Q3 2011 investor presentation by AFI Development

CONFIDENTIAL

Q3 2011 INVESTOR PRESENTATION January 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.

Contents 1. 2. 3. 4.

AFI Development at glance Key Moscow projects Portfolio overview Operational and financial update a. Company update b. AFIMALL City operational summary c. Operational update d. Senior Management Team Q3 2011 Financial results a. Financial results for Q31 2011 b. Debt & Liquidity

4 5 6 8 9 10 11 13 14

Market update a. Macroeconomic & political update b. Moscow office segment c. Moscow retail segment

16 17 18

Appendix 1. Portfolio of assets in details a. AFIMALL City Project Highlights b. Office portfolio c. Residential and hotel portfolio d. Development Portfolio e. Projects next in line for development f. Land bank / Projects on hold

20 21 22 23 24 25

Appendix 2. Development process in Moscow

Appendix 3. Financial results for the 9 months 2011

10.

Contacts

AFI Development at glance Market Cap, as of Jan 23, 2012

US$ 0.52bn

Market Cap, 12months average 2011

US$ 0.86 bn

Price per share, as of 23 Jan, 2012

US$ 0.50

NAV, Sep 30, 2011

US$ 1.84bn

NAV per share, Sep 30, 2011

US$ 1.76

Portfolio MV*

US$ 2.6bn

•Full cycle real estate developer

BUSINESS

•Focus on unique large scale commercial and residential projects

•Strong liquidity position with around US$107,2 mn in cash as at Sep 30, 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

Pipeline 28%

•Free float – 36.3%

Projects Under Construction 6%

Income Producing Projects 13%

BRAND AFIMALL City 41%

•Substantial income generating portfolio. Major project AFIMALL (p.20) 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* Land Bank 12%

•Secured financing for on-going projects

PORTFOLIO

•2 projects under construction (p.23), 4 in pipeline (p.24) •Extensive land bank to support future income (p.25)

* Latest JLL report as of 3o June, 2011

* Bank loans only 4

Key projects in Moscow 1

AFIMALL City 107K sqm GLA 100% ownership $138M stabilized NOI

CITY OF MOSCOW

Four Winds 22K sqm GLA 50% ownership $29.2M NOI

Aquamarine hotel 159 keys 100% ownership $4M stabilized NOI

Kosinskaya 100K sqm GLA 100% ownership $ 26.3M NOI

Pavetetskaya II 70K sqm GSA 100% ownership residential

11 8 6 7 10

Otradnoe 450K sqm GSA

4 3

100% ownership residential

Pochtovaya Phase I 100K sqm GSA/GLA

100% ownership residential

H2O 9K sqm GLA 100% ownership $2.2M NOI Paveletskaya I 13K sqm GLA 100% ownership $3.8M NOI

Ozerkovskaya III 46K sqm GLA 50% ownership $40M stabilized NOI

Ozerkovskaya II resi 1,8K sqm unsold 50% ownership $33M in revenue Berezhkovskaya 10K sqm GLA 74% ownership $2.9M NOI

Existing projects Projects under development

Botanic Garden 100K sqm GSA 90% ownership residential

Tverskaya Phase I 169.7K sqm GBA 95-100% ownership

Pipeline projects

Note: the NOI projections are â&#x20AC;&#x153;forward looking statementsâ&#x20AC;? 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

All amounts as per JLL valuation (June 30, 2011) 5

* based on Company estimation

Portfolio overview Track record* (sqm) office 78,647

hotel 12,665

 

Delivered Under development

retail 188,807

hotel 33,931



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



Current portfolio – up to 2 mn sqm



Active pipeline projects– c. 1.2 mn sqm



AFIMALL is the flagship yielding asset with 179K 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 Q1 2012

office 99,685

*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** Pipeline 28%

Land Bank 12% Income Producing Projects 13%

Projects Under Construction 6%

Current portfolio MV – US$ 2.6 bn*



Current MV of yielding properties – US$ 1.4 bn*



Selection of attractive pipeline projects provides with wide opportunities for future development

