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2008AnnuAl RepoRt

Contents

Financial Highlights 4

2008 At a Glance 6

Board of Directors 8

Chief Officers and Executive Directors 9

Chairman’s Statement 10

Joint Statement of the Managing Director

and the Chief Executive Officer 12

Financial Review 14

Operational Review 16

Governance Report 33

Consolidated Financial Statements 47

His Highness Sheikh Khalifa Bin Zayed Al Nahyan

President of the United Arab Emirates

Supreme Commander of the UAE Armed Forces

2

His Highness Sheikh Mohammed Bin Zayed Al Nahyan

Crown Prince of Abu Dhabi

Deputy Supreme Commander of the

UAE Armed Forces

3

Net profit for 2008 amounted to AED 1.784 billion, an increase of 42 per cent over 2007, all generated from operating activities, representing a 48 per cent rise in earnings per share to 74 fils. Total assets grew by 135 per cent to AED 16.939 billion, and net asset value was 33.5 per cent up at AED 5.958 billion. Operating revenue rose from AED 2.321 billion to AED 3.723 billion.

FINANCIAL HIGHLIGHTS

4

Total assets

AED million

2008

16,939

2007

7,220

2006

4,350

Earnings per share

AED

2008

0.74

2007

0.50

2006

0.39

Net profit

AED million

2008

1,784

2007

1,257

2006

976

Market capitalisation

AED million

2008

7,900

2007

21,700

2006

6,000

Average return on equity

Per cent

2008

30%

2007

28%

2006

28%

Total revenue

AED million

2008

3,723

2007

2,321

2006

630

06 07 08

06 07 08 06 07 08

06 07 08 06 07 08

Net asset value per share

AED

2008

2.38

2007

1.79

2006

1.39

06 07 08

06 07 08

Total equity

AED million

2008

5,958

2007

4,463

2006

3,470

06 07 08

5

Project Progress

Sorouh made progress on all fronts

in its property developments in 2008.

Construction has well advanced on

Sky and Sun Towers, part of the Shams

project, with completion scheduled

for early 2010. Further significant

advancement has been made at Golf

Gardens 1 with a handover planned for

late 2009. Further progress was seen in

the design stages of the Al Ain Mall, Golf

Gardens 2 and Al Mashtal. Lulu Island

and Saraya also made good progress in

2008. All these are planned and delivered

in conjunction with, and conformity to,

the strategy plan of the government of

Abu Dhabi.

2008 AT A GLANCE

129 13% increase in properties under development

% increase in investmentproperties and those under development

Diversity of Our Customers

Our customers are a top priority

and are one of the four core

principles of Sorouh’s strategy.

Middle East 72% Asia 8% Americas 3% Europe 2% Asia Pacific 2% Africa 1% Others 12%

SAS AL NAKHL

GOLF GARDENS

LULU ISLAND

TALA TOWER

AL MASHTAL

SKY TOWER, SUN TOWERAND GATE DISTRICT

SARAYASHAMS ABU DHABI

KHALIDIYA VILLAGE

ALGHADEER55KM NORTHEAST

2007AED 1.08 billion


Property Development

Our underlying principle is to create

destination developments that will rank

with the highest international standards,

creating irresistible appeal for owners

and investors alike.



6

Share Performance: Sorouh vs UAE Peers

Share Performance 2008 Share Performance 2006 – 2008

12/0

7

03/0

8

06/0

8

09/0

8

12/0

8

20

15

10

5

0

Emaar Aldar Sorouh

12/0

5

12/0

6

12/0

7

12/0

8

25

20

15

10

5

0

Emaar Aldar Sorouh

249% growth in sales



48% increase in earnings per share

2007AED 0.50

2008AED 0.74

Cultural Diversity of Employees

Committed to promoting

cultural diversity within

Sorouh, whilst supporting the

government strategy on the

employment of UAE nationals

as part of the Emiratisation

programme. Enhancing Sorouh’s

reputation as a ‘first choice’

employer in a more challenging

business environment.

Sorouh’s cultural diversity is

reflected in its employment

profile, with more than

and nationalites represented

amongst its staff.

Sorouh’s aim is to

be the ‘first choice’

for employment.

As a leading UAE business,

Sorouh has a social,

professional and cultural

obligation to support

government goals to attract,

develop and retain UAE

nationals.

Gender Distribution (%)

% Female

% Male

Workforce Distribution (%)

% Operational

% Senior Management

% Executive Management

Age Group Distribution (%)

% Female

% Male

< 25 26-35 36-45 46-55 > 56

0

4

3

14

6

21

18

27

4

3

2005 2006 2007 2008

16

14

8 10

85 8 3

878876 82

2005 2006 2007 2008

12

88

31

69

31

69

32

68

38 countries

Key companies

incorporated within

the Group in 2008

Gate Towers – Shams Abu

Dhabi LLC Delivering

Sorouh’s prestigious Gate

Towers development.

Al Sdeirah Real Estate

Investment Co LLC Delivering

the Al Ghadeer development.

Abu Dhabi Business Parks

Co LLC Developing world

class business and logistics

parks in Abu Dhabi and

across the GCC.

Sorouh Egypt for Investment

and Tourism Development

JSC (closed) Facilitating

Sorouh’s property development

activities in Egypt.

Pivot Engineering & General

Contracting WLL Supporting

Sorouh’s construction activities.

S&T Cool District Cooling Co

LLC Providing state of the art

district cooling to the Shams

Abu Dhabi development.

LLJ Co LLC Facilitates the

purchase and sale of Sorouh’s

real estate developments.

Abu Dhabi Finance PJSC

Provides turn-key mortgage

financing solutions to Sorouh

homeowners.

7

Saeed Eid Al GhafliChairman

Mohamed Khalaf Al MazroueiVice Chairman

Abubaker Seddiq Al KhouriManaging Director, Board Member

Fardan Hasan Al FardanBoard Member

Yousif Mohammed Al NowaisBoard Member

Mohamed Ahmed Saeed Al QasmiBoard Member

Mubarak Mattar Al HoumeiryBoard Member

Saeed Mubarak Al HajeriBoard Member

BOARD OF DIRECTORS

8

CHieF OFFiCeRs & exeCUtive DiReCtORs

Mounir Haidar Chief Executive Officer

Ala Khannak Chief Financial Officer

Afshar Monsef Chief Corporate Officer

Gurjit Singh Chief Property Development Officer

Samer Abu-Hijleh Chief Operations Officer

Paul Warren Chief Strategy Officer

Simon Cunningham Chief Sales & Marketing Officer

Firoze Kapadia Executive Director, Treasury & Investments

Abdallah Shabaan Executive Director, International Property Development

Akram Abu El-Huda Executive Director, Legal

Anthony Mallows Executive Director, Design & Planning (Lulu)

Fahad Al Ketbi Executive Director, Operations

Georges Page Executive Director, Development (Lulu)

Mohamed Al Marzouqi Executive Director, HR & Admin

Sutton Turner Executive Director, Asset Management

Richard Hyde Executive Director, Procurement and Contracts

9

On behalf of the Board of Directors of Sorouh Real Estate PJSC, I am pleased to present our annual report and financial statements for the year ended 31 December 2008.

CHAIRMAN’S STATEMENT

The progress made during the year – the most

successful year since our inception in 2005 – is

reflected in our strong financial and operating

performance. In an uncertain global economic

environment, stakeholders can be assured that our

company is well prepared for the future.

Net profit for 2008 amounted to AED 1.784 billion,

an increase of 42 per cent over 2007. It is gratifying

to point out that the return was generated from

operating activities, with no asset revaluations.

Total assets grew by 135 per cent to AED 16.94

billion at the end of 2008, compared to AED 7.22

billion in 2007, reflecting the increasing value of

Sorouh’s development business. Our financial

position is further strengthened by the proceeds

from the successful AED 4 billion sukuk issue of late

August 2008.

From this position of security we will continue our

strategy of building a diversified stream of revenue

to generate cash and long-term value for our

shareholders. The ultimate aim remains to create an

income-producing real estate portfolio with primary

emphasis on the needs of the customer.

The year was one of consolidation and

implementation of the executive and financial

structures put in place by our strategic plan, which

will stand us in good stead in 2009.

We are aware of the uncertainties facing the global

economy, but remain confident that Sorouh has the

resilience, strength-in-depth and sound financial

resources to emerge from this period a dynamic,

world-class property company, ready to take

advantage of any future upturn in world conditions.

At the same time, we are acutely aware of our

position within Abu Dhabi society, and will

continue to play our role, to the utmost, in helping

the government of the Emirate achieve its long-term

vision for the future. We reaffirm our commitment

to the highest standards of corporate social

responsibility. Meeting those standards is the task of

all Sorouh employees, whom I thank for their

dedication and hard work in 2008.

Of course, all our work would be in vain without

the guidance and support of the government of Abu

Dhabi, under the visionary leadership of HH Sheikh

Khalifa Bin Zayed Al Nahyan, President of the UAE

and Supreme Commander of the UAE Armed

Forces, and HH Mohammed Bin Zayed Al Nahyan,

Crown Prince of Abu Dhabi and Deputy Supreme

Commander of the UAE Armed Forces. They have

cultivated the economic conditions in which UAE

real estate developers will flourish, and under their

leadership we will continue our task of fulfilling the

aspirations of residents, investors and stakeholders.

Saeed Eid Al Ghafli

Chairman

10

Net profit for 2008 amounted to AED 1.784 billion. Total assets grew by 135 per cent to AED 16.939 billion at the end of 2008.

11

In the first three quarters of 2008, we witnessed

continued strong growth in sales, with Shams Abu

Dhabi and Saraya continuing to attract investor

interest. Rental income from the three residential

villages – Sas Al Nakhl, Khalidiya and Al Oyoun

– was also ahead of expectations.

The final quarter, when the global situation

deteriorated faster than most experts had predicted,

was challenging. We were nonetheless pleased to

meet full-year expectations, and encouraged that we

have the resources and management team in place to

keep Sorouh in the leading position it has achieved.

Given the actions of the UAE government and

other governments around the world, we anticipate

that the situation will start to improve in late 2009.

Meanwhile, we are well placed to deliver on our

committed projects due to our competitive advantage,

strong balance sheet and enhanced liquidity.

Each sub-developer, on the flagship master

developments Shams Abu Dhabi and Saraya, has

met its financial obligations on time. Nonetheless,

we continue to monitor the performance and

progress of these projects.

Our central goal remains to deliver real estate

developments based on strong fundamentals for the

benefit of all our stakeholders, in accordance with

the strategic plan of the government of Abu Dhabi

and with the interests of our customers at the

forefront. The emphasis for 2009 will be to focus on

the on-time delivery of Sorouh projects and to take

advantage of the opportunities that will inevitably

present themselves in the more demanding markets

we currently face.

During 2008 significant progress was made towards

achieving Sorouh’s long-term business strategy – to

become an income-yielding operation generating

revenue from first-class developments on prime

sites. That will continue in the current year, and the

proportion of income revenue can be expected to

increase annually over the next five years as core

developments are rolled out.

It is our intention to proceed with the scheduled

launches as planned, including in the international

sector, but we reserve the right to re-prioritise

projects according to demand and local market

conditions. This is an essential part of the prudent

management of resources incumbent on all

companies in the challenging times we face.

We do, however, enter this critical period with

strong advantages. Our management team is now

fully in place; we have institutionalised corporate

processes and procedures that reinforce our

corporate credibility; we have a strong relationship

with the Abu Dhabi authorities; and a well-located

and valuable land-bank. These will serve us well in

the demanding times ahead.

It is especially reassuring that in 2008 liquid funds

increased from AED 1.4 billion to AED 6.8 billion,

as a result of cash flow from sales and rental

income, and the proceeds of the award-winning

asset-backed sukuk completed in the third quarter.

Bank borrowings are significantly lower now than at

the start of 2008, putting Sorouh in the

advantageous position of being under-leveraged and

cash positive during such a turbulent time in the

world’s credit markets. It is our intention to take

advantage of this positive position, as and when the

opportunities arise, but at the same time to exercise

prudence and caution in our financial transactions.

We remain fully conscious of our responsibility to

enhance shareholder value, but retain the right to

adopt a flexible approach to our financial and

capital structure, as the broader global macro-

economic situation allows.

The macro-economic background continues to be

problematic. The general consensus is that the UAE

is well-resourced, with sound management-in-

depth, and therefore well-placed to benefit from

global recovery. The liquidity and resilience of the

Abu Dhabi financial infrastructure lead us to believe

that the Emirate will lead the way in the return to

growth in the UAE.

Just as important as the financial structure is the

human capital on which our efforts are built, and

we take this opportunity to thank all Sorouh

employees for their dedication, commitment and

professionalism in 2008. They have made, and we

are sure will continue to make, a huge contribution

towards our goal of being a world-class company.

We also take this opportunity to thank the Board

of Directors for their efforts during 2008 and

congratulate them on their successful achievements.

The past year was one of achievement and progress for Sorouh, with the best financial results in our history, complementing significant operational advances. Our success in 2008 leaves us well placed to face the challenges presented by the current global market uncertainty in property and finance.

JOINT STATEMENT BY THE MANAGING DIRECTOR

AND THE CHIEF EXECUTIVE OFFICER

12

Abubaker Seddiq Al Khouri

Managing Director

Mounir Haidar

Chief Executive Officer

13

Net profit rose by 42 per cent to AED 1.784 billion

for the year, compared to AED 1.257 billion in

2007. The net profit represented a 48 per cent rise

in earnings per share to 74 fils from 50 fils per

share in 2007.

Sorouh’s total assets increased 135 per cent to AED

16.939 billion by the year end compared to AED

7.221 billion in 2007. The net asset value rose 33.5

per cent to AED 5.958 billion compared to AED

4.463 billion in 2007.

The increase in profits reflected the continuing

completion and sales of land in ongoing flagship

projects. The entire profit rise was generated from

operating activities, with no asset revaluations in

2008. Operating revenues rose from AED 2.321

billion to AED 3.723 billion with the bulk derived

from land sales, especially in the Shams Abu

Dhabi and Saraya projects.

The income from such sales is recognised in

accordance with the existing accounting policy and

International Financial Reporting Standards.

Other projects also contributed to the growth

in revenue. Sas Al Nakhl, Khalidiya Village and

Al Oyoun Village, the three prime residential

developments, made significant contributions to

revenues in 2008, underlining Sorouh’s position

as an income-generating operation.

In addition, revenue of AED 127 million was also

recognised from Pivot Engineering and General

Contracting, a newly acquired subsidiary (60 per

cent ownership).

The continued growth of the company generated

increased costs of revenue – attributable to cost of

land plots, infrastructure work and lease expenses

– of AED 1.427 billion compared to AED 1 billion

in 2007. General and administrative expenses rose

from AED 165 million to AED 320 million, due to

Sorouh’s expansion, consultancy work and expenses

related to subsidiaries and impairment taken for

certain projects.

Sales and marketing expenses rose in line with

this growth, from AED 100 million to AED 311

million, reflecting a rise in sponsorships,

communication expenses and sales commission

on newly launched projects.

As a key part of Sorouh’s financial strategy, 2008 saw

the completion of the award-winning asset-backed

sukuk facility in the third quarter. This instrument

raised AED 4 billion in funds, freed up operating

capital for the development of flagship projects, and

helped put Sorouh on a very sound financial footing

for the future. Finance income from liquid

investments increased from AED 73 million in 2007

to AED 120 million for the year 2008.

There was an unrealised loss on financial assets at

fair market value of AED 35 million due to

prevailing market conditions. Earlier this year, the

company realised a gain of AED 4 million on the

sale of investments in listed companies. Other

income, including transfer fees, dividends and late

payment charges, increased from AED 18 million to

AED 79 million in 2008.

Investment properties marginally increased from

AED 853 million to AED 858 million over the year.

Sorouh is developing the second phase of Sas Al

Nakhl and the Abu Dhabi Aviation project and as a

result investment properties under development

increased from AED 408 million to AED 573

million at year end.

Sorouh has seven associated companies: Aseel

Finance, Green Emirates, Bunya, Al Maabar, LLJ

Property, Al Sdeirah Real Estate Investment and Abu

Dhabi Finance. Sorouh’s share of profit from its

associates increased from AED 18 million in 2007

to AED 51 million in 2008.

The inventory of land plots still held at the Shams

Abu Dhabi and Saraya projects represents AED 257

million, down AED 358 million from AED 615

million, due to the recognition of revenue on plots

held in the two developments.

Development work in progress of AED 2.474

billion represents properties developed for sale

recorded at cost, including costs attributable to

the design and construction of such properties.

The increase of AED 1.392 billion represents

project work completed in 2008. Trade and other

receivables (non-current and current) at the end

of 2008 amounted to AED 4.331 billion compared

to AED 2.080 billion in 2007, as a result of an

increase in receivables on the sale of plots and an

increase in advance payments to contractors.

