Deyaar Development PJSC — Regulatory Filings 2017

May 1, 2017

DEYAAR DEVELOPMENT PJSC

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UNAUDITED)

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FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (Unaudited)
For the three month period ended 31 March 2017

Content	Pages
Independent auditors' report on review of condensed consolidated interim financial information $1-2$
Condensed consolidated statement of financial position	$\overline{3}$
Condensed consolidated statement of profit or loss	4
Condensed consolidated statement of profit or loss and other comprehensive income	5
Condensed consolidated statement of changes in equity	6
Condensed consolidated statement of cash flows	7
Notes to the condensed consolidated interim financial information	$8 - 19$

KPMG Lower Gulf Limited Level 12, IT Plaza Dubai Silicon Oasis, Dubai, UAE Tel. +971 (4) 356 9500, Fax +971 (4) 326 3788

Independent Auditors' Report on Review of Condensed Consolidated Interim Financial Information

The Shareholders Deyaar Development PJSC

Introduction

We have reviewed the accompanying 31 March 2017 condensed consolidated interim financial information of Deyaar Development PJSC ("the Company") and its subsidiaries (collectively referred to as "the Group") which comprises:

• the condensed consolidated statement of financial position as at 31 March 2017:
• the condensed consolidated statement of profit or loss for the three $\bullet$ month period ended 31 March 2017;
• the condensed consolidated statement of profit or loss and other comprehensive income for the three month period ended 31 March 2017:
• the condensed consolidated statement of changes in equity for the three month period ended 31 March 2017;
• the condensed consolidated statement of cash flows for the three month period ended 31 March 2017; and
• notes to the interim financial information.

Management is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting'. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Deyaar Development PJSC Independent auditors' report on review of condensed consolidated interim financial information 31 March 2017

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying 31 March 2017 condensed consolidated interim financial information is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting'.

KPMG Lower Gulf Limited

$\downarrow \qquad \qquad \downarrow$

Richard Ackland Registration No: 1015 Dubai, United Arab Emirates

Date: 3 0 APR 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2017

		31 March	31 December
		2017	2016
	Note	AED'000	AED'000
		(Unaudited)	(Audited)
ASSETS
Non-current assets
Property and equipment		375,528	343,955
Investment properties	6	330,669	330,669
Investments in joint ventures and an associate	12	1,258,740	1,256,016
Properties held for development and sale	8	344,137	333,482
Trade and other receivables		11,559	4,835
Advance for purchase of properties	8a	263,118	136,293
Long term fixed deposits	7	50,580	50,377
Available-for-sale financial assets		20,574	22,186
		2,654,905	2,477,813
Current assets
Properties held for development and sale	8	935,054	956,747
Inventories		2,076	2,171
Trade and other receivables		235,749	176,379
Due from related parties	9	1,819,963	1,954,449
Cash and bank balances	13	509,796	647,171
		3,502,638	3,736,917
Total assets		6,157,543	6,214,730
EQUITY Share capital		5,778,000	5,778,000
Legal reserve		264,144	264,144
Available for sale fair valuation reserve		1,239	2,851
Accumulated losses		(1, 139, 413)	(1, 172, 327)
Total equity		4,903,970	4,872,668
LIABILITIES
Non-current liabilities Borrowings	10
Retentions payable		319,138 20,319	343,046 27,874
Advances from customers
		63,051	54,052
Provision for employees' end of service benefits		13,406 415,914	12,892 437,864
Current liabilities
Borrowings	10	95,633	95,633
Trade and other payables	11	686,598	742,767
Retentions payable		19,658	1,155
Advances from customers		23,471	52,344
Due to a related party	9	12,299	12,299
		837,659	904,198
Total liabilities		1,253,573	1,342,062
Total equity and liabilities		6,157,543	6,214,730

The condensed consolidated interim financial information was approved by the Board of Directors, and authorised for issue on $\begin{bmatrix} 0 \ 0 \end{bmatrix}$ APR 20 and signed on their behalf by:

