirement under ISA regulation to publish these reports to

the general public by the company as these reports are the propriety of the

analysts and are made for their clients; as for the credit rating report - under

ISA regulation the report must be published to the public as an immediate report

in the Maya system; the company doesn't carry our webcast, press conferences

or analysts calls post the publications of its financial reports, hence no

announcement re such event is made publicly in advance; the company does

meet periodically with institutional investors (which either holds securities of the

company or are potentially interested to do so) to the request of such investors

on a one-one-one basis, consequently these meetings are not announced

publicly (and there is no ISA regulation requires to do so); the company is

publishing on a quarterly basis post the release to the public of its financial

reports, its Investors Presentation (in Hebrew) and according to ISA regulation,

the presentation is being made public by posting it on TASE system (Maya); as

the securities of the company are traded only in Israel, the company doesn't

deem it necessary to provide the analysts reports (equity and debt) as well as

the investors presentation in English or any other language other then Hebrew.

ISL requires that the debt rating

reports as well the Investors

Presentation will be published

over TASE system (Maya) in

Hebrew;


t.asp?report_cd=1035543;



IV.3.2 Assessment of analysts' report only on factual

inaccuracies

Analysts' reports and valuations may not be assessed, commented upon or corrected, other than

factually, by the company in advance.

The company is complying with this regulation

IV.3.3 Company pays no fees for preparation of analysts'

reports

The company may not pay any fee(s) to parties for the carrying out of research for analysts' reports or for

the production or publication of analysts' reports, with the exception of credit rating agencies.


IV.3.4 No Analysts' meetings and such shortly before

publication of regular financial information

Analysts meetings, presentations to institutional or other investors and direct discussions with the

investors may not take place shortly before the publication of the regular financial information (quarterly,

half-yearly or annual reports).


IV.3.5 SB and MB provide AGM with all information unless

contrary to interests of the company

The management board and the supervisory board shall provide the general meeting with all requested

information, unless this would be contrary to an overriding interest of the company. If the management

board and the supervisory board invoke an overriding interest, they must give reasons.


IV.3.6 The company shall place and update information

which is relevant to the shareholders and which it is

required to publish pursuant to company securities

law, in a separate section of the company's website.

The company shall place and update information which is relevant to the shareholders and which it is

required to publish or deposit pursuant to the provisions of company law and securities law applicable to

it, in a separate section of the company's website.

As the company securities are traded only in TASE, ISA regulations requires

that such information (investors presentations, credit rating reports, information

which is material to the company shareholders) will be published in a form of an

immediate report over TASE reporting system (Maya) and in Hebrew. the

company complies with ISA regulations and as the company securities are

traded only in Israel, the company doesn't deem it necessary to provide this

information in English or any other language other then Hebrew and on any

other information platform (e.g., company website) other then TASE Maya

platform.

IV.3.7 AGM agenda lists items for discussion separately

from items for voting

The agenda of the general meeting shall list which items are for discussion and which items are to be

voted upon.

The company is complying with this regulation; the agenda is being published in

Hebrew at TASE platform (Maya) and at 2 Israeli news papers as well at a

Dutch newspaper

IV.3.8 Shareholders' circular of all facts and circumstances

relevant to approval requested from shareholders

A resolution for approval or authorisation to be passed by the general meeting shall be explained in

writing. In its explanation the management board shall deal with all facts and circumstances relevant to

the approval or authorisation to be granted. The notes to the agenda shall be posted on the company’s

website.

The company is complying with this regulation; the explanatory notes, reasoning

and argumentations for the GM agenda and resolutions to be adopted are being

published in Hebrew at TASE platform (Maya); as the securities of the company

are traded only in Israel, the company doesn't deem it necessary to provide this

information in English or any other language other then Hebrew.

IV.3.9 Appointments and amendments of AoA as separate

items of AGM agenda

Material amendments to the articles of association of the company and resolutions for the appointment of

management board members and supervisory board members shall be submitted separately to the

general meeting.

See section IV 3.8 above

IV.3.10 AGM minutes are published within three months after

the AGM

The report of the general meeting shall be made available, on request, to shareholders no later than

three months after the end of the meeting, after which the shareholders shall have the opportunity to

react to the report in the following three months. The report shall then be adopted in the manner provided

for in the articles of association.

Under ISA regulation, the minutes of the GM are published in Hebrew over the

TASE platform (in Hebrew); as the securities of the company are traded only in

Israel, the company doesn't deem it necessary to provide this information in

English or any other language other then Hebrew.

IV.3.11 BM gives overview of protection measures and

states under which conditions these would be

implemented

The management board shall provide a survey of all existing or potential anti-takeover measures in the

annual report and shall also indicate in what circumstances it is expected that these measures may be

used.

This principle is not applied. The board of the company will take the necessary

steps to implement this best practice by the end of 2016

IV.3.12 Independent third party for proxy voting The company shall give shareholders and other persons entitled to vote the possibility of issuing voting

proxies or voting instructions, respectively, to an independent third party prior to the general meeting.