FINANCIAL REVIEW

Sorouh’s financial performance in 2008, the most successful year in its corporate history, was marked by strong increases in revenue, profit, asset values and earnings per share, against the background of a resilient capital and liquidity structure. Achieving such an encouraging result leaves Sorouh well placed to exploit the opportunities presented by current uncertainties in the global economy.

14

Bank borrowings were reduced from AED 233

million to AED 220 million at year end. This

puts Sorouh in the enviable position, vis-à-vis

many of its competitors, of enjoying a healthy

debt-to-equity ratio. In September 2008, Sun

Finance Limited, a consolidated Special Purpose

Vehicle, issued non-convertible Islamic Sukuk

Certificates for a total amount of AED 4.02 billion.

The Sukuk Certificates are arranged to conform to

the principles of Islamic Sharia and are structured

as a non-recourse facility with repayment solely

from the receivables due from clients on certain

plots sold on the Shams Abu Dhabi and Saraya

projects. As a result of the non-recourse nature of

the Sukuk Certificates, the adjusted debt-to-equity

ratio for Sorouh (excluding the outstanding

amounts of the Sukuk Certificates as of 31

December 2008) is 3.7 per cent.

Due to prevailing market conditions, the market

capitalisation of Sorouh, listed on the Abu Dhabi

Securities Exchange, fell from AED 21.7 billion to

AED 7.9 billion at year end.

Sorouh has sufficient liquidity, and is well-placed to

meet its working capital requirements for the current

year. Senior management is aware of the constraints

operating in the broader financial and equity

markets as a result of the global financial situation,

but is equally cognisant of the opportunities

presented by the current downturn. All options are

being considered to allow Sorouh to maximise the

potential presented by these opportunities.

Property, especially in the markets in which Sorouh

operates, is a long-term and low-risk business.

Management is fully aware of this and sets its central

strategy as the continuation of Sorouh’s prudent and

cautious approach to the real estate business.

Decisions on asset selection, allocation of financial

resources and long-term development plans are

taken with this fundamental reality in mind.

The low-risk nature of Sorouh’s portfolio,

focusing on prime developments in or near the

core market of Abu Dhabi, in alliance with the

government of the Emirate and its long-term

strategic plan, will continue to be Sorouh’s guiding

principle in the coming year. As in previous years,

the key performance indicators will remain profit

growth, total shareholder return and asset growth.

Benchmarking these indicators against our

competitors in the real estate sector will remain a

central part of our management philosophy, and

will ensure adherence to the basic principle of

value creation for our shareholders, business

partners and customers.

In the current volatile financial environment, Sorouh

will adopt a flexible and pragmatic approach to

capital structure. Solid asset backing and liquidity

give management the opportunity to consider the

long-term benefits of securitisation at competitive

rates, wherever possible without recourse to

third-party dependence or rigid financial covenants.

Revolving credit facilities and committed bank lines,

which are both long term and flexible, will continue

to be considered as options, along with more

conventional forms of capital raising, with a view

to taking advantage of the long-term global trend

towards lower basic interest rates. The central financial

strategy will remain, to finance Sorouh’s growth in as

flexible and sustainable a manner as possible in the

challenging global financial environment.

42%increase in net profit in 2008

135%growth of total assets to AED 16.939 billion

48%rise in earnings per share

15

Property Development

The key efforts of 2008 included the implementation

of the development management framework based

on a matrix management approach. This saw the

progression of development business plans for

various integrated mixed-use developments within

the Sorouh portfolio such as alghadeer, The Gate

Towers, Al Mashtal, Shams Marina, Al Ain Mall, Al

Ain Hotel and Golf Gardens 2.

The development plans were based on a rigorous

analysis of the property market and the various asset

classes including an assessment of the consumer

demand for the various types of real estate. Various

master plans were also carried out for numerous

potential developments both within the UAE and

overseas, namely the Lulu Island development in

Abu Dhabi, Sorouh Egypt and the Atlas Gardens

development in Marrakesh, Morocco.

One of the key initiatives undertaken was the

strategy to increase the development of income-

producing property within the Sorouh portfolio.

To this end the development plans were implemented

for the Al Mashtal and Golf Gardens 2 developments,

which are intended to be longer term income-

producing property. Initiatives also commenced

with the leasing of retail space within the Sun and

Sky Tower mall.

In May 2008, the Government of Abu Dhabi

endorsed Sorouh’s conceptual master plan for Lulu

Island, granting the land to Sorouh in partnership

with the Mubadala Development Company. The

conceptual master plan reflects Sorouh’s vision for a

low rise, low density and low impact development.

It will see Lulu Island become an integral district of

the capital city, offering a world-class destination for

residents and visitors and a benchmark for

self-sustainable island communities.

Sorouh is continuing to work in conjunction with

the Abu Dhabi Municipality and the Urban

Planning Council to refine the master plan in line

with the strategic plan for Abu Dhabi. An

international team of renowned urban designers,

architects, landscape designers, engineers and

environmental experts is being assembled to deliver

Sorouh’s vision for Lulu Island.

Another key project in which master planning was

completed in 2008 was alghadeer; this project is one

of the major strategic developments that Sorouh is

focusing on in 2009. Meanwhile, concept designs

were completed for the Navy Base, Maya Island,

Emirates Golf Club, Fujairah Resort and the hotel

and retail developments in Al Ain.

Going forward, the approach will be one of

adhering to the Plan Abu Dhabi 2030, the Urban

Structure Framework Plan and the Abu Dhabi

Economic Vision Plan 2030. One of the principal

focuses for attention will be the creation of an

affordable housing portfolio in line with the

objectives of the Government of Abu Dhabi.

International

In the international arena, progress was maintained

on Sorouh’s two projects in Egypt and Morocco, to

which Sorouh retains a long-term commitment.

Master planning was completed and development

commenced on Sorouh City outside Cairo and Atlas

Gardens in Marrakesh. In view of the global

economic climate, Sorouh intends to proceed

cautiously on these projects, with constant attention

to customers’ needs as its top priority.

Operations

Sorouh’s development projects adhere to several

project fundamentals: feasibility and differentiation

of the project concept and design, the ability to

meet the demand of the market, and consistent and

timely delivery. Sorouh continues to apply these

fundamentals and has proven this in the

considerable operational progress made across its

portfolio in 2008.

This progress is reflected by the ramping up of

resources in the operations division’s workforce,

which almost doubled in 2008 in all areas, from

project management and design through to quality

control and safety.

Design stage work has advanced for many projects

including the hotel in Al Ain. Shams Marina has

completed the master plan and initial concept and

is getting ready to commence the tendering process

for the design consultancy. Design stage work has

been substantially completed in 2008 for the Al Ain

Mall, Golf Gardens 2 and the schematic design was

completed for Al Mashtal. Each of these projects is

now in the initial stages of construction, site

clearance, excavation and preliminary infrastructure

work. Construction commenced with the Gate

Towers in late 2008 and is progressing well. It

remains on target for initial completion in 2013.

Several flagship projects in Shams Abu Dhabi have

made significant progress in 2008 and are nearing

the final stages of completion, with Sun Tower

scheduled to reach its full 64 floors by the end of

April 2009. Sky Tower will reach its full 74 floors by

June 2009. Golf Gardens 1 is nearing substantial

completion and is scheduled for handover in 2009.

Work is underway on the Saraya flagship

development, where Sorouh has responsibility for

master developing the infrastructure and managing

the development of the plots by various sub-

developers. Sorouh has also made significant

progress on the design of the new Corniche

Hospital in the Saraya project, scheduled to start

construction in 2009. This includes a 400 bed

maternity hospital and represents part of Sorouh’s

social responsibility contribution to Abu Dhabi.

OPERATIONAL REVIEW

16

OPERATIONAL REVIEW CONTINUED

Sas Al Nakhl Village is a beautifully designed gated community fulfilling the needs of modern families. At its heart is the superbly equipped Clubhouse offering various leisure and recreational facilities.

462,000 sq metrescompleted development

Situated close to Abu Dhabi Golf Club

and the cricket stadium, Sas Al Nakhl is just

30 minutes from the city centre, 15 minutes

from Abu Dhabi Airport and 40 minutes

from Jebel Ali Free Zone.

588 residential unitsunder leasing process

The Clubhouse offers a range of first-rate

amenities including swimming pools, a

fully-equipped gymnasium, sauna and steam

room, tennis and squash courts, a children’s

playground and games room.

18

Strategy

Sorouh’s strategy in 2008 focused on the need to

provide stability and continuity. Sorouh shifted from

a functional structure to a hybrid matrix model,

utilised by most big corporations, and formalised

‘operating model principles’ to support the matrix

organisational structure and the project life-cycle.

The core principles of Sorouh’s strategy are to

focus on ‘the Four Cs’ – Country, Customers,

Competencies and Cash. This is in line with the basic

corporate position of being primarily an Abu

Dhabi-oriented business, which places its customers

as a top priority in its core activity as a master property

developer with a strong emphasis on managing its

financial resources soundly and prudently.

Asset Management

Within this framework, the asset management

department began the task of preparing for the

launch of a new service management unit in 2009.

The new unit, Khidmah, finalised its business plan,

grew its staffing numbers to 14 and managed the

leases on three current leased properties – Golf

Gardens, Sas Al Nakhl and Khalidiya Village.

Sales & Marketing

The sales and marketing division had a successful

year, advancing its goal to be one of the UAE’s top

property developers and real estate brands. The

emphasis is on sustained and excellent customer

relations, designed to strengthen our reputation as a

provider of first class customer-centric products.

This will continue to be our goal in the more

demanding market conditions of 2009.

In 2008 projects were launched or major sales

made in alghadeer, Gate Towers 1, 2 and 3, The

Arch and the Sun Tower. The total inventory for

2008 amounted to 10,361 units, of which

approximately 6,700 units were sold. This included

sales through joint venture partners, such as the

Gate development.

The first sales centre was opened in Abu Dhabi and

the sales staff grew by 16 employees. In line with our

business strategy and customer-oriented focus, a

new customer service department was established

to enhance customer experience and diversify

Sorouh within the real estate market. In the same

year Sorouh was voted “Best Customer Services

Company – Real Estate” by the Middle East

Excellence Awards Institute.

Sorouh signed deals with seven significant

financial groups to support property financing

for its customers, against the background of

increasingly constrained market conditions

towards the end of 2008.

One highlight for sales and marketing was the

Sorouh Faces project, which included a donation of

$1 million to the UAE Red Crescent and the

building of the biggest advertising poster in the

world, comprising 1 million photographed faces

from local and international contributions. The

poster was clearly visible from the air on the final

approach to Dubai International Airport.

The corporate communications department

developed a core strategy, integrated with all

divisions, whilst focusing primarily on marketing

and project activities. A major initiative of the year

was to research and present a corporate branding

refocus designed to meet the needs of our key

stakeholders – the Government of Abu Dhabi, our

strategic partners, the community, our employees,

the media, our customers and our shareholders. The

unit also introduced an innovative benchmark for

gauging return on investment in corporate

communications, a first for Sorouh and the UAE

business community.

Key events and sponsorships of the year included

the eye-catching exhibits at the Cityscape events

in Dubai and Abu Dhabi and participation in the

Abu Dhabi Investment Forum in London in

October. The unit also strengthened its involvement

with the UAE cultural and sporting community with

sponsorship of equestrian and sporting events across

the Emirates, and the Paris Art Abu Dhabi exhibition

at the Emirates Palace Hotel in the capital.

Corporate

The corporate division continued to serve Sorouh

under its slogan “the better we serve, the faster

Sorouh grows”. The departments within corporate

met many challenges during 2008 as a result of the

growth of Sorouh.

The human resources and administration

departments oversee the well-being and

development of Sorouh’s most important asset –

its people. Key achievements for HR in 2008

included the recruitment of UAE nationals in line

with the long-term Emiratisation programme, to

bring the total number of UAE nationals employed

by Sorouh to 49 (15 per cent of the total workforce);

and the employment of 164 additional staff to

meet Sorouh’s growing operational manpower

requirement. The focus on manpower development

saw the delivery of a range of training programmes

in support of the matrix organisation, as well as

enhancement of Sorouh’s induction programme

for all new employees.

Sorouh’s workforce mirrors the cultural and ethnic

diversity of the UAE, with representatives from 38

nationalities. We remain committed to promoting

cultural diversity within Sorouh, while always

acting within the guidelines of government strategy

on the employment of UAE nationals as part of the

Emiratisation programme.


20


22

Strategically positioned between Abu Dhabi and Dubai, alghadeer is a community of villas, town houses, terraced homes and apartments close to some of the UAE’s most significant industrial zones and facilities.

3.11 million sqm land under development

Adding to the convenient location, the

development will be beautifully landscaped

to seamlessly bring together nature and urban

living with hills and valleys, walkways, lakes

and public parks.

19,000 residentsat 100 per cent occupancy

Combining sustainability with charm and

the essence of the natural desert, residents

will be offered the best of everything, from

education to entertainment, beautiful homes

and modern office space.

23


Advancing Sorouh’s human capital will

continue to be a top priority in 2009, specifically

designed to enhance Sorouh’s reputation as a

‘first choice’ employer in a more challenging

business environment.

The information technology department, in

conjunction with the business divisions, successfully

implemented an Oracle ERP System in 2008; a

critical component of Sorouh’s organisation-wide

infrastructure. IT also set up Sorouh’s new data

centre and rolled out a new suite of collaborative

tools to enhance Sorouh’s partnership with third

parties across its value chain.

The legal department, in liaison with the sales

and finance divisions, executed a new transfer

and mortgage process as part of Sorouh’s

customer-centricity programme to deliver more

streamlined procedures, faster settlement and a

better customer experience.

The procurement and contracts departments, in

liaison with the legal department, implemented a

new monitoring and standardisation system for new

contracts. The contracts department will continue to

ensure Sorouh enjoys a competitive advantage in the

tendering process by negotiating agreements that

deliver higher quality and lower cost within more

effective timelines. In an era of volatile raw material

and labour costs, the effective supervision of this

process will continue to be an important goal.

The corporate division also advanced Sorouh’s

corporate social responsibility by securing

scholarships for 15 UAE nationals. Furthermore, with

contributions from staff, matched by the company, it

funded the building of water wells in Ghana and

Niger and supported an orphanage programme.

Sustainability

As a responsible corporation doing business in the

real estate sector, Sorouh is firmly committed to

delivering sustainable growth to its customers and

the wider community. The thrust of our business in

2009 will be to extend this ambition, in alliance

with the Government of Abu Dhabi and the

Emirate’s planning authorities. We fully share the

goal of making the UAE a new paradigm for global

developers, in line with internationally agreed

models for best practice in environmental and

ecological matters. This approach is of fundamental

importance for the future of the UAE, the region

and the world.

Corporate Governance and Internal Audit

Corporate governance is fundamental to Sorouh’s

long-term prosperity. The Board and Executive

Management are committed to ensuring that

shareholder value is enhanced on a sustainable basis,

in a manner that recognises the interests of all

stakeholders, including employees, suppliers,

customers and the communities in which we operate.

Governance Achievements

In 2008, we further aligned our governance

framework with the Securities and Commodities

Authority (SCA) - Decision No. R/32 (Corporate

Governance Regulations for Joint-Stock Companies

and Institutional Discipline Criteria). We have

implemented all material requirements ahead of the

2010 deadline.

In 2008, under the stewardship of the Audit &

Governance Committee, the Board of Directors also

attended an internal corporate governance

workshop provided by an independent expert, as

part of Sorouh’s commitment to continually

enhance and revaluate governance to ensure our

governance practices adhere to the highest

standards and to provide valuable information to

all our stakeholders.

Sorouh’s governance framework includes the

following elements:

• Board stewardship.

• Integrity of financial reporting.

• Timely and balanced disclosures.

• Recognition of stakeholders’ interests.

• Accountable and ethical decision-making.

• Management of risk and internal controls.

• Responsible remuneration for management

and staff.

Further details on the above elements are included

in Sorouh’s Governance Report for 2008 shown on

pages 34 - 46.

24


26

SunTower

SkyTower

40,000 sq metrescombined tower land area

The Sky Tower will comprise apartments,

penthouses and Class-A offices, while the Sun

Tower is exclusively residential. Both will offer

intelligent building design with panoramic

views across the Gulf and Abu Dhabi island.


The towers’common podium will house a

state-of-the-art fitness and leisure centre, a 70

metre infinity pool and a yoga lawn. Below a

striking glass atrium, an integrated mall will

include exclusive shops, cafes and restaurants.

The Sky and Sun Towers, 74 and 64 storeys high respectively, are the iconic multi-use developments at the heart of the Gate District, the breath-taking entrance to Shams Abu Dhabi.

27


Audit and Governance Committee

In providing an advisory service to the Board of

Directors, the Audit and Governance Committee

provides independent comment, advice and counsel

to the Board on matters considered at its regular

meetings. The committee’s role is to provide

reasonable assurance that Sorouh is meeting its

core business goals and objectives efficiently and

effectively, within the internal control and risk

management framework established by the Board

of Directors.

In 2008, the committee’s activities included:

• Providing assurance on the financial statements.