AFIMALL City 41%

** MV according to JLL’s valuation



June 30 2011, after accounting

* according to JLL’s valuation as of June 30, 2011 after accounting amendments applied in Q3 2011

amendments applied in Q3 2011 6

SECTION 1

Operational and financial update

Company update In 2011 the Company has progressed in it’s development:

Company and SMT 

Replaced Mr. Alexander Khaldey by Mr. Mark Groysman in the Company leading role



Improved Corporate Governance



Strengthened AFID team by new CFO Natalia Pirogova and new Chief Legal Counsel Vyacheslav Khlopunov



Developed a motivation system program for Senior Management Team (SMT) based on performance of the Company shares

Project Update 

Developed and successfully opened the flagship project AFIMALL City (179K sqm of GBA) in H1 2011



Obtained 100% ownership in AFIMALL through City share buy-out for c.US$ 157 mn incl. VAT



Secured agreement with the City on AFIMALL City parking buy-out (2700 units) for c.US$ 126 mn incl. VAT



Decreased an interest rate in AFIMALL loan to 11,5% and agreed on a further decrease down to 9,5%, following the registration of AFIMALL mortgage scheduled for Q1 2012



Reached 79% occupancy level (based on contracts signed)



Refinanced 4Winds asset (28K sqm of GBA) and achieved more than a double interest payment decrease



Progressed on Aquamarine III (79K of GBA) development to its successful completion in Q1 2012



Under a non-binding agreement the City of Moscow was consented to re-approve and renew the Company’s development rights and leasehold interests in land plots at Plaza Ic (part of Plaza I) Plaza IIa and Plaza IV projects with total GBA of approximately 170K sqm



Stabilized Aquamarine Hotel (8,935K sqm of GBA) occupancy level and ADR rate in H2 2011



Completed B-class office at Paveletskaya (16.5K sqm of GBA) in Q1 2011 and fully leased to Greenatom (Rosatom subsidiary)



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

AFIMALL City operational summary Recent updates 

Ownership certificate received in Q4 2011



Lease agreements for 79% of GLA in place



Profound marketing campaign initiated with a focus on mass media and

outdoor

advertising

combined

with

aggressive

event

management AFIMALL City parking 

Negotiations with VTB Bank on the provision of debt financing for

the acquisition and construction of the parking area are close to 35

completion 

The Company is in continuous negotiations with VTB Bank on a

potential acquisition of c. 600 parking lots

Next steps on track to project promotion 

Reach footfall over 40-50k visitors a day – a comfortable threshold

Average daily footfall

15 10 5

for tenants to support rental payments 0



Complete works in parking area to allow for its staged opening in Q1 – Q3 2012

Operational update Recently Completed Projects •

AFIMALL City -

Completed construction in December 2010 and received act of acceptance in February 2011

Soft opening on March 10, 2011; Grand opening on May 22, 2011

Achieved 79% level of leases

Closed transaction for buying-out of 25% City share for consideration of RUB 5 bn (US$157mn)

Ownership certificate received

Signed parking buy-out agreement with a City (2700 units for c.US$ 126 mn)

•

Paveletskaya Office Complex -

Completed construction in December 2010 and received full permitting package in January 2011. Leased to a single tenant in March 2011 with US$3.8 NOI

Advanced Stage Development Projects •

Ozerkovskaya Phase III -

Construction is on schedule for completion in Q1 2012

Negotiations with potential buyers and tenants are ongoing

Marketing is on-going

• Kalinina SPA Hotel -

On-going construction

Operation start is scheduled for Q2 2012

•

Tverskaya Plazas -

under a non-binding agreement, the City of Moscow consented the Company's development rights and leasehold interests in land plots at Plaza Ic (part of Plaza I), Plaza IIa and Plaza IV projects with total gross buildable area of approximately 170K sqm

