Abu Dhabi Marina Real Estate Investment PJSC CONSOLIDATED FINANCIAL STATEM ENTS AND BOARD OF DIRECTORS REPORT

Transcription

1 Abu Dhabi Marina Real Estate Investment PJSC CONSOLIDATED FINANCIAL STATEM ENTS AND BOARD OF DIRECTORS REPORT 31 DECEMBER 2011

2 Abu Dhabi Marina Real Estate Investment PJSC BOARD OF DIRECTORS REPORT 31 DECEMBER 2011

3 BOARD OF DIRECTORS REPORT 31 D ecem b e r 2011 The Board o f Directors have pleasure in subm itting their report and the audited consolidated financial statem ents for me ycai cuucu j i uecemoei ZU 11. Principal activities and review o f business developm ents Abu Dhabi M arina Real Estate Investment PJSC (the Com pany ) is a private joint stock company that was incorporated in Dubai, United Arab Emirates ( UAE ) in accordance with the provisions o f the UAE Federal Com mercial Com panies Law No (8) o f 1984 (as amended). The consolidated financial statements com prise the financial statements o f the Company, Rkaiz Properties LLC, Marsa Jordan Real Estate Development LLC and Marsa Abu Dhabi Properties LLC and its subsidiary together the G roup. The G roup s registered office is at P O Box 474, Dubai, UAE. The principal activities o f the Group involve owning, selling, purchasing and leasing real estate, carrying out business real estate project investment and all associated activities. Results f o r the year The results for the year o f the Group are summarized as follows: A E D Revenues Loss for the year ( ) (34.&HL77S) The m ovem ent on accum ulated deficit was as follow's: A ccum ulated deficit A E D Balance at 1 January 2011 Loss for the year attributable to shareholders o f the parent Balance at (57,079,193) ( 14, ) ( ) Auditors A resolution proposing the reappointment o f Ernst & Young as auditors o f the Group will be General Meeting. put to the A nnual Abu Dhabi

4 Abu Dhabi Marina Real Estate Investment PJSC CONSOLIDATED FINANCIAL STATEM ENTS 31 DECEMBER 2011

5 =!J Er n s t & Yo u n g P 0. Box th Floor - Al Ghaith Towel Hamdan Street Abu Dhabi, United Arab Emirates Tel: Fax: www, ev. com/me INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF ABU DHABI MARINA REAL ESTATE INVESTMENT PJSC Report on the consolidated financial statements W e have au d ited the acco m p an y in g financial statem en ts o f A bu D habi M arina Real E state In v estm en t P JSC (the C o m p an y ") and its su b sid iaries (the G ro u p ), w hich co m p rise the conso lid ated sta te m en t o f fin an cial position as at 31 D ecem b er and the co n so lid ated statem ent o f co m p reh en siv e in c o m e, co n so lid a ted statem ent o f c h a n g es in eq u ity and conso lid ated statem ent o f cash Hows fo r the y ear th e n en d ed, and a su m m ary o f sig n ifican t acco u n tin g policies and o th er ex p lan ato ry inform ation. M a n a g e m e n t's re sp o n sib ility f o r th e co n so lid a te d fin a n c ia l sta tem en ts M anag em en t is resp o n sib le for the p rep a ra tio n and fair p resen tatio n o f these co n so lid ated fin an c ial sta te m en ts in acco rd an c e w ith International F inancial R eportin g S tandards and the ap p licab le p ro v isio n s o f the articles o f asso cia tio n o f the C o m p an y and the U A E C o m m ercial C om panies L aw o f 1984 (as am en d ed), and for such internal controls as m an ag em en t d eterm in e s is n ecessary to en able th e p re p a ra tio n o f the co n so lid a ted fin an cial statem ents that are free from m aterial m isstatem ent, w hether d u e to fraud o r eitor. A u d ito r s ' re sp o n sib ility O u r resp o n sib ility is to ex p re ss an opinion on these conso lid ated financial statem ents based on our a u d it. W e co n d u c te d o u r audit in acco rd an ce w ith International S tan d ard s on A uditing. T hose standard s re q u ire that w e co m p ly w ith eth ical req u irem en ts and plan and p erform the audit to obtain reaso n ab le a ssu ra n c e w h eth e r the co n so lid a ted financial statem ents are free from m aterial m isstatem ent. An audit in v o lv e s p e rfo rm in g procedures to obtain audit ev id en c e about the am ounts and d isc lo su re s in the c o n so lid a ted financial statem ents. T he p ro cedure s selected depend on the auditors* ju d g m e n t, in clu d in g th e assessm en t o f th e risks o f m aterial m isstatem en t o f the consolidated financial sta te m en ts, w h e th e r due to fraud o r erro r. In m aking th o se risk assessm en ts, the au d ito r considers in tern al co n tro l relev an t to th e e n tity 's p rep a ra tio n and fair p resen tatio n o f the co nsolidated financial statem ents in o rd e r to design audit p ro c e d u re s that are appropriate in the circ u m sta n ces, but not for th e purpose o f e x p re ssin g an o p in io n on the e ffe c tiv e n e ss o f the e n tity 's internal control. A n audit also includes e v a lu a tin g th e a p p ro p riaten e ss o f a c c o u n tin g policies used and th e reaso n ab le n ess o f acco u n tin g estim ates m ade by m an ag em en t, as w ell as e v a lu a tin g the overall p rese n tatio n o f th e co n so lid ated financial statem ents. W'e b eliev e that the au d it ev id en c e we have o b tain ed is su fficien t and appropriate to provide a basis for o u r audit opin io n. A m enitip r firm uf m st S Y ounq GloOal LimiW u

