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YEAR END 2011 INVESTOR PRESENTATION March 2012


Disclaimer This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of AFI Development Plc (the "Company") or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the document. This communication is only being distributed to and is only directed at (1) qualified institutional buyers (within the meaning of Rule 144A of the United States Securities Act of 1933, as amended (the "Securities Act") or (2) accredited investors (as defined in Rule 501(a) of Regulation D adopted pursuant to the Securities Act). Any person who is not a "qualified institutional buyer" or "accredited investor" should not act or rely on this document or any of its contents. This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Company, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document. The information contained in this document is provided as at the date of this document and is subject to change without notice. 2


Contents 1. 2. 3. 4.

5.

6.

7.

AFI Development at glance Key Moscow projects Portfolio overview Company update a. Main events during 2011 Projects update a. AFIMALL City project highlights b. AFIMALL City Operational Summary c. Yielding Properties d. Property under construction e. Projects next for development f. Pipeline and land bank

2011 Financial Results a. Income Statement b. Balance Sheet

4 5 6 8 11 12 13 17 20 22 24

Annex a. b. c. d. e. f. g.

Senior Management Team Outstanding Corporate Governance Issues Completed Macroeconomic Update Moscow office market Moscow retail market Moscow and Moscow region residential market Development process in Moscow

26 27 28 29 30 31 32

3


AFI Development at Glance Market Cap, as of Mar 23, 2012

US$ 0.65bn

Market Cap, 12months average 2011

US$ 0.75 bn

Price per share, as of 23 Mar, 2012

US$ 0.63

NAV(Equity), Dec 31, 2011

US$ 1.87 bn

NAV per share, Sep 30, 2011

US$ 1.78

Portfolio MV*

US$ 2.7 bn

•Full cycle real estate developer

BUSINESS

•Focus on unique large scale commercial and residential projects

•Strong liquidity position with around US$84,8 mn in cash as at Dec 31, 2011 FINANCIAL STABILITY

•Primary market: Moscow, Russia

•Low leverage: Debt/Total assets* is 22%

•Active on the market for 11years

HISTORY

•Admitted to LSE in 2007 (Tickers: AFID.IL; AFRB.LN). Received premium listing in 2010

•10 completed projects with total c. 500,000 sqm of space TRACK RECORD

Projects Under Construction 7%

•Free float – 36.3%

Land Bank 15%

Income Producing Projects 12%

BRAND AFIMALL 43%

•Substantial income generating portfolio. Major project AFIMALL (p.11) completed in Q1 2011

•Strong global brand

•Affiliate of Africa Israel Group (63.7% owner) , a major conglomerate with global focus on real estate, construction and infrastructure

•Impeccable credit history •Market reputation for high quality and professional property management

Portfolio market breakdown* Next for Development 23%

•Secured financing for on-going projects

PORTFOLIO

•2 projects under construction (p.15), 3 project are next for development (p.18) •Pipeline and land bank (p.20)

* Latest JLL report as of 31 December, 2011

* Bank loans only 4


Key Projects in Moscow Current Portfolio Yielding Assets / Trading Stock

Botanic Garden

AFIMALL City

Aquamarine II

H2O

Four Winds

Berezkovskaya

Value (JLL): US$ 1.5 bn GLA: 169.9K sqm NOI stab.(AFID share) US$ 165.8 mn GSA: 2.2Ksqm Price US$ psqm: 13K – 15K

*Plaza Spa *Outside of Moscow

Pochtovaya, Phase I

Tverskaya Plazas

AFIMALL City

Paveletskaya, 1

Aquamarine Hotel

Projects close to completion

Four Winds

Value(JLL): US$ 191.1 mn GLA: 51.9K sqm NOI stab.(AFID share): US$ 24.8 mn

Aquamarine Complex Berejkovskaya Otradnoe

Paveletskaya, Phase # II H2O Office Paveletskaya, 1

Aquamarine III Kosinskaya

*Kalinina Hotels *Outside of Moscow

Development Projects

Tverskaya Plazas

Otradnoe

Pochtovaya, Phase I

Value(JLL): US$ 625.6mn GLA: 100.2K sqm NOI stab.(AFID share): US$ 99.7 mn GSA: 607.1K sqm CF from sale: US$ 2.3 bn

Pipeline and Land Bank

Kosinskaya

Botanic Garden

Paveletskaya, Phase # II

Other projects

Value(JLL): US$ 399,1 mn GBA upon completion: 559.6K sqm

5 Note: the NOI projections are “forward looking statements” based on JLL valuation assumptions and Company estimations and they can be realized or not realized due to factors beyond the Company's control including, among others, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions


Portfolio Overview Track record* (sqm) hotel  Delivered 12,665 office  Under construction 78,647 retail 174,802 hotel 36,130

Company track record – c. 500K sqm of commercial and residential space

Current portfolio – up to 2 mn sqm

Active pipeline projects– c. 1.1 mn sqm

AFIMALL is the flagship yielding asset with 166K sqm GBA operation started in Q1 2011

residential 69,783

Aquamarine III delivery will add 79K sqm of high quality office stock to the Company yielding portfolio in H1 2012

office 102,376

*total gross area of projects shown inclusive of shares owned by partners and projects sold, exclusive of pipeline and land bank projects

Market Value breakdown** Next for Development 23%

Land Bank 15% Income Producing Projects 12%

Projects Under Construction 7%

Current portfolio MV – US$ 2.7 bn**

Current MV of yielding properties – US$ 1.5 bn**

Selection of attractive pipeline projects provides with wide opportunities for

future development

AFIMALL 43%

** MV according to JLL’s valuation

as of December 31, 2011

6


SECTION 1

Company Update


Main Events Events during during 2011(1/2) 2011(1/2) Main TARGETS FOR 2011

COMMENTS

Strengthen SMT (Senior Management Team)

The team has been substantially renewed and stabilized in 2011 (Mark Groysman as a CEO, Natalia Pirogova as a CFO, Vitaliy Tkachenko as a CDO, Vyacheslav Khlopunov as a CLO)

Reduce debt service costs

AFIMALL City: • Interest rate decreased from 13,25% to approximately 9,5% (potential annual savings up to US$ 16 mn) FOUR WINDS OFFICE: • Interest rate decreased from 10,5% to 5% (potential annual savings up to US$ 4,7 mn)

FINANCIAL

MANAGEMENT

STATUS

TVERSKAYA MALL: • Interest rate increased from 9,5% to 11% (additional annual expense US$ 1,5 mn)

Obtain new financing

The company secured financing with VTB to buy-out City share and parking in AFIMALL (US$ 155 mn and US$ 124 mn respectively)

VAT reimbursement

The company has reimbursed significant VAT amount: US$ 12 mn construction VAT on Aquamarine III project and US$ 21 mn construction VAT reimbursement at AFIMALL City

Loan extension on Aquamarine III

The company secured extension of the draw down period on the existing loan with Sberbank till June 2012

8


Main events during 2011(2/2)

CONSTRUCTION AND OPERATION

ACQISITION AND DISPOSITION

STATUS

TARGETS FOR 2011

COMMENTS

AFIMALL

The company finalized agreement with the City for 25% City share and parking buy-out Negotiations regarding disposition of 665 parking lots to VTB are ongoing (see more details on the slide # 13)

Aquamarine Residential

11 apartment sold

Aquamarine III

Active negotiations to sell the projects or leased it up

Restructuring the deal on Kosinskaya

The deal on Kosinskaya sale was forfeited as the buyer stopped payments. Following that AFID reached a financial settlement agreement with the buyer: the Company has retained US$ 28 mn as a penalty and will pay back the rest to the buyer in installment payments scheduled for Q4 2011- Q2 2012. As a result AFID will remain a sole owner of the asset

Tverskaya Project

Under a non-binding agreement, the City of Moscow will re-approve and renew the Company’s development rights and leasehold interests in land plots at the Plaza Ic (part of Plaza I), Plaza IIa and Plaza IV projects (which were subject to termination at the end of 2011) with a total gross buildable area of approximately 170,000 sq. m. In addition, the City will not charge AFI Development municipal development rights costs of approximately US$ 95 mn, which the Company had expected to pay in the course of the initial construction. The City of Moscow has also confirmed that the land plots can be developed as office space

AFIMALL

Obtained the ownership certificate; Operation and footfall rates are continuing to increase (achieved 30K ; 77% leased)

Aquamarine III

Delivery is expected in Q1 2012 (shifted from Q4 2011)

Kalinina Hotel

Delivery is expected in Q2 2012 (shifted from Q1 2012)

Aquamarine Hotel

In 2011 NOI in Aquamarine Hotel has stabilized

9


SECTION 2

Projects Update


AFIMALL City Project Highlights Key advantages     

The largest mall in the city center Best quality construction and fit-out Attractive consumer target group, employed by worldwide institutional companies in the surrounding offices Perfect tenant mix: Banana Republic, Inditex, H&M, X5 Good transport accessibility – metro station underneath, 100 m distance to the Third Transport Ring PROJECT HIGHLIGHTS (as of Dec 2011)

Ownership

100%

Land area

4.4 ha in the unique business district

GBA, sqm

165,924

GLA, sqm Parking units, #

107,121 2,700

Forecast NOI*(stab.)