Existing Portfolio

• Commercial: Four Winds Plaza, H2O, Berezhkovskaya - vacancy levels are low (<2%). Average rate in Four Winds Plaza is over US$1,300 psqm pa, seeing improvement of rent levels in the other projects • Hotels: Aquamarine Hotel, which was opened in February 2010 is now achieving 60-70% occupancy level, Plaza Spa Hotel enjoys occupancy of c.75% • Rental revenues in Q3 2011 were US$49 mn due to increase of rental activities at AFIMALL and Paveletskaya • Residential: Over 9 months period in 2011the Company received US$15 mn revenue from sales of apartments and parking units at Four Winds Residential Complex and Ozerkovskaya Phase II

Reactivated Early Stage Projects • Odintsovo (Otradoye) – Renewal of construction permit and construction start and/or disposition (clarity in H1 2012) • Paveletskaya Residential Development - Design and approval works proceeding to secure construction permit (clarity in 2012)

• Bolshaya Pochtovaya – Design and approval works proceeding to secure construction permit (clarity in 2012)

• Tverskaya Plazas – concept design and documents preparation in progress following the latest agreement with the City

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

SECTION 2

3Q 2011 Financial results

Financial results for Q3 2011  Revenues for the nine months to 30 September 2011, including net

Summary Income Statement as of September 30, 2011

proceeds from the sale of trading properties, increased by 84% yearon-year to US$98,7 mn driven by higher rental income. The contribution of AFIMALL City was US$43 mn  Net profit for the nine months to 30 September 2011 was US$147

mn compared to loss of US$53.9 mn for nine months to 30 September 2010, driven by asset revaluations mainly  During Q3 2011 the Company received a US$6 mn and US$13 mn

VAT reimbursement from the Russian tax authorities on VAT incurred during construction of Ozerkovskaya phase III project and AFIMALL City respectively

Narrative Rental Income Net proceeds from sale of trading properties Other Total revenue Operating expenses Carrying value of trading properties sold Net valuation gain/(loss) Results from operating activities Net finance costs Tax expense Profit/(loss) for the period

3Q 2011

3Q2010

9m 2011

9m 2010

US$ mn

34.6 5.7 0.2 40.6 (28.0) (5.1) 175.4 182.9 (24.0) (40.7) 118.2

11.1 3.1 0.3 14.4 (8.5) (1.0) 0.0 5.0 3.3 0.8 9.1

83.2 14.8 0.8 98.7 (64.0) (9.3) 194.6 220.0 (25.5) (47.5) 147.0

32.1 21.1 0.7 53.9 (24.1) (13.1) (62.0) (45.2) (4.6) (4.1) (53.9)

 As at 30 September 2011, the Company’s loans totaled US$626 mn

compared with US$468 mn at 31 December 2010. This increase of

Summary Statement of financial position as of September 30, 2011

approximately US$157 mn was mainly due to an additional loan facility from VTB Bank to finance the acquisition of Moscow City’s Narrative 25% share in AFIMALL City

Total non-current assets Total current assets  The Company's NAV as of 30 September 2011 amounted to Total assets US$1,844 mn, representing a US$112 mn increase compared to 31 Total equity December 2010

Total non-current liabilities Total current liabilities

Total liabilities Total equity and liabilities

3Q 2011

3Q2010

US$ mn

2,359.5 384.0 2,743.4 1,844.1

1,965.0 464.1 2,429.1 1,728.4

394.4 (80.1) 314.3 115.7

20.1% -17% 13% 6%

741.9 157.7

543.8 153.7

198.1 4.0

36% 3%

903.4 2,743.4

697.5 2,429.1

205.9 314.3

30% 13%

3Q 2011 vs 3Q 2010

Debt & Liquidity Gross balance of the bank loan portfolio (as of September 30, 2011) – US$609 mn( exclusive of percentage payments) Total cash balance (as of Sept-30, 2011) – US$107mn Project

Lending bank

(100% ownership)

Max debt limit

Current balance

US$ mn

LTV%

Maturity

Nominal Interest rate

Currency

11.5%**

RUB

23.08.2013

11.5%**

RUB

23.08.2013

Available (US$ mn)