6 IH 1"" HJ Er n s t & Yo u n g O pinion In o u r o p in io n, the conso lid ated financial sta te m en ts present fairly, in all m aterial resp e cts, the fin a n c ia l position o f the G roup as o f 31 D ecem b er 2011, and its financial p erfo rm an ce and its c a sh flow s fo r th e y ear then en d ed in accordance w ith In ternational F inancial R eporting S tandards. Report on other legal and regulatory requirements W e also co n firm that, in o ur opin io n, th e co n so lid ated financial statem ents, in clu d e in all m a te ria l respects, the applicable req u irem en ts o f the U A E C o m m ercial C o m p an ies L aw o f 1984 (a s am en d ed ) a n d the articles o f association o f the C o m pany; p ro p er b ooks o f acco u n t have been kept by th e C o m p an y a n d the c o n ten ts o f the report o f the B oard o f D irecto rs relatin g to these conso lid ated financial statem en ts are co n sisten t w ith the books o f account. W e have obtained all the in form ation and e x p lan a tio n s w h ich w e required for the p urpose o f o ur audit and. to the best o f o u r know ledge and belief, no vio latio n s o f th e U A E C o m m ercial C o m p an ies Law o f 1984 (as am en d ed) or o f the articles o f asso cia tio n o f the G ro u p have o ccu rre d during the y ear w hich w ould have had a m aterial effect on th e business o f th e G roup o r on its fin an cial position. R ichard M itchell P artn er Ernst & Y oung R eg istratio n N o M arch 2012 D ubai

7 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended Notes Rental income O ther income G eneral and adm inistrative expenses 3 D epreciation 4 Finance costs N et decrease in fair value o f investment properties 6 N et decrease in fair value o f investment properties under developm ent 7 Provision for loss on advances for purchase o f investm ent properties ,284, ,247 (3,135,151) (286,989) (3,830,466) (10,094,705) (1,800,000) (2, ) (1,927,133) ( ) (3, ) ( ) ( ) ( ) NET LOSS FOR THE YEAR AND TOTAL COMPREHENSIVE LOSS FOR THE YEAR (18, ) ( ^ A ttributable to: N on-controlling interests Equity holders o f the parent (3,335,648) ( ) ( ) ( ) ( ) ( ) The attached notes 1 to 19 form part o f these consolidated financial statements.

8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION A t 31 D ecