EVDORO WATER SPRING | VALUATION REPORT

VALUATION REPORT

OF THE FAIR VALUE OF THE PROPERTY ASSET – WATER SPRING

"EVDORO",

CURRENTLY BEING EXPLOITED BY THE COMPANY STYLED

"LAVE S.A."

AS OF AUGUST 31, 2011

VALUATION STUDY

CONTENTS

1. Instructions and object of study.............................................................................................32. Constraints and necessary clarifications................................................................................43. Data on which the valuation was based.................................................................................45. Choice of approaches and valuation methods........................................................................76. Average capital cost...............................................................................................................87. Assessment of the fair commercial value of the property asset "EVDORO"........................98. Final Valuation – Conclusion...............................................................................................12

CONFIDENTIAL

HELLENIC AUDITING S.A.2

VALUATION STUDY

To: the company "LAVE S.A."

Attention Mr. Ioannou

Athens, October 13, 2011

VALUATION REPORT

OF THE FAIR VALUE OF THE PROPERTY ASSET – WATER SPRING

"EVDORO",

CURRENTLY BEING EXPLOITED BY THE COMPANY STYLED

"LAVE S.A."

AS OF AUGUST 31, 2011

1. Instructions and object of study

The present valuation study was prepared pursuant to instructions of the Management of

the Company "LAVE S.A." to [the company] "HELLENIC AUDITING S.A." for the purpose of

assessing the fair market value of the property asset – water spring “EVDORO” as of

31.8.2011.

For the purposes of the present study, the term fair market value is defined as the price

at which the lawful possessors of the property asset in question will transfer ownership and

exploitation thereof to the Purchaser, none of whom, however, would be under a

constraint to sell or purchase, while every one of them would have full knowledge of the

relevant data for the evaluation thereof. Accordingly, the fair market value constitutes a

reasonable assessment of the price at which ownership and exploitation of the intangible

property asset would be transferred.


VALUATION STUDY

It should, however, be pointed out that the actual price at which the agreement would be

implemented might differ from the assessed value for various reasons, as, for instance, the

motives of the contracting parties, the form of the transaction (e.g. the modalities οf

payment, the manner of acquisition of possession etc) as well as for other reasons that

might affect exclusively the particular agreement.

2. Constraints and necessary clarifications

The result of the valuation, as hereinabove calculated, is subject to the following

constraints:

The valuation of the fair market value of the property asset was carried out in

accordance with the internationally accepted methodology, based on which the

assessed fair market value thereof on as "as is" basis resulted.

In our opinion, to the extent the foregoing clarifications and constraints are taken into

account, the final assessed fair market value of the water spring "EVDORO" as of

31.8.2011 is considered reasonable and just.

3. Data on which the valuation was based

The data on which the valuation of the assessed fair value of the property asset of the

company was based, are the following:

o The Business Plan prepared by the Company's Management showing the projected

financial results of the business year which are expected to derive from the

exploitation of the trademark over the period 1.9.2011 – 31.12.2016.

o The financial and business information, the hypotheses and assumptions as well as the

forecasts provided by the Management of the Company with respect to their future

course, which we considered as sound and complete and therefore abstained from

conducting an independent validation, survey, audit or confirmation thereof or from

issuing any certificate in relation thereto. The Company bears the full responsibility

regarding the validity of the financial and other information pertaining to the Company,

which were provided to us.

o It was assumed that the totality of the necessary permits and certifications which are

required for the function and the achievement of the financial forecasts of the

Company (e.g. License to operate by legislative or administrative authorities and

organizations), on which the value assessed by the present study is based, have already


VALUATION STUDY

been acquired and are renewable in the future.

We point out, however, that certain assumptions that were adopted might conceivably be

modified, resulting in a modification of the relevant results of this study. Therefore, we

may not be held liable for any divergence from the hypotheses mentioned in this study or

for any omissions.

4. Valuation Methodologies

The following chart presents the main and more widely accepted and disseminated

methods of valuation of intangible property assets as well as their main respective

advantages and disadvantages.

4.1 Cost Approach

The Cost Approach is based on the principle of substitution. For the acquisition of an

intangible property asset, a purchaser will pay a consideration not greater than the cost


VALUATION STUDY

required for the reproduction of such a property asset or for its substitution by a readily

available replacement.

The Cost Approach effectively comprises two kinds of cost which are considered as

determinant of value, namely the reproduction cost and the substitution cost. The

difference between the two relates to the influence of time on the factors affecting the

cost during the period between the moment of production of the property asset and the

moment of its valuation. Further to the assessment of the reproduction cost and the

substitution cost, the influence of the amortization and of the physical, functional or

financial devaluation of the intangible property asset are taken into account.