(dd.mm.yy)

Project level debt AFIMALL (construction loan)

VTB

265

265 40%

AFIMALL (25% share buyout)

VTB

157

Tverskaya Mall

Sberbank

280

103%

6-month LIBOR +11.5%

USD

16.08.2014

Ozerkovskaya III*

Sberbank

13%

RUB

17.06.2015

Kalinina Hotel

Sberbank

73%

6.75%

RUB

20.12.2014

Four Winds Office*

Nordea Bank

170

63%

3- month LIBOR +4.5%

USD

13.07.2018

AFIMALL parking

in negotiations

126

n/a

11.50%

RUB

23.08.2013 (planned)

Highlights  With nearly US$ 107 mn in cash and cash equivalents as of September 30, 2011 the liquidity position remains strong  Sufficient debt financing secured to complete current construction in place  Continued strategy of using only project-fenced financing to develop real estate  To minimize costs in 2012 the Company intends to refinance its construction loans (e.g. AFIMALL, Ozerkovskaya III) at more favorable terms

* AFID is liable for only 50% of these loans ** Interest rate will be decreased to 9,5% following mortgage registration scheduled for Q1 2012

SECTION 3

Market update

Macroeconomic & political update 

GDP real growth in Russia stood at 4.8% in Q3 2011, compared to 3.4% in Q2 driven by manufacturing, transportation and retail sectors. The 4.1% growth is expected for the whole year 2011



Sovereign debt Over the course of 2011 Russian government debt has been solid against a volatile global backdrop, with a decades worth of generally tight fiscal policy and strong oil revenues, backing Russia’s debt position. Russian sovereign debt to GDP ratio is the lowest among its peers



Oil price (Brent) Steady growth from US$100 for barrel during 2011 and stabilization within US$100 - 112 range in Q3 2011. The country budget was compiled basing on US$100 price for Urals blend with minor deficit of 1.5% to GDP, oil price still over US$100 is favorable for the Russian economy



Ruble exchange rate steadily appreciated during 2011 and Q3 2011 and reached 28.8 USD/RUB by Q3. The volatility of financial markets which started in August caused a sharp retreat to year beginning levels following stabilization around 31 USD/RUB Political environment in Russia: the President - Prime Minister tandem of Mr. Medvedev and Mr. Putin remains stable fully supported by the dominating political party. The situation is not likely to change after coming 2012 president election campaign

Positive changes in the Moscow Government: a new Mayor of Moscow Sergey Sobyanin appointed by the Russian President has appealed to transparency increase for the construction permitting mechanism. The main goal of the new Government is to improve investment climate and eliminate complexity of approval procedure

1.8

Exchange Rates

45 1.6 40 35

1.4

30 1.2 25 USD/RUB 20 Nov-09 140

EUR/RUB

USD EUR (Right axis) 1.0

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Aug-11

Nov-11

Oil price (Brent, US$ per barrel)

120 100 80 60

Dec, 2011 US$ 107.5 / barrel

40 20

Source: EIU, Federal statistics service, JLL

Moscow office market

Class A

US$1,150 US$1,200 psqm pa US$600 US$850 psqm pa 9%

Vacancy prime

2% - 4%

30% 2,150,000 2,000,000

2,000,000

20% 1,500,000

1,300,000

central stock and City’s restrictions

850,000

10%

650,000

500,000

0% 2005 2006 2007 total supply vacancy Class A CBD



source: JLL, C&W

3,500

1,500 1,150 1,150 1,000 800

800

850

620

650

1,000 750 600

Average Class A

750

850

Class A CBD Prime

13.00%

2,500

2,168 2,270 2,194

2,000

1,730

1,500

1,252

1,094

Prague

12.00%

Warsaw

11.00%

Madrid

10.00%

London

9.00%

Dublin Paris

Quality Class A in CBD is expected to have lower vacancies in 2011-

500

8.00%

2012 as postponed demand for

7.00%

Stockholm

2005 2006 2007 2008 2009 2010 2011E Investment deal volume yields source: JLL, C&W

Frankfurt

555

1.2 sqm

Moscow Budapest

1,000

quality space emerges

1,400

Office stock per capita 14.00%

3,000 USD mn

by scarce investment grade assets

2,000

2011E

Office transaction volumes and yields

on rents Yield compression is ongoing driven

2008 2009 2010 vacancy Class A

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

source: AFID JLL, C&W

on development put upward pressure



15%

1,100,000

1,000,000

22%

Limited supply of high quality

25%

1,800,000

Current market drivers: 

Class A rates

2,500,000

Yields

Vacancy average

Class A office supply and vacancy

USD/psqm/pa

CBD prime rates

Units

sqm

Key indicators

Amsterdam Brussels Munich

source: JLL

Moscow retail market

Base rents Prime yield Vacancy

Retail supply and vacancies 3,500,000

4,000 psqm pa 1,350 psqm pa 9.0% – 9.5% <1% (prime) 7% (Moscow aver.)

*Prime rates: 100 sqm shops on shopping centers

1st

3,151,0003,163,500

3,000,000 2,200,000

2,000,000

4.0%

1,800,000

3.0%

1,500,000 1,200,000 1,000,000

2.0%

1,000,000 500,000

1.0%

0.0%

Current market drivers:

total area

and regional cities

1,400

1,554

1,507

Overall space at modern shopping centers in Moscow continues to expand

1,000 800

2,500

371

384

200 0

8.00% 2008

Investment deals volume

2010

2011E

1,700 1,200

500

Hamburg

9.00%

2007

1,300

1,500

1,000

13.00%

11.00%

2006

1,350

2,000

Moscow

10.00%

2005

1,350

3,000

14.00%

12.00%

780

400

3,500

2007

2008 2009 Base rents

source: AFID, JLL, C&W

273 sqm

London

1,301

600

4,000

Retail stock per 1,000 inhabitants

1,689

1,600

4,000 3,700

3,000

2005 2006 Prime rents

1,200



3,500

vacancy source: AFID, JLL, C&W

The largest retailers, both Russian Retail transaction volumes and yields and foreign, continue to expand 2,000

4,800

2005 2006 2007 2008 2009 2010 2011E

their development plans in Moscow

4,500

1,500

floors in quality

1,800

5,000

4,000

2,500,000

1,500,000

6.0% 5.0%



Retail rates

USD psqm pa

Prime rates*

Units

sqm

Key indicators

2009

2010

2011E

yields

Paris Budapest Berlin Warsaw Frankfurt Prague 0

100

200

300

400

500

600 source: JLL

source: JLL, C&W

APPENDIX 1

Portfolio of assets in details

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

Land area

4.4 ha in the unique business district

GBA

179,930 sqm

GLA

107,080 sqm

Ownership

100%

Forecast NOI

US$138 mn (JLL)

Average net market rent *

US$ 1,290 per sqm per annum (JLL)

Space leased

79%

Market Value (JLL) *

US$ 1,093 mn (for 100% share)

* Valuation conducted by JLL as at June 30, 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 20

Office portfolio Project

Ownership

Year of completion

GBA (sqm)

GLA (sqm)

Current rent as of June 2011 (US$/ psqm/pa)

50%

2008

28,308

21,964

1,327

1,211

14.6 mn

13.3 mn

135.5 mn

100%

2006

10,698

8,998

240

289

2.2 mn

2.6 mn

18.1 mn

74%

2006

11,612

10,259

384

470

2.9 mn

4.8 mn

28.0 mn

100%

2010

16,512

13,130

300

290

3.8 mn

27.7 mn

Market rent (US$/psqm/ pa) **

Current NOI * (US$/pa)

Stabilized NOI**

Market value * (US$)

4W Plaza

H2O

Berezhkovskaya

Paveletskaya Paveletskaya

* AFID share only ** Valuation conducted by JLL as at 30 June, 2011

Note: the stabilized NOI projections, market rent estimates are â&#x20AC;&#x153;forward looking statementsâ&#x20AC;? 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