• Providing a forum for the consideration of

external auditors’ findings.

• Reviewing the implementation of SCA corporate

governance regulations.

• Reviewing the quality of Sorouh’s financial

policies, practices and disclosures.

• Reviewing the appropriateness of accounting

policies adopted by the Executive Management.

• Discussing and resolving issues arising from

internal audit reports.

• Monitoring coordination between the external

and internal audit programmes.

• Reviewing the Internal Audit Charter and scope of

internal audit operations.

Further information on the above is discussed in the

Governance Report.

Internal Audit

Sorouh’s Internal Audit Directorate provides

independent, objective and authoritative advice and

counsel to the Board of Directors, the Audit and

Governance Committee and Executive Management

to assist them in discharging the functions and

duties conferred or imposed on them.

The department provides assurance in the

following areas:

• Reliability of financial and related management

information.

• Cost effectiveness and efficiency of all Sorouh’s

operations.

• Adequacy and accuracy of its accounting and

computer systems.

• Protection and efficient utilisation of funds and

assets under Sorouh’s control.

• Compliance with legislative and statutory

requirements and established policies.

It also advises on the following:

• Identification of improvement opportunities in

the delivery of services or activities.

• Improved accountability and transparency of

decision-making.

• Assessment of internal control frameworks within

line areas.

• Effective implementation of audit

recommendations.

• Ad hoc advice on emerging issues.

Internal Audit coverage includes all aspects of

Sorouh’s activities in accordance with the Internal

Audit Charter. All areas are subject to internal audit

coverage, based on risk assessment and contractual

and/or statutory provisions. The extent and

frequency of audits depends upon varying

circumstances, such as results of previous audits,

relative risk associated with activities, materiality,

the adequacy of the system of internal control, and

available resources.

Our reporting and consultative relationship is

illustrated below:

In 2008, the internal audit activities included:

• Assessing the control environment.

• Providing assurance on the implementation of

Oracle ERP.

• Facilitating implementation of Enterprise Risk

Management.

• Performing audits and consulting on

recommendations with management.

• Leading the implementation of the SCA

Corporate Governance regulations.

In 2009, the internal audit focus will be on:

• Improving reporting.

• Aligning assurance, risk and governance efforts.

• Facilitating improved awareness on corporate

governance.

• Actively engaging with clients to improve

effectiveness of our services.

Direct reporting relationship

Consultative relationship

Board committees

29


345,000 sq metresdevelopment land area

Just 30 kilometres from Abu Dhabi city

centre, Golf Gardens will feature a range of

home designs from the family-size Orchid

Villa, to the simple yet comfortable Jouri

and Khuzama townhouses.


Residents can take advantage of the sprawling

gardens, beautiful boulevards, and the

Gardens Club, designed as a vibrant centre

for recreational activities and housing the

clubhouse, sports centre and retail zone.

Golf Gardens is a premium residential compound bordering the lush greens of Abu Dhabi Golf Club. The project comprises 391 beautifully finished villas and townhouses, and a large retail and entertainment area.

30

governance report

contents:

1.0 Overview 34 1.1 SCA Corporate Governance Regulations 35

2.0 Board of Directors 36 2.1 Matters Reserved for the Board 37 2.2 Composition of the Board 37 2.3 Induction Programme 38 2.4 Access to Independent Advice 38 2.5 Board Performance 38 2.6 Directors’ Meetings 39 2.7 Chairman of the Board 39 2.8 Executive Management 39 2.9 Board of Directors’ Remuneration 39 2.10 Directors’ Transaction in Sorouh Securities 39

3.0 Board Committees 40 3.1 Audit & Governance Committee 40 3.2 Follow-up & Remuneration Committee 42 3.3 Investment Committee 42

4.0 Risk Management 43

5.0 Shareholder Communication 43

6.0 Business Conduct 44 6.1 Employee Disclosure Line 44 6.2 Conflict of Interest 44 6.3 Insider Share Dealing 44 6.4 Corporate Social Responsibility 45

7.0 External Auditor 45

8.0 Top 20 Shareholders 45

governance reportfor the year ended 31 december 2008

1.0 overviewThe Board of Directors believes that good corporate governance is fundamental to the long-term prosperity of Sorouh. The Board is committed to ensuring that shareholder value is enhanced on a sustainable basis in a manner that recognises the interests of all stakeholders in Sorouh including its employees, suppliers, customers, business partners and the communities in which it operates.

In 2007, the Board formalised and aligned Sorouh’s Corporate Governance framework in accordance with SCA regulations and international best practice. The diagram below provides a schema of the framework and the key elements adopted.

ShareholdersThe Shareholders represent the highest level of governance and set, via the Articles of Association, the framework within which Sorouh must operate as a Public Joint Stock Company. Sorouh’s Corporate Governance framework takes into account the principles espoused and standards set by the Securities & Commodities Authority (SCA), the Abu Dhabi Securities Exchange (ADX) and Commercial Companies Law Federal Law No (8) (as amended), in setting the direction and requirements for Sorouh.

Board of DirectorsThe Board is accountable to Sorouh’s shareholders and seeks to ensure that the business objectives of Sorouh are aligned with the expectations of shareholders, and that the operations of Sorouh are being effectively managed in a manner that is properly focused on those objectives as well as conforming to the regulatory and ethical requirements of the SCA and ADX.

The key Board level corporate governance elements are the charters that outline the objectives, responsibilities and framework for operation of the Board and Board Committees.

• CharterfortheBoardofDirectors • CharterfortheChairman&Vice-Chairman • CodeofConductforDirectorsoftheBoard • ScheduleofDelegations • CharterfortheInvestmentCommittee • CharterfortheAudit&GovernanceCommittee • CharterfortheFollow-up&RemunerationCommittee

Securities & CommoditiesAuthority

Charter for Chairman&ViceChairman

Code of Conduct forDirectors of the Board

Schedule of Delegations

Charter forManaging Director

Charter forChief Executive Officer

Charter forManagement Reporting

BusinessCode of Ethics

Abu DhabiSecurities Exchange

Charter forBoard of Directors

Articles of Association

Charter for Audit & Governance Committee

Charter for Follow-up & Remuneration Committee

Charter for Investment Committee

corporate governance framework

Shareholders

Board of Directors

Executive Management

34

1.0 overview continued

Executive Management The Executive level implements the corporate strategy and manages the day-to-day affairs of Sorouh according to the business plan approved by the Board. Executive Management has the authority to manage Sorouh affairs and business, taking into account the protection of shareholders’ interests, international best practice, as well as the pragmatic day-to-day operational needs.

The key executive level corporate governance elements are the charters setting out the objectives, responsibilities and authority of Executive Management.

• CharterfortheManagingDirector • CharterfortheChiefExecutiveOfficer • CharterforManagementReporting • BusinessCodeofEthicsforallSorouhStaff

1.1 Sca corporate governance regulationsThe table below summarises Sorouh’s compliance with the Securities and Commodities Authority – Decision No. R/32, Corporate Governance Regulations for Joint-Stock Companies and Institutional Discipline Criteria. (The reference column identifies the relevant section of this report for further commentary.)

corporate governance regulations elements comply reference

I Lay Solid foundation for management and oversightImplement Decision No. R/32 – Corporate Governance Regulations for Joint-Stock Companies and Institutional Discipline Criteria in accordance with the timeframe stipulated.

Yes 1.0, 3.1

Board approved Corporate Governance framework. Yes 1.0Formalise and disclose the functions reserved for the Board and those delegated to management.

Yes 1.0, 2.0, 2.1

II Structure the board to add valueA majority of the Board should be Independent Directors Yes 2.2The roles of Chairperson and Chief Executive Officer should not be exercised by the same individual.

Yes 1.0, 2.2

The Board should establish a Follow-up & Remuneration Committee. Yes 3.0Structure the Follow Up & Remuneration Committee so that it consists of –•Notlessthan3Non-ExecutiveDirectors.•Atleast2IndependentDirectors.•ChairmancannotbeamemberoftheCommittee.

YesYesYes

3.2

III promote ethical and responsible decision-makingEstablish a Code of Conduct to guide the Board of Directors as to the practices necessary to maintain confidence in the company’s integrity. (Code of Conduct for Directors of the Board)

Yes 1.0, 6.0, 6.2

Establish a Code of Conduct to guide the key executive and staff as to the practices necessary to maintain confidence in the company’s integrity. (Business Code of Ethics)

Yes 1.0, 6.0

Board approved Employee Disclosure Policy through which employees can make confidential disclosures.

Yes 6.1

Board approved policy on Insider Share Dealing. Yes 6.3

Iv Safeguard Integrity in financial reportingThe Board should establish an Audit Committee. Yes 3.0The Audit Committee should have a formal charter. Yes 3.1Structure of the Audit Committee so that it consists of –

•Notlessthan3Non-ExecutiveDirectors.•Atleast2IndependentDirectors.•MajorityareIndependentDirectors.•Includefinancialandaccountingexpert.•Anindependentchair,whoisnotchairmanoftheBoard

YesYesYesYesYes

3.1

External Auditor to be independent from the Company and Board of Directors. Yes 7.0

35

1.0 overview continued

1.1 Sca corporate governance regulation continued

corporate governance regulations elements continued comply reference

v make timely and balanced disclosureBoard approved Market Disclosure Policy Yes 5.0Procedures designed to ensure compliance with ADX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance –•Identifiedwhohasresponsibilitytocaptureinformationfordisclosure.•Corporateframeworktoensurecompliancewithstandardsfordisclosures.•Identifiedauthorisedspokespersonstomakeanypublicstatement.

YesYesYes

5.0

vI respect the rights of ShareholdersCommunications strategy to promote effective communication with shareholders and encourage effective participation at General Assembly Meetings.

Yes 5.0

Representation on the Board of Directors of minority shareholders’ interests. Yes 2.2The appointment and remuneration of the External Auditor shall be according to a decision of the General Assembly.

Yes 7.0

External auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

Yes 5.0, 7.0

vII recognise and manage risk Board approved Risk Management Policy. Yes 4.0Risk management oversight under stewardship of Audit & Governance Committee. Yes 3.1, 4.0Risk management and internal compliance and control system reporting. Yes 3.1, 4.0

vIII assurance on Internal controlsBoard approved Internal Audit function. Yes 3.1Charter for Internal Audit, which outlines purpose, powers, tasks and reporting on internal control system of the company.

Yes 3.1

Internal Audit oversight under stewardship of Audit & Governance Committee. Yes 3.1

IX remunerate fairly and responsiblyArticles of Association shall have a system to determine the Board of Directors’ remuneration. Yes 2.9Provide disclosure in relation to the company’s remuneration policies. Yes 2.9

X recognise Interests of StakeholdersBoard approved Corporate Social Responsibility Policy. Yes 6.4

2.0 board of directorsThe role of the Board is to provide stewardship for Sorouh’s business and affairs, which are conducted by its officers and employees under the direction of the Managing Director (MD) and Chief Executive Officer (CEO).

The Board is responsible for overseeing the effective governance, management and control of Sorouh. The Board has delegated certain responsibilities to Board Committees which operate in accordance with charters approved by the Board.

The Board has delegated the day to day management of the business of Sorouh to management through the MD and CEO subject to agreed authority limits applicable to the Senior Executive Team. These delegations are documented within the Schedule of Delegations and are reviewed regularly to ensure a balance between appropriate control, risk management and operational business requirements.


36

2.0 board of directors continued

2.1 matters reserved for the boardThe Board has established a list of matters which have been reserved for its control. These are of a strategic, sensitive or extraordinary nature or which exceed the thresholds set in the authority delegated to management. Reserved matters include –

• SettingandreviewingthestrategicdirectionofSorouh.• OverseeingthemanagementandcontrolofSorouh.• Initiatingandimplementingkeycorporatepolicies,proceduresandcontrolsasnecessary.• Approvingandmonitoringkeybudgets,businessplans,financialstatementsandfinancialpolicies.• Overseeingtheadequacyandeffectivenessofaccountability,responsibility,riskmanagementandcorporategovernance.• Approvingproposalsformajorinvestments,capitalexpenditureinitiativesasproposedbytheMDandCEOandendorsedbythe

Investment Committee.• Overseeingtheadequacyofmanagerialresourcestoensurethatthereisadequatedepthofresourcesandappropriate

succession planning.• Ensuringthatshareholdersreceivehighquality,relevantandaccurateinformationinatimelymannerandthatinvestorsgenerallyare

able to trade in Sorouh’s securities in a market which is efficient, competitive and informed. • TheappointmentandremovaloftheManagingDirector,ChiefExecutiveOfficer,DirectorInternalAuditandCompanySecretary.

2.2 composition of the boardThere are currently eight Directors on the Sorouh Board; seven are Non-Executive Directors.

composition of the boarddirectors position

Saeed Eid Al Ghafli ChairmanMohamed Khalaf Al-Mazrui Vice-ChairmanAbubaker Seddiq Al Khouri Member & Managing DirectorFardan Hassan Al Fardan MemberMohammed Ahmed Saeed Al Qasmi MemberMubarak Matar Al Humairi MemberSaeed Mubarak Al Hajeri MemberYusouf Mohammed Al Nowais Member

Since inception Sorouh has had a majority of independent Directors. This is in line with the Board’s Charter, which provides that the Board should have a majority of Non-Executive Directors who are considered by the Board to be independent.

The Board considers six of the seven Non-Executive Directors as independent. (See Board of Director Division table on next page.) Mr Al Khouri is assessed to be an Executive Director as he also holds the position of Managing Director.

The Board has adopted a policy on the independence of Directors, under which the Board assesses the independence of each Director annually and on disclosure of any new interests or relationships by a Director. In the event that the Board considers that an independent Director has ceased to be so, this will be disclosed to the SCA, ADX and the market.

The overarching test used by the Board to assess the independence of a Director is whether the Director is independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement. The Board evaluates the materiality of any interests or relationships that could be perceived to compromise independence on a case-by-case basis, having regard to each Director’s individual circumstances.

37


2.2 composition of the board continued

Board of Directors Division directors Independent executive appointed

Saeed Eid Al Ghafli No 2005Mohamed Khalaf Al-Mazrui Yes 2007Abubaker Seddiq Al Khouri No Yes 2007Fardan Hassan Al Fardan Yes 2005Mohammed Ahmed Saeed Al Qasmi Yes 2005Mubarak Matar Al Humairi Yes 2005Saeed Mubarak Al Hajeri Yes 2005Yusouf Mohammed Al Nowais Yes 2005Note:(a) H.E. Saeed Eid Al Ghafli and Mr Abubaker Seddiq Al Khouri are deemed non independent as per the definition stipulated in Article 1 of SCA - Decision

No. R/32, Corporate Governance Regulations for Joint-Stock Companies and Institutional Discipline Criteria. (b) Mr Al Khouri was appointed Managing Director on 14 Nov 07.

In line with the Board’s Charter, all Directors have substantial experience in Business and Management and within the real estate industry specifically. The table below provides an overview of the experience.

directors Qua

lifi

cati

ons

bac

helo

r (b

) /

mas

ters

(m

) /

prof

essi

onal

(p)

bus

ines

s &

man

agem

ent

expe

rien

ce (

year

s)

expe

rien

ce a

s d

irec

tor

(yea

rs)

rea

l est

ate

& c

onst

ruct

ion

oil

& U

tili

ties

ban

kin

g , f

inan

ce &

In

sura

nce

tele

com

mun

icat

ion

s

gov

ern

men

t, n

ot f

or

profi

t &

com

mun

ity

org

anis

atio

ns

and

oth

er

Saeed Eid Al Ghafli B 15+ 10-15 P P P

Mohamed Khalaf Al-Mazrui B 15+ 10-15 P P

Abubaker Seddiq Al Khouri M & P 15+ 10-15 P P P P P

Fardan Hassan Al Fardan B 15+ 10-15 P P

Mohammed Ahmed Saeed Al Qasmi P 15+ 15+ P P

Mubarak Matar Al Humairi B & P 15+ 15+ P P P P

Saeed Mubarak Al Hajeri M & P 10-15 10-15 P P P P

Yusouf Mohammed Al Nowais B 15+ 15+ P P P

2.3 Induction programme New Directors are provided with a formal letter of appointment, which sets out their rights, duties and responsibilities as a Director of Sorouh. New Directors also participate in an induction programme involving comprehensive briefings from management and site visits.

All Directors have access to information and senior management as required to enable them to fulfil their responsibilities. In addition to management briefings at every Board meeting, Directors are regularly briefed by internal and external specialists on key business and industry developments and matters material to their role as Directors.

2.4 access to Independent advice Under the Board Charter, any Director may seek external, independent, professional advice at Sorouh’s expense. It is expected that a Director will consult the Chairman before obtaining external advice. The policy of the Board is that external advice will be made available to all Directors, unless the Chairman determines otherwise.

2.5 board performance The Board Charter provides that the Board will undertake a self-assessment of its performance annually. The review process will include interviews with the Directors as well as Senior Executives and generate recommendations to assist the Board in developing initiatives to enhance governance.