IV.3.13 Outline policy for one-on-one meetings The company shall formulate an outline policy on bilateral contacts with the shareholders and publish this

policy on its website.

Under the Israeli corporate and security laws and regulations which are

applicable to the company having its securities traded at TASE, any

transactions with its shareholders is subject to a rigorous scrutiny and approval

process in which the AC is required to determine whether the transaction is an

ordinary or extraordinary transaction (Extraordinary - either - (1) not at market

terms; or - (2) Material; or - (3) Not normal course of business), to asses

whether its market terms via a competitive bidding process, submit its

recommendations to the board approval and in certain transactions, also

approval of the GM with special majority is required.

ICL Sections 270-279 AOA

Articles 14, 15 and 16.5

IV.4 Responsibility of shareholder Responsibility of shareholders out of scope

IV.4.1 Investors annually publish voting right policy on

website

Institutional investors (pension funds, insurers, investment institutions and asset managers) shall publish

annually, in any event on their website, their policy on the exercise of the voting rights for shares they hold

in listed companies.

IV.4.2 Investors annually report on voting policy on website Institutional investors shall report annually, on their website and/or in their annual report, on how they

have implemented their policy on the exercise of the voting rights in the year under review.

IV.4.3 Investors quarterly report on their website how they

voted at AGM's in concrete cases

Institutional investors shall report at least once a quarter, on their website, on whether and, if so, how

they have voted as shareholders at the general meeting.

IV.4.4 Consultation of BM prior to request item on AGM

agenda

A shareholder shall exercise the right of putting an item on the agenda only after he consulted the

management board about this. If one or more shareholders intend to request that an item be put on the

agenda that may result in a change in the company’s strategy, for example through the dismissal of one

or more management or

supervisory board members, the management board shall be given the opportunity to stipulate a

reasonable period in which to respond (the response time). This shall also apply to an intention as

referred to above for judicial leave to call a general meeting pursuant to Article 2:110 of the Netherlands

Civil Code. The shareholder shall respect the response time stipulated by the management board within

the meaning of best practice provision II.1.9.

AoA section 22

IV.4.5 Voting shareholder shall vote as he sees fit. A shareholder who makes use of the voting advice of a third party is

expected to form his own judgment on the voting policy of this adviser and the voting advice provided by

him.

IV.4.6 Shareholders explain request to put item on AGM

agenda

If a shareholder has arranged for an item to be put on the agenda, he shall explain this at the meeting

and, if necessary, answer questions about it.

V.1 Financial Reporting Financial Reporting

V.1.1 Supervisory board supervises procedures concerning

preparation and publication of financial reports

The preparation and publication of the annual report, the financial statements, the quarterly and/or half-

yearly figures and ad hoc financial information require careful internal procedures. The supervisory board

shall supervise compliance with these procedures.

There is a procedure in place and formalized as described in the BOD report. BOD report, part C

V.1.2 Audit committee assesses how auditor is involved in

financial reporting

The audit committee shall determine how the external auditor should be involved in the content and

publication of financial reports other than the financial statements.


V.1.3 Board of management carries responsibility for

internal procedures securing timely provision of full

and correct information

The management board is responsible for establishing and maintaining internal procedures which ensure

that all major financial information is known to the management board, so that the timeliness,

completeness and correctness of the external financial reporting are assured. For this purpose, the

management board ensures that the financial information from business divisions and/or subsidiaries is

reported directly to it and that the integrity of the information is not compromised. The supervisory board

shall ensure that the internal procedures are established and maintained.

There is a procedure in place and formalized as described in the BOD report. BOD report, part C

V.2 Role, appointment, remuneration and

assessment of the functioning of the external

auditor

Role, appointment, remuneration and assessment of the functioning of the external auditor

V.2.1 External auditor is present at the general meeting

and can be questioned

The external auditor may be questioned by the general meeting in relation to his report on the fairness of

the financial statements. The external auditor shall for this purpose attend and be entitled to address this

meeting.

The external auditor is present at all the audit committee quarterly meeting and

when relevant is invited to the Board meetings. The company doesn't deem it

necessary to invite the external auditor to the general meeting of the

shareholders as the financial statements are not being discuss in details in

those meeting.

Audit Committee and BoD

meeting minutes.

V.2.2 assessing independence of the external auditor The management board and the audit committee shall report their dealings with the external auditor to

the supervisory board on an annual basis, including his independence in particular (for example, the

desirability of rotating the responsible partners of an external audit firm that provides audit services, and

the desirability of the same audit firm providing non-audit services to the company). The supervisory

board shall take this into account when deciding its nomination for the appointment

of an external auditor, which nomination shall be submitted to the general meeting.

The company is complying with this regulation Audit Committee and BoD

meeting minutes.

V.2.3 Board of management and audit committee assess

external auditor once every 4 years

At least once every four years, the supervisory board and the audit committee shall conduct a thorough

assessment of the functioning of the external auditor within the various entities and in the different

capacities in which the external auditor acts. The main conclusions of this assessment shall be

communicated to the general meeting for the purposes of assessing the nomination for the appointment

of the external

auditor.