Residential and hotel portfolio Project

Ownership

Year of completion

GBA (sqm)

GSA unsold /keys

Sale price per sqm/ADR (US$) **

Average rent (US$/psqm/ pa)

Market value *;** (US$)

50%

2008

41,364

611*

13,000

Retail 300

28.1 mn

50%

2008

49,258

1629*

13,500

n/a

33.2 mn

50%

2006

25,000

274

n/a

30.6 mn

100%

2010

11,130

159

n/a

47.0 mn

4 Winds Plaza Residential

Ozerkovskaya II

151

Plaza Spa Hotel

187

Aquamarine Hotel * AFID share only ** Valuation done by JLL as of 30 June, 2011 and as of 31 December , 2010 Note: the Sale price projections are â&#x20AC;&#x153;forward looking statementsâ&#x20AC;? based on JLL valuation assumptions and they can be realized or not realized due to factors beyond the 22 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

Development portfolio

GBA (sqm)

Project

MV of unsold GSA/MV of hotels *

Ozerkovskaya III GBA , sqm

Kalinina Hotel

78,648

12,665

46,394 sqm

175 keys

Parking

557

n/a

Ownership

50%

100%

Q1 2012

Q2 2012 (operation start)

US$ 19.6 mn

n/a

US$ 202.0 mn

US$ 26.3 mn

GLA

Delivery Forecast NOI * MV upon completion * / **

Details

•

Located in Zamoskvorechye, Moscow’s prestigious business area within the Garden Ring

•

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

•

3-rd phase of Ozerkovskaya Embankment development site

•

Inspired by the success of Plaza Spa Hotel in Kislovodsk

•

4 Class A office buildings comprising one complex

* AFID share only ** Valuation done by JLL as at June 30, 2011 Note: the MV upon completion is “forward looking statements” based on JLL valuation assumptions and it 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

Projects next in line for development

GBA (sqm)

Project

Odintsovo (Otradnoye) GBA, sqm GLA /GSA, sqm Parking Ownership Delivery Expected revenue / outstanding investment costs * •

Details

MV of unsold GSA/MV of hotels *

Apartments left/occupancy

Bolshaya Pochtovaya Phase I

Tverskaya (Phase 1)

Paveletskaya II

703,317 *

231,680*

106,250*

169,700**

450,100 residential and 44,050 commercial *

123,750 residential*

59,250*

107,000 **

2,053 lots*

1,904 lots *

930 lots*

588 lots**

100%

design stage

US$ 1,371 mn/ US$ 860 mn*

US$ 699,5 mn/ US$ 334,1 mn*

US$ 390,3 mn /US$ 183,0 mn*

To be presented in Q4 2012

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

•

The project is located in the Moscow Central District on the Yauza river bank; total site area is 4.5 ha

•

Located on the same land site with Paveletskaya office complex, on 4.1 ha site

•

Phased mixed use development dominated by residential component

•

610 business class (monolith) apartments planned

•

Currently in design and permitting stage

•

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

•

Project is in planning stage. Full set of permits is expected over the next 18 months

* Based on valuation conducted by JLL as of June 30, 2011 ** based on Company estimation

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

Land Bank / Projects on hold Project

Type

Land (ha)

B/S value as of 30/09/2011, US$K

GBA upon completion (sqm)

MV* upon completion, US$K

Kosinskaya

Office

8.1

111,770

142,169

214,763

Ozerkovskaya IV

Office

0.04

TBD

2,222

n/a

Botanic Garden

Residential

3.2

192,555

66,732

496,115

Park Plaza Kislovodsk

Hotel resort

5.3

40,000

9,649

101,949

Versailles, Kislovodsk

Hotel resort

0.6

11,762

8,800

29,000

Ruza

Mixed use

387

n/a

3,942

St. Petersburg

Mixed use

3.7

n/a

1,828

Boryspol

Residential

130.7

n/a

13,090

538.6

248,432

841,827

TOTAL



* Valuation by JLL as at June 30, 2011 or December 31, 2010

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

Over 500 ha of land



Future MV of land bank projects – c. US$ 840 mn

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

APPENDIX 2

Development process in Moscow

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

APPENDIX 3

Financial results for the 9 months 2011

Income Statement Income Statement for the Period from January 1, 2011 to September 30, 2011 3Q 2011 US$