38


2.6 directors’ meetings The Board formally convened on 7 occasions during 2008, to consult and make determinations on strategic and operational issues affecting Sorouh. Attendance was as follows –

directors positionboard meetings

available attended

Saeed Eid Al Ghafli Chairman 7 7Mohammed Khalaf Al Mazrui Vice-Chairman 7 6Abubaker Seddiq Al Khouri Member & MD 7 7Yusouf Mohammed Al Nowais Member 7 4Mubarak Matar Al Humeiry Member 7 5Saeed Mubarak Al Hajeri Member 7 5Fardan Hassan Al Fardan Member 7 5Mohammed Ahmed Saeed Al Qasmi Member 7 6

2.7 chairman of the board H.E. Saeed Eid Al Ghafli has been Chairman of the Board since inception of the company. The Chairman serves as the primary link between the Board and Management and works closely with the MD and CEO. He is responsible for drafting and approving the agenda of Board meetings, taking into consideration any matter proposed by other Directors. The Chairman is responsible for providing leadership to the Board and ensuring that the Board works effectively and discharges its responsibilities.

There is no financial, family, business or other important relevant relationships between the Chairman, MD and CEO.

2.8 executive managementThe MD and CEO operate in accordance with the authority set by the Board within the approved Strategic Plan. The MD and CEO have full authority to act within the Operational Plan and Operating Cost Budget that has been presented to and agreed by the Board. The MD and CEO may sub-delegate functions to the Senior Management Group subject to existing Board policies and legal requirements that limit that power of sub-delegation.

Senior Management GroupThe Senior Management Group (SMG) is jointly chaired by the MD and CEO and comprises Chiefs and Executive Directors. The SMG is responsible for managing Sorouh’s day to day performance and key business issues in line with Sorouh’s Operational Plan. SMG members meet face-to-face on a regular basis.

2.9 board of directors’ remunerationIn accordance with the Articles of Association the remuneration of the Board of Directors shall consist of a percentage of the net profit. The upper limit is fixed at no more than 10 per cent of the net profit (Article 34(1) & 58(4)). This is in accordance with and complies with Articles 7, Decision No. R/32 – Corporate Governance Regulations for Joint-Stock Companies and Institutional Discipline Criteria issued by the Securities and Commodities Authority.

In 2008, with the approval of the General Annual Assembly, the amount of AED 31.434 million (equivalent to 2.5 per cent of the net profit) was allocated to the remuneration of the Board of Directors. (2007 – AED 14.633 million)

2.10 directors’ transaction in Sorouh Securities The Board approved Sorouh’s Insider Share Dealing Policy in 2007. This policy prohibits trading where it is reasonably probable that unpublished price-sensitive information relating to Sorouh’s business could be exploited. Sorouh’s Insider Share Dealing policy applies to the Board of Directors. More information on the policy is provided under Section 6.3 of this report.

The Board and the individual Directors understand their obligations with respect to disclosure requirements in connection with their dealings in Sorouh securities and are committed to complying with all requirements set by the SCA and ADX.

39

3.0 board committeesThe Board has established three Committees to assist in executing its functions and bestow on them powers and entrusts them with responsibilities to implement resolution(s) of the Board.

The permanent Committees of the Board are –• InvestmentCommittee• Audit&GovernanceCommittee• Follow-up&RemunerationCommittee

Each Committee has a Charter setting out its objectives, responsibilities, structure, operation and reporting framework. The Board reconstituted all Committees in 2007, to ensure that the roles and responsibilities were aligned to and in accordance with SCA Decision No. R/32.

3.1 audit & governance committee The Audit & Governance Committee assists the Board in fulfilling its corporate governance responsibilities in relation to Sorouh’s risk management and internal control systems, accounting policies and practices, financial reporting and internal and external audit functions.

The Audit & Governance Committee provides assurance to the Board that Sorouh’s core business goals and objectives are being achieved in an efficient and economical manner, within an appropriate framework of internal control, risk management and governance.

The Audit & Governance Committee is composed of three Non Executive Directors. All members of the Committee are independent Directors. It is a requirement of the Audit & Governance Committee’s Charter that all committee members are financially literate and that at least one member has relevant accounting or financial expertise.

The Committee Chairman meets with the MD, CEO and Director Internal Auditor to ensure that Committee members are kept regularly informed of key issues. The Committee also meets with the External Auditor, without members of management present, as it deems appropriate.

The Charter of the Audit & Governance Committee defines the Committee’s responsibilities as follows –

External Auditor• Considerthe“TermsofEngagement”oftheExternalAuditor,includingthenature,scopeofworkandauditplan.• ConsidertheindependenceoftheExternalAuditorandanypotentialconflictsofinterest.• DiscusswiththeExternalAuditoranyauditproblemsencounteredinthecourseoftheengagement,includinganyrestrictionson

scope or access to information.• DiscusswiththeExternalAuditortheappropriatenessoftheaccountingpoliciesappliedinfinancialreports.• EnsurethatsignificantfindingsandrecommendationscommunicatedbytheExternalAuditorandExecutiveManagement’sproposed

responses are received, discussed and appropriately acted upon.• ReviewtheperformanceoftheExternalAuditorandmakerecommendationstotheBoardofDirectors.

External Reporting• Assuranceover“going-concern”.• EnsureaprocessisinplaceforcontinuousdisclosuretotheSCAandADX.• Assuranceovertheintegrityofthequarterly,halfyearlyandannualfinancialstatements.• ReviewtheintegrityofSorouh’sfinancialreporting,including–¡ Appropriateness of accounting policies.¡ Significant estimates and judgments used in financial reports.

• RecommendationtotheBoardconcerningtheadoptionofthefinancialstatements.• Reviewdocuments,reportsandstatementsrequiredtobeapprovedbytheBoardandrecommendtheybesignedby

the Board based on the Committee’s assessment of them.


40

3.0 board committees continued

3.1 audit & governance committee continued

Risk Management• MonitorSorouh’sriskregisterandriskprofile.• Reviewstrategicandoperationalriskmanagement.• Monitortheeffectivenessofimplementedriskmitigationstrategies.• Evaluatetheoveralleffectivenessoftheriskmanagementframework.• Reviewtheadequacyofriskmanagementpolicies,processes,proceduresandsystems.

Internal Audit • Reviewthescopeofworkandreviewandapprovetheannualauditplan.• Reviewtheactivities,resourcesandorganisationalstructureofInternalAudit.• AssessandcontributetotheauditplanningprocessesrelatingtorisksandthreatstoSorouh,takingintoaccountthefinancialand

operational environment in which it operates and its performance management framework.• DiscusswiththeDirectorInternalAuditorwhetheranydifficultieswereencounteredinthecourseoftheaudit,suchasrestrictionson

the scope of their work or access to information.• EnsurethatthefindingsandrecommendationscommunicatedbyInternalAudit,andExecutiveManagement’sproposedresponses,

are received, discussed and appropriately acted upon.• EvaluatethequalityoftheInternalAuditfunction,particularlyinrespecttoplanning,monitoringandreporting.• ContributetotheselectionprocessfortheappointmentoftheDirectorInternalAuditor.

Internal Control • Evaluatetheoveralleffectivenessoftheinternalcontrolframework.• Reviewtheimplementationofkeyaccountingpoliciesandfinancialreporting.• OverseeandappraiseSorouh’sfinancialandoperationalreportingprocesses.

Compliance• ReviewadherenceofSorouhstafftorulesofprofessionalconduct.• Reviewtheadequacyofpracticesandprocedureswithrespecttocompliancewithapplicablelaws.• ReviewtheeffectivenessofthesystemformonitoringcompliancewiththeListingRules,DisclosureRulesandothersuchlegal

requirements as relevant to the preparation of financial reports.• Reviewtheeffectivenessofthesystemformonitoringcompliancewithrelevantlawsandregulations(includinginternalrules)and

the measures taken by Management as a result of its investigation of material incidents of non-compliance.• ObtainregularupdatesfromManagement(andCompany’slegaladvisorifappropriate)regardingcompliancematters.

Related Party Transactions• Reviewandmonitortheproprietyofrelatedpartytransactions,otherthantransactionswithmajorshareholders,whichshallbethe

responsibility of the Board of Directors.

Whistleblower – Employee Disclosures • ReviewpoliciesandprocessesthroughwhichtheemployeesofSorouhcanconfidentiallynotifyanyoftheirdoubtsonpotential

abnormalities in the financial reports or internal control or any other matters.• Overseetheinvestigationofsuchabnormalitiestoensureanindependentandfairinvestigation.• ReviewExecutiveManagementactionstoaddressvalidatedabnormalities.

During the period 1 Jan – 31 Dec 08, four meetings of the Committee were held. Attendance was as follows –

audit & governance committee positionmeetings

available attended

Yusouf Mohammed Al Nowais Chair 4 2Mohammed Khalaf Al Mazrui Member 4 4Saeed Mubarak Al Hajeri Member 4 3

41


3.1 audit & governance committee continued

2008 Achievements Financial Reporting• Reviewedthefinancialinformationpresentedbymanagementforquarterlyandhalf-yearlyandFinancialStatements,togetherwith

reports and opinions from Deloitte & Touche – External Auditors.• AssessedtheappropriatenessofaccountingpoliciesandmethodschosenbyManagement.• ReviewedappropriatenessofdisclosureinthefinancialstatementsandfinancialreportingtotheSCAandADX.• MaderecommendationstotheBoardonthefinancialinformation(Q1,Q2&Q3)andyearendFinancialStatements.

Corporate Governance• ReviewedandapprovedtheCorporateGovernanceReporttoSCAandADX.• InitiatedandconductedCorporateGovernanceworkshopfortheBoardofDirectorsbyanindependentexpert.

Audit • MaderecommendationstotheBoardastotheappointmentoftheExternalAuditor.• ReviewedwithDeloitte&Touchethescopeandtermsoftheiraudit.• MonitoredthecoordinationbetweentheExternalAuditandInternalAuditprogrammes.• ReviewedtheimplementationoftheCorporateGovernanceregulationsissuedbytheSCA.• ReviewedandapprovedoperationsofInternalAudit.• DiscussedandresolvedissuesarisingfromInternalAuditreports.

3.2 follow-up & remuneration committee The Follow-up and Remuneration Committee provides assurance to the Board on Human Resource Management and Compensation policies that reflect best practice. It also provides guidance on Board succession planning, taking into account the challenges and opportunities facing Sorouh and what skills and expertise are needed in the future.

The Follow-up and Remuneration Committee is composed of three Non-Executive Directors and one Executive Director. All Non-Executive Directors of the Committee are independent. The Committee Chairman meets with the CEO and Executive Director HR to ensure that Committee members are kept regularly informed of key issues.

The Charter of the Follow-up and Remuneration Committee defines the Committee’s responsibilities in the following categories –

• NominationofDirectors• ExternalReporting• AnnualIncentivePlan• RemunerationReviews• RelatedPartyTransactions• HumanResourceManagement• LongTermDeferredIncentivePlan• RemunerationforDirectorsoftheBoard

During the period 1 Jan – 31 Dec 08, one meeting of the Committee was held. Attendance was as follows –

follow-up and remuneration committee positionmeetings

available attended

Mohammed Khalaf Al Mazrui Chair 1 1Yusouf Mohammed Al Nowais Member 1 -Mohammed Ahmed Saeed Al Qasmi Member 1 1Abubaker Seddiq Al Khouri Member 1 1

2008 Achievements • ReviewedandapprovedtheDirectors’RemunerationdisclosurestatementtobeprovidedaspartofSorouh’sGovernanceReport.• ReviewedandsubmittedtotheBoardrecommendationsonremunerationguidelinesforemployees.• ReviewandsubmittedtotheBoardrecommendationsontheannualincentiveguidelines.• Reviewandapprovethetermsoftheannualincentiveplanandtheparticipationlevelsfor2007and2008.• ReviewedandsubmittedtotheBoardproposalonlong-termdeferredincentiveplanforstaffandSeniorManagement.

3.3 Investment committee The Investment Committee provides the Board assurance and oversight of Sorouh’s investment strategy and performance. The Committee also ensures that there has been an appropriate level of due diligence undertaken on investment proposals.


42


3.3 Investment committee continued

The Investment Committee is composed of two Non-Executive Directors and one Executive Director. All Non-Executive Directors of the Committee are independent. The Committee Chairman meets with the CEO, CFO and Executive Director Investment to ensure that Committee members are kept regularly informed of key issues.

The Charter of the Investment Committee defines the Committee’s responsibilities in the following categories –

• InvestmentStrategy• MonitoringandReviewofInvestments.• EndorsemandatesrelatingtoInvestment• PortfolioComplianceProgram• RiskManagementProgram• RelatedPartyTransactions

During the period 1 Jan – 31 Dec 08, one meeting of the Committee was held. Attendance was as follows –

Investment committee positionmeetings

available attended

Saeed Mubarak Al Hajeri Chair 1 1Fardan Hassan Al Fardan Member 1 -Abubaker Seddiq Al Khouri Member 1 1

2008 Achievements • Monitoredtheperformanceofinvestmentportfolio.• Reviewedtheinvestmentvaluationpoliciesandmethodologies.• ProvidedadvicetotheBoardontheeffectiveutilisationofthebalancesheet.• Evaluatedtheoverallriskmanagementframeworkfortreasuryandinvestments.• ReviewedandrecommendedtotheBoardtheneedforadditionalfundingandcapital.• ReviewedandsubmittedtotheBoardrecommendationsoninvestmentstrategyandpolicies.• ReviewedproposalsformaterialinvestmentsandsubmittedtotheBoardrecommendationsonthemosteffective

options for implementation.

4.0 risk managementSorouh considers effective risk management as a fundamental part of good management practice and is committed to maintaining risk management systems to safeguard shareholders’ investment, other stakeholders’ interests and Sorouh’s assets; and to prevent breaches in applicable laws or regulation.

The Enterprise Risk Management (ERM) project was initiated in 2007, to formalise existing risk management practices and to align these to best practice. The aim of the ERM project is to ensure there is a consistency to the methods used in assessing, monitoring and communicating risks and that risk management efforts are aligned with Sorouh’s strategic and business objectives.

In 2008 as part of the ERM, Phase 1 of the project was implemented. This included –

• DevelopingtheRiskManagementPolicyandFramework• Developingriskimpactandlikelihoodcriteria.• EstablishingthecontextandidentifyrisksthroughoutSorouh.• Ratingstrategicandoperationalrisks.• DevelopingRiskRegisters.

The Board is responsible for approving the risk policy, reviewing the effectiveness of the risk management process and confirming Sorouh’s risk appetite. The Audit and Governance Committee assists the Board in fulfilling its obligations in relation to risk management.

Sorouh’s MD and CEO are responsible for implementing the risk management framework within Sorouh and ensuring its effective performance.

5.0 Shareholder communicationSorouh is committed to ensuring that shareholders and the market receive high quality, relevant and accurate information in a timely manner and that investors generally are able to trade in Sorouh’s securities in a market which is efficient, competitive and informed.

Sorouh has a Market Disclosure Policy setting out the corporate governance standards, protocols and related processes aimed at ensuring timely and accurate information is provided equally to all shareholders and market participants. The policy also outlines processes implemented by the Board to ensure compliance with continuous disclosure obligations imposed by the SCA and ADX.

43

5.0 Shareholder communication continued

Under the policy the only persons authorised to make any public statement on behalf of or attributable to Sorouh are those that hold the following positions –

• ChairmanoftheBoardofDirectors• ManagingDirector• ChiefExecutiveOfficer• ChiefFinancialOfficer

From time to time Sorouh conducts analyst and investor briefings. In these cases no information is disclosed at these briefings unless it has been previously or is simultaneously released to the market. Furthermore, Sorouh does not comment on market speculation or rumours, unless it relates to an official query from regulatory authorities – the SCA or ADX.

The General Assembly is the primary opportunity for shareholders to meet with the Board and Senior Executives face-to-face. All shareholders receive the Notice of Meeting detailing the time and venue and outlining the resolutions to be put to the Meeting. Accompanying the Notice is a proxy form, instructions on completion and lodgement and addressed return envelope to encourage maximum shareholder participation.

Shareholders attending the venue are given the opportunity to ask questions during the course of the meeting. The Chairman will seek to address as many of the more frequently raised topics as possible within the time available. Directors also make themselves available after the formal part of the meeting with shareholders.

The External Auditor also attends the General Assembly Meeting and is available to answer questions.

6.0 business conduct The success of Sorouh depends on its reputation for enterprise, fair dealing and professionalism. Sorouh is committed to the highest standards of legal and ethical conduct in its business dealings and complies with all applicable governmental laws, regulations and codes whenever it conducts business.

For Sorouh employees, ethical behaviour is a duty and commitment; and considered as an integral part of the way we do business. The principles and values to which we are committed are summarised within our Business Code of Ethics.

6.1 employee disclosure LineIn line with the Code of Conduct, Sorouh has developed an Employee Disclosure Policy which outlines Sorouh’s commitment to ensuring that employees are able to raise concerns regarding any improper conduct without being subject to victimisation, harassment or discriminatory treatment, and to have such concerns properly investigated.