$\overline{a}$ ..................................... ...................................... $\sim$ Saeed Al Qatami Chief Executive Officer

ElWa Hani K. Fansa

Chief Financial Officer

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the three month period ended 31 March 2017

		Three month ended
		31 March	31 March
		2017	2016
	Note	AED'000	AED'000
		(Unaudited)
Revenue		141,802	60,218
Direct / operating costs		(93, 152)	(30, 600)
Other operating income	8a(ii)	19,087	1,593
General and administrative expenses		(35,902)	(31, 678)
Provision / expense against claims	11(ii)	(1,044)	(11, 547)
Finance cost		(4,298)	(4, 826)
		2,616	3,165
Finance income
Share of results from joint ventures and an associate	12	2,724	(4,178)
Write back of provision for impairment of investment in an associate	12		68,884
Profit for the period		31,833	51,031
		Fils 0.55	Fils 0.88
Earnings per share - basic and diluted

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the three month period ended 31 March 2017

	Three month ended
		31 March	31 March
		2017	2016
	Note	AED'000	AED'000
		(Unaudited)
Profit for the period		31,833	51,031
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Change in fair value of available-for-sale financial assets		(1,612)	(1, 138)
Total comprehensive income for the period		30,221	49,893

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the three month period ended 31 March 2017

	Available-for-
	Share	Legal	sale fair	Accumulated	Total
	capital	reserve	valuation reserve	losses	equity
	AED'000	AED'000	AED'000	AED'000	AED'000
Balance at 1 January 2016 (audited)	5,778,000	242,529	4,558	(1,362,534)	4,662,553
Total comprehensive income for the period (unaudited)
Profit for the period				51,031	51,031
Other comprehensive income for the period	$\blacksquare$	$\overline{\phantom{a}}$	(1, 138)		(1, 138)
Total comprehensive income for the period (unaudited)			(1, 138)	51,031	49,893
Balance at 31 March 2016 (unaudited)	5,778,000	242,529	3,420	(1,311,503)	4,712,446
At 1 January 2017 (audited)	5,778,000	264,144	2,851	(1,172,327)	4,872,668
Total comprehensive income for the period (unaudited)
Profit for the period				31,833	31,833
Other comprehensive income for the period
			(1,612)		(1,612)
Total comprehensive income for the period (unaudited)	$\blacksquare$		(1,612)	31,833	30,221
Adjustments to Board of Directors' remuneration (Refer
Note $11(i)$				1,081	1,081
Balance at 31 March 2017 (unaudited)	5,778,000	264,144	1,239	(1, 139, 413)	4,903,970

The notes on pages 8 to 19 are an integral part of the condensed consolidated interim financial information.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the three month period ended 31 March 2017

		Three month ended
		31 March	31 March
		2017	2016
	Note	AED'000	AED'000
		(Unaudited)
Cash flows from operating activities
Net cash (used in) / generated from operating activities	13	(78, 690)	22,814
Cash flows from investing activities
Additions to property and equipment		(32, 892)	(11, 338)
Additions to investment property			(320)
Term deposits with an original maturity after three months		84,796	36,378
Income from deposits		2,616	2,163
Net cash generated from investing activities		54,520	26,883
Cash flows from financing activities
Net movement in borrowings		(23,908)	(62, 885)
Finance costs paid		(4,298)	(4,221)
Net cash used in from financing activities		(28, 206)	(67, 106)
Net decrease in cash and cash equivalents		(52, 376)	(17, 409)
Cash and cash equivalents, beginning of the period		507,172	453,340
Cash and cash equivalents, end of the period		454,796	435,931
For the purpose of statement of cash flows, cash and cash equivalents comprise:
Cash on hand		3,084	3,260
		201,052	156,952
Current accounts		356,240	660,991
Fixed deposits		560,376	821,203
Cash and bank balances	13	(105, 580)	(385, 272)
Less : deposits with an original maturity after 3 months		454,796	435,931
Cash and cash equivalents

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017

Legal status and activities $\mathbf{1}$

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 ("UAE). The company is listed on Dubai Financial Market.

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

This condensed consolidated interim financial information has been reviewed, not audited.

Basis of preparation and accounting policies $\overline{2}$

Basis of preparation $2.1$

The condensed consolidated interim financial information for the three month period ended 31 March 2017 has been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed consolidated interim financial information should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2016, which have been prepared in accordance with International Financial Reporting Standards and the requirements of UAE Federal Law No. (2) of 2015.

UAE Federal Law no 2 of 2015 being the Commercial Companies Law ("the UAE Companies Law of 2015") was issued on 1 April 2015 to come into force on 1 July 2015 repealing the old UAE Federal Law No. 8 of 1984 (as amended). Companies are allowed to ensure compliance with the new UAE Companies Law of 2015 by 30 June 2017 as per the transitional provisions contained therein.

$2.2$ Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial information are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2016.

3 Estimates and assumptions

The preparation of condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing the condensed consolidated interim financial information, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.

The Group has an established control framework with respect to the measurement of fair values, and management has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.

The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

Estimates and assumptions (continued) 3

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period in which the change has occurred.

$\overline{\mathbf{4}}$ Financial risk management

The Group's activities potentially expose it to a variety of financial risks: market risk (including currency risk, price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual consolidated financial information, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2016. The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2016.

Segmental information 5

Operating segment

The Board of Directors are the Group's chief operating decision maker. The Board considers the business of the Group as a whole for the purpose of decision making.

Management has determined the operating segments based on segments identified for the purpose of allocating resources and assessing performance. The Group is organised into two major operating segments: Property development 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 perating profit or loss.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

$\mathbf{r}$ $\mathbf{r}$ $\mathbf{r}$

Segmental information (continued) $\overline{5}$

Operating segment (continued)

		Property Property and
	development	facilities
	activities	management	Total
	AED'000	AED'000	AED'000
Three month period ended 31 March
2017 (unaudited)
Segment revenues – external	118,239	23,563	141,802
Segment profit	23,964	7,869	31,833
As at 31 March 2017 (unaudited)
Segment assets	5,995,143	162,400	6,157,543
Segment liabilities	1,109,927	143,646	1,253,573
Three month period ended 31 March 2016
(unaudited)
Segment revenues - external	39,626	20,592	60,218
Segment profit	45,587	5,444	51,031
As at 31 December 2016 (audited)
Segment assets	6,049,892	164,838	6,214,730
Segment liabilities	1,201,952	140,110	1,342,062

Geographic information

The carrying amount of total assets located outside the United Arab Emirates as at 31 March 2017 is AED 3.3 million (31 December 2016: AED 3.3 million).

6 Investment properties

	UAE	UAE	UAE	UAE	31 March	31 December
	Office	Parking	Stores	Retail	2017	2016
	Building	spaces	units	units	Total	Total
	AED'000	AED'000	AED'000	AED'000	AED'000	AED'000
			(Unaudited)			(Audited)
Fair value hierarchy
level	3	3	3	3
Fair value at the
beginning of the
reporting period	85,795	66,445	10,711	167,718	330,669	253,556
Additions						848
Transfer from properties
held for sale						773
Net gain from fair value
adjustments on
investment properties						75,492
Fair value at the end of
reporting period	85,795	66,445	10,711	167,718	330,669	330,669

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

6 Investment properties (continued)

In 2016, the Company reclassified its portfolio of parking spaces and store units in various buildings from property held for sale to investment properties as a result of change in use of these parking spaces and store units. The parking spaces and store units were reclassified to investment properties at their fair value on the date of transfer based on a fair valuation exercise carried out by an external valuer resulting in a fair value gain of AED 66.5 million and AED 9.9 million respectively. The gain was recognised in the consolidated statement of profit or loss in accordance with the accounting policy adopted for the measurement of investment properties.

