Deyaar Development PJSC — Regulatory Filings 2013

Feb 12, 2013

Consolidated financial statements for the year ended 31 December 2012

Consolidated financial statements for the year ended 31 December 2012

	Pages
Independent auditor's report	1 - 2
Consolidated balance sheet	3
Consolidated statement of income	4
Consolidated statement of comprehensive income	5
Consolidated statement of changes in equity	6
Consolidated statement of cash flows	7
Notes to the consolidated financial statements	8 - 41

Independent auditor's report

To the shareholders of Deyaar Development PJSC

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Deyaar Development PJSC ("the Company") and its subsidiaries (together, "the Group"), which comprise the consolidated b December 2012 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. financial and (together, balance sheet as at 31 in and accounting explanatory the fair these and for as management determines

Management's responsibility for the consolidated financial statements sibility

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standard necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. and for such internal control a

Auditor's responsibility

Our responsibility is to express an opinion on these consol conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance wh consolidated financial statements are free from material misstatement. consolidated financial statements based on our audit. We preparation consolidated statements that are idated on our audit. our Standards and plan reasonable whether the

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend o assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the enti fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. on the auditor's judgement, including the ntrol. e involves performing audit about and in n auditor's thematerial misstatement financial to making entity's preparation and fair order audit procedures that expressing opinion on of ntrol. evaluating the of and ofestimates made presentation obtained financial fairly, its performance and its

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at then ended in accordance with International Financial Reporting Standards. 31 December 2012 and its financial performance and its cash flows for the year ith

PricewaterhouseCoopers, Emaar Square, Building 4, Level 8, PO Box 11987, Dubai, United Arab Emirates T: +971 (0)4 304 3100, F: +971 (0)4 346 9150, www.pwc.com/middle-east Emaar Building Box 11987, United Emirates

			At 31 December
		2012	2011
	Note	AED'000	AED'000
ASSETS
Non-current assets
Property and equipment	5	35,550	41,661
Investment property	6	1,206,077	1,219,718
Investments in associates	7	273,828	277,205
Available-for-sale financial assets	9	20,517	19,507
Trade and other receivables	11	3,574	36,899
Due from related parties	12		2,394,056
		1,539,546	3,989,046
Current assets
Properties held for development and sale	10	1,970,278	2,146,707
Inventories		6,378	4,875
Due from related parties	12	2,516,120	18,898
Trade and other receivables	11	267,623	295,073
Cash and bank balances	13	268,379	339,568
		5,028,778	2,805,121
Total assets		6,568,324	6,794,167
EQUITY
Equity attributable to owners of the parent
Share capital	14	5,778,000	5,778,000
Statutory reserve	15	178,267	172,256
Exchange translation reserve		(27, 512)	(32, 282)
Available for sale fair valuation reserve	9	1,182	172
Accumulated losses		(2,025,076)	(2,057,670)
Total equity		3,904,861	3,860,476
LIABILITIES
Non-current liabilities
Borrowings	16	448,842	118,000
Advances from customers	17	114,405	197,967
Trade and other payables	18		294,368
Retentions payable	19	25,089	49,975
Provision for employees' end of service benefits	20	8,502	7,594
		596,838	667,904
Current liabilities
Borrowings	16	438,608	797,548
Advances from customers	17	640,459	895,735
Trade and other payables	18	891,030	488,550
Retentions payable	19	81,177	69,541
Due to related parties	12	15,351	14,413
		2,066,625	2,265,787
Total liabilities		2,663,463	2,933,691
Total equity and liabilities		6,568,324	6,794,167

Consolidated statement of income

		Year ended 31 December
	Note	2012 AED'000	2011 AED'000
Revenue	21	552,250	805,871
Direct costs	22	(353,242)	(706,914)
Gross profit		199,008	98,957
Other operating income	23	4,430	6,216
Expenses
General and administrative	24	(115,753)	(106,887)
Gain/(loss) on fair valuation of investment property	6	6,263	(97,534)
Operating profit/(loss)		93,948	(99,248)
Finance cost	26	(64,405)	(46,769)
Finance income	26	9,477	188,277
Finance (cost)/income, net		(54,928)	141,508
Share of results from associates	7	623	(863)
Profit before income tax		39,643	41,397
Income tax expense		(1,038)	(3,694)
Profit for the year		38,605	37,703
Profit attributable to:
Owners of the parent		38,605	37,703
Non-controlling interest		-	-
		38,605	37,703
Earning per share attributable to the equity holders of the Company
during the year - basic and diluted	27	Fils 0.67	Fils 0.65

Consolidated statement of comprehensive income

		Year ended 31 December
		2012 AED'000	2011 AED'000
Profit for the year		38,605	37,703
Other comprehensive income
Exchange translation differences		4,770	(21,155)
Change in fair value of available-for-sale financial assets	9	1,010	172
Other comprehensive income/(loss) for the year		5,780	(20,983)
Total comprehensive income for the year		44,385	16,720
Attributable to:
Owners of the parent		44,385	16,720
Non-controlling interest		-	-
Total comprehensive income for the year		44,385	16,720

Consolidated statement of changes in equity

	Share capital AED'000	Statutory reserve AED'000	Exchange translation reserve AED'000	Available for sale fair valuation reserve AED'000	Accumulated losses AED'000	Total equity AED'000
At 1 January 2011	5,778,000	155,278	(11,127)	-	(2,078,395)	3,843,756
Net profit for the year	-	-	-	-	37,703	37,703
Transfer to statutory reserve	-	16,978	-	-	(16,978)	-
Other comprehensive income/(loss)	-	-	(21,155)	172	-	(20,983)
Balance at 31 December 2011	5,778,000	172,256	(32,282)	172	(2,057,670)	3,860,476
Net profit for the year	-	-	-	-	38,605	38,605
Transfer to statutory reserve	-	6,011	-	-	(6,011)	-
Other comprehensive income	-	-	4,770	1,010	-	5,780
Balance at 31 December 2012	5,778,000	178,267	(27,512)	1,182	(2,025,076)	3,904,861