The Employee Disclosure Line allows Sorouh staff to confidentially and anonymously (if they wish) raise concerns in a responsible manner without fear of discriminatory treatment via an internally developed web-based system.

Arrangements are in place to investigate matters raised. Where appropriate, investigations will be conducted independently. Under the policy levels of activity and support processes for employees will be monitored, with activity reports submitted to the Audit & Governance Committee and the Board.

6.2 conflict of InterestDirectors and Senior Executives are required to identify any conflicts of interest they may have in dealing with Sorouh’s affairs, and refrain, as appropriate, from participating in any discussion or voting on these matters. In addition to general guidelines in the Code of Conduct, a range of procedures designed to ensure compliance with laws and the highest standards in relation to managing conflicts of interest have been implemented. Furthermore, Directors are encouraged to raise any matters that may give rise to a conflict of interest with the Chairman of the Board.

6.3 Insider Share dealingSorouh has developed an Insider Share Dealing Policy to assist Directors and employees to comply with their legal obligations while they are in possession of price-sensitive information. The policy contains an explanation and prohibition of insider trading and sets out restrictions on dealing in Sorouh securities.

Under the policy, and in addition to the ADX enforced restriction periods, Sorouh Directors, Executive Management and staff are required to advise Sorouh Management before or at the same time as lodgment of their applications with ADX for an insider trade no matter what the value of the trade – Buy or Sell. Notification for an insider trade by Directors and designated executives is required to be made to the Chairman of the Board prior to any dealing.

Sorouh reserves the right to disallow or restrict a trade where it considers it is reasonably probable that unpublished price-sensitive information relating to Sorouh’s business could be exploited. Furthermore, an additional restriction period can be imposed during which no insider trade will be allowed by Board of Directors, Executive Management or staff.


44

6.0 business conduct continued

6.4 corporate Social responsibility Sorouh’s Corporate Social Responsibility (CSR) objective is to create sustainable value for shareholders, employees, suppliers, customers, business partners and the communities we operate in. It is about ensuring our business remains viable and contributes lasting benefits to the UAE and other societies through the consideration of social, environmental, ethical and economic aspects in all that we do.

Our aim is to meet all social, environmental and corporate responsibilities imposed by the jurisdictions we operate in. To this end, we will be working to integrate environmental and social considerations into our decision-making and operational practices. This assists us in understanding the impact (direct and indirect) created by our operations. Ultimately this leads to better decisions and improved business performance, adding value to our business by reducing risk, improving our operational efficiency, as well as creating a great place to work.

Our CSR strategy will be implemented by focusing on the following areas –

• Governance–Ethicsandaccountability.• Employees–Creatingagreatplacetowork.• Environment–Managingourenvironmentalimpacts.• Suppliers–WorkingwithoursupplychaintoenhanceCSR.• Customers–Providingcustomerswithanenhancedexperience.• Community–Supportingandinvestinginthelocalcommunitiesinwhichweoperate.

7.0 external auditorThe External Auditor of Sorouh is Deloitte & Touche. Deloitte & Touche were appointed by a decision of the General Assembly at the General Assembly Meeting in 2008.

Deloitte & Touche are a professional external audit firm and are independent from Sorouh’s Board of Directors, MD, CEO and CFO.

The Audit & Governance Committee reviews the quality and effectiveness of the audits conducted by the External Auditor and makes recommendations to the Board as to the re-appointment or replacement of the auditor and the rotation of the audit engagement partner where appropriate.

The External Auditor attends the General Assembly Meeting and is available to answer questions.

8.0 top 20 Shareholders and nationality of ShareholdingThe table below lists Sorouh’s Top 20 shareholders.

no citizenship Investor nameQuantity (million)

% of Issued capital

1 UAE Al Joud Investment 290.66 11.63%2 UAE Abu Dhabi Investment Co 180.71 7.23%3 UAE Capital Investment 106.93 4.28%4 UAE National Bank of Abu Dhabi 96.00 3.84%

5 UAE Al Oula investment 87.91 3.52%6 UAE Al Nahda Investment 68.45 2.74%7 UAE Capital Investments International 60.34 2.41%8 UAE 7 Emirates Co. for Investment and Trading 57.29 2.29%9 UAE Mohammed Ahmed Saeed Al Qasmi 55.65 2.23%10 UAE Al Tadamon Financial Investment 52.03 2.08%11 UAE Abu Dhabi Co-operative Society 37.34 1.49%12 GBR HSBC Bank plc 31.47 1.26%13 UAE Damac Invest Co 29.00 1.16%14 UAE Shuaa Capital 24.51 0.98%15 UAE Abd el Rahman Saeed Ghanem 21.18 0.85%16 UAE Link Investment 21.00 0.84%17 UAE Sheikh Tahnon Bin Zayed Bin Sultan Al Nehyan 20.53 0.82%18 UAE Yousef Mohammed Ali Naser Al Nowais 20.52 0.82%19 GBR Hermitage Global Master 20.47 0.82%20 UAE Reem Investments 19.99 0.80%

total 1,302.00 52.08%Source : ADX as at 22 Jan 09

45


8.0 top 20 Shareholders and nationality of Shareholding continued

Under Sorouh’s Articles of Association 15 per cent of the issued share capital can be owned by Non-UAE Nationals. The table below outlines the nationality of the shareholding.

no code citizenship% of Issued

capital

1 UAE United Arab Emirates 90.58%2 GBR Great Britain 4.72%3 KWT Kuwait 0.74%4 IRL Ireland 0.60%5 LUX Luxembourg 0.44%6 OMN Oman 0.34%7 JPN Japan 0.31%8 SAU Saudi Arabia 0.28%9 JOR Jordan 0.28%10 BHR Bahrain 0.26%11 DEU Germany 0.22%12 ESP Spain 0.20%13 LBN Lebanon 0.19%14 USA Unites States of America 0.13%15 EGY Egypt 0.10%16 ITA Italy 0.09%17 QAT Qatar 0.07%18 YAM Yemen 0.06%19 PAL Palestine 0.06%20 IRQ Iraq 0.04%

total 99.72%

Source : ADX as at 22 Jan 09

46

noteS to the conSoLIdated fInancIaL StatementSfor the year ended 31 december 2008fInancIaL StatementS

contents:

Board of Directors’ Report 48

Independent Auditor’s Report 49

Consolidated Balance Sheet 50

Consolidated Statement of Income 51

Consolidated Statement of Changes in Equity 52

Consolidated Statement of Cash Flows 53

Notes to the Consolidated Financial Statements 54

board of dIrectorS’ report

On behalf of the Board of Directors, I am pleased to present the audited consolidated financial statements of Sorouh Real Estate PJSC (Sorouh) for the year ended 31 December 2008.

financial resultsSorouh has earned profits of AED 1,784 million for the year ended 31 December 2008 compared to AED 1,257 million for the year ended 31 December 2007. Earnings per share for the year ended 31 December 2008 amount to AED 0.74 compared to AED 0.50 for the prior year. The Group’s asset base has grown to AED 16.9 billion during this year from AED 7.2 billion for the prior year.

releaseThe Directors propose to discharge the Chairman and Members of the Board of Directors and auditors from liabilities related to the performance of their duties for the year ended 31 December 2008.

auditorsDeloitte and Touche (M.E.) were appointed as auditors for the Company for the year ended 31 December 2008.

directors

The Board of Directors comprises:Saeed Eid Al Ghafli ChairmanMohamed Khalaf Al Mazrouei ViceChairmanAbubaker Seddiq Al Khouri Managing DirectorYousif Mohammed Al Nowais DirectorMubarak Mattar Al Houmeiry DirectorSaeed Mubarak Al Hajiri DirectorFardan Hasan Al Fardan DirectorMohammed Ahmed Saeed Al Qasmi Director

The appointment or re-election of board members will be presented to the General Annual Meeting for approval in accordance with the Company’s Articles of Association.

on behalf of the board of directors

Saeed eid al ghafliChairman28 January 2009

48

Independent aUdItor’S report

To the Shareholders of Sorouh Real Estate PJSCAbu Dhabi, UAE

report on the consolidated financial statementsWehaveauditedtheaccompanyingconsolidatedfinancialstatementsofSorouhRealEstatePJSC(the“Company”)anditssubsidiaries(togetherreferredtoasthe“Group”),whichcomprisetheconsolidatedbalancesheetasat31December2008,andtheconsolidatedincome statement, consolidated statement of changes in equity and consolidated statement of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes.

management’s responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We 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 whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the 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 entity’s preparation and 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.

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

opinionIn our opinion, the consolidated financial statements present fairly, in all material respect the financial position of the Group as of 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

report on other legal and regulatory requirementsAlso, in our opinion, proper books of account are maintained by the Company, and the financial information included in the Board of Directors’ report is in agreement with the books of account. We have obtained all the information and explanations which we considered necessary for the purpose of our audit. According to the information available to us, there were no contraventions of the UAE Federal Commercial Companies Law No. (8) of 1984 (as amended) or the Articles of Association of the Company which might have a material effect on the financial position of the Company or on the results of its operations for the year.

deloitte & touche

Saba y. SindahaRegistration Number 41028 January 2009

49

conSoLIdated baLance Sheet aS at 31 december 2008

Notes2008

aed’0002007

AED’000

aSSetSnon-current assetsProperty, plant and equipment 5 87,716 17,971Investment properties 6 858,236 852,979Investment properties under development 7 572,769 408,438Intangible assets 8 143,300 -Goodwill 9 508,281 345,355Investment in associates and joint ventures 10 610,664 174,022Available-for-sale financial assets 11 148,887 39,251Prepaid leases – long term 20,158 20,591Trade and other receivables 12 1,938,142 904,424Other financial assets 14 28,577 -total non-current assets 4,916,730 2,763,031

current assetsInventories 29,891 -Land held for resale 15 256,593 614,822Development work-in-progress 16 2,474,754 1,082,079Financial assets at fair value through profit or loss 17 29,333 126,799Trade and other receivables 12 2,393,052 1,176,279Cash and cash equivalents 18 6,839,040 1,457,657total current assets 12,022,663 4,457,636total assets 16,939,393 7,220,667

eQUIty and LIabILItIeScapital and reservesShare capital 19 2,500,000 2,500,000Share issuance costs, net (5,292) (5,292)Statutory reserve 20 409,108 223,292Hedging reserve (1,423) -Revaluation reserve (37,112) -Translation reserve (1,518) -Retained earnings 3,085,903 1,744,996attributable to equity holders of the parent 5,949,666 4,462,996Minority interest 8,658 -total equity 5,958,324 4,462,996

non-current liabilitiesNon-convertible Sukuk 21 1,874,293 -Provision for end of service benefits 22 19,938 3,250Notes payable – long term 23 - 135,853Bank borrowings – long term 24 114,950 190,181Other long term payables 128,192 -total non-current liabilities 2,137,373 329,284

current liabilitiesNon-convertible Sukuk 21 1,735,626 -Trade and other payables 25 6,727,418 2,177,273Notes payable – short term 23 275,461 208,526Bank borrowings – short term 24 105,191 42,588total current liabilities 8,843,696 2,428,387total liabilities 10,981,069 2,757,671total equity and liabilities 16,939,393 7,220,667

Saeed eid al ghafliChairman

mounir haidarChief Executive Officer

ala’a KhannakChief Financial Officer

The accompanying notes form an integral part of these consolidated financial statements.

50

Notes2008

aed’0002007

AED’000

revenue 26 3,723,428 2,320,961Cost of revenue 27 (1,426,924) (1,001,343)

gross operating profit 2,296,504 1,319,618Unrealised (loss)/gain on financial assets at fair value through profit or loss (34,714) 47,420Realised gain on disposal of financial assets at fair value through profit or loss 3,615 48,627Impairment loss on available-for-sale financial assets (20,855) -Share of net profits from associates and joint ventures 10 51,174 18,431General and administrative expenses 28 (319,501) (165,076)Selling and marketing expenses 29 (311,513) (99,802)Finance income 30 120,508 72,926Finance costs 31 (80,262) (2,903)Other income 79,312 18,150profit for the year 1,784,268 1,257,391Attributable to:Equity holders of the parent 1,858,158 1,257,391Minority interest (73,890) -

profit for the year 1,784,268 1,257,391

basic earnings per share (in aed per share) 32 0.74 0.50


conSoLIdated Statement of Incomefor the year ended 31 december 2008

51

conSoLIdated Statement of changeS In eQUItyfor the year ended 31 december 2008

The accom

panying n

otes form an

integral part of th

ese consolidated fin

ancial statem

ents.

Share

capitala

ed’000

Share

issuance

costs, net

aed

’000

Statutoryreserve

aed

’000

hedgin

greserve

aed

’000

revaluation

reservea

ed’000

translationreserve

aed

’000

retain

edearn

ings

aed

’000

attributable

to equity ofthe paren

ta

ed’000

min

orityin

teresta

ed’000

totala

ed’000

Balan

ce at 1 January 2007

2,500,000(5,292)

97,553-

--

877,9773,470,238

-3,470,238

Profit for the year

--

--

--

1,257,3911,257,391

-1,257,391

Transfer to statutory reserve

--

125,739-

--

(125,739)-

--

Dividen

ds-

--

--

-(250,000)

(250,000)-

(250,000)D

irectors’ remun

eration

--

--

--

(14,633)(14,633)

-(14,633)

balan

ce at 1 January 2008

2,500,000(5,292)

223,292-

--

1,744,9964,462,996

-4,462,996

Min

ority share in

the capital of

subsidiaries established during the year-

--

--

--

-103

103Profit for th

e year -

--

--

-1,858,158

1,858,158(73,890)

1,784,268Tran

sfer to statutory reserve-

-185,816

--

-(185,816)

--

-D

ividend paid

--

--

--

(300,000)(300,000)

-(300,000)

Directors’ rem

uneration

--

--

--

(31,435)(31,435)

-(31,435)

Decrease in fair value of available for sale

finan

cial assets-

--

-(57,967)

--

(57,967)(35)

(58,002)Im

pairmen

t loss on available-

for-sale finan

cial assets-

--

-20,855

--

20,855-

20,855C

han

ge in fair value of cash

flow h

edge-

--

(1,423)-

--

(1,423)-

(1,423)M

inority in

terest in th

e net assets of

subsidiaries on acquisition

date-

--

--

--

-82,859

82,859Exch

ange differen

ces arising on

tran

slation of foreign

operations

--

--

-(1,518)

-(1,518)

(379)(1,897)

balan

ce at 31 decem

ber 20082,500,000

(5,292)409,108

(1,423)(37,112)

(1,518)3,085,903

5,949,6668,658

5,958,324

52

conSoLIdated Statement of caSh fLowSfor the year ended 31 december 2008

2008aed’000

2007AED’000

operating activitiesProfit for the year 1,784,268 1,257,391Adjustments for: Depreciation of property, plant and equipment 11,195 2,962 Amortisation of non-cash prepaid leases - 53,948 Provision for infrastructure costs 431,913 226,581 Adjustments to property, plant and equipment - 1,334 Finance cost 80,163 - Amortisation of intangible assets 6,188 - Provision for future loss, impairment loss and write-off of project costs 65,550 16,808 Impairment loss on available-for-sale financial assets 20,855 - Unrealised loss/(gain) on financial assets at fair value through profit and loss 34,714 (47,420) Realised gain on disposal of financial assets at fair value through profit and loss (3,615) (48,627) Share of net profits from associates and joint ventures (54,351) (18,431) Interest income (130,554) (72,796) Dividend income - (8,015) Provision for end of service benefits, net 6,755 2,386

operating cash flows before movements in working capital 2,253,081 1,366,121

Decrease / (increase) in land held for sale 358,229 (614,822)

Increase in inventories 4,385 -

Expenditure on development work in progress (1,314,740) (684,423)

Increase in trade and other receivables (2,027,046) (1,832,666)

Increase in trade and other payables 3,635,732 1,159,799

(Decrease) / increase in notes payable (68,918) 648,007

Decrease in other long-term payables (9,121) -

net cash from operating activities 2,831,602 42,016

Investing activities

Purchase of property, plant and equipment (25,699) (16,040)

Expenditure on investment properties (5,257) (18,251)

Expenditure on investment properties under development (176,915) (223,746)

Purchase of available-for-sale financial assets (167,514) (23,251)

Purchase of financial assets at fair value through profit and loss (2,008) -

Disposal of financial assets at fair value through profit and loss 66,367 216,225

Investment in associates (217,815) (30,000)

Investment in joint ventures (160,073) -

Acquisition of a subsidiary (132,660) -

Cash received from business combination 78,013 -

Interest received 103,716 74,739

Dividend received 3,000 8,015Movement in term deposits with original maturities greater than three months and restricted short term deposits (1,223,998) -net cash used in investing activities (1,860,843) (12,309)

financing activities

Minority contribution in the capital of subsidiary 103 -

Proceeds from non-convertible Sukuk 4,016,000 -

Repayment of bank borrowings (66,809) (5,864)

Bank borrowings raised 54,181 197,584

Dividends paid (308,004) (217,455)

Repayment of non-convertible Sukuk (320,857) -

Finance costs paid (187,988) -

net cash from/(used in) financing activities 3,186,626 (25,735)

net increase in cash and cash equivalents 4,157,385 3,972Cash and cash equivalents at the beginning of the year 1,457,657 1,453,685

cash and cash equivalents at the end of the year (note18) 5,615,042 1,457,657


53

noteS to the conSoLIdated fInancIaL StatementSfor the year ended 31 december 2008

1 generalSorouhRealEstatePJSC(the“Company”)wasinitiallyformedbyaMinisterialDecreedated23July2005andformallyincorporatedasa public joint stock company in the Emirate of Abu Dhabi, United Arab Emirates, on 26 July 2005. The Company’s ordinary shares are listed on the Abu Dhabi Securities Exchange.