Bank borrowings are secured against investment properties for the value of AED 131.5 million (31 December 2016: AED 131.5 million) (Refer Note 10).

Valuation processes

Retail units, parking spaces and store units included in the Group's investment properties are valued on a periodic basis by independent professionally qualified valuers who hold a recognised relevant professional qualification and have experience in the locations and segments of the investment properties valued. For all investment properties, their current use equates to the highest and best use. Valuation of UAE office building is valued by the Groups' finance department. The Group's finance department includes a team that also reviews the valuations performed by the independent valuers for financial reporting purposes. Discussions of valuation processes and results are held between management and the independent valuers on a regular basis.

Management believes that there was no material variance in the value of Group's investment properties in the current period.

Information about fair value measurements using significant unobservable inputs (Level 3) are as follows:

					Sensitivity of management estimates
Country		Segment Valuation	Estimate	Range of inputs	Impact lower AED'000	Impact higher AED'000
UAE	Office	Income	Estimated rental value	AED 95 to AED 210 per sqft per annum	(914)	914
	building	capitalisation	Discount rate	11.59%	9,067	11,572)

A change of 100 basis points in management's estimate at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown above.

Valuation techniques underlying management's estimation of fair value:

For office building, the valuation was determined using the income capitalisation method based on following significant unobservable inputs:

Estimated rental value (per	based on the actual location, type and quality of the properties and
sqft p.a.)	current market rents for similar properties;
Cash flow discount rate	reflecting current market assessments of the uncertainty in the
	amount and timing of cash flows.

For retail units, parking spaces and store units, the valuation was determined using the indicative fair values of these investment properties as at 31 December 2016 provided by an independent professionally qualified valuer. The valuer has used sales comparison method to determine the fair values of these assets.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

$\overline{7}$ Long term fixed deposits

During 2014, the Company had signed a financial restructuring plan with a financial institution for settling its Wakala deposit amounting to AED 101 million. Key terms of the financial restructuring plan were as follows:

• The financial institution will make a 20% of the outstanding amount as a down payment upon signing the restructuring plan;
• 65% of the amount will be paid in monthly predetermined instalments, over a period of 12 years $\bullet$ and will carry interest rate of 2% per annum; and
• 15% of the remaining amount will be converted into convertible contingent instruments and will be settled in cash or the financial institution's equity shares or combination of both after a period of 12 years. This will carry a profit rate of 1% payment in kind.

In 2014, upon signing the restructuring plan, and considering the key terms of the same, management had recognized an impairment charge of AED 15.3 million and present value impact of AED 6.7 million on the non-current fixed deposit. In 2015, the Company received AED 2.3 million against convertible contingent instruments and had accordingly written back the impairment charge by an equivalent amount.

As at 31 March 2017, the Company has cumulatively received AED 32.4 million (2016: AED 32.4) million) from the financial institution towards the repayment of deposit including early repayment of some of the instalments. The balance outstanding amount has been classified as non-current in accordance with the agreement.

8 Properties held for development and sale

Management's assessment of the net realisable value of the properties held for development and sale resulted in a net reversal of impairment amounting to AED 0.4 Million (for the year ended 31 December 2016: AED 3.3 million and for three month period ended 31 March 2016: net provision for impairment AED 0.4 million), which was recognized in the condensed consolidated statement of profit or loss under "direct / operating costs".

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 the expected market prices.

In 2016, the Company had reclassified part of its portfolio of parking spaces and store units in various buildings from property held for sale to investment properties based on change in use.

A plot of land with a total carrying value of AED 244 million (31 December 2016: AED 244 million) is mortgaged under Islamic finance obligations (Refer Note 10).

In the current period, the Company has recognised an amount of AED 88.1 million (for three month period ended 31 March 2016: AED 24.5 million) in condensed consolidated statement of profit or loss under "directs / operating costs" against revenue recognised of AED 108.7 million (for three month period ended 31 March 2016: AED 31.3 million).