3Q2010 US$

9m 2011 US$

9m 2010 US$

Revenue Construction consulting/management services Rental Income Sale of residential Total revenue

0.2 34.6 5.7 40.6

0.3 11.1 3.1 14.4

0.8 83.2 14.8 98.7

0.7 32.1 21.1 53.9

Other income Operating expenses Administrative expenses Cost of sales of residential Other expenses

0.3 (22.1) (5.8) (5.1) (0.3)

(3.5) (3.2) (1.0) (1.8)

0.5 (48.6) (13.3) (9.3) (2.6)

0.1 (11.3) (8.8) (13.1) (4.0)

7.3

5.0

25.4

16.8

(1.2) 198.5 (2.8)

(7.5) (40.4) (14.1)

Narrative

 Revenues for the nine months to 30 September 2011,

including net proceeds from the sale of trading properties, increased by 84% year-on-year to US$ 98,7 mn driven by

higher rental income. The contribution of AFIMALL City was US$ 43 mn

Gross profit Impairment of prepayment for investments Valuation gains on investment property Impairment loss for trading property and hotels Results from operating activities

175.4 182.7

5.0

220.0

(45.2)

Finance Income Finance Expense Net finance income/(costs)

3.3 (27.2) (24.0)

5.5 (2.2) 3.3

6.4 (31.9) (25.5)

5.4 (10.0) (4.6)

Profit before Income tax

158.7

8.3

194.5

(49.8)

Tax expense

(40.7)

0.8

(47.5)

(4.1)

Profit/(loss) for the period

118.0

9.1

147.0

 The dynamic of operating expenses change correlates with

revenue increase following AFIMALL City operation start. For the 9m 2011 operating expenses grew up to US$48.6

mn from US$ 11.3 mn over 9m 2010

 In Q3 2011 the Company recognized US$112 mn valuation

gain on the 25% AFIMALL City share acquisition

 The remaining US$63mn out of US$175 mn revaluation

gain is driven by FX effect and asset cap rate change

(53.9)

Balance sheet statement Balance statement for the Period from December 31, 2010 to September 30, 2011 Narrative Assets Investment property under development Property, plant and equipment Long-term loans receivable VAT recoverable Goodwill Total non-current assets Trading properties Trading properties under construction Inventory Short-term loans receivable Trade and other receivables Income tax payable Cash and cash equivalents Total current assets

Total assets Equity Share capital Share premium Translation reserve Retained earnings Total equity Minority interest Liabilities Long-term loans and borrowings Deferred tax liabilities Deferred income Total non-current liabilities Short-term loans and borrowings Trade and other payables Income tax payable Total current liabilities Total liabilities

Total equity and liabilities

Change 9 months

30-Sep-11

31-Dec-10

US$ mn

1,316 937 85 0 21 0 2,359 12 173 1 1 91

1,123 (738) (3) 0 12 394 (9) (2) (0) 1 (46) (1) (23) (79)

582% -44% -3% 100% 132%

107 384

193 1,675 88 0 9 0 1,965 21 175 1 0 137 1 130 464

20% -43% -1% -9% 875% -34% -100% -17% -17%

2,743

2,429

315

13%

1 1,763 (177) 253 1,840 4 601 114 27 742 25 131 1 158 903 -

1 1,763 (143) 107 1,728 3 434 81 28 544 34 120

(35) 146 112 1 166 33 (1) 198 (9) 12 2 5 203 -

2,743

154 697 -

2,429

315

 The value of Company non-current assets increased by 20% over

9m 2011 following further investment accruals into active projects and AFIMALL City 25% city share acquisition. Completed AFIMALL City and Paveletskaya projects were reclassified into Investment property item