TheprincipalactivitiesoftheCompanyanditssubsidiaries(togetherreferredtoas“theGroup”)includerealestatedevelopmentandsale, real estate investment, property management, contracting works and related services.

The Company is domiciled in the United Arab Emirates and its registered office is P.O. Box 93666 Abu Dhabi, United Arab Emirates.

2 adoption of new and revised standardsThree interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) effective for the current period are as follows:

• IFRIC11IFRS 2 Group and Treasury Share Transactions• IFRIC12Service Concession Arrangements• IFRIC14IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their interaction.

The adoption of these Interpretations has not led to any changes in the Group’s accounting policies.

At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations were in issue but not yet effective:

New Standards and Amendments to Standards:

• IAS 1 (revised) Presentation of Financial Statements and IAS 32 (revised) Financial Instruments: Presentation – Amendments relating to puttable instruments and obligations arising on liquidation

Effective for annual periods beginning on or after 1 January 2009

• IAS 23 (Revised) Borrowing Costs Effective for annual periods beginning on or after 1 January 2009

• IAS 39 (revised) Financial Instruments: Recognition and Measurement- Amendments for eligible hedged Items

Effective for annual periods beginning on or after 1 July 2009

• IFRS 1 (revised) First time Adoption of IFRS and IAS 27 (revised) Consolidated and Separate Financial Statements – Amendment relating to cost of an investment on first time adoption


• IFRS 2 (revised) Share-based payment – Amendment relating to vesting conditions and cancellations


• IFRS 3 (revised) Business Combinations – Comprehensive revision on applying the acquisition method and consequential amendments to IAS 27 (revised) Consolidated and Separate Financial Statements, IAS 28 (revised) Investments in Associates and IAS 31 (revised) Interests in Joint Ventures

Effective for annual periods beginning on or after 1 July 2009

• IFRS 8 Operating Segments Effective for annual periods beginning on or after 1 January 2009

• Amendments to IFRS 5, IAS 1, IAS 16, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41 resulting from the May and October 2008 Annual Improvements to IFRSs


New Interpretations:

• IFRIC 13 Customer Loyalty Programmes Effective for annual periods beginning on or after July 1, 2008

• IFRIC 15 Agreements for the Construction of Real Estate Effective for annual periods beginning on or after January 1, 2009

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation Effective for annual periods beginning on or after October 1, 2008

• IFRIC 17 Distributions of Non-cash Assets to Owners Effective for annual periods beginning on or after July 1, 2009

The directors anticipate the adoption of those Standards and Interpretations in future periods will have no material impact on the consolidated financial statements of the Group in the period of initial application.

54

3 Summary of significant accounting policies

3.1 Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

3.2 basis of preparationThe consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of investment properties and certain financial instruments. The principal accounting policies are set out below:

3.3 basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the consolidated financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Minority interests in the net assets (excluding goodwill) of subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Transactions with minority interests are handled in the same way as transactions with external parties. Sale of participations to minority interests result in a gain or loss that is recognised in the consolidated income statement. Acquisition of minority shares can result in goodwill if the cost exceeds the carrying amount of the acquired net assets.

Details of the Group’s subsidiaries at 31 December 2008 are as follows:

name of subsidiaries place of incorporationownership interest % principal activities

Sorouh International Limited U.A.E. 100 Holding company of foreign entitiesGate Towers- Shams Abu Dhabi L.L.C. U.A.E. 60 Development of Gate TowersPivot Engineering & General Contracting Co. (WLL) U.A.E 60 Engineering and general

construction worksAl Seih Real Estate Management L.L.C. U.A.E 91.4 Management and leasing of real estate;

real estate projects investmentSorouh Abu Dhabi Real Estate L.L.C. U.A.E. 100 Act as Mudareb in accordance with the

Sukuk Issue structureSun Finance Limited Jersey, Channel Islands 100 Issuance of the Sukuk Certificates and

execution of the issuance documentsSorouh Egypt for Investment and Tourism Development SAE

Egypt 80 Investment in tourism activity

3.4 business combinationsAcquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured at the aggregated of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in consolidated income statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

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3 Summary of significant accounting policies continued

3.5 Interests in joint venturesA joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control. The results and assets and liabilities of joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5: Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in joint venture are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the joint venture, less any impairment in the value of individual investments.

Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group’s interest in the joint venture.

3.6 Investment in associatesAn associate is an entity over which the Group has significant influence that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but has no control or joint control over those policies.

The results and assets and liabilities of the associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in consolidated income statement.

Where the Group transacts with an associate, profits and losses are eliminated to the extent of the Group interest in the relevant associate.

3.7 goodwillGoodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the consolidated income statement on disposal.

3.8 Intangible assets

3.8.1 Intangible assets acquired separatelyAn intangible asset is recognised at fair value as at the date of acquisition of the right to the extent the Group receives a right to charge users of the service. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Intangible assets are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets is recognised in the consolidated income statement in the expense category consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in consolidated income statement when the asset is derecognised.

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3.8 Intangible assets continued

3.8.2 Intangible assets acquired in a business combinationIntangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and the fair values can be measured reliably. The cost of such intangible assets is the fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses on a straight-line basis over their estimated useful lives.

The following useful lives are used in the calculation of amortisation of intangibles:

Trade name IndefiniteLeasehold premises Over periods of leasesVendorpricebenefit IndefiniteCustomer relationships 5 – 10 yearsContracts on hand Based on remaining periods of contracts

The estimated useful life and amortisation methods are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

3.9 revenue recognition Revenue is measured at the fair value of the consideration received or receivable in the ordinary course of the Group’s activities.

3.9.1 Sale of properties Revenue from the sale of properties shall be recognised when the equitable interest in a property vests in a buyer and all the following conditions have been satisfied:

• theGrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipoftheproperties;• theGroupretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffectivecontrol

over the properties sold;• theamountofrevenuecanbemeasuredreliably;• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheGroup;and• thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

3.9.2 Rental income Lease income from operating leases is recognised on a straight-line basis over the lease term.

3.9.3 Interest incomeInterest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable.

3.9.4 Dividend incomeDividend income is recognised when the right to receive payment is established.

3.10 construction contractsThe Group recognises revenue from contracts following the percentage-of-completion method.

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the consolidated balance sheet date, as measured by the proportion that contract costs incurred forworkperformedtodatebeartotheestimatedtotalcontractcosts.Variationsincontractwork,claimsandincentivepaymentsareincluded in revenue to the extent that they have been agreed with the client and can be reliably measured.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is possible that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Costs of contracts include all direct costs of labour, materials, depreciation of property, plant and equipment and costs of subcontracted works, plus an appropriate proportion of construction overheads and general and administrative expenses of the year, which are allocated to construction contracts in progress during the year.

The gross amount due from clients for contract work classified under accounts receivable, is the net amount of costs incurred plus recognised profits; less recognised losses and progress billings, for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings.

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3.10 construction contracts continued

The gross amount due to clients for contract work classified under accounts payable, is the net amount of costs incurred plus recognised profits less recognised losses and less progress billings, for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).

3.11 LeasingLeases are classified as finance leases whenever the terms of the lease transfers substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

3.11.1 The Group as lessorAmounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Lease income from operating leases is recognised on a straight-line basis over the term of the relevant lease agreement. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

3.11.2 The Group as lesseeLeases payable under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into the operating lease are also spread on a straight-line basis over the lease term.

3.12 foreign currencies For the purpose of these consolidated financial statements U.A.E Dirhams (AED) is the functional currency of the Company and the presentation currency of the Group.

Transactions in currencies other than AED (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each consolidated balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the consolidated balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in consolidated income statement in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in consolidated profit or loss on disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign subsidiaries are expressed in UAE Dirhams using exchange rates prevailing at the consolidated balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the translation reserve. Such exchange differences are recognised in consolidated profit or loss in the period in which the foreign operation is disposed of.

3.13 borrowing costs 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 the consolidated income statement in the period which they are incurred.

3.14 property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

The cost of property, plant and equipment is their purchase cost, together with any incidental expense of acquisition.

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3.14 property, plant and equipment continued

Depreciation is calculated so as to write off the cost of property, plant and equipment, other than land and properties under construction, over their useful lives using the straight line method on the following basis:

Furniture and fixtures 4 – 10 yearsOffice equipment 3 – 5 yearsMotor vehicles 3 – 5 yearsPlant and machinery 3 – 10 yearsLabour camps 10 years

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in consolidated income statement.

3.15 capital work in progressCapital work in progress is stated at cost. When commissioned, capital work in progress is transferred to the appropriate property, plant and equipment category and is depreciated in accordance with the Group’s policies.

3.16 Inventories Inventories consisting of materials in stores for use of projects are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, directs labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted-average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

3.17 Investment property Investment property, which is property held to earn rental income and/or for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in the consolidated income statement in the period in which they arise.

3.18 Investment properties under developmentProperties in the course of construction for rental or appreciation in value are carried at cost, less any recognised impairment loss. Cost includes all direct costs attributable to the design and construction of the property including direct staff costs. Upon completion of construction or development, such properties are transferred to investment properties.

3.19 development work-in-progressDevelopment work-in-progress consists of property being developed principally for sale and is stated at the lower of cost or net realisable value. Cost comprises all direct costs attributable to the design and construction of the property including staff costs. Net realisable value is the estimated selling price in the ordinary course of the business less applicable variable selling expenses.

3.20 Land held for resaleLand held for resale is stated at lower of cost and net realisable value. Costs include the cost of land acquired. Net realisable value represents the estimated selling price of the land less all estimated costs necessary to make the sale.

3.21 government grants Land granted by the government is recognised at nominal value where there is reasonable assurance that the land will be received and the Group will comply with any attached conditions, where applicable.

3.22 Impairment of tangible and intangible assets excluding goodwill At each consolidated balance sheet date, the Group reviews the carrying amounts of its assets whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use.

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3.22 Impairment of tangible and intangible assets excluding goodwill continued

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in consolidated income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in consolidated income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

3.23 provisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the consolidated balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

3.23.1 Employee benefitsAn accrual is made for estimated liability for employees’ entitlement to annual leave and leave passage as a result of services rendered by eligible employees up to the consolidated balance sheet date.

Provision is also made for the full amount of end of service benefits due to employees in accordance with the Group’s policy, which is at least equal to the benefits payable in accordance with UAE Labour Law, for their period of service up to the consolidated balance sheet date.

Pension and national insurance contributions for U.A.E. citizens are made by the Group in accordance with Federal Law No. 7 of 1999.

3.24 cash and cash equivalentsCash and cash equivalents comprised cash on hand and balances at banks. Cash and cash equivalents are short term, high liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less and are subject to an insignificant risk of change in value.

3.25 financial assetsInvestments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit and loss, which are measured at fair value.

Financial assets are classified into the following specified categories:

Financialassetsatfairvaluethroughprofitandloss(FVTPL),availableforsale(AFS)financialassetsandloansandreceivables.Theclassification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

3.25.1 Financial assets at fair value through profit or lossFinancialassetsareclassifiedasatFVTPLwherethefinancialassetiseitherheldfortradingoritisdesignatedasatFVTPL.

A financial asset is classified as held for trading if:• ithasbeenacquiredprincipallyforthepurposeofsellinginthenearfuture;or• itisapartofanidentifiedportfoliooffinancialinstrumentsthattheGroupmanagestogetherandhasarecentactualpatternof

short-term profit-taking; or• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

AfinancialassetotherthanafinancialassetheldfortradingmaybedesignatedasatFVTPLuponinitialrecognitionif:• suchdesignationeliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldotherwisearise;or• thefinancialassetformspartofagroupoffinancialassetsorfinancialliabilitiesorboth,whichismanagedanditsperformanceis

evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• itformspartofacontractcontainingoneormoreembeddedderivatives,andIAS39permitstheentirecombinedcontract(assetorliability)tobedesignatedasatFVTPL.

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3.25 financial assets continued

3.25.1 Financial assets at fair value through profit or loss continued

FinancialassetsatFVTPLarestatedatfairvalue,withanyresultantgainorlossrecognisedinconsolidatedincomestatement.Thenetgain or loss recognised in consolidated income statement incorporates any dividend or interest earned on the financial asset. Fair values of financial assets at fair value through consolidated income statement are determined by reference to quoted market prices.

3.25.2 Available-for-sale financial assetsAvailable-for-sale investments are measured at subsequent reporting dates at fair value unless the latter cannot be reliably measured. Gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gains or losses previously recognised in equity are included in the net consolidated income statement for the period. Impairment losses recognised in consolidated income statement for equity investments classified as available-for-sale are not subsequently reversed through consolidated income statement.

3.25.3 Loans and receivablesTrade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

3.25.4 Impairment of financial assetsFinancial assets are assessed for indicators of impairment at each consolidated balance sheet date.

For unquoted shares classified as AFS at cost, objective evidence of impairment could include:

• significantfinancialdifficultyoftheissuerorcounterparty;or• defaultordelinquencyininterestorprincipalpayments;or• itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialreorganisation;or

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in consolidated income statement.

With the exception of AFS equity instruments, 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, the previously recognised impairment loss is reversed through consolidated income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised through consolidated income statement are not reversed through consolidated income statement. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

3.25.5 Derecognition of financial assetsThe Group recognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset.

3.26 financial liabilities and equity instruments

3.26.1 Classification as debt or equityDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

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3.26 financial liabilities and equity instruments continued

3.26.2 Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

3.26.3 Financial liabilitiesFinancial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

3.26.4 Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

3.27 derivative financial instrumentsThe Group enters into derivative financial instruments to manage its exposure to interest rate risk.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each consolidated balance sheet date. The resulting gain or loss is recognised in the consolidated income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the consolidated income statement depends on the nature of the hedge relationship. The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges).

The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than 12 months.

3.27.1 Hedge accountingAt the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

3.27.2 Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in consolidated income statement.

Amounts deferred in equity are recycled in the consolidated income statement in the periods when the hedged item is recognised in consolidated income statement, in the same line of the consolidated income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in consolidated income statement.

4 critical accounting judgements and key sources of estimation uncertainty

4.1 critical judgments in applying the group’s accounting policiesIn the process of applying the Group’s accounting policies, which are described in note 3, management has made the following judgments that have the most significant effect on the amounts recognised in the consolidated financial statements (apart from those involving estimations, which are dealt with below).

62

4 critical accounting judgements and key sources of estimation uncertainty continued

4.1 critical judgments in applying the group’s accounting policies continued

4.1.1 Business CombinationsIn accordance with International Financial Reporting Standards, the Group is required to allocate the cost of business combinations by recognising, at fair value the acquiree’s identifiable assets, liabilities and contingent liabilities that meet certain recognition criteria. In doing so, management have exercised their judgment, based on experience and knowledge of the industry, in determining the applicability of the recognition criteria, including the separability of intangible assets, the amortisation timetable and the impairment tests to be applied in future.

4.1.2 Classification of propertiesIn the process of classifying properties, management has made various judgments. Judgment is needed to determine whether a property qualifies as an investment property, property plant and equipment and/or property held for resale. The Group develops criteria so that it can exercise that judgment consistently in accordance with the definitions of investment property, property plant and equipment and land held for resale. In making its judgment, management considered the detailed criteria and related guidance for the classification of properties as set out in IAS 2, IAS 16 and IAS 40, in particular, the intended usage of property as determined by management.

4.1.3 Classification of leasesDuring the year, the Group, as a lessor, entered into long term lease arrangements for plots of land with entities outside the Gulf Cooperation Council (non-GCC entities) whereby the lease term under each lease is valid for a period of 99 years renewable at the option of the lessees for an indefinite duration.

In the process of determining whether these arrangements represent operating leases or finance leases, the Group management has made various judgments. In making its judgments, the Group management considered the terms and conditions of the lease agreementsandtherequirementsofInternationalAccountingStandard17“Leases”,includingtheBasisforConclusionsonIAS17provided by the International Accounting Standards Board and related guidance, to determine whether significant risks and rewards associated with the land in accordance with each lease term would have been transferred to the lessees despite there being no transfers of title. The Group evaluated the transfer of risks and rewards before and after entering into the lease arrangements, and has obtained a legal opinion from independent legal advisors. Management has determined that in the lease arrangements referred to above, the Group transferred substantially all risks and rewards of ownership to the lessees with practical ability for the lessees to exercise unilaterally all rights on the plots of land. Accordingly, management is satisfied that these arrangements represent finance leases.

During the year, the Group recognised revenue from sale of land under finance leases amounting to AED 914.7 million with cost of sale amounting to AED 366.8 million.

4.2 Key sources of estimationThe key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, 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:

4.2.1 Allowance for doubtful debtsManagement has estimated the recoverability of accounts receivable balances and has considered the allowance required for doubtful debts based on the current economic environment and past default history.

4.2.2 Estimate of fair value of investment propertyThe best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence of such information, the management determined the amount within a range of reasonable fair value estimates by considering recent transaction prices or rentals and discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing leases and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same or similar locations and conditions, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. Management has also identified any differences in the nature, location or condition of the properties, or in the contractual terms of the leases and other contracts, with adjustments made to reflect any changes in the nature, location or economic conditions since the date of the transactions that occurred at market prices. Such estimation is based on certain assumptions, which are subject to uncertainty and may differ from the actual results.

4.2.3 Contract cost estimatesAs described in note 3.10, when the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity on the consolidated balance sheet date. In judging whether the outcome of the construction contract can be estimated reliably, management has considered the detailed criterion for determination of such outcome as set out in IAS 11 ‘Construction Contracts’. For the purpose of estimating the stage of completion of contract activity, management has considered the contracted revenue and forecasted cost related to the construction contract.

63


4 critical accounting judgements and key sources of estimation uncertainty continued

4.2 Key sources of estimation continued

4.2.4 Project cost to complete estimates At each consolidated balance sheet the Group is required to estimate costs to complete fixed price and modified fixed price contracts. Estimating costs to complete on such contracts requires the Group to make estimates of future costs to be incurred, based on work to be performed beyond the consolidated balance sheet date. These estimates include the cost of potential claims by contractors and the cost of meeting other contractual obligations to the customers.

4.2.5 Provision for infrastructure constructionThe Group has an obligation under the terms of its sale and purchase agreements to develop the infrastructure of the sold land. Infrastructure cost is deemed to form part of the cost of revenue and is based on management estimate. The provision for infrastructure costs requires the Group’s management to revise its estimate of such costs on a regular basis in light of current market prices for inclusion as part of the cost of revenue.

4.2.6 Impairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculations require the entity to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value of those estimated future cash flows.

4.2.7 Impairment of other intangible assets with indefinite livesAn annual assessment is required to be made as to whether intangible assets with indefinite useful lives other than the goodwill have been impaired. Determining whether such assets are impaired requires an estimation of the value in use of assets. The value in use calculation requires the entity to estimate the future cash flows expected to arise from each asset and a suitable discount rate in order to calculate present value. The aggregate carrying amount of indefinite life of intangible assets other than goodwill at the consolidated balance sheet was AED 118,457,000.

4.2.8 Impairment of other intangible assets with definite livesFinite life intangible assets have to be tested for impairment only if there are indications that they may be impaired. Determining whether such assets are impaired requires an estimation of the value in use of assets. The value in use calculation can be undertaken using the same techniques employed to value the asset as on date of acquisition. However, no marketability discount would need to be applied as value in use rather than fair value is being computed. The aggregate carrying amount of finite life intangible assets at the consolidated balance sheet date was AED 24,843,500.

4.2.9 Impairment of properties under development Properties classified under capital work in progress, development work in progress and investment properties under development are assessed for impairment based on assessed cash flows on individual cash-generating units when there is indication that those assets have suffered an impairment loss. Cash flows are determined based on contractual agreements and estimations over the useful life of the assets and discounted using a range of discounting rates representing the rate of return on such cash-generating units. The net present values are compared to the carrying amounts to assess any probable impairment.

4.2.10 Impairment of available-for-sale financial assetsManagement regularly reviews indicators of impairment for available-for-sale financial assets and considers whether there has been a significant or prolonged decline in their fair value below cost. This determination of what is significant or prolonged decline requires judgement. In making this judgement and to decide if an impairment loss adjustment is necessary, the Management evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology and operational and financial cash flows and pay out dividend capability of the investee. In assessing the volatility in the share price, the Management also takes into consideration various aspects related to the market, including but not limited to, volume of trading over the past period, whether the listed price is a reflection of a distressed value driven by inactive or illiquid one way market, and the subsequent performance of the market after the consolidated balance sheet date. Management also considers its intent and ability to hold the investment until its market price recovers. Impairment of available-for-sale financial assets at 31 December 2008 is AED 20.85 million.

64

5 property, plant and equipment

furniture &fixtures

aed’000

officeequipment

aed’000

motorvehicles

aed’000

plant andmachinery

aed’000

Labourcamps

aed’000

Landat Sharjah

aed’000

capitalwork in

progressaed’000

total aed’000

cost1 January 2007 2,429 3,980 558 - - - 650 7,617Additions 4,105 2,022 525 - - - 9,664 16,316Disposals - - (301) - - - - (301)Adjustments (422) (245) - - - - (667) (1,334)

1 January 2008 6,112 5,757 782 - - - 9,647 22,298Additions 9,332 8,049 1,385 2,705 - - 4,228 25,699Additions through business

combination 10,317 - 7,786 48,580 17,753 1,350 1,107 86,893Disposals (35) - - - - - - (35)31 december 2008 25,726 13,806 9,953 51,285 17,753 1,350 14,982 134,855

accumulated depreciation1 January 2007 143 1,047 200 - - - - 1,390Disposals - - (25) - - - - (25)Charge for the year 1,190 1,530 242 - - - - 2,9621 January 2008 1,333 2,577 417 - - - - 4,327

Additional accumulated depreciation through business combination 5,829 - 2,293 19,350 4,180 - - 31,652Disposals (35) - - - - - - (35)Charge for the year 2,751 2,444 1,000 3,601 1,399 - - 11,19531 december 2008 9,878 5,021 3,710 22,951 5,579 - - 47,139

carrying amount 31 december 2008 15,848 8,785 6,243 28,334 12,174 1,350 14,982 87,716

31 December 2007 4,779 3,180 365 - - - 9,647 17,971

Property, plant and equipment includes a plot of land granted by the Government of Abu Dhabi, on which the Group has the intention to build its head office premises. The land is accounted for at nominal value of AED 1.

6 Investment propertiesInvestment properties comprise of the following:

2008aed’000

2007AED’000

Land held as investment property 650,451 650,451Villasheldasinvestmentproperty 207,785 202,528

858,236 852,979

Movement during the year is as follows:2008

aed’0002007

AED’000

Opening balance 852,979 834,728Additions 5,257 18,251

858,236 852,979

65


6 Investment properties continued

The fair value of investment property has been estimated by management by considering recent transaction prices or rentals and discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing leases and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same or similar locations and conditions, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. Management has also identified any differences in the nature, location or condition of the properties, or in the contractual terms of the leases and other contracts, with adjustments made to reflect any changes in the nature, location or economic conditions since the date of the transactions that occurred at market prices.

As at year end, management estimated the fair value of its investment properties and determined that there is no fair value gain or loss on its investment properties for the year ended 31 December 2008.

All investment properties are located in the United Arab Emirates.

7 Investment properties under development

2008aed’000

2007AED’000

Opening balance 425,246 184,692Additions during the year 176,915 240,554Additions through business combination 247 -

602,408 425,246Less: Impairment (29,639) (16,808)

572,769 408,438

All investment properties under development are located in the United Arab Emirates.

8 Intangible assets

trade nameaed’000

Leaseholdpremisesaed’000

vendorprice benefit

aed’000

customerrelationships

aed’000

customer contractsaed’000

totalaed’000

costAcquisition through business combinations 92,683 10,762 25,774 13,379 6,890 149,488as at 31 december 2008 92,683 10,762 25,774 13,379 6,890 149,488

accumulated amortisationAmortisation for the year - 1,461 - 1,694 3,033 6,188as at 31 december 2008 - 1,461 - 1,694 3,033 6,188

net carrying amount as at 31 december 2008 92,683 9,301 25,774 11,685 3,857 143,300

9 goodwill

2008aed’000

2007AED’000

Opening balance 345,355 345,355Goodwill recognised from business combination (note 34) 162,926 -

Closing balance 508,281 345,355

66

10 Investment in associates and joint ventures

Investeeownership

interestplace of

registration

cost at 1 January

2008aed’000

additionaed’000

Share in current

year’s profit/(loss)

aed’000

dividends receivedaed’000

Unrealised profits

aed’000

allocated to associate/

joint venture current account

aed’000

Share in underlying

net assets at 31 december

2008aed’000

associatesAl Maabar International Investment LLC 20% Abu Dhabi 30,000 70,000 (3,667) - - - 96,333

Aseel Finance PJSC 20% Abu Dhabi 63,076 40,000 14,971 - - - 118,047

Green Emirates Properties PJSC 20% Abu Dhabi 80,946 - 51,855 (3,000) - - 129,801

Bunya LLC (formerly Bayt Al Khidmah LLC) 33.33 % Abu Dhabi - - (4,502) - - 4,502 -

Abu Dhabi Finance PJSC 20% Abu Dhabi - 100,000 - - - - 100,000

LLJ Properties LLC 40% Abu Dhabi - 4,815 (1,768) - 3,177 - 6,224

Al Sdeirah Real Estate Investment – LLC 30% Abu Dhabi - 3,000 - - - - 3,000

174,022 217,815 56,889 (3,000) 3,177 4,502 453,405

Joint venturesRise Above Real Estate * 0.6% Abu Dhabi - 157,573 (2,625) - - - 154,948

S&T Cool District Cooling Co. LLC 50% Abu Dhabi - 2,500 (189) - - - 2,311

Abu Dhabi Business Co. LLC ** 51% Abu Dhabi - - (2,901) - - 2,901 -

- 160,073 (5,715) - - 2,901 157,259

174,022 377,888 51,174 (3,000) 3,177 7,403 610,66

Asatthebalancesheetdate,60percentofthecapitalwascalledandcollectedbyGreenEmiratesPropertiesPJSC(the“Associate”).Theremaining 40 per cent is payable within two years from the date of registration of the Associate in the commercial registry.

Latest available financial information in respect of the Group’s associates is summarised below:

2008aed’000

2007AED’000

Total assets 11,086,364 1,786,072

Total liabilities 9,650,496 962,221

Net assets 1,435,869 823,851

Group’s share of net assets of associates and joint ventures 610,664 174,022

Total revenue 434,994 159,940

Total profit for the year 499,467 101,141

Group’s share of net profits of associates and joint ventures 51,174 18,431

* The Group has a shareholding interest of 0.6 per cent in Rise Above Real Estate, but has joint control over the strategic financial and operational decisions and is entitled to 25 per cent share in the profit of the entity. Losses are shared in proportion to the respective shareholding interest.

** Although the Group holds 51 per cent of the equity shares of Abu Dhabi Business Co. LLC, the entity is jointly controlled by the Group and the other venturer. Profits and losses are shared equally.

11 available-for-sale financial assetsAvailable-for-sale financial assets represent investments in unlisted equity securities of companies registered in the United Arab Emirates and non-UAE based funds.

Due to the absence of an active market or any recent transactions that could provide evidence of the current fair value, the unlisted equity securities registered in United Arab Emirates are carried at cost less impairment losses, if any. Management believes that the fair market value of these securities approximates their carrying value. The fair value of the non-UAE based funds is based on the latest quotations available in the market.

67


11 available-for-sale financial assets continued

2008aed’000

2007AED’000

Balance at the beginning of the year 39,251 16,000Additions during the year 167,514 23,251Additions through acquisition of a subsidiary 124 -Changes in fair value (37,147) -Impairment losses (20,855) -

Balance at the end of the year 148,887 39,251

Management reviewed its available-for-sale financial assets for impairment based on criteria that include the extent to which carrying value exceeds market value, the duration of the market decline, management’s intent and ability to hold investment up to recovery and the financial health and specific prospects for the issuer. As a result, Management recognised impairment on available-for-sale financial assets for the amount of AED 20.85 million.

The geographical distribution of available-for-sale financial assets is as follows:

2008aed’000

2007AED’000

Within the UAE 24,326 16,000Outside the UAE 124,561 23,251

148,887 39,251

12 trade and other receivables

2008aed’000

2007AED’000

non-current portion

Trade receivables 1,938,142 904,424

current portionTrade receivables 1,260,832 550,668Less: allowance for doubtful debts (19,578) (19,578)

1,241,254 531,090Advances to contractors 675,496 286,044Due from related parties (note 33) 191,350 159,776Advance for investment property 73,774 73,774Retentions receivable 34,603 -Interest receivable 32,831 5,700Prepayments 31,643 36,674Gross amount due from clients (note 13) 14,072 -Accrued income 5,072 -Prepaid leases-short term 433 433Other receivables 92,524 82,788

2,393,052 1,176,279

Trade receivables represent the amounts due from sales of plots of land and revenue from construction contracts. Interest is charged at 12 per cent per annum on the outstanding past due amounts.

Trade receivables over 120 days are provided for based on estimated irrecoverable amounts from the sale of plots of land and revenue from construction contracts, determined by reference to management expectations.

Of the trade receivables balance at the end of the year, 71 per cent is due from 9 major customers. There are no other customers who represent more than 5 per cent of the total balance of trade receivables.

68

12 trade and other receivables continued

Included in the Group’s trade receivable balance are debtors with a carrying amount of AED 250 million (2007 : AED 117 million) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.

Ageing of past due but not impaired:

2008aed’000

2007AED’000

60-90 days 71,777 28,35390-120 days 135,663 25,994Over 120 days 42,416 62,541

249,856 116,888

Movement in the allowance for doubtful debts:

2008aed’000

2007AED’000

Balance at beginning of the year 19,578 -Charge for the year - 19,578

Balance at end of the year 19,578 19,578

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

13 construction contractsContracts in progress at balance sheet date

2008aed’000

2007AED’000

Amount due from contract customers included in trade and other receivables (note 12) 14,072 -Amount due to contract customers included in trade and other payables (note 25) (20,347) -

(6,275) -

Contracts cost incurred plus recognised profits less recognised losses to date 84,196 -Less: Progress billings (90,471) -

(6,275) -

14 other financial assetsOther financial assets include a derivative designated and effective as hedging instrument carried at fair value. In connection with the non-convertible Sukuk issuance, the Group has entered into hedge agreement with a foreign bank in order to hedge its exposure to movements in interest rates.

Under the hedge agreement, the Group secures an interest rate cap which provides protection from rises in interest rates.

15 Land held for resaleThe land held for resale at the year end is located in the United Arab Emirates.

69


16 development work-in-progress Development work-in-progress represents development and construction costs incurred on properties being constructed for and are related to the following projects:

2008aed’000

2007AED’000

Sky Tower and Sun Tower 1,117,143 411,942Golf Gardens 808,296 450,830Danet Abu Dhabi 116,934 81,785Al Mashtal 56,896 -Lulu Island 68,184 48,074Gate District 50,323 -Projects under planning 83,586 52,432Al Nagfa 34,304 25,635Al Ghadeer 66,383 11,381Egypt project 72,705 -

2,474,754 1,082,079

The Group is also pursuing several other projects which are currently at the design or the pre-development phases.

All development work in progress relates to projects undertaken in the United Arab Emirates, except for Egypt project which is still in the pre-development phase.

17 financial assets at fair value through profit or loss

2008aed’000

2007AED’000

Balance at the beginning of the year 126,799 246,977Disposal during the year (62,752) (167,598)Fair value (loss)/ gain (34,714) 47,420

Balance at the end of the year 29,333 126,799

The investments included above are held for trading and represent investments in listed equity securities listed in the United Arab Emirates that offer the Group the opportunity for return through dividend income and fair value gains. The fair values of these securities are based on quoted market prices.

18 cash and cash equivalents

2008aed’000

2007AED’000

Cash in hand 408 94Current account 440,865 48,230Fixed deposits 6,288,431 1,409,333Call account 109,336 -

6,839,040 1,457,657Less: Short term deposits with original maturities date greater than three months (1,100,000) -Restricted short term deposits (123,998) -

5,615,042 1,457,657

The interest rate on term deposits ranges between 2 per cent and 6 per cent per annum.

Cash and cash equivalents as at 31 December 2008 includes current account balances of AED 255 million held with foreign banks.

19 Share capitalShare capital comprises of AED 2,500,000,000 authorised, issued and fully paid up ordinary shares of AED 1 each. Equity includes ordinary shares of AED 395 million issued at nominal value to the previous owner of Al Reem Island as partial payment of land’s purchase consideration (note 23).

70

20 Statutory reserveIn accordance with its Articles of Association and the UAE Federal Law No. (8) of 1984, as amended, 10 per cent of the annual net profit of the Company is transferred to a statutory reserve that is non-distributable. Transfers to this reserve are required to be made until such time as it equals at least 50 per cent of the paid up share capital of the Company.