The company is complying with this regulation; the assessment is made by the

Audit Committee and reported to the board on an annual base.

Audit Committee and BoD

meeting minutes.

V.3 Internal audit function Internal audit function

V.3.1 External Auditor and audit committee prepare the

work schedule of the internal auditor

The external auditor and the audit committee shall be involved in drawing up the work schedule of the

internal auditor. They shall also take cognizance of the findings of the internal auditor.

the company employ and internal auditor (IA) which yearly work plan is

approved by the board audit committee (AC). The IA produce 2 reports each

year on business risk areas which the AC together with the IA identified; the

reports are being submitted to the AC by the IA and reported to the board by

the AC; the IA also conduct a monitoring review to check whether its

recommendations were implemented by the company and report its finding to

the AC and BoD

BoD report chapter C (2)

V.3.2 Internal auditor's position versus external auditor and

Chairman audit committee

The internal auditor shall have access to the external auditor and to the chairman of the audit committee. The company complies with this regulation; the IA is invited to participate in

each AC meeting

V.3.3 Annual review of need for internal auditor If there is no internal audit function, the audit committee shall review annually the need for an internal

auditor. Based on this review, the supervisory board shall make a recommendation on this to the

management board in line with the proposal of the audit committee, and shall include this

recommendation in the report of the supervisory board.

This principle is not applicable, as there is an internal audit function.

V.4 Relationship and communication of the external

auditor with the organs of the company

Relationship and communication of the external auditor with the organs of the company

V.4.1 The external auditor is present at Supervisory board

meeting in which the report of the audit of the annual

accounts and its approval are discussed

The external auditor shall in any event attend the meeting of the supervisory board, at which the report of

the external auditor with respect to the audit of the financial statements is discussed, and at which

financial statements are to approved or adopted. The external auditor shall receive the financial

information underlying the adoption of the quarterly and/or half-yearly figures and other interim financial

reports and shall be given the opportunity to respond to all information.


V.4.2 Access to audit committee by external auditor When the need arises, the external auditor may request the chairman of the audit committee for leave to

attend the meeting of the audit committee.

The external auditor is present at all the quarterly audit committee meetings

V.4.3 Lay-out demands 2:393 subsection 4 of the

Netherlands Civil code concerning audit

The report of the external auditor pursuant to Article 2:393, paragraph 4, of the Netherlands Civil Code

shall contain the matters which the external auditor wishes to bring to the attention of the management

board and the supervisory board in relation to the audit of the financial statements and the related audits.

The following examples can be given:

A. With regard to the audit:

• information about matters of importance to the assessment of the independence of the external auditor;

• information about the course of events during the audit and cooperation with internal auditors and/or

any other external auditors, matters for discussion with the management board, a list of corrections that

have not been made, etc.

The external auditor (Israel) prepares a management letter with their findings, in

which all the material findings of the audit are presented to the audit committee

and to the board. The letter is provided on an annual base.

Audit committee and board

meeting minutes.

Lay-out demands 2:393 subsection 4 of the

Netherlands Civil code concerning financial figures

B. With regard to the financial figures:

• analyses of changes in shareholders’ equity and results, which do not appear in the information to be

published, and which, in the view of the external auditor, contribute to an understanding of the financial

position and results of the company;

• comments regarding the processing of one-off items, the effects of estimates and the manner in which

they have been arrived at, the choice of accounting policies, when other choices were possible, and

special effects of such policies;

• comments on the quality of forecasts and budgets.

The company is complying with this regulation Company financial statements,

change in equity report and

explanations on the changes in

the different balance sheet, P&L

and cash flow that are described

in chapter A of the BoD report

Lay-out demands 2:393 subsection 4 of the

Netherlands Civil code concerning internal risk

management and control systems

C. With regard to the operation of the internal risk management and control systems (including the

reliability and continuity of automated data processing) and the quality of the internal provision of

information:

• points for improvement, gaps and quality assessments;

• comments about threats and risks to the company and the manner in which they should be reported in

the particulars to be published;

• compliance with articles of association, instructions, regulations, loan covenants, requirements of

external supervisors, etc.

The company is complying with this regulation; The internal controls of the

company were set and maintain in corporation with Deloite, and due to ISA

regulations, are audited by Israeli external auditor which certify; in addition, the

company describe its exposure to risk factors, and its internal control and the

officers responsibilities to it in its financial reports.

Board reports chapters B and C.

YFS auditor opinion on the

Financial statements,

management declaration about

compliance with ISOX

procedures (the last chapter in

the YFS)

BRACK CAPITAL PROPERTIES NV · 1083 HN Amsterdam The Netherlands Chamber of Commerce No. 34250659 ....

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Transcript of BRACK CAPITAL PROPERTIES NV · 1083 HN Amsterdam The Netherlands Chamber of Commerce No. 34250659 ....