 Ongoing cash spendings on development of investment projects

and decreased trade receivables due to construction VAT recovery resulted in net decrease of current assets by US$ 79 mn

24% 137% 6%

 Further drawdowns of construction loans for active projects

17%

AFIMALL City share acquisition led to long-term loans and

38% 40% -4% 36%

borrowings increase through 9m 2011 by US$166 mn

-26% 10% 3%

financing and drawdown of 157mn from VTB bank for 25%

 Equity capital increased by US$112mn or 6% mostly because of

profit recognition upon 25% share acquisition of AFIMALL City project

29%

13%

Cash-flow statement Cash-flow statement for the Period from January 1, 2011 to September 30, 2011 Narrative Cash flows from operating activities Profit/(loss) for the period Adjustments for non-cash income and expenses: Depreciation Interest expense accruals Fair value adjustments Unrealised (gain)/loss on foreign exchange Income tax expense Other non-cash items Change in net working capital Cash generated from operating activities Income taxes paid Net cash from operating activities Cash flows from investing activities Payments for construction of investment property under development Payments for acquisition of investment property Change in VAT recoverable Acquisition of property, plant and equipment Other Net cash used in investing activities Cash flows from financing activities Payments for loans receivable Proceeds from loans and borrowings Repayment of loans and borrowings Interest paid Net cash used in financing activities Effect of exchange rate fluctuations Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 30 September The cash and cash equivalents consist of: Cash at banks Cash in hand Total cash

Q3 2011

Q3 2010

US$ mn

9m 2011 vs 9m 2010 US$ mn

US$43.3mn compared to US$33.8mn inflow for 9m 2010 due to

147.0

(53.9)

200.9

1.4 25.3 (194.6) 4.0 47.5 (6.3) 24.3 29.4 53.7 (10.4) 43.3

0.9 5.4 62.0 2.8 4.1 (5.3) 16.1 24.7 40.8 (6.9) 33.8

0.5 19.9 (256.6) 1.2 43.5 (1.0) 8.3 4.7 13.0 (3.5) 9.5

44.1% 1061.2% 19.7% 51.6% 18.9% 31.8% 50.3% 28.0%

(55.8)

(104.4)

48.6

-46.5%

1.7 (3.2) 5.3 (100.7)

(156.9) 27.2 (2.6) (4.6) (88.3)

(0.7) 259.7 (86.9) (43.0) 129.0 (6.0) (22.6) 129.8 107.2

74.0 (70.7) (36.5) (33.2) (0.5) (100.6) 210.8 110.3

(0.7) 185.7 (16.3) (6.5) 162.2 (5.5) 77.9 (81.0) (3.1)

1057.1% -77.5% -38.4% -2.8%

107.2

110.3

107.2

110.3

(3.1) 0.0 (3.1)

-2.8% 2300.0% -2.8%

(156.9) 28.9 (5.7) 0.6 (188.9)

 Cash inflow from operating activities for 9m 2011 reached

47.7% 370.7%

AFIMALL City put into operation  Development of active projects and AFIMALL City 25% share

acquisition resulted in cash outflow from investment activities of US$188.9mn for 9m 2011 compared to cash outflow of US$100.7mn during the same period of 2010 in the time was AFIMALL City was under active construction  Change of MDM-bank loan to Nordea bank refinancing in Four

Winds and drawdown of US$157mn from the VTB bank for 25% 1644.0% 81.5% -87.8% 87.7%

AFIMALL City share buyout provided positive cash flow from financing activities of US$129 mn. Debt service was according to the existing loan agreements. US$43 mn of interest was paid to the

251.0% 23.0% 17.8%

lending banks in Q3 2011  Reimbursement of construction VAT added US$28.9 mn to the

closing balance in Q3 2011  Cash balance as of September 30, 2011 remained high at the level

of US$107.2mn compared to US$110.3mn balance a year before

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