21 non-convertible SukukInSeptember2008,theGroupissuednon-convertibleSukukCertificates/Sukukal-mudarabaal-muqayyada(the“Sukuk”)foratotalamount of AED 4.016 billion. The Sukuk are structured to conform to the principles of Islamic Sharia and were issued in 3 classes of certificates with initial capital amount, anticipated profit rate and weighted average life as follows:

class

Initial capital amount

aed’ 000anticipated

profit rateweighted

average lifeScheduled

dissolution datefinal

dissolution date

Class A 2,761,000 1 m EIBOR +2% 1.02 years January 2012 January 2015Class B 251,000 1 m EIBOR +2.5% 2.05 years January 2012 January 2015Class C 1,004,000 1 m EIBOR +3.5% 2.54 years January 2012 January 2015

As per the terms of the issuance, an amount of AED 1.84 billion of the proceeds has been deposited in Reserve Accounts and will be mainly used to fund infrastructure development and any shortfall in profits payable. The Sukuk are secured by first fixed charge security over the Reserve Accounts and a floating charge over some of the Group’s business and assets.

Transaction costs in connection with the issuance of the Sukuk amounted to AED 123 million.

The non-convertible Sukuk are presented in the consolidated balance sheet as follows:

2008aed’000

2007AED’000

Proceeds from the issue of non-convertible Sukuk 4,016,000 -Less: Issuance costs (123,254) -Net proceeds from the issue of non-convertible Sukuk 3,892,746 -Payments made (320,857)Profit distribution accrued up to year end 38,030 -Carrying amount of non-convertible Sukuk 3,609,919 -Less: current portion (1,735,626) -

Non current portion of non-convertible Sukuk 1,874,293 -

Sukuk profit payable amounting to AED 22.6 million has been capitalised during the year.

22 provision for end of service benefitsThe movement in the provision for end of service benefits is as follows:

2008aed’000

2007AED’000

Balance at 1 January 3,250 864On acquisition of a subsidiary 9,933 -Charge during the year 8,187 2,518Payments during the year (1,432) (132)

Balance at 31 December 19,938 3,250

71


23 notes payableTheGroupenteredintoaSale&PurchaseAgreement(“SPA”)forthepurchaseoftwoplotsoflandintheEmirateofAbuDhabiforatotal consideration of AED 241 million and AED 72 million, respectively. As at consolidated balance sheet date, the outstanding balance payable was AED Nil and AED 3.8 million, respectively.

The Group also entered into a SPA on 1 April 2007 for the purchase of freehold title to a portion of Al Reem Island in Abu Dhabi for a consideration of AED 1,074,260,000. As at consolidated balance sheet date, the outstanding balance payable was AED 271.7 million.

2008aed’000

2007AED’000

Total payables as of year end 275,461 344,379Less: Short term payables (275,461) (208,526)

Long term payables - 135,853

24 bank borrowings

2008 2007

currentaed’000

non currentaed’000

CurrentAED’000

Non currentAED’000

Secured – at amortised cost Bank loan (1) 5,864 23,457 10,588 24,597Bank loan (2) 45,146 - 32,000 78,359Bank loan (3) - 91,493 - 87,225Bank overdraft 54,181 - - -

105,191 114,950 42,588 190,181

The non-current portion of the bank loan is repayable over the next 7 years.

Bank loan (1) represents a loan assumed by the Group in 2007 following the acquisition of the six real estate projects of Al Rayan InvestmentsPvtJSC(“ARI”).Theloanbearsaninterestrateat6monthsEIBORplusamarginof1.25percentperannumandisrepayable over 7 years. The loan is secured by a mortgage over the villas of one of the projects acquired from ARI. The interest charge on the loan for the year amounting to AED 2 million has been capitalised.

Bank loan (2) was obtained in 2007 from a local bank for the purpose of financing the construction of villas at Abu Dhabi Golf Residential Community. The loan bears an interest rate at 3 months EIBOR plus a margin of 1.25 per cent per annum and is repayable over 1 year. The loan is secured by the assignment over income from sale of the villas. The interest charge on the loan for the year amounting to AED 4.6 million has been capitalised.

Bank loan (3) was obtained in 2007 from a local bank for the purpose of financing the construction of Sky Tower on Al Reem Island, Abu Dhabi. The loan bears an interest rate at 3 months EIBOR plus a margin of 1.25 per cent per annum and is repayable at the end of the fourth year from the date of initial disbursement. The loan is secured by the assignment over income from sale of the units of Sky Tower. The interest charge on the loan for the year amounting to AED 5.8.million.has.been.capitalised.

25 trade and other payables

2008aed’000

2007AED’000

Advances from customers 4,716,245 1,318,914Provision for infrastructure construction 893,451 461,538Accrued expenses 404,352 172,060Trade payables 149,292 100,967Sales commission payable 125,641 -Retention payable 123,001 57,959Payable to minority shareholders 76,400 -Dividend payable 40,798 32,545Provision for future losses from projects 35,362 -Gross amounts due to contracts’ customers (note 13) 20,347 -Other payables 142,529 33,290

6,727,418 2,177,273

72

26 revenue

2008aed’000

2007AED’000

Sale of land 3,532,341 2,000,774Contract revenue earned 126,963 -Lease income 64,124 320,187

3,723,428 2,320,961

27 cost of revenue

2008aed’000

2007AED’000

Cost of land sold 1,290,165 848,422Cost of contract revenue 118,151 -Lease expense 18,608 152,921

1,426,924 1,001,343

28 general and administrative expenses

2008aed’000

2007AED’000

Staff costs 168,632 68,462Consultation and advisory costs 39,708 28,241Project costs written off 17,357 10,127Project costs impaired 12,831 16,808Office rent 11,464 4,923Depreciation on property, plant and equipment 5,676 2,962Provision for future losses on projects 35,362 -Amortisation of intangible assets 6,187 -Others 22,284 33,553

319,501 165,076

29 Selling and marketing expenses

2008aed’000

2007AED’000

Sales commission 167,361 7,961Exhibitions and sponsorships 56,725 28,093Advertising expenses 81,383 62,249Others 6,044 1,499

311,513 99,802

30 finance income

2008aed’000

2007AED’000

Interest and profit income:Bank fixed deposits 128,607 72,796Call and current accounts 1,947 130Gross income 130,554 72,926Less: Amounts offset against the finance costs capitalised during the year (10,046) -

120,508 72,926

73


31 finance costs

2008aed’000

2007AED’000

Interest on bank loans: Gross 12,451 12,367 Less: Amounts included in the cost of qualifying assets (12,451) (12,367)

- -Sukuk profits: Gross 75,546 - Less: Amounts included in the cost of qualifying assets (22,601) -

52,945 -Interest on overdraft and other facilities 27,218 2,903Net foreign exchange loss 99 -

27,317 2,903

80,262 2,903

32 earnings per shareBasic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the year which amounted to 2,500,000,000 shares.

There were no potentially dilutive securities as at 31 December 2008.

33 transactions and balances with related partiesRelated parties include the Group’s major shareholders, directors, and business controlled by them and their families or over which they exercise a significant influence as well as key management personnel.

The Group maintains significant balances with these related parties, which are as follows:

due from related parties2008

aed’0002007

AED’000

Due from associates 10,252 15,377Due from directors 172,905 144,399Others 8,193 -

191,350 159,776

Significant transactions with these related parties are as follows:

2008aed’000

2007AED’000

Revenue from sale of plots of land to directors 166,182 190,865Advances and payments effected on behalf of associates 78,843 -RevenuefromsaleofplotoflandtoaJointVenture 942,235 -

Key management personnel remuneration 23,232 10,900

34 acquisition of subsidiaries

(a) acquisition of pivot engineering and general contracting co. wLLDuring the year, the Company acquired 60 per cent of the issued share capital of Pivot Engineering and General Contracting Co. WLL for cash consideration of AED 264.7 million. This transaction has been accounted for by the purchase method of accounting effective 1 July 2008. The net assets acquired in the transaction, and the goodwill arising, are as follows:

74

34 acquisition of subsidiaries continued

(a) acquisition of pivot engineering and general contracting co. wLL continued

book valueaed’000

fair valueadjustment

aed’000

fair value (100%)

aed’000

fair value on acquisition

(60%)aed’000

net assets acquiredCurrent assets 315,631 - 315,631 189,379Non-current assets 46,771 8,470 55,241 33,145Current liabilities (271,271) - (271,271) (162,762)Long term liabilities (9,933) - (9,933) (5,960)Retained earnings / shareholders loan (79,698) 10,099 (69,599) (41,760)Intangible assets 149,488 149,488 89,692

1,500 168,057 169,557 101,734Goodwill on acquisition 60% 162,926Total consideration 264,660Cash consideration payable (132,660)Cash consideration paid 132,000Cash and cash equivalents acquired (77,658)

Net cash outflow on acquisition 54,342

(b) acquisition of Sorouh egypt for Investment and tourism development SaeDuring the year, the Group acquired 80 per cent ownership of Sorouh Egypt for Investment and Tourism Development SAE (formerly known as Modern Egyptian Company for Investment in Tourism MCIT), an Egyptian Company with a net asset value of AED 73.23 million, which represents mainly the subsidiary’s investment in a single property in Egypt. As a result of this acquisition the Group recognised assets, deferred consideration and minority interest for the amounts of AED 75.2 million, AED 60.1 million and AED 15.1 million respectively.

35 contingent liabilities and commitments

2008aed’000

2007AED’000

Bank guarantees 375,025 -

Letters of credit 67,518 -

Bank guarantees and letters of credit are issued in the normal course of business.

Contractual capital commitments as at 31 December 2008 in respect of agreements with consultants and contractors for projects under development amounted to AED 9,800 million which are all expected to be paid within four years from the consolidated balance sheet date (notes 7 and 16). The Group has also a commitment of AED 40 million towards investment in associates (note 10).

The future aggregate minimum lease payments under non-cancellable operating lease arrangements are as follows:2008

aed’0002007

AED’000

Not later than one year 6,588 4,500Later than one year but not later than five years 84,230 53,000Later than five years 399,568 455,000

490,386 512,500

36 financial instruments

36.1 capital risk managementThe Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2007.

The capital structure of the Group consists of debt, which includes the non-convertible Sukuk and the borrowings disclosed in Notes 21 and 24, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity.

75


36 financial instruments continued

36.1.1 Gearing ratioThe Group’s Board of Directors reviews the capital structure on a regular basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital and debt. The Group has targeted a maximum gearing ratio of 100 per cent determined as the proportion of debt to equity. The Group expects to increase its gearing ratio closer to 100 per cent through the issue of new debt in 2009.

The gearing ratio at the year end was as follows:2008

aed’0002007

AED’000

Debt (1) 3,830,060 232,769Equity (2) 5,949,666 4,462,996

Debt to equity ratio 64.37% 5.2%

(i) Debt is defined as long and short term non convertible Sukuk and long and short-term borrowings, as detailed in Notes 21 and 24.

(ii) Equity includes all capital and reserves of the Group.

36.2 Significant accounting policiesDetails of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 3 to the consolidated financial statements.

36.3 financial risk management objectivesThe Group’s Corporate Treasury function co-ordinates access to domestic and international financial markets and monitors and manages the financial exposures relating to the operations of the Group. These financial exposures include credit risk, liquidity risk and market risk.

The Corporate Treasury function reports monthly to the Group’s Investment Committee, an independent body that monitors funding and investment policies.

36.4 market riskThe Group’s activities expose it primarily to the financial risks of changes in interest rates (as illustrated below).

36.4.1 Foreign currency risk managementCurrency risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group does not have any significant exposure to currency risk as most of its assets are denominated in UAE Dirhams.

36.4.2 Interest rate risk managementThe Group’s exposure to interest rate risk results mainly from its funds borrowed at floating interest rates and short term deposits at fixed interest rates. The Group actively manages its interest rate risk on deposits.

The Group’s exposure to interest rate cash flow risk is managed by the use of interest rate cap contracts.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in Notes 18, 21 and 24.

Interest rate sensitivity analysisThe sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase or decrease is used to represent management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2008 would decrease/increase by AED 19 million (2007: decrease/increase by AED 0.2 million). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings.

36.4.3 Other price risksThe Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Equity price sensitivity analysisThe sensitivity analysis below have been determined based on the exposure to equity price risks at the reporting date.

76


36.4 market risk continued

36.4.3 Other price risks continued

Equity price sensitivity analysis continued

If equity prices had been 20 per cent higher/lower:

• TheGroup’sprofitwouldincrease/decreasebyAED5.6million(2007:increase/decreasebyAED24.8million)asaresultoftheGroup’s portfolio classified at fair value through profit and loss.

• TheGroup’sequityreserveswouldincrease/decreasebyAED29.6million(2007:increase/decreasebyAED8million)asaresultofthe Group’s portfolio classified as available-for-sale financial assets.

36.5 credit risk managementCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group’s significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics is provided in Note 12. The Group defines counterparties as having similar characteristics if they are related entities. Except where related to liquid funds the concentration of credit risk did not exceed 10 per cent of gross monetary assets at any time during the year. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies or reputable local banks closely monitored by the regulatory body.

The carrying amount of trade and other receivables and cash and cash equivalents represents the Group’s maximum exposure to credit risk.

36.6 Liquidity risk managementUltimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

effectiveInterest rate

%

Less than1 monthaed‘000

1-6months

aed‘000

7 monthsto 1 yearaed‘000

1-5 yearsaed‘000

5+ yearsaed‘000

totalaed‘000

2008Non-interest bearing - 336,573 635,862 584,136 2,115,606 - 3,672,177Interest bearing instruments 5.11 3,221,167 2,519,969 1,100,000 - - 6,841,136

3,557,740 3,155,831 1,684,136 2,115,606 - 10,513,313

2007Non-interest bearing - 320,589 72,673 141,039 682,967 15 1,217,283Interest bearing instruments 5.80 - - 42,588 190,181 - 232,769

320,589 72,673 183,627 873,148 15 1,450,052

The following tables detail the Group’s expected maturity for its non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period.

effectiveInterest rate

%

Less than1 monthaed‘000

1-6months

aed‘000

7 monthsto 1 yearaed‘000

1-5 yearsaed‘000

5+ yearsaed‘000

totalaed‘000

2008Non-interest bearing - 453,674 186,372 656,375 - - 1,296,421Interest bearing instruments 6.83 78,137 885,100 953,980 2,117,435 - 4,034,652

531,811 1,071,472 1,610,355 2,117,435 - 5,331,073

2007Non-interest bearing - 235,873 210,134 298,267 939,378 221 1,683,873Interest bearing instruments 4.77 936,434 537,451 - - - 1,473,885

1,172,307 747,585 298,267 939,378 221 3,157,758

77



36.6 Liquidity risk management continued

The Group has access to financing facilities, of which the unutilised amount is AED 739 million at the consolidated balance sheet date. The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets. The Group expects to maintain current debt to equity ratio, within 100 per cent limits. This will be achieved through the issue of new debt and the increased use of secured bank loan facilities.

37 Segment reporting

primary reporting format - business segmentsFor management purposes, the Group is organised into four main business segments – property development, land sales, construction and investment properties portfolio.

Segment information about the Group’s continuing operations for the year then ended is presented below:

propertydevelopment

aed’000Land sales

aed’000construction

aed’000

Investment propertiesportfolioaed’000

Unallocatedaed’000

groupaed’000

year ended 31 december 2008Revenue - 3,532,341 126,963 64,124 - 3,723,428Investment income - - - - 51,174 51,174Finance costs - - - - 80,262 80,262Net profit/(loss) for the year (105,258) 1,823,398 1,428 14,417 50,283 1,784,268

year ended 31 december 2007Revenue - 2,000,774 - 320,187 - 2,320,961Investment income - - - - 18,431 18,431Finance costs - - - - 72,926 72,926

Net profit/(loss) for the year (69,528) 1,055,652 - 167,266 104,001 1,257,391

The segment assets and liabilities for the year then ended are as follows:

propertydevelopment

aed’000Land sales

aed’000construction

aed’000

Investment propertiesportfolioaed’000

Unallocatedaed’000

groupaed’000

as at 31 december 2008Assets 3,150,250 5,286,614 222,574 803,632 7,476,323 16,939,393Liabilities 3,896,624 3,506,759 214,823 50,222 3,312,641 10,981,069

as at 31 december 2007Assets 1,082,077 614,822 - 852,978 4,670,790 7,220,667

Liabilities 805,636 1,081,906 - 88,540 781,589 2,757,671

The Group operated only in one geographical segment, i.e., United Arab Emirates, except for the Egypt project which is still in the pre-development phase.

38 approval of consolidated financial statementsThe consolidated financial statements were approved by the Board of Directors and authorised for issue on 28 January 2009.

78

noteS

79

noteS

80

Sorouh Real estate p.J.S.C. P.O. Box 93666Abu Dhabi, UAETel: +971 2 444 0006Fax: +971 2 444 0066www.sorouh.com

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