US$ 134 mn

Average rent per sqm pa

US$ 1,147 per sqm pa

Market Value (JLL)*

US$ 1,160 mn

Area leased

77%

* Valuation conducted by JLL as at December 31, 2011

Surrounding offices and apartments GBA: • Already completed – 1.1 mn sqm • In mid-term GBA to reach – 1.6 mn sqm • Total pipeline – over 2.5 mn sqm Source: http://eng.citynext.ru 11


AFIMALL City Operational Summary PROGRESS IN 2011: City share buy-out: The Company has completed the acquisition of the 25% stake in AFIMALL City, previously owned by the City of Moscow. The total consideration of RUR 5 bn (approximately US$155mn) was financed in full through a loan facility provided by VTB Bank Parking buy-out: The Company singed agreement on parking buy-out from the City of Moscow at the end of 2011 for the total consideration of RUR 4bn (US$ 124 mn). The consideration will be paid in four tranches. Two tranches amounting to US$ 41 mn have been already paid in Jan-Feb 2012 Finance: The Company has drawn down RUR 5 bn to finance 25% city share acquisition under a supplement agreement to the loan agreement. The interest blended rate was decreased from previous 11.5% to approximately 9.5% pa after mortgage registration The Company has reimbursed US$ 21 mn construction VAT Parking operation: The company has put into operation the first 300 parking units from the total of 2,700 in March 2012. The delivery of the whole parking facility is expected in Q4 2012

Next steps on track to project promotion 

Complete construction works on parking facilities

Increase footfall by putting parking into operation (up to 50K)

The Company is continuing its negotiations regarding potential sale of 665 parking lots to VTB

12


Yielding Properties

Building Year of construction Administrative District Ownership Location GLA, sqm Parking lots (total), # WAULT, year Ocupancy rate, %

Four Winds Office

AFIMALL 2011 Central 100% Moscow, Moscow City 107,121

Paveletskaya, bld. 1

Berezkovskaya

2008 Central 50% Moscow, CBD 21,876

Aquamarine Hotel

H2O

2006 Central 74%

2010 Central 99.10%

2006 Central 100%

Moscow

Moscow

Moscow

11,378

13,615

Plaza Spa

2009 Central 100% Moscow, CBD

2006 Kislovodsk 50% 50% Caucasian region

8,996

159 keys

274 keys 162,986*** 3,179

2,700

138

128

126

72

15

4

3

1

2

1

n/a

100%

85%

100%

86%

77%

TOTAL

n/a

Average rent, $/sq m

1,147

1,468

544

416

404

ADR 201

ADR 104

Market Rent, US$ (JLL)

1,179

900 - 950

550

280

320

ADR 238

ADR 125

Class

Retail

Office A

Office B

Office B

Office B

Hotel

64.4

15.0

3.0

2.2

1.3

3.8

3.7 3.7

1,160

138

38

28

19

45

30

NOI 2012E, US$ mn* MV, US$ mn* *JLL estimation

Hotel 93.4 1,456**

**Total MV does not include Ozerkovskaya II residential (US$ 30 mn) and Four Winds Residential (US$ 22 mn) value

*** offices and retail only

13


Assets under Construction


Aquamarine III KEY ADVANTAGES: 

Located in Zamoskvorechye, Moscow’s prestigious business area without the Garden Ring

3-rd phase of Ozerkovskaya Embankment development site

4 Class A office buildings comprising one complex

PROGRESS IN 2011:  Construction:

PROJECT HIGHLIGHTS (as of Dec 2011)

2012 and building commissioning and handover in Q2 2012

Ownership

50%

GBA,sqm*

78.6K

and sale

GLA, sqm*

46.4K

 Finance:

Parking, # lots Delivery MV upon completion(JLL est.)* Exp. NOI (JLL est.), pa* * For 100% of the projects

Progressed towards completion in shell&core in Q1

 Disposition:

The project has been put on the market for both lease up

The outstanding limit of the loan facility from Sberbank

551

(US$16mn limit) is enough to cover most of the outstanding

H1 2012

construction works. The availability period has been extended until

US$ 430.8 mn c. US$40.9mn

June 2012  The

company has reimbursed significant VAT amount on construction:

US$ 12 mn

15


Kalinina Spa Hotel KEY ADVANTAGES: 

Located in Russia’s south region in the city of Zheleznovodsk, popular resort destination

Inspired by the success of Plaza Spa Hotel in Kislovodsk

PROGRESS IN 2011:

 Construction: construction is ongoing and completion is expected in Q2 2012  Design: Comments form Plaza Spa management regarding optimization of hotel planning and equipment received and are PROJECT HIGHLIGHTS (as of Dec 2011)

under consideration. The number of keys has been decreased from

Ownership

100%

GBA,sqm

12,665

175 to 136 following request of the hotel management team  Finance: As of December 2011 the Company has drawn down

# of keys

136

Delivery

Q2 2012

municipality subsidy and 6.25% after it. Management is currently

71%

extending drawdown period until the end of Q2 2012 to secure

US$ 26.2 mn

debt financing of the construction expenses. The loan together

US$ 136.7

with the expected VAT reimbursement are enough to cover

Stabilized occupancy(JLL est.) MV upon completion (JLL.) Average Room Rate (Jll est.)

US$11.7 mn of Sberbank loan facility, interest rate is 13% before

outstanding costs on the property development

16


Projects next for Development


Projects Next in Line for Development

Project

GBA (sqm) Odintsovo (Otradnoye)

GBA, sqm

Apartments left/occupancy Tverskaya Plazas

Bolshaya Pochtovaya

703,317 *

231,680*

169,700*

436,494 residential and 39,557 commercial *

123,750 residential*

100,175*/7,070*

Parking

2,053*

1,904 lots *

588 lots*

Ownership

100%

100%

100%

design stage

design stage

design stage

Expected revenue / outstanding investment costs *

US$ 1,331 mn/ US$ 871 mn*

US$ 807 mn/ US$ 334 mn*

US$ 1,207 mn/ US$ 358 mn*

• The project is located in the Moscow Central District on the Yauza river bank; total site area is 4.5 ha • Phased mixed use development dominated by residential component

• Located in one of Moscow’s most central neighborhoods near Belorussky rail terminal, on the intersection with Tverskaya Street

Details

• Located on 32 ha site in the town of Odintsovo, one of the newest and most environmentally clean areas bordering Moscow • Project includes multifunctional infrastructure with schools, kindergardens and sports facilities for children • Currently on-going concept refinement and design

GLA /GSA, sqm

Delivery

* Based on valuation conducted by JLL as of December 31, 2011, excl. entrepreneur's profit from investment costs

Note: All pipeline projects projections are “forward looking statements” based on JLL valuation assumptions and Company estimates and they can be realized or not realized due to factors beyond the Company's control including, among others, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions

18


Tverskaya Plazas PROGRESS IN 2011: 

Under a non-binding agreement, the City of Moscow will re-approve and renew the Company’s development rights and leasehold interests in land plots at the Plaza Ic (part of Plaza I), Plaza IIa and Plaza IV projects (which were subject to termination at the end of 2011) with a total gross buildable area of approximately 170,000 sq. m. In addition, the City will not charge AFI Development municipal development rights costs, which the Company had expected to pay in the course of the initial construction. The City of Moscow has also confirmed that the land plots can be developed as office space

Based on the Jones Lang LaSalle LLC, valuation report as at 31 December 2011, this settlement represents full compensation for the book value of Tverskaya Zastava shopping centre project

During this year our negotiations with the City of Moscow on the Tverskaya Zastava area reached a very favourable result. AFI Development has achieved a green light for new office construction in central Moscow at a time when the City's policy is not to allow new office construction in the area. The Company has also received full compensation from the City of Moscow for the City’s decision to terminate the Tverskaya Zastava shopping centre project

19


Pipeline and Land Bank

Project

Type

GBA upon completion (sqm)

Land (ha)

MV as of 31/12/2011, US$K (JLL)*

8.07

111,770

146,120

Residential

3.2

173,300

68,300

Park Plaza Kislovodsk

Hotel resort

5.3

40,000

10,000

Versailles, Kislovodsk

Hotel resort

0.6

11,762

6,900

Ruza

Mixed use

387

n/a

3,922**

St. Petersburg

Mixed use

3.7

n/a

1,850

Paveletskaya, II

Mixed use

4.0

106,250

47,800

Boryspol

Residential

130.7

n/a

13,500

Tverskaya Plazas(Ib, II)

Mixed use

116,526

100,700

559,608

399,092

Kosinskaya

Office

Botanic Garden

TOTAL

Extensive land bank  Land bank – projects the Company is currently put on hold 

* Valuation by JLL as at 31, 2011

** Value presented as a BS value

Over 500 ha of land

Land bank strategy  Activate projects upon securing required financing and evaluation of demand level from prospective tenants/buyer 

Full flexibility regarding future development in various cycles of the economy – the major competitive advantage for the Company

Note: MV upon completion and GBA upon completion are “forward looking statements” based on JLL valuation assumptions and they can be realized or not realized due to factors beyond the Company's control including, among others, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions

20


SECTION 3

2011 Financial Results


Income Statement Income statement for the period from 01/01/2011 to 31/12/2011 US$ mn Revenue Construction consulting/management services Rental income Sale of residential