Consolidated statement of cash flows

		Year ended 31 December
		2012	2011
	Note	AED'000	AED'000
Cash flows from operating activities
Net cash generated from operating activities	28	5,880	72,066
Cash flows from investing activities
Purchase of property and equipment	5	(460)	(1,922)
Proceeds from sale of property and equipment		378	717
Proceeds on reduction of investment in an associate	7	4,000	10,362
Additions to investment property - net of project accruals	6	825	(23,162)
Movement in term deposits with original maturity more than three months	13	760	236,070
Finance income from deposits	26	7,540	22,398
Net cash generated from investing activities		13,043	244,463
Cash flows from financing activities
Repayment of borrowings		(13,474)	(140,817)
Finance costs paid	26	(66,024)	(53,963)
Net cash used in financing activities		(79,498)	(194,780)
(Decrease)/increase in cash and cash equivalents		(60,575)	121,749
Cash and cash equivalents, beginning of the year		171,369	62,447
Exchange gain/(loss) on cash and cash equivalents		4,770	(12,827)
Cash and cash equivalents, end of the year	13	115,564	171,369

Notes to the consolidated financial statements for the year ended 31 December 2012

1 Legal status and activities

Deyaar Development PJSC (the "Company") was incorporated and registered as a Public Joint Stock Company in the Emirate of Dubai, UAE on 10 July 2007. The registered address of the Company is P. O. Box 30833, Dubai, United Arab Emirates.

The principal activities of the Company and its subsidiaries (together, "the Group") are property investment and development, mechanical, electrical and plumbing works, brokering, facility and property management services.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with and comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and available-for-sale financial assets.

As a result of the downturn in the real estate market, the Group's cash flows have come under pressure. The Group's success in achieving its objectives is dependent on the realisation of the cash-flow forecasts based on a number of financial and operating assumptions. The actual outcome of these forecasts is reliant on a number of factors, such as the ability of the Group to successfully roll-over maturing loans, realise a number of significant receivables and continued improvement in the core operations.

The Board of Directors believes that the key assumptions used in the forecasts are realistic and will enable the Group to meet its obligations as they fall due and ensure the continuity of the Group's operations in the foreseeable future. Accordingly, these consolidated financial statements have been prepared on a going concern basis.

The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

On 26 December 2012, the Board of Directors of the Company decided to liquidate a wholly owned subsidiary, Omega Engineering LLC ("Omega"). Omega's net loss for the year ended 31 December 2012 amounts to AED 9,501,000 (2011: AED 573,000) and it has a net liability position of AED 108,035,000 as at 31 December 2012 (2011: AED 98,534,000). Included in Omega's liabilities is a payable to the Company amounting to AED 84,194,000 (2011: AED 69,939,000).

(a) Amended standards adopted by the Group

• IFRS 7, Financial instruments: Disclosures (amendment) effective on or after 1 July 2011, the amendments promote transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures; and
• IAS 12, Income taxes (amendment) effective on or after 1 January 2012, the amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

• (b) New standards, amendments and interpretation issued but not effective for the financial year beginning 1 January 2012 and not early adopted by the Group
• IAS 1 (amendment), 'Financial statement presentation', (effective for periods beginning on or after 1 July 2012);
• IAS 19 (amendment), 'Employee benefits', (effective from 1 January 2013);
• IAS 27 (amendment), 'Separate financial statements', (effective from 1 January 2013);
• IAS 28 (amendment), 'Associates and joint ventures', (effective from 1 January 2013);
• IAS 32 (amendment), 'Financial instruments: Presentation', (effective from 1 January 2014);
• IFRS 1, 'First time adoption' (amendment), (effective from 1 January 2013);
• IFRS 7, 'Financial instruments: Disclosures' (amendment), (effective from 1 January 2013);
• IFRS 9, 'Financial instruments', (effective from 1 January 2015);
• IFRS 10, 'Consolidated Financial Statements', (effective from 1 January 2013);
• IFRS 11, 'Joint Arrangements', (effective from 1 January 2013);
• IFRS 12, 'Disclosure of Interests in Other Entities', (effective from 1 January 2013);
• IFRS 13, 'Fair Value Measurement', (effective from 1 January 2013); and
• IFRIC 20, 'Stripping costs in the production phase of a surface mine', (effective from 1 January 2013);

Under the new standard IFRS 11, 'Joint Arrangements', proportionate consolidation of joint ventures is no longer allowed. This will impact the presentation of the consolidated balance of the Group, given that the joint-ventures are currently being consolidated on a proportional line by line basis (Note 8).

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

2.2 Basis of consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.2 Basis of consolidation (continued)

(b) Eliminations on consolidation

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Consolidated financial statements are prepared using uniform accounting policies for like transactions. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(c) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates includes goodwill identified on acquisition.

The Group's share of post-acquisition profit or loss is recognised in the consolidated statement of income, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in associates is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated statement of income.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group's consolidated financial statements only to the extent of unrelated investor's interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

(d) Joint ventures

The Group's interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the joint ventures' individual income and expenses, assets and liabilities and cash flows on a lineby-line basis with similar items in the Group's consolidated financial statements.

The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the Group's purchase of assets from the joint venture until it re-sells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in United Arab Emirates Dirham ("AED"), which is the Company's functional and the Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of income.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of income within "finance income or cost". All other foreign exchange gains and losses are presented in the consolidated statement of income within "other operating income or expense".

(c) Group entities

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (i) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
• (ii) Income and expenses for each statement of income are translated at average exchange rates; and
• (iii) All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings are taken to equity.

On the disposal of a foreign operation (that is, a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation) all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.5 Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. The cost of property and equipment is its purchase cost together with any incidental costs of acquisition. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the consolidated statement of income during the financial year in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated on the straight-line method, at rates calculated to reduce the cost of assets to their estimated residual value over their expected useful lives, as follows:

Type of assets	Years
Buildings	20
Leasehold improvements	4
Furniture and fixtures	4 - 5
Office equipment	4
Motor vehicles	4

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the asset's carrying amount. These are recognised within "other income or expense" in the consolidated statement of income.

Capital work-in-progress is stated at cost and includes property that is being developed for future use. When commissioned, capital work-in-progress is transferred to the respective category, and depreciated in accordance with the Group's policy.

2.6 Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property.

Investment property is measured initially at cost, including related transaction costs and where applicable borrowing costs (see Note 2.17).