4.2 Income Approach

On the basis of this approach, the value of an intangible property asset is determined by

the future or expected income to be generated by the asset in question, which might

relate to the following: net income before and after taxes, net operational result, income

from royalties, net or free cash flow. A further set of assumptions that need to be defined

relate to the operational cost, the maintenance cost and the warehousing cost of the asset

in question during the period in which the property asset will generate income (value

creating life) as well as to an appropriate discount coëfficient.

Depending upon the selected income index we can define two particular valuation methods

based on the Income Approach: the multi-period excess earnings method) and the relief

from royalty method. According to the first method, the value of the intangible

commercial asset is defined by the present value of future cash flows that shall be

generated in the remainder of its value creating life.

As related to the other method, its basic tenet consists in the assumption that a business

would be obliged to pay royalties to the possessor of the property asset under valuation for

the concession of the right of use thereof, in case [said business] did not hold the lawful

right of such use. Usually, the relevant royalties are computed as a percentage of the

income before taxes generated by the use of said property asset. According to this

method, the fair value of a property asset is equal to the present value of the right of its

use, which shall not be paid by the company during its value creating life, i.e. during the

period in which it is estimated that the use of the property asset shall contribute financial

benefits to the business.

4.3 Market Approach


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The Market Approach determines the value of a property asset in comparison to sale and

purchase agreement or to agreements for the provision of rights upon similar property

assets in the relevant primary or secondary market. This approach is based almost

exclusively on the availability and comparability of relevant commercial transactions.

Other factors that should be examined pertain to the moment in time of completion of the

selected comparable transactions as related to the valuation date, to the selected

comparability unit which shall yield the multiplication coëfficient of the property asset

being valuated, to the devaluation adaptations of both the property asset being valuated

and the comparable property assets as well as to any adaptations that are necessary,

according to the assessor's judgment, so as to allow comparability between the property

asset being valuated and the comparable property assets.

The valuation of the fair market value of the intangible property assets comprises,

depending upon the selected methodology, the following particular stages:

Computation of tax effect;

Computation of the contribution debit to other property assets (contributory asset

charges).

5. Choice of approaches and valuation methods

For the determination of the assessed value of the property asset – water spring

“EVDORO”, the Income Approach was adopted. The valuation of the property asset in

question shall be based on the assumption that the water spring constitutes an intangible

immovable property. As intangible immovable property are considered the intangible legal

claims in immovable property, such as sale-leasing rights, rights of possession of property

assets, exploration rights, airline rights [?], water rights etc.

As mentioned in a preceding paragraph, the approach in question constitutes a method of

appraisal of the value of an intangible property asset and is founded upon the discount of

the future income. As income, within the context of the present method, may be

considered the profits after taxes, the income from lease or rental, the royalties and the

cash flows generated by the operation of a company.

As a result of the particularity of the property asset – water source, in order for its value

to be assessed, the profits after taxes shall be used, as such profits are generated from the

exploitation of the water source and the sale of the products that derive from the bottling

of the water to be pumped in the period from 1.9.2011 to 31.12.2016, as computed in the

business plan of the company according to the assumptions of its Management.

The valuation of the commercial value of the property asset – water source “EVDORO”

was made as of 31.8.2011.


VALUATION STUDY

6. Average capital cost

The average capital cost calculates the capital cost of a company by a proportional

averaging of each category of capital (own funds and borrowed funds). The average capital

cost comprises (1) the part of the short term debt being used as a source of continuous

financing, (2) the aggregate long term debt, (3) the aggregate preferred stock and (4) the

aggregate of common stock of the company and results from the following formula:

WACC = Kd (I – Tc ) B/V + Kps P/V + Ks S/V

where :

Kd = Expected debt liabilities of the Company before taxesTc = Tax coëfficient in force applying to the profits of the CompanyB = Current value of all of Company's loansV = Current value of the Company under valuation (V = B+P+S)Kps = After tax cost of capital held by preferred shareholders of the CompanyP = Current value of preferred stock in the Company

Ks = Opportunity cost, as determined by the market, of common stock in the Company

S = Current value of common stock in the Company

Additionally, for the calculation of the cost of own funds, which, in the case on hand,

pertains to the common stock cost of each Company being acquired, the CAPM model was

applied (Capital Asset Pricing Model), according to which the formula or the calculation of

the cost of own funds is expressed as follows:

KS = KRF + (Km – KRF ) x bi

where :

KS = Own funds cost

KRF = Risk free ratio

Km – KRF = Expected difference between the yield of the portfolio of the capital market as a whole (Km) and the risk free ratio(KRF)

bi = Beta coëfficient the dependance of yield (variability) of its share in relation to an average (stable) share and in relation, at all times, to the yield (variability) of the aggregate capital market, i.e. the share's systemic risk.

