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Immediate Report – Disposal of Land Holdings in China

Elco Ltd. (The Company) hereby announced that on 7.1.2016, the foreign subsidiary (100%) of the Company (The Seller) which holds 35% of a Chinese company (The Chinese Company) that owns land in China in an agreement with the other shareholder in the Chinese Company (The Buyer) in which the subsidiary would sell all of its shares in the Chinese Company, for a total gross consideration of RMB 730 million (approximately NIS 440 million, at the representative rates of the NIS, the US Dollar and RMB).

In accordance with the agreement, by 15 January 2016, the Buyer will deposit in a trust account the sum of the consideration, and this sum, less the applicable tax for the Seller in China with regards to the transaction, will be released to the Seller by and no later than 30 June 2016 pursuant to compliance with the terms specified in the Agreement including, inter alia, approval of the Chinese authorities of the engagement, and less eh deduction at source that applies to the Seller with regards to the said transaction.

Once the transaction has been completed, and in accordance with the Company's assessment regarding the results of said transaction, it expects to generate for the Company, a free cash flow after expenses in the amount of NIS 325 million. The Company also expects to record in its financial statements for the first half of 2016 a net profit in the amount of NIS 270 million. It should be noted that this data has not yet been reviewed, or audited by the Company's auditor.

The Company's assessments as specified are forward looking information, which might not materialize or that might materialize differently than expected, if the transaction is not completed due to non-compliance with the conditional terms for its completion, or will be completed under different conditions than those set forth above, if the Company's results are revealed to be higher than the current projections (including rate of deduction applied to the Seller with regards to the said transaction), any changes in the exchange rates between the Euro and the RMB and the Euro and the NIS, and factors that are not under the control of the Company or that are known at this date.