After initial recognition, investment property is carried at fair value. Investment property under construction is measured at fair value if the fair value is considered to be reliably determinable. Investment property under construction for which the fair value cannot be determined reliably, but for which the Group expects that the fair value of the property will be reliably determinable when construction is completed, are measured at cost less impairment until the fair value becomes reliably determinable or construction is completed - whichever is earlier. Fair value is based on active market prices, adjusted, if necessary, to reflect the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. Valuations are performed as of the financial position date by professional valuers who hold recognised and relevant professional qualifications and have recent experience in the location and category of the investment property being valued. These valuations form the basis for the carrying amounts in the consolidated financial statements.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.6 Investment property (continued)

It may sometimes be difficult to determine reliably the fair value of the investment property under construction. In order to evaluate whether the fair value of an investment property under construction can be determined reliably, management considers the following factors, among others:

• The provisions of the construction contract;
• The stage of completion;
• Whether the project/property is standard (typical for the market) or non-standard;
• The level of reliability of cash inflows after completion;
• The development risk specific to the property;
• Past experience with similar constructions;
• Status of construction permits; and
• Availability of funding.

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

The fair value of investment property does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future expenditure other than those a rational market participant would take into account when determining the value of the property.

Changes in fair values are recognised in the consolidated statement of income. Investment properties are derecognised when they have been disposed.

Where the Group disposes of a property at fair value in an arm's length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the consolidated statement of income within net gain from fair value adjustment on investment property.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment. Its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.

If an item of owner-occupied property becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is treated in the same way as a revaluation under IAS 16. Any resulting increase in the carrying amount of the property is recognised in profit or loss to the extent that it reverses a previous impairment loss, with any remaining increase recognised in other comprehensive income and increase directly to equity in revaluation surplus within equity. Any resulting decrease in the carrying amount of the property is initially charged in other comprehensive income against any previously recognised revaluation surplus, with any remaining decrease charged to profit or loss.

Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to property held for development and sale. A property's deemed cost for subsequent accounting as inventories is its fair value at the date of change in use.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.7 Impairment of non-financial assets

Assets that have an indefinite useful life, for example land and goodwill, are not subject to depreciation or amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows ("cash generating units"). Non-financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. A reversal of an impairment loss for an asset shall be recognised immediately in the consolidated statement of income. After a reversal of an impairment loss is recognised, the depreciation/amortisation charge of the asset shall be adjusted in future periods to allocate the asset's revised carrying amount, less residual value over the remaining useful life.

2.8 Financial assets

2.8.1 Classification

The Group classifies its financial assets in the categories set out below. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivables are carried at amortised cost using the yield method. Loans and receivables are classified as trade and other receivables, due from related parties, and cash and cash equivalents (Notes 11, 12 and 13) in the consolidated balance sheet.

(b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories of financial assets. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

2.8.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date, being the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Available-for-sale financial assets are subsequently carried at fair value. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership.

Changes in the fair value of the available-for-sale financial assets are recognised in other comprehensive income. Dividends on available-for-sale financial assets are recognised in the consolidated statement of income as part of other income when the Group's right to receive payments is established.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.9 Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaired.

A financial asset or a Group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted using the yield method. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of income.

(b) Assets classified as available-for-sale

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the consolidated statement of income. Impairment losses recognised in the consolidated statement of income on equity instruments are not reversed through the consolidated statement of income.

2.10 Property held for development and sale

Land and buildings identified as held for sale, including buildings under construction, are classified as such and are stated at the lower of cost and estimated net realisable value. The cost of work-in-progress comprises construction costs and other related direct costs. Net realisable value is the estimated selling price in the ordinary course of business, less cost of completion and selling expenses.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.11 Trade and other receivables

Trade receivables are amounts due from customers for properties sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the yield method, less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted using the yield method.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the consolidated statement of income. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited to the consolidated statement of income.

2.12 Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

2.13 Employee benefits

(a) End of service benefits to non-UAE nationals

An accrual is made for employees employed in the UAE for estimated liability for their entitlement to annual leave and leave passage as a result of services rendered up to the balance sheet date.

Provision is also made, using actuarial techniques, for the end of service benefits due to employees in accordance with the UAE Labour Law for their periods of service up to the balance sheet date. The provision relating to annual leave and leave passage is disclosed as a current liability, while that relating to end of service benefits is disclosed as a non-current liability.

(b) Pension and social security policy within the U.A.E

The Group is a member of the pension scheme operated by the Federal Pension General and Social Security Authority. Contributions for eligible UAE National employees are made and charged to the consolidated statement of income, in accordance with the provisions of Federal Law No. 7 of 1999 relating to Pension and Social Security Law.

2.14 Advances from customers

Instalments received from buyers, for properties sold or services performed, prior to meeting the revenue recognition criteria, are recognised as advances from customers. If their settlement, through revenue recognition or refund, is expected in one year or less, they are classified as current liabilities. If not, they are presented as noncurrent liabilities.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.15 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. These are recognised initially at fair value and subsequently measured at amortised cost using the yield method.

2.16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of income over the period of the borrowings using the yield method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.

2.17 Borrowings costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.18 Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and risks specific to the obligation. Increases in provisions due to the passage of time are recognised as finance cost.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.19 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.

(a) Sales of properties

Revenue from sales of properties is recognised in the consolidated statement of income when the risks and rewards of ownership are transferred to the buyer, which is deemed to take place when legal title passes to the buyer. The significant risks and rewards are deemed to be transferred when the title deed is registered in the name of the buyer, which in the case of properties, generally takes place only upon completion of construction and physical handover of the property. However, in certain circumstances, equitable interest in the property may vest in the buyer before the legal title passes and therefore the risks and rewards of ownership are transferred at that stage. In such cases, provided that the Group has no further substantial acts to complete in connection with the sale of the property, revenue is recognised when equitable interest in the property passes to the buyer.

(b) Forfeiture income

Forfeiture income is recognised in the consolidated statement of income when, in the case of properties sold and not yet recognised as revenue, a customer does not fulfil to the contractual payment terms. This is deemed to take place when, despite rigorous follow-up with the defaulted customer, as per the procedures set out by the Dubai Real Estate Regulatory Authority, the customer continues to default on the contractual terms.

(c) Contract revenue for mechanical, electrical and plumbing works

A construction contract is defined by IAS 11, 'Construction contracts', as a contract specifically negotiated for the construction of an asset.

When the outcome of a contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract by reference to the stage of completion. Contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

When the outcome of a contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that they have been agreed with the customer and are capable of being reliably measured.

The Group uses the "percentage-of-completion method" to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion.

On the balance sheet, the Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

2 Summary of significant accounting policies (continued)

2.19 Revenue recognition (continued)

(d) Service revenue

Revenue from services such as property and facilities management is recognised in the accounting period in which the services are rendered.