For land held for future development and use amounting to AED 424.5 million as at the reporting date (31 December 2016: AED 424.5 million), management is currently evaluating feasibility of the projects and considering alternative viable and profitable options.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

Advance for purchase of properties 8a

		31 March 2017 31 December 2016
	AED'000	AED'000
	(Unaudited)	(Audited)
Advance for purchase of share in real estate projects (i)	394,038	392,813
Advance for purchase of properties (ii)	125,600
	519,638	392,813
Less: provision for impairment against
advance for purchase of share in real estate projects (i)	(256, 520)	(256, 520)
	263,118	136,293

• In previous years, the Company had entered into a Memorandum of Understanding (MoU) for i. purchase of its share of a portfolio of investment properties in a real estate project. The advance is recoverable by means of transfer of the Company's share of properties in the project.
• In the current period, the Company has signed a termination and settlement agreement with a ii. master developer whereby the master developer will swap the plots of land designated as per original sale and purchase agreement with other new plot(s) at a later date and pay a termination compensation. Accordingly, the original purchase amount paid has been classified as advance for purchase of properties and the Company recorded a net income of AED 15.9 million as other income in the current period representing agreed compensation.

$\boldsymbol{9}$ Related party transactions and balances

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

Related party transactions $(a)$

During the period, the Group entered into the following significant transactions with related parties:

	Three month period ended	Three month period ended
	31 March 2017	31 March 2016
	AED'000	AED'000
	(Unaudited)	(Unaudited)
A significant shareholder Other operating income/finance income Finance cost	963 2,401	1,817 1,716

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

9 Related party transactions and balances (continued)

Remuneration of key management personnel $(b)$

	Three month period	Three month period
	ended	ended
	31 March 2017	31 March 2016
	AED'000	AED'000
	(Unaudited)	(Unaudited)
Compensation to key management personnel
Salaries and other short term employee benefits	3,037	3,292
Termination and post employment benefits	106	197
	3,143	3,489

Due from related parties comprises: $(c)$

	31 March 2017	31 December 2016
	AED'000	AED'000
	(Unaudited)	(Audited)
Due from joint ventures	15,129	15,908
Due from other related parties	1,806,372	1,940,079
	1,821,501	1,955,987
Less : provision for impairment for due from a
related party	(1, 538)	(1, 538)
	1,819,963	1,954,449

Cash and bank balances include fixed deposits of AED 255 million (31 December 2016: AED 290 million) deposited with a significant shareholder of the company (a bank), at market prevailing profit rates.

In 2010, the Group entered into a sale and purchase agreement with a related party to sell properties with a carrying value of AED 1,337.8 million and rights to purchase plots of land amounting to AED 899.6 million. The sale consideration agreed on by both parties as per the initial agreement was AED 3,647.5 million.

The salient terms and conditions of the transaction including subsequent revisions are as follows:

• The sale consideration is receivable on or before 1 June 2016; i.
• The sale consideration can be settled in cash or kind or a combination of both, at the discretion ii. 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 Group.

Following the amendments to the original agreement, the sale consideration was reduced by approximately AED 731 million, as a result of the purchaser's commitment to settle this balance on demand, on or before 31 December 2017, in cash or in kind, or a combination of both.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

9 Related party transactions and balances (continued)

(c) Due from related parties comprises: (continued)

During 2014, pursuant to the addendum to original sale and purchase agreement for a plot of land with the master developer, the Group had entered into an amendment agreement with the related party, which resulted in a further reduction of the sale consideration by AED 141 million. Further, the related party had also transferred plots of land thereby settling receivable balance of AED 669.3 million against the outstanding receivable.

During 2015, the Company settled an amount of AED 108 million relating to certain plots on behalf of the related party resulting in reduction of the Company's commitments. The receivable amount is reflected in the books of the Company after deducting the future committed payments of AED 170.9 million (Note 14) relating to rights to purchase plots from the sale consideration as per the sale and purchase agreement.