4q 2011

4q 2010

Change 4q 2011 / Change TY 2011 / TY 2011 TY 2010 4q 2010 TY 2010

0.2 33.8 1.2 35.2

0.2 11.8 9.1 21.1

0.0 22.0 (7.9) 14.1

0.3 (23.5) (5.3) (11.7) (1.0) 0.3 (41.1)

0.2 (7.4) (4.3) (7.1) (3.9) (22.5)

0.1 (16.2) (1.0) (11.7) 6.1 4.2 (18.5)

Gross profit

(5.9)

(1.4)

(4.4)

310%

Impairement of prepayment for investments Valuation gains on investment property Negative goodwill Impairement loss for trading property and hotels

69.4 3.7

124.1 (4.0)

(54.7) 7.7

Results from operating activities

67.2

-

67.2

2.8

8.2

(15.1)

Expenses Other income Operating expenses Administrative expenses Bad debt provisions and write-offs Cost of sales of residential Other expenses

Finance income Finance expense Impairement of financial asset Net finance income/(costs) Profit before income tax Income tax expense Profit from continuing operations

11% 186% -87% 67%

1.0 117.0 15.9 133.9

0.9 44.0 30.2 75.0

0.1 73.0 (14.2) 58.9

15% 166% -47% 79%

53% 0.7 220% (72.1) 22% (17.0) n/a (13.3) -86% (10.4) n/a (2.3) 82% (114.4)

0.2 (18.7) (13.2) (20.2) (7.9) (59.7)

0.5 (53.4) (3.8) (13.3) 9.8 5.5 (54.7)

209% 286% 29% n/a -48% -70% 92%

19.5

15.3

4.2

27%

n/a -44% n/a n/a

(1.2) 268.0 1.0

(17.7) 93.9 (18.1)

16.5 174.1 19.1

-93% 185% n/a n/a

287.3

73.4

213.9

(5.4)

n/a n/a -66%

1.4

(16.6)

n/a n/a

8.2 (48.9) (40.6)

13.7 (16.8) (3.1)

(5.4) (32.1) (37.5)

291% n/a -40% 360% n/a 1194%

52.1

120.1

(68.0)

-57%

246.6

70.3

176.4

251%

(27.6)

(40.3)

12.8

-32%

(75.1)

(44.4)

(30.7)

69%

24.6

79.8

(55.2)

-69%

171.5

25.9

145.7

563%

 Revenue from sales and leasing in Q4 2011 amounted to

US$35.2mn. On the annual basis rental income has increased from US$44mn to US$117mn following operational start of AFIMALL City project  In Q4 costs have increased to US$41.1mn – excess is

mainly explained through bad debt provisions (US$ 11.7mn)  Valuation gain on investment property amounted to

US$69.4mn in Q4 2011 and US$268mn on the annual basis  Finance expense significantly increased compared to

the same period of 2010 following completion of the AFIMALL asset and transfer of interest payments under the construction loan on this property to P&L from BS  Following significant revaluation gain and improved

operational results the Company profit was positive in Q4 and for the whole year of 2011; equal to US$24.6mn and US$171.5mn respectively

22


Loans and Cash Position as of Dec 31, 2011 Gross balance of the loan portfolio (as of Dec 31, 2011) – US$609mn (excl. parking draw down of US$ 41 mn) Total cash balance (as of Dec-31, 2011) – US$ 85 mn Max debt limit Project

Lending bank

Balance as of Dec-31, 2011

(US$ mn)

(US$ mn)

AFIMALL (construction loan)

VTB

262

262

AFIMALL 25% share buyout

VTB

155

155

AFIMALL parking buyout

VTB

124

41

Tverskaya Mall

Sberbank

73

73

Ozerkovskaya III (100%)

Sberbank

37

Kalinina Hotel

Sberbank Nordea Bank

Four Winds (100%)

Available (US$ mn)

Nominal Interest rate

-

9.5%

-

9.5%

83 n/a

23

20 85

Total/Blended interest rate *

LTV%

*

Maturity Currency (dd.mm.yy)

RUB

23.08.2013

RUB

23.08.2013

10.8%

RUB

23.08.2013

-

(6-month LIBOR, min 1,5% + 9,5%)

USD

16.08.2014

13%

16

13.0%

RUB

17.06.2015

12

89%

8

6.75%

RUB

20.12.2014

84

62%

-

3-month LIBOR + 4,5%

USD

13.07.2018

40%

**

*** 650

*

9.24%

Effective from March 1, 2012

** First draw down on parking loan has been conducted in February 2012 *** Inclusive first tranche of parking loan drawn down made in February 2012