(e) Leasing income

Leasing income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides operating lease incentives to its customers, the aggregate cost of incentives are recognised as a reduction of rental income over the lease term on a straight-line basis.

(f) Finance income

Finance income is recognised in the consolidated statement of income on a time-proportion basis using the yield method.

(g) Dividend income

Dividend income is recognised when the right to receive the dividend is established.

2.20 Income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the subsidiaries and associates of the Group operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to operations where applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

2.21 Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's consolidated financial statements in the period in which the dividends are approved by the Company's shareholders.

2.22 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of income on a straight-line basis over the period of the lease.

2.23 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

3 Financial risk management

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, cash flow and fair value profit rate risk and other price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies and evaluates financial risks in close co-operation with the Group's operating units.

• (a) Market risk
• (i) Currency risk

Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The Group does not have any significant exposure to foreign currency risk since the majority of the transactions are denominated in AED, US Dollar or other currencies, whereby the AED or other currencies are pegged to the US Dollar.

(ii) Price risk

The Group is exposed to equity securities price risk through investments held by the Group and classified as available-for-sale. The Group is not exposed to commodity price risk.

(iii) Cash flow and fair value profit rate risk

The Group has an insignificant profit rate risk arising from profit bearing bank deposits. Bank deposits are placed with banks offering favourable rates. The Group's profit rate risk arises from its profit bearing liabilities.

At 31 December 2012, if profit rates on borrowings had been 1% higher/lower with all other variables held constant, profit for the year would have been AED 9,015,000 lower/higher (2011: profit for the year would have been AED 9,633,000 lower/higher), mainly as a result of higher/lower finance expense on floating rate borrowings.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(b) Credit risk

The Group is exposed to credit risk in relation to its monetary assets, mainly trade receivables, due from related parties, and bank deposits. Trade receivables are made to customers with an appropriate credit history. The Group has no other significant concentrations of credit risk. Bank deposits are limited to high-credit-quality financial institutions.

The table below presents an analysis of short term bank deposits and cash and cash equivalents by rating agency designation at the end of reporting period based on Moody's ratings or its equivalent for the main banking relationships:

Counterparties with external credit rating (Moody's)	2012 AED'000	2011 AED'000
A2	896	2,485
Aa3	562	563
Ba3	271	300
Baa1	98,907	167,993
Baa2	64,415	63,169
*	102,801	104,621
	267,852	339,131

* Balances of AED 102,801,000 (2011: AED 104,621,000) are maintained with banks with no formal credit rating. However, management views these banks to be high-credit-quality financial institutions and does not expect these financial institutions to default.

The table above excludes cash in hand amounting to AED 526,000 (2011: AED 437,000).

(c) Liquidity risk

The Group monitors its risk of a possible shortage of funds using cash flow forecasts. These forecasts consider the maturity of both its financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank facilities. The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecasted and actual cash flows and matching the maturity profiles of financial assets and liabilities. The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

3 Financial risk management (continued)

3.1 Financial risk factors (continued)

(c) Liquidity risk (continued)

	Within 1	2 to 5	More than 5
	year AED'000	years AED'000	years AED'000
As at 31 December 2012
Islamic finance facilities	321,309	421,914	65,283
Other borrowings	130,844	1,971	-
Trade and other payables	881,211	-	-
Retention payables	81,177	25,089	-
Due to related parties	15,351	-	-
	1,429,892	448,974	65.283
As at 31 December 2011
Islamic finance facilities	684,214	131,337	-
Other borrowings	165,762	-	-
Trade and other payables	360,107	396,888	-
Retention payables	69,541	49,975	-
Due to related parties	14,413	-	-
	1,294,037	578,200	-

3.2 Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to maximise returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and noncurrent borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as "equity" as shown in the consolidated balance sheet plus net debt.

The gearing ratios at 31 December were as follows:

	2012	2011
	AED'000	AED'000
Total borrowings (Note 16)	887,450	915,548
Less: cash and bank balances (Note 13)	(268,379)	(339,568)
Net debt	619,071	575,980
Total equity	3,904,861	3,860,476
Total capital	4,523,932	4,436,456
Gearing ratio	14%	13%

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

3 Financial risk management (continued)

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group's assets that are measured at fair value:

	Level 1 AED'000	Level 2 AED'000	Level 3 AED'000	Total AED'000
As at 31 December 2012
Available-for-sale financial assets	-	-	20,517	20,517
As at 31 December 2011
Available-for-sale financial assets	-	-	19,507	19,507

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market profit rate that is available to the Group for similar financial instruments. Other receivables and payables approximate their fair values.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Valuation of investment property

The Group carries its investment property at fair value, with changes in fair value being recognised in the consolidated statement of income. The Group engaged independent valuation specialists to determine the fair values of investment properties as at 31 December 2012. For investment properties under construction, management used a valuation technique based on a discounted cash flow model, as there is a lack of comparable market data because of the nature of the properties.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

4 Critical accounting estimates and judgements (continued)

4.1 Critical accounting estimates and assumptions (continued)

(a) Valuation of investment property (continued)

For investment property under construction or development and measured at fair value, the estimated period from 31 December 2012 to completion is 1 year. If the period to completion was to increase by 1 year, the impact on the fair value would be an estimated decrease of AED 72,468,000 with a corresponding effect to the consolidated statement of income (2011: AED: 72,251,000).

The future rental rates were estimated depending on the actual location, type and quality of the properties, and taking into account market data and projections at the valuation date. Were the market rentals assumed in the discounted cash flow analysis to increase or decrease by 10% from management's estimate, the carrying amount of investment property that are valued by the discounted cash flow method (DCF) would be an estimated AED 144,373,000 higher or lower, respectively (2011: AED 144,373,000).