In the current period, pursuant to the termination of original sale and purchase agreement for plots of land with a master developer, the Group entered into an amendment agreement with the related party which resulted in reduction of receivable balance by AED 134.4 million which includes deferred profit of AED 8.8 million.

Furthermore, management is currently evaluating various options for settlement of the outstanding balance.

(d) Due to a related party comprises:

	31 March 2017	31 December 2016
	AED'000	AED'000
	(Unaudited)	(Audited)
Current
Due to a joint venture partner	12,299	12,299
	12,299	12,299

At 31 March 2017, the Group had bank borrowings from a significant shareholder (a bank) of AED 288.4 million (31 December 2016: AED 307.6 million), at market prevailing profit rates. Also refer Note 10.

10 Borrowings

	31 March 2017	31 December 2016
	AED'000	AED'000
	(Unaudited)	(Audited)
Non-current	319,138	343,046
Current	95,633	95,633
Total borrowings	414,771	438,679

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

10 Borrowings (continued)

	Islamic finance obligations
	AED'000
1 January 2016	478,848
Additional drawdown	100,000
Repayments	(140, 169)
31 December 2016 - audited	438,679

1 January 2017
Repayments	(23,908)
31 March 2017 - Unaudited	414,771

The Islamic finance obligations represent Ijarah and Murabaha facilities obtained from Dubai Islamic Bank PJSC (a significant shareholder), and from other local Islamic banks. The facilities were availed to finance the properties under construction. The Islamic finance obligations carry market prevailing profit rates and are repayable in monthly or quarterly instalments over a period of four to seven years from the reporting date.

The Islamic finance obligations are secured by mortgages over properties classified under property held for development and sale (Note 8), property and equipment and investment property (Note 6).

In the current period, the Company has signed project specific financing agreements with various banks. The Company is currently in the process of finalising relevant facilities documents.

Also refer Note 9.

11 Trade and other payables

Trade and other payables include the following:

• i. Provision for Board of Directors' remuneration amounting to AED 3.2 million (31 December 2016: AED 4.3 million) after reversal of AED 1.1 million based on the final approval of the shareholders in the Annual General Meeting dated 5^th April 2017.
• ii. Provision relating to claims made by third parties and customers against the Company. The provisions are based on management's best estimate after considering the potential cash flows in respect of the claim on a case to case basis.

12 Investment in joint ventures and an associate

In 2016, the Company's management had written back provision for impairment against investment in associate amounting to AED 68.8 million based on their assessment of the recoverable amount of the Group's share of assets held by the entity in which an associate of the Company holds an interest. Management's assessment was based on the indicative fair values of the assets after considering the development progress of the project undertaken by the entity.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

Cash flows from operating activities 13

	Three month ended 31 March
	2017	2016
	AED'000	AED'000
	(Unaudited)	(Unaudited)
Profit for the period	31,833	51,031
Adjustment for
Depreciation	1,319	1,161
Provision for employees' end of service benefits	1,215	685
(Reversal of provision) / provision for impairment of
properties held for development and sale	(409)	440
Provision for doubtful debts	1,000
Provision for claims		11,547
Reversal of provision of investment in an associate		(68, 884)
Reversal of provision for impairment against advance for
purchase of properties	(1,225)
Compensation from the master developer	(9, 401)
Finance income	(2,616)	(3,165)
Finance costs	4,298	4,826
Share of results from joint ventures and an associate	(2, 724)	4,178
Operating cash flows before payment of employees' end of
service benefits and changes in working capital	23,290	1,819
Payment of employees' end of service benefits	(701)	(183)
Changes in working capital:
Property held for development and sale (net of project cost
accruals)	11,447	(890)
Trade and other receivables - non current	(6, 724)	656
Trade and other receivables - current	(42,083)	20,228
Inventories	95	381
Retentions payable - non current	(7, 555)	1,514
Retentions payable - current	18,503	26
Advances from customers - non current	8,999	(8,028)
Advances from customers - current	(28, 873)	17,879
Trade and other payables	(55,088)	(9,215)
Due to related parties		(1, 373)
Net cash (used in) / generated from operating activities	(78, 690)	22,814

Bank accounts include balance of AED 85.23 million (31 December 2016: AED 83.4 million) and fixed deposits of AED 170 million at market prevailing profit rates (31 December 2016: AED 205 million) held in escrow accounts.