For the purposes of the present valuation of the fair market price, the average capital cost

based on [available] data for the Utilities branch (water) was used as discount interest rate

for the calculation of the amortization benefit. The following data were used for its

assessment:


VALUATION STUDY

(a) as risk-free interest rate, the yield before taxes of the fifteen-year bond (August 2011)

which is 15.90%, and the net yield which was 9.67 % (Statistical Bulletin of Economic

Conjecture, issue 138, July – August 2011),

(b) as market risk premium, the assessment of the aggregate risk coëfficient for the Greek

capital market, which amounted to 15.50 % (New York University, Leonard N. Stern School

of Business),

(c) as beta coëfficient, which is used for the calculation of the opportunity cost of common

stock, the average of beta coëfficients for the Utilities branch (Water) was used; it

amounted to 0.32 (Source: New York University, Leonard N. Stern School of Business).

Based on the foregoing analysis, the common stock cost, as results from the formula (2), is

expected to evolve, in the course of the period from 1.9.2011 to 31.12.2016 according to

the data of the following table:

Ks = KRF + (Km – KRF) x bi

2011 20.60= 15.58 + (15.50) x 0.324

2012 20.04 = 15.27 + (14.73) x 0.324

2013 19.49 = 14.96 + (13.99) x 0.324

2014 18.97 = 14.67 + (13.29) x 0.324

2015 18.46 = 14.37 + (12.62) x 0.324

2016 17.97 = 14.08 + (11.99) x 0.324

Therefore, the average capital cost of the Company is expected to amount to 4.26 % for

the period 1.9-31.12.2011, to 12.51 % on 31.12.2012, to 12.26 % on 31.12.2013, to

12.02% on 31.12.2014, to 11.78 % on 31.12.2015 and to 11.55 % on 31.12.2016.

7. Assessment of the fair commercial value of the property asset "EVDORO"

As mentioned previously, the water source of the Company is a property asset representing

a certain value and, based on the [valuation] method used, said value is equal to the

present value of future profits which shall be generated by the particular property asset in

the course of its value-creating life.

According to the data and assumptions communicated by the Management of the Company,

it ensued that almost the total turnover of the Company, pursuant to the pumping of the

water from the source and its bottling by the Company itself, was realized through

agreements with commercial agents and wholesalers with whom the Company maintains a

long-standing relationship. Accordingly, the expected turnover for each financial year was

calculated by taking into account the cubic [meters] of water expected to be pumped by


VALUATION STUDY

the Company in each financial year in the period from 1.9.2011 to 31.12.2016, always

according to the historical data of the Company, the capabilities of yearly pumping as well

as the market share of the Company, and according to the assumptions of the Company on

the evolution of such data per financial year. Furthermore, according to the business plan

of the Company as relates to the evolution of the expenses and of the Management's plans

over above period, estimates of projected profits after taxes were made possible.

The table on the following page presents the calculation of the market value of the water

spring named "EVDORO", exploited by the company "LAVE S.A.", as of August 31, 2011:


VALUATION STUDY

Based on the Method of Discounted Cash Flow, the projections for income generated by the property asset "EVDORO" and after taking into

account the capital cost estimate and the tax influences, the fair market value [of the asset] amounts to € 7,170.3 thousand

approximately (for a more detailed analysis, see Attachment):


VALUATION STUDY

8. Final Valuation – Conclusion

The method used for the assessment of the fair market price of the property asset – water

spring “EVDORO” as of 31.8.2011 was discussed in detail In the preceding chapters.

Based on the expositions in the preceding pages of this study, the final assessment of the

fair market value of the property asset – water spring "EVDORO" as of 31.8.2011,

amounts to € 7,170,346.06.

The Assessor,

Agape Koussi

Chartered Auditor- Accountant

Registry Number SOEL 26731

It is hereby certified that this is a complete and accurate

translation of the attached Greek original into English.

Athens, March 8, 2012

The Translator


VASSILIS D. ΜAROULISATTORNEY AT LAW

4, LYCAVITTOU STR • 10671 ATHENSTEL. 2103637775, 2103630821

FAX 2103636479 • ATHENS BAR 12868VAT NO. 026990656

EVDORO WATER SPRING | VALUATION REPORT

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