Were the discount rate used in the DCF analysis to increase by 10%, the carrying amount of investment property would be an estimated decrease of AED 168,734,000 with a corresponding effect to the consolidated statement of income (2011: AED 167,502,000).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

5 Property and equipment

	Land and buildings AED'000	Leasehold improvements AED'000	Furniture and fixtures AED'000	Office equipment AED'000	Motor vehicles AED'000	Capital work in-progress AED'000	Total AED'000
Cost At 1 January 2011	35,845	381	17,270	23,505	5,772	1,564	84,337
Additions	1,253		- 69	584	-	16	1,922
Disposals		-	- (10,028)	(120)	(3,480)	-	(13,628)
Transfers		-	- -	1,580	-	(1,580)	-
At 31 December 2011	37,098	381	7,311	25,549	2,292	-	72,631
Additions	237		- 35	188	-	-	460
Disposals		-	- (1,009)	(989)	(1,614)	-	(3,612)
At 31 December 2012	37,335	381	6,337	24,748	678	-	69,479
Depreciation
At 1 January 2011	1,145	375	13,618	14,696	4,226	-	34,060
Charge for the year	1,928		6 1,661	4,256	910	-	8,761
Disposals		-	- (8,609)	(44)	(3,198)	-	(11,851)
At 31 December 2011	3,073	381	6,670	18,908	1,938	-	30,970
Charge for the year	1,961		- 533	3,628	277	-	6,399
Disposals		-	- (891)	(980)	(1,569)	-	(3,440)
At 31 December 2012	5,034	381	6,312	21,556	646	-	33,929
Net book amount - 31 December 2011	34,025		- 641	6,641	354	-	41,661
Net book amount - 31 December 2012	32,301		- 25	3,192	32	-	35,550

Buildings with a carrying value of AED 23,237,000 (2011: AED 24,528,000) are mortgaged under Islamic finance obligations (Note 16).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

5 Property and equipment (continued)

	Year ended 31 December 2012 AED'000	Year ended 31 December 2011 AED'000
Depreciation charge is included under:
Direct costs	466	1,334
General and administrative expenses (Note 24)	5,933	7,427
	6,399	8,761

6 Investment property

	Capital work
	Land	Buildings	in-progress	Total
	AED'000	AED'000	AED'000	AED'000
1 January 2011	282,074	90,485	952,127	1,324,686
Additions	-	1,081	-	1,081
Reversal of accruals	-	-	(7,348)	(7,348)
Capitalised borrowing costs (Note 26)	-	-	30,293	30,293
Transfer to a real estate investment trust
(Note 9)	-	(19,335)	-	(19,335)
Transfer to a related party	-	(6,765)	-	(6,765)
Net loss from fair value adjustments on
investment property	(11,482)	(9,616)	(76,436)	(97,534)
Effect of translation to presentation
currency	(5,360)	-	-	(5,360)
31 December 2011	265,232	55,850	898,636	1,219,718
Additions	-	825	-	825
Reversal of accruals	-	-	(19,015)	(19,015)
Net gain/(loss) from fair value adjustments
on investment property	7,746	-	(1,483)	6,263
Effect of translation to presentation
currency	(1,714)	-	-	(1,714)
31 December 2012	271,264	56,675	878,138	1,206,077

The Group determined that the fair value of all of its investment properties under construction at 31 December 2012 were reliably determinable on a continuing basis. The investment property under construction has been internally determined using a valuation technique, as there is a lack of comparable market data because of the nature of the properties. The valuation was based on a discounted cash flow model supported by current market rents for similar properties in the same location adjusted to reflect the level of completion of construction of these properties.

At 31 December 2012, the Group did not have any un-provided contractual obligations for future repairs and maintenance.

Bank borrowings to the value of AED 158,500,000 (2011: AED 106,952,000) are secured on investment property (Note 16).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

6 Investment property (continued)

The following amounts have been recognised in the consolidated statement of income in respect of investment property:

	2012	2011
	AED'000	AED'000
Rental income	4,332	1,885
Direct operating expenses arising from investment properties under lease	(763)	(756)
	3,569	1,129

7 Investments in associates

	2012	2011
	AED'000	AED'000
At 1 January	277,205	288,430
Share of profit/(loss)	623	(863)
Capital reduction	(4,000)	(10,362)
At 31 December	273,828	277,205

The Group has a 22.72% interest in Solidere International Al Zorah Equity Investments Inc ("Al Zorah"), a company registered in the Cayman Islands. The associate is a holding company investing in companies engaged in property development.

The Group has a 40% interest in Landmark Properties LLC ("Landmark Properties"), a company registered in the United Arab Emirates which is involved in real estate brokerage.

Summarised financial information relating to the Group's share of its associates is as follows:

Name	% interest held	Assets AED'000	Liabilities AED'000	Revenue AED'000	Net profit/(loss) AED'000
31 December 2012
Al Zorah	22.72	255,469	(50,398)	2,596	1,400
Landmark properties	40.00	698	(287)	660	(777)
		256,167	(50,685)	3,256	623
31 December 2011
Al Zorah	22.72	254,020	(50,350)	3,983	1,801
Landmark properties	40.00	14,174	(9,295)	3,286	(2,664)
		268,194	(59,645)	7,269	(863)

The Group's share of its associates' commitments amounts to AED 7,429,000 (2011: AED 11,986,000).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

8 Investments in joint ventures

The Group has a 50% interest in the following joint ventures, which are engaged in property development. The following amounts represent the Group's 50% share of the assets, liabilities, revenue and results of the joint ventures. They also include consolidation adjustments made at the Group's level to ensure uniform accounting policies. They are included in the consolidated balance sheet and statement of income of the Group:

Name	% interest held	Non-current assets AED'000	Current assets AED'000	Non-current liabilities AED'000	Current liabilities AED'000	Net profit / (loss) AED'000
31 December 2012
Arady Development LLC	50	878,111	35,288	6,575	509,317	(1,528)
Dubai International
Development Co. LLC (*)	50	-	150	-		- -
Alarko Deyaar Gayrimenkul	50	111,444	79,489	-		6 (6,944)
		989,555	114,927	6,575	509,323	(8,472)
31 December 2011
Arady Development LLC	50	940,576	35,216	6,535	528,689	(31,013)
Dubai International
Development Co. LLC (*)	50	-	150	-		- -
Alarko Deyaar Gayrimenkul	50	117,811	79,489	-		5 33,524
		1,058,387	114,855	6,535	528,694	2,511

The Group's proportionate share in joint ventures commitments is AED 289,617,000 (2011: AED 292,659,000).

(*) This joint venture did not commence its commercial activities.

