ELLO

Business Context and Reporting Period

This Form 20-F is an annual report for Ellomay Capital Ltd. for the fiscal year ended December 31, 2009. The company, incorporated in Israel, ceased its primary operating business (wide-format digital printing) following the sale of substantially all assets to Hewlett-Packard Company (HP) on February 29, 2008. As of the reporting date, the company operates as a shell company holding cash proceeds from the HP transaction, with a strategic plan to identify new business opportunities. In March 2010, the company entered the photovoltaic market by signing contracts to construct two solar power plants in Italy.

Key Financial Metrics (Year Ended Dec 31, 2009)

Material Changes vs. Prior Period

• Cessation of Operations: Revenues dropped to zero in 2009 compared to $11.4 million in 2008 (which reflected only two months of operations prior to the HP sale). Consequently, cost of revenues and operating expenses related to the printing business were eliminated.
• Operating Expenses: General and administrative expenses decreased to $2.2 million in 2009 from $9.8 million in 2008, reflecting the winding down of the former business and reduced staff.
• Financial Income: Net financial income decreased to $1.3 million in 2009 from $7.6 million in 2008. The 2008 figure included a one-time $7.3 million gain from the amortization of deferred interest following the full repayment of bank loans.
• Net Income/Loss: The company reported a net loss of $0.97 million in 2009, a significant shift from the $87 million net income in 2008, which was driven by a $95.1 million gain on the sale of the business to HP.

Outlook, Risks, and Contingencies

• New Strategic Direction: On March 4, 2010, the company signed Engineering Procurement & Construction (EPC) contracts with Ecoware S.P.A. to build two photovoltaic plants in Italy. The project requires an initial investment of approximately €4.5 million. The company intends to finance the majority of this project through bank loans.
• HP Indemnification Claims: HP has submitted claims against the $14.5 million indemnity escrow account established during the 2008 sale. Claims totaling approximately $8.1 million and €2.4 million were made in 2009, and an additional $2.9 million claim was made in January 2010. The company disputes the majority of these claims. The outcome of these disputes is uncertain and could impact the release of escrow funds.
• Passive Foreign Investment Company (PFIC): The company believes it is a PFIC for U.S. tax purposes for 2008 and 2009 due to its asset composition (primarily cash). This status may result in adverse tax consequences for U.S. shareholders.
• Market Risks: The new photovoltaic venture is subject to risks regarding government subsidies (feed-in tariffs), regulatory changes in Italy, and the company's lack of prior experience in the solar energy sector.

Investor Verification Checklist

• Escrow Fund Status: Verify the current status of the $14.5 million HP indemnity escrow and the company's legal position regarding HP's claims.
• Photovoltaic Project Financing: Confirm whether the company has secured the bank financing intended to fund the majority of the €4.5 million Italian solar project.
• PFIC Status: Consult tax advisors regarding the implications of the company's PFIC status for U.S. shareholders.
• Share Ownership Concentration: Note that a group of investors (Kanir and Nechama Investments) beneficially owns approximately 72.2% of the outstanding ordinary shares, giving them significant control over corporate decisions.
• Liquidity vs. Operations: While the company holds ~$75 million in cash, it has no operating revenue. Verify the timeline for the solar project to generate cash flow.