23


Balance Sheet 2011 US$ ’000

2010 US$ ’000

1,403,580 983,598 92,034 34 66,221 5,370 153 2,550,990

192,973 1,674,585 88,402 38 68,842 8,893 153 2,033,886

from US$2,033.9mn at year beginning to US$2,551.0 mn at

11,053 129,598 665 786 107,170 84,820 334,092

21,386 105,962 576 79 136,706 689 129,839 395,237

 Total current assets have decreased following drop in cash

Total assets

2,885,082

2,429,123

Equity Share capital Share premium Translation reserve Retained earnings Equity attributable to owners of the Company Non-controlling interests Total equity

1,048 1,763,409 (178,491) 277,503 1,863,469 3,887 1,867,356

1,048 1,763,409 (142,632) 106,571 1,728,396 3,225 1,731,621

Liabilities Long-term loans and borrowings Long-term amounts payable Deferred tax liabilities Deferred income Non-current liabilities

528,116 71,627 142,093 22,622 764,458

434,352 81,194 28,239 543,785

Short-term loans and borrowings Trade and other payables Current tax liabilities Current liabilities

98,973 154,092 203 253,268

33,883 119,834 153,717

Total liabilities

1,017,726

697,502

Total equity and liabilities

2,885,082

2,429,123

Assets Investment property Investment property under development Property, plant and equipment Long-term loans receivable Inventory of real estate VAT recoverable Goodwill Non-current assets Trading properties Trading properties under construction Inventories Short-term loans receivable Trade and other receivables Current tax assets Cash and cash equivalents Current assets

 In 2011 non-current Company assets have increased in value

year end. The change was mainly driven by acquisition of

AFIMall parking and city-share as well as by revaluation of other assets over the year

and trade receivables  Retained earnings grew by US$170.9mn in 2011 due to

portfolio revaluation effect on the Company profits  Acquisitions in AFIMall subsequently resulted in long-term

loans increase as the city share buy-out was financed through VTB loan facility  Trade and other payables (both current and non-current)

include payables due on AFIMALL parking to the city, on Aquamarine III to the partner in the project, on Kossinskaya to the former project buyer

24


Annex


Senior Management Team* The Senior management team is formed by professionals capable to implement the Company strategy CEO Mark Groysman

Finance Natalia Pirogova

Legal Vyacheslav Khlopunov

Marketing and BD Tzvia Leviev

Development Vitaly Tkachenko

Approvals Evgeny Potashnikov

•Mark has long and successful experience in the Russian real estate market. He has built up a reputable facility & asset management company (Sawatsky) and in partnership with Mr. Leviev managed a lucrative Novie Veshki complex (a large single-family houses residential community located north to Moscow) •Natalia has joined the management team as CFO in October 2011. She has long and successful background in the Russian real estate with a focus on M&A deals and tax issues. For the last seven years Natalia was involved in the Russian business of Fleming Family and Partners Limited as the Financial Director and the Managing Partner and worked for Marbleton Advisers Limited as the Managing Director

•Before joining the company Vyacheslav practiced as a lawyer for many years. With AFID, he has already substantially progressed on several negotiation processes and law suits currently held by the Company

•Tzvia’s core experience is concentrated in management of large shopping centers. Before coming to Moscow she was managing shopping centers for Africa Israel Investments in Israel and had established long-term business relationships with a variety of international retail chains. Mrs. Tzvia Leviev Eliazarov is currently responsible for managing AFIMALL City •Vitaly has extensive experience in development of residential and retail properties. Before his assignment with AFID he worked as a CEO for Hermitage Construction & Management – a Russian investment company and Heliopark – a chain of countryside hotels

•Evgeny has been with the company since 2005 when he left the post of Deputy Chief Engineer in the Mayor’s office of Arara Ba Negev, Israel. Evgeny has successfully settled most complex approval issues with the Moscow authorities

* Management team of AFI-RUS LLC

26


Outstanding Corporate Governance Issues Completed During 2011 the Company has completed all outstanding Corporate Governance issues for compliance with UKLA rules ISSUE

TREATMENT/COMPLETION

The Chairman is not deemed to be independent since he is a major shareholder of the Company

AFID believes that Chairman’s existing significant time commitment to AFI Development is of great value to the Company and can only be perceived as positive for the Company. This is stated in the Annual Report.

There is no annual evaluation of the Chairman’s performance; the Chairman’s performance is not subject to a formal appraisal by the Board

Chairman appraisal procedure was conducted in December 2011 Board meeting, in accordance with UK Corporate Governance Code..

The Directors letters of appointment do not set out the expected time commitment and do not refer to a contract period

New versions of standard letters of appointment were approved by the Board in November 2011 and signed by all directors.

There is no formal induction process in place for newly appointed directors

Induction pack was approved at November 2011 Board meeting.