9 Available-for-sale financial assets

	2012	2011
	AED'000	AED'000
1 January	19,507	-
Transfer from investment property (Note 6)	-	19,335
Change in fair value	1,010	172
31 December	20,517	19,507

The fair valuation gain of AED 1,010,000 (2011: AED 172,000) was recorded in the consolidated statement of comprehensive income.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

10 Property held for development and sale

	Properties held	Properties under	Land held for future
	for sale AED'000	construction AED'000	development AED'000	Total AED'000
1 January 2011	252,342	2,169,888	240,000	2,662,230
Additions	-	98,354	-	98,354
Provision for impairment (Note 22)	(113,139)	(4,294)	-	(117,433)
Reversal of impairment (Note 22)	9,363	35,777	-	45,140
Capitalised borrowing costs (Note 26)	-	5,121	-	5,121
Transfers	1,067,438	(1,067,438)	-	-
Sales, net of returns (Note 22)	(546,705)	-	-	(546,705)
31 December 2011	669,299	1,237,408	240,000	2,146,707
Additions	-	145,544	-	145,544
Provision for impairment (Note 22)	(145,173)	-	-	(145,173)
Reversal of impairment (Note 22)	46,344	31,660	-	78,004
Capitalised borrowing costs (Note 26)	-	1,619	-	1,619
Transfers	482,165	(482,165)	-	-
Sales (Note 22)	(256,423)	-	-	(256,423)
31 December 2012	796,212	934,066	240,000	1,970,278

Management's assessment of the net realisable value of the property held for development and sale resulted in a net write down of AED 67,169,000 (2011: AED 72,293,000), charged to the consolidated statement of income under "direct costs" (Note 22).

Net realisable value has been determined on the basis of committed sale price if the remaining receivable amount is lower than the current market value of the units booked by customers. For units not yet booked by customers, net realisable value takes into consideration current market prices.

A building and a plot of a land with a total carrying value of AED 277,995,000 (2011: AED 277,400,000) are mortgaged under Islamic finance obligations (Note 16).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

11 Trade and other receivables

	2012	2011
	AED'000	AED'000
Trade receivables	205,404	217,387
Less: provision for impairment of trade receivables	(151,339)	(150,803)
	54,065	66,584
Retention receivables	19,129	51,051
Less: provision for impairment of retention receivables	(7,875)	(1,817)
	11,254	49,234
Advance for purchase of property	187,510	187,510
Less: provision for impairment of other receivables	(187,510)	(187,510)
Receivable on cancelled purchase agreement	117,900	120,163
Advances to contractors	44,777	61,973
Advances to suppliers	20,708	11,799
Prepayments and other receivables	3,699	5,079
Amounts due from customers for contract works	-	3,343
Other debtors	18,794	13,797
	205,878	216,154
	271,197	331,972
Less: current portion	(267,623)	(295,073)
Non-current portion	3,574	36,899
Amounts due from customers for contract works are analysed as follows:
Contract costs incurred and recognised profits	129,914	1,041,102
Less: progress billings	(135,581)	(1,056,802)
	(5,667)	(15,700)
Analysed as:
Amounts due to customers for contract works (Note 18)	(5,667)	(19,043)
Amounts due from customers for contract works	-	3,343
The non-current portion of trade and other receivables is analysed as follows:
Non-current trade receivables	3,574	6,222
Non-current retention receivables	-	30,677
	3,574	36,899

As of 31 December 2012, trade receivables of AED 39,269,000 (2011: AED 49,642,000) were fully performing.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

11 Trade and other receivables (continued)

As of 31 December 2012, trade receivables of AED 14,796,000 (2011: AED 16,942,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

	2012 AED'000	2011 AED'000
Up to 3 months	3,150	4,461
Over 3 months	11,646	12,481
	14,796	16,942

As of 31 December 2012, trade receivables of AED 151,339,000 (2011: AED 150,803,000) were impaired and fully provided for. The individually impaired receivables mainly relate to customers who are in difficult economic situations. The ageing analysis of these trade receivables is as follows:

	2012 AED'000	2011 AED'000
Over 6 months	151,339	150,803

The movements on the Group's provision for impairment of trade receivables are as follows:

	2012 AED'000	2011 AED'000
At 1 January	150,803	157,763
Provision for impairment of trade receivables (Note 24)	3,163	18,180
Receivables written off during the year as uncollectable	(2,627)	-
Reversal	-	(25,140)
At 31 December	151,339	150,803

The movements on the Group's provision for impairment of retention receivables are as follows:

	2012 AED'000	2011 AED'000
At 1 January	1,817	-
Provision for impairment of retention receivables (Note 24)	6,058	1,817
At 31 December	7,875	1,817

The creation and release of the provision for impaired receivables have been included in the consolidated statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable. The Group holds title deeds of the assets sold or post dated cheques as security.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

12 Transactions and balances with related parties

Related parties include the significant shareholders, key management personnel, associates, joint ventures, directors and businesses which are controlled directly or indirectly by the significant shareholders or directors or over which they exercise significant management influence.

(a) Related party transactions

During the year, the Group entered into the following significant transactions with related parties in the normal course of business and at prices and terms agreed by the Group's management.

2012	2011 AED'000
	2,936
	6,765
	19,335
22,868	21,832
	649
	720
24,463	23,201
	2011
AED'000	AED'000
	2,394,056
-	2,394,056
18,856	17,782
2,497,264	1,116
2,516,120	18,898
	AED'000 1,547 - - 942 653 2012 -

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

12 Transactions and balances with related parties (continued)

Cash and bank balances include a fixed deposit amount of AED 40,000,000 (31 December 2011: AED 80,917,000) deposited with Dubai Islamic Bank, a significant shareholder of the Company.

At 31 December 2012, the Group had bank borrowings from Dubai Islamic Bank of AED 377,739,000 (2011: AED 390,000,000).

In 2010, the Company entered into a sale and purchase agreement with a related party to sell properties and rights to purchase plots amounting to AED 2,237,435,000. The salient terms and conditions of the transaction are as follows:

• i. The sale consideration was receivable on or before 1 June 2016;
• ii. The sale consideration can be settled in cash or kind or a combination of both, at the discretion of the purchaser. Where settlement is in kind, the fair value of the assets transferred will be determined by an independent valuation expert, to be selected by the seller and purchaser; and
• iii. The commitment on the remaining purchase price of the land held for development remains with the Company.

At 31 December 2011, the non-current amount due from other related party represented the net present value of the above consideration discounted at a rate of 7% per annum.

During the year, the Company has signed an amendment to the original sale and purchase agreement whereby, with effect from 20 April 2012, the sale consideration has been reduced by AED 731 million, as a result of the purchaser's commitment to settle this balance on demand in cash or kind or a combination of both. Management's expectation is that the receivable will be settled during the forthcoming year.

The impact of unwinding the fair value discount on the non-current receivable offsets the reduction in the sale consideration.