14 Commitments

At 31 March 2017, the Group had total commitments of AED 540.4 million (31 December 2016: AED 612.1 million) with respect to project related contracts issued as of the end of period / year net of invoices received and accruals made at that date. The Group also had commitments with respect to purchase of land of AED 170.4 million (31 December 2016: AED 170.4 million) (Refer note 9 (c) and note 15).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

15 Contingent liabilities

At 31 March 2017, the Group had contingent liabilities in respect of performance and other guarantees issued by a bank on behalf of a subsidiary, in the ordinary course of business, from which it is anticipated that no material liabilities will arise, amounting to AED 11.4 million (31 December 2016: AED 10.6 million).

The Company is also a party to certain legal cases in respect of certain plots of land and party to various potential claims from customers and, where necessary, makes adequate provisions against any potential claims. Such provisions are reassessed regularly to include significant claims and instances of potential litigations. Based on review of opinion provided by the legal advisors / internal legal team, management is of the opinion that no material cash outflow in respect of these claims is expected to be paid by the Company in these legal cases over and above the existing provision in the books of accounts. The Company has elected not to present the complete disclosures as required by IAS 37 "Provision and Contingent Liabilities and Contingent Assets" as management is of the view that since the legal claims are sub-judice and are disputed, therefore this information may be prejudicial to their position on these matters. Also refer Note 14.

Certain other contingent liabilities may arise during the normal course of business, which based on the information presently available, either cannot be quantified at this stage or in the opinion of the management is without any merit. However, in the opinion of management, these contingent liabilities are not likely to result in any cash outflows for the Group.

16 Financial instruments by category

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

		Available- for-sale
	Loans and receivables (at	financial assets (at fair
	amortized cost)	value)	Total
31 March 2017 (unaudited)	AED'000	AED'000	AED'000
Assets as per statement of financial position
Available-for-sale financial assets		20,574	20,574
Trade and other receivables excluding
prepayments and advances	147,902		147,902
Due from related parties	1,819,963		1,819,963
Long term fixed deposits	50,580		50,580
Bank balances	506,712		506,712
	2,525,157	20,574	2,545,731
			Amortised cost
31 March 2017 (unaudited)			AED'000
Liabilities as per statement of financial
position
Trade and other payables			686,598
Retentions payable			39,977
Borrowings			414,771
Due to a related party			12,299
			1,153,645

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017 (continued)

Financial instruments by category (continued) 16

	Loans and receivables (at amortized cost)	Available- for- sale financial assets (at fair value)	Total
31 December 2016 (Audited)	AED'000	AED'000	AED'000
Assets as per statement of financial position
Available-for-sale financial assets		22,186	22,186
Trade and other receivables excluding
prepayments and advances	111,411		111,411
Due from related parties	1,954,449		1,954,449
Long term fixed deposits	50,377		50,377
Bank balances	645,718		645,718
	2,761,955	22,186	2,784,141
			Amortised
			cost
31 December 2016 (Audited)			AED'000
Liabilities as per statement of financial
position
Trade and other payables			742,767
Retentions payable			29,029
Borrowings			438,679
Due to related parties			12,299
			1,222,774

The following table presents the Group's financial assets that are measured at fair value, by valuation method:

	Level 1 AED'000	Total AED'000
As at 31 March 2017 (unaudited)
Available-for-sale financial assets	20,574	20,574
As at 31 December 2016 (audited)
Available-for-sale financial assets	22,186	22,186

The carrying value less impairment provision of trade receivables is assumed to be approximate their fair values keeping in view the period over which these are expected to be realised. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Other receivables and payables approximate their fair values.

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