There is no formal performance appraisal process in place for the Board and its committees

In December 2011 the Company completed performance appraisal procedure for the Board and its’ committees. It was conducted in-house with facilitation of the “Board Governance Analysis” of the UK Institute of Directors.

The Company has not designed a formal performance-related remuneration scheme for the Directors

The remuneration scheme for executive directors is approved by the Remuneration Committee individually. The existing remuneration scheme for non-executive directors remains in place, it is consistent with the CG Code

The Company does not have in place a process to formally review the effectiveness of the system of internal control

During 2011 the Company completed and documented its system of internal control. A thorough review and analysis of controls was completed with assistance of Internal Control team of Africa-Israel Group. The Board will receive and review regular reports on Company internal control.

There is no formal whistle blowing policy in place

The whistle blowing policy was introduced and approved by the Board in 2011

STATUS

27


Macroeconomic Update 

GDP: In 2011 year Russian GDP increased by 4.0%, the world’s third highest growth rate among leading economies. The economy of Russia is the ninth largest economy in the word by nominal value and the six largest by purchasing power parity (PPP). Russia has an abundance of natural gas, oil, coal, and precious metals

Sovereign debt in 2011 remained stable following tight fiscal policy and strong oil revenues backing Russia’s debt position. Sovereign debt to GDP ratio in Russia is the lowest among the country peers

Oil price (Brent): Oil price increased throughout 2011 year from US$100 up to over US$120 per barrel and stabilized at US$107 in December 2011. The country budget for 2012 was developed based on US$100 oil price and further supported by strong reserves of the national government. The growth of the Russian economy is still commodity-driven. Payments from the fuel and energy sector in the form of customs duties and taxes comprise nearly half of the federal budget's revenues

Ruble exchange rate During the last 12 months, the Russian Ruble depreciated 4.1% against the US Dollar. In December 2011 the exchange stabilized at 31 RUB/US$

50

1.8

Exchange Rates USD/RUB

45

EUR/RUB

USD EUR (Right axis) 1.6

40 35

1.4

30 1.2

Dec 31, 2011 USD 30.23 EUR 39.74

25 20

140

1.0

Oil price (Brent, US$ per barrel)

120 100

Political environment in Russia: Following the presidential election in March 2012 the prime-minister Vladimir Putin won the campaign and will lead the country for the next six years. Putin emphasized the importance of institutional reforms as a key driver for the economy going forward

80 60

Dec 31, 2011 US$ 107 / barrel

40 20

Source: EIU, Federal statistics service, JLL

28


Moscow Office Market Class A office supply and vacancy

Units 2,500,000

1000 – 1200

CBD prime rates (US$/sqm/year)

600 - 850

Prime Yields

8%-9%

Vacancy rate (market average)

16%

Vacancy rate, Class A CBD

5%

25%

2,000,000

2,000,000

20%

1,800,000

1,500,000

15%

1,300,000

sqm

Base rent Class A (US$/sqm/year)

2,233,393

Office rates

1,100,000 850,000

1,000,000

10%

USD/psqm/pa

Key indicators

650,000

500,000

5%

0

0% 2005

total supply

2006

2007

2008

2009

vacancy Class A

2010

2011

2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

2,000

1,500 1,200 1,000

1,400

800

800

850

620

650

2009

2010

1,000 850

750 600

2005

2006

2007

Average Class A

2008

2011

Class A CBD Prime

vacancy Class A CBD

Source: JLL, C&W

Source: JLL, C&W

Current market drivers:

Office transaction volumes and yields

 Limited supply of high quality

Office stock per capita

central stock in Moscow and City

3,500

14.00%

Moscow

authorities

on

3,000

13.00%

Budapest

development put upward pressure on

2,500

rents  Yield compression is ongoing driven by scarce investment grade assets volume  Quality Class A in CBD is expected to have lower vacancies in 2012 – 2013 as postponed demand for

Prague

USD mn

restrictions

1.2 sqm

2,168

2,000

2,270

2,194

2,266

1,730

1,500

12.00%

Warsaw

11.00%

Madrid

10.00%

London

Dublin

1,252

1,000

9.00% 555

Paris

Amsterdam

500

8.00%

Brussels

0

7.00%

Stockholm

2005 2006 2007 2008 2009 2010 2011 Investment deal volume

yields

Munich Frankfurt 0

Source: JLL, C&W

5

10

15

20

Source: JLL, C&W

quality space emerges 29


Moscow Retail Market Retail supply and vacancies

Units

Retail rental rates

3,500,000

Prime rates, (US$ psqm/year)

4,000

Base rents (US$ psqm/year)