(c) Due to related parties comprises:

	2012 AED'000	2011 AED'000
Current Due to a significant shareholder	2,347	2,148
Due to joint venture partner	13,004	12,265
	15,351	14,413

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

13 Cash and bank balances

	2012 AED'000	2011 AED'000
Cash and bank balances including call deposits	60,751	154,183
Short-term fixed deposits	207,102	184,948
Cash on hand	526	437
	268,379	339,568

Cash and cash equivalents include the following for the purposes of the consolidated statement of cash flows:

	2012 AED'000	2011 AED'000
Cash and bank balances Less: bank overdraft Less: deposits with original maturity of more than three months	268,379 (132,815) (20,000)	339,568 (147,439) (20,760)
Cash and cash equivalents	115,564	171,369

Short-term fixed and call deposits bear profit ranging from 1.19% to 1.69% per annum (2011: 0.20% to 3.125% per annum).

14 Share capital

At 31 December 2012, share capital comprised of 5,778,000,000 shares of AED 1 each (2011: 5,778,000,000 shares of AED 1 each). All shares are authorised, issued and fully paid up.

15 Legal reserve

In accordance with the UAE Commercial Companies Law of 1984 (as amended) and the Company's Articles of Association, 10% of the profit for the year is transferred to a statutory reserve, which is not distributable. Transfers to this reserve are required to be made until such time as it equals at least 50% of the paid up share capital.

16 Borrowings

	2012	2011
	AED'000	AED'000
Non-current
Islamic finance obligations	446,871	118,000
Other Islamic borrowings	1,971	-
	448,842	118,000
Current
Islamic finance obligations	302,283	646,167
Other Islamic borrowings	136,325	151,381
	438,608	797,548
Total borrowings	887,450	915,548

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

	Islamic finance	Other Islamic
	obligations	borrowings	Total
	AED'000	AED'000	AED'000
1 January 2011	878,475	153,485	1,031,960
Additions	-	32,186	32,186
Repayments	(114,308)	(34,290)	(148,598)
31 December 2011	764,167	151,381	915,548
Additions	-	8,462	8,462
Transfers	19,978	(19,978)	-
Repayments	(34,991)	(1,569)	(36,560)
31 December 2012	749,154	138,296	887,450

16 Borrowings (continued)

The Islamic finance obligations represent Ijarah and Mudarabah facilities obtained from Dubai Islamic Bank PJSC (a significant shareholder), and from other local Islamic banks and financial institutions. The facilities are used to finance the properties under construction. The Islamic finance obligations carried an effective profit rate of 1 month EIBOR + 3%, with a minimum of 5%, to 6.25% per annum (2011: 1 month EIBOR + 3%, with a minimum of 4.5% to 6.25% per annum), and are repayable in equal monthly or quarterly instalments over a period of five to ten years from the balance sheet date. The Islamic finance obligations are secured by mortgages over property held for development and sale (Note 10), a building (Note 5) and an investment property (Note 6).

The other Islamic borrowings include an overdraft facility amounting to AED 132,815,000 (2011: AED 147,439,000) with a local Islamic bank and carried an effective profit rate based on 3 months EIBOR + 4.5%, with a minimum of 9.5% (2011: 3 months EIBOR + 4.5%, with a minimum of 9.5%). Subsequent to the year end, the Group has signed a restructuring agreement with the bank (subject to certain conditions), whereby the overdraft has been restructured into a loan repayable over a six-year period, with a revised profit rate of 3 months EIBOR + 3%, with a minimum of 5.5%. The revised profit rate is effective from 1 March 2012.

The borrowings include an amount of AED 377,739,000 (2011: AED 395,512,000) obtained from the significant shareholder.

17 Advances from customers

Advances from customers represent instalments received from customers towards purchases of land and property held for development and sale of AED 754,618,000 (2011: AED 1,088,038,000) and towards customer contracts of AED 246,000 (2011: AED 5,664,000).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

18 Trade and other payables

	2012	2011
	AED'000	AED'000
Trade payables	133,434	106,820
Payables for purchase of land	411,834	308,348
Accrued Islamic facilities charges	64,444	49,715
Project cost accruals	57,271	131,835
Amounts due to customers for contract works	5,667	19,043
Tax payable	4,152	6,880
Other payables and accrued expenses	214,228	160,277
	891,030	782,918
Less: current portion	(891,030)	(488,550)
Non-current portion	-	294,368

19 Retentions payable

	2012	2011
	AED'000	AED'000
Non-current portion	25,089	49,975
Current portion	81,177	69,541
Retentions payable	106,266	119,516

Non-current retentions are due to be paid to contractors within 1 to 5 years from the balance sheet date. The fair value of non-current retentions payable approximate to their carrying amounts as the impact of discounting is not significant.

20 Provision for employees' end of service benefits

	2012	2011
	AED'000	AED'000
At 1 January	7,594	8,529
Charge for the year (Note 25)	2,476	2,208
Payments	(1,568)	(3,143)
At 31 December	8,502	7,594

In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present value of its obligations as at 31 December 2012 and 2011, using the projected unit credit method, in respect of employees' end of service benefits payable under the UAE labour law. Under this method an assessment has been made of the employee's expected service life with the Group and the expected basic salary at the date of leaving the service. Future salary increases have been estimated on a basis consistent with the natural progression of an employee's salary in line with the Group's salary scales, past experience and market conditions. Management has assumed average increment/promotion costs of 5% (2011: 5%). The expected liability at the date of leaving the service has been discounted to its net present value using a discount rate of 3% (2011: 4.5%).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

21 Revenue

	2012	2011
	AED'000	AED'000
Sale of properties	264,736	634,723
Forfeiture income	193,958	139,545
Property management	29,931	27,863
Facilities management	24,500	16,569
Leasing income	21,818	7,816
Contract revenue	16,774	52,485
Others	533	1,712
Properties returned	-	(74,842)
	552,250	805,871
22 Direct costs
Cost of properties sold (Note 10)	256,423	587,010
Provision for impairment of property held for development and sale, net
(Note 10)	67,169	72,293
Facilities management	12,913	6,504
Contract costs	10,613	73,646
Leasing cost	4,588	5,064
Others	1,536	2,702
Properties returned (Note 10)	-	(40,305)
	353,242	706,914
23 Other operating income
Consolidation fees	114	2,043
Other operating income	4,316	4,173
	4,430	6,216
24 General and administrative expenses
Staff costs (Note 25)	59,105	56,176
Association fees	11,909	11,108
Legal and professional charges	9,551	11,950
Provision for/(reversal of) impairment of trade and other receivables, net
(Note 11)	9,221	(5,143)
Depreciation (Note 5)	5,933	7,427
Communication expenses Marketing and selling expenses	2,961 2,921	2,685 3,050
Rent	1,604	2,820
Write-off of trade receivable	-	2,770
Others	12,548	14,044
	115,753	106,887

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

25 Staff costs

	2012 AED'000	2011 AED'000
Salaries and wages	45,565	43,600
End of service benefits (Note 20)	2,476	2,208
Other benefits	11,408	10,368
	59,449	56,176
Included under
Direct cost	344	-
General and administrative expenses (Note 24)	59,105	56,176
	59,449	56,176
26 Finance (cost)/income
Finance cost on bank borrowings	66,024	62,924
Finance cost on unwinding of discounted trade payables	-	19,259
Less: amounts capitalised on qualifying assets (Notes 6, 10)	(1,619)	(35,414)
Total finance cost	64,405	46,769
Finance income on short-term bank deposits	7,540	22,398
Finance income on unwinding of discounted receivable from a related party	-	156,621
Finance income on unwinding of discounted trade receivables	1,937	9,258
Total finance income	9,477	188,277

27 Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year (Note 14).

Net finance (cost)/income (54,928) 141,508

	2012	2011
Profit attributable to equity holders of the Company (AED'000) Weighted average number of ordinary shares in issue (thousands)	38,605 5,778,000	37,703 5,778,000
Earnings per share (fils)	0.67	0.65

Diluted

The Company has not issued any instruments which would have a dilutive impact on earnings per share when exercised.

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

	2012	2011
	AED'000	AED'000
Profit before tax	39,643	41,397
Adjustment for:
Depreciation (Note 5)	6,399	8,761
Provision for employees' end of service benefits (Note 20)	2,476	2,208
Provision for/(reversal of provision) for doubtful debts (Note 24)	9,221	(5,144)
Write-off of trade receivable (Note 24)	-	2,770
Provision for impairment of property held for development and sale
(Note 22)	67,169	72,293
Finance income (Note 26)	(9,477)	(188,277)
Finance costs (Note 26)	64,405	46,769
Share of results from associates (Note 7)	(623)	863
(Gain)/loss on fair valuation of investment properties (Note 6)	(6,262)	97,534
(Gain)/loss on disposal of property and equipment (Note 24)	(206)	1,060
Operating cash flows before payment of employees' end of service
benefits and changes in working capital	172,745	80,234
Payment of employees' end of service benefits (Note 20)	(1,568)	(3,143)
Decrease in non-current trade and other receivables	33,325	119,154
Decrease in non-current retentions payable	(24,886)	(34,640)
Decrease in non-current advances from customers	(83,562)	(392,818)
Changes in working capital:
Property held for development and sale net of project cost accruals	110,879	471,719
Trade and other receivables	20,166	81,151
Inventories	(1,503)	(2,783)
Due from related parties	(103,166)	(3,357)
Retentions payable	11,636	7,519
Advances from customers	(255,276)	(171,007)
Trade and other payables	126,152	(75,943)
Due to related parties	938	(4,020)
Net cash generated from operating activities	5,880	72,066

28 Cash flow from operating activities

29 Commitments

At 31 December 2012, the Group had total commitments of AED 395,603,000 (31 December 2011: AED 489,549,000) with respect to project related contracts issued net of invoices received and accruals made at that date. The Group also had commitments with respect to purchase of land of AED 419,639,000 (31 December 2011: AED 419,639,000).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

30 Contingent liabilities

At 31 December 2012, the Group had contingent liabilities in respect of performance and other guarantees issued by banks on behalf of one of the subsidiaries in the ordinary course of business, amounting to AED 27,227,000 (31 December 2011: AED 63,133,000).

31 Segment information

Operating segment

For management purposes the Group is organised into three major operating segments: Property development, electrical and mechanical works, and properties and facilities management.

Management monitors the operating results of its operating segments for the purpose of making strategic decisions about performance assessment. Segment performance is evaluated based on operating profit or loss.

	Property development	Electrical and mechanical	Property and facilities management
	activities	works		Total
	AED'000	AED'000	AED'000	AED'000
31 December 2012
Segment revenues – external	481,045	16,774	54,431	552,250
Segment profit/(loss)	30,890	(9,501)	17,216	38,605
Segment assets	6,471,811	37,643	58,870	6,568,324
31 December 2011
Segment revenues – external	708,950	52,489	44,432	805,871
Segment profit/(loss)	69,195	(51,434)	19,942	37,703
Segment assets	6,640,407	84,278	69,482	6,794,167

Geographic information

Revenue earned from properties outside the United Arab Emirates amounts to AED Nil (2011: AED 19,198,000). Total assets located outside the United Arab Emirates amount to AED 309,604,000 (31 December 2011: AED 315,490,000).

Notes to the consolidated financial statements for the year ended 31 December 2012 (continued)

32 Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

	Loans and	Available
	receivables	for-sale	Total
31 December 2012	AED'000	AED'000	AED'000
Assets as per the balance sheet
Available-for-sale financial assets Trade and other receivables excluding prepayments,	-	20,517	20,517
advances to contractors and suppliers	202,013		202,013
		-
Due from related parties Cash and bank balances	2,516,120 268,379	- -	2,516,120 268,379
	2,986,512	20,517	3,007,029
		Amortised
		cost	Total
		AED'000	AED'000
Liabilities as per the balance sheet Trade and other payables excluding amounts due
from customers on contract works		881,211	881,211
Retentions payable		106,266	106,266
Borrowings		887,450	887,450
Due to related parties		15,351	15,351
		1,890,278	1,890,278
	Loans and	Available
	receivables	for-sale	Total
31 December 2011	AED'000	AED'000	AED'000
Assets as per the balance sheet
Available-for-sale financial assets	-	19,507	19,507
Trade and other receivables excluding prepayments,
advances to contractors and suppliers	253,120	-	253,120
Due from related parties	2,412,954	-	2,412,954
Cash and bank balances	339,568	-	339,568
	3,005,642	19,507	3,025,149
		Amortised
		cost	Total
		AED'000	AED'000
Liabilities as per the balance sheet
Trade and other payables excluding amounts due
from customers on contract works		756,995	756,995
Retentions payable		119,516	119,516
Borrowings Due to related parties		915,548 14,413	915,548 14,413