1,350

3,151,000 3,152,000

3,000,000

5.0%

2,500,000

2,200,000

4.0%

1,800,000

sqm

2,000,000

3.0%

1,500,000

1,500,000

1,200,000 1,000,000

Prime yield

9.0% – 9.5%

Vacancy (market average)

4%

Current market drivers:

2.0%

1,000,000

1.0%

500,000 0

0.0%

2005

2006

2007 2008 2009 total area

 Moscow citizens spend over 77% of their incomes on consumption. Declining savings rate and the recovery of consumer financing provide with support for retail sales

Retail transaction 2,000

1,554

1,600 1,400

 Current lack of supply has continued to push rental rates upward, while keeping downward pressure on vacancy. This trend will continue in 2012

1,200

US$ mn

 Existing shopping centers were in high demand and the vacancy rate declined to 4%

1,000 800

s o u r volumes c e :

1,689

1,800

2010 2011 vacancy

0 2006

2007

2008

Investment deals volume

4,000

4,000

1,200

1,350

1,350

2009

2010

2011

3,700

3,500 3,000

1,300

1,500

2006

1,700

2007

2,000

2008

Base rents

Source: JLL, C&W

Retail stock per 1,000 inhabitants 14.00%

274 sqm

Moscow Hamburg

13.00% London 12.00% 11.00% 10.00% 384

2009

9.00% 8.00% 2010

Paris Budapest Berlin Warsaw

C & W

200

4,800

Prime rents

1,700

371

400

4,500

2005

and yields

J L L ,

600

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

Source: JLL, C&W

A F I 1,301 D ,

780

2005

6.0%

USD psqm pa

Key indicators

Frankfurt Prague

2011

yields

0

100

200

300

400

500

600

Source: JLL, C&W Source: JLL, C&W

30


Moscow and Moscow Region Residential Market Key indicators

Average market price in business-class apartments (US$)

Units

Prime market price (US$ psqm)

15 650

Business class segment (US$ psqm)

6 500

Economy/ comfort class segment (US$ psqm)

3 820

Average prices of residential market by town of Moscow region, US$ psqm

Source: Intermark Savills

Trends and forecast:

Supply for business-class apartments by area

Delivery volume remains stable compared to the level recorded last year

Secondary market remains unchanged

The positive trend in demand for economy and business-class segments are anticipated in the forthcoming years supported by growing level of middle class in Russia

supply

volume

Source: Intermark Savills

31


Development Process in Moscow Development stage

Opportunity identification

Initial permitting (pre project stage)

Project permitting (project stage)

Construction

Operation

Disposal

Activity

Results

Search for land plot for potential development Analysis of possible use of selected land based on City’s General Plan/ land tenure & development regulations Highest and best use analysis Feasibility studies

Project parameters established Preliminary budget estimated Preliminary timeline for construction set

Concept development Architectural design Master planning work Dialog with City authorities – Development of “Regulation Album” for submission to Moscow City Architectural Agency’s (Moscomarchitektura) Project Approvals Committee

Preliminary concept prepared “Regulation Album”, which includes general development plan (height, footage, floor plans, traffic flows, visuals, compatibility with the surrounding community and project economics) approved by the City Moscomarchitektura issues “Town planning Permit” (GPZU) (other City agencies are involved in approval of this permit) Investment contract signed with the municipality

More detailed architectural design Work on project documentation for submission to “The Moscow State Expertise” Documentation is prepared in sections

Each section of project documentation requires separate approval Sections include legal, general plan, architecture, construction solutions; technological solutions; internal & external engineering; fire prevention; power efficiency; environmental protection and security Upon approval, construction permits issued

Work with banks to secure debt financing Work with general contractor to develop “working documentation”, or detailed specifications for construction work Monitoring construction progress and budget Cost control Preleasing/preselling/ advertising Leasing/preselling of remaining space Property management (by AFID or outsourced) Rent collection Tenant relations management

Real estate delivered and commissioned Property rights received Efficient legal structure in place

Property marketing Organizing the tender process amongst willing buyers Support in buyer due diligence

Property sold Funds reinvested in future development

Timeline

1-4 months

3 months

8 – 12 months

2-3 years

Fully operating income generating business Sustainable value through high quality product and strong tenant mix

Any, depending on strategy (3-7 years target)

6 – 12 months

32


Contact Information

Registered office AFI DEVELOPMENT PLC 25 Olympion St., Omiros & Araouzos Tower, 3035 , Limassol, Cyprus. Tel: +357 25 340 058 Principal office of operating subsidiary AFI RUS 16 A Berezhkovskaya Embankment, building 5, Moscow, 121059, Russian Federation. Tel: +7 495 796 99 88 http://investors.afi-development.ru

33


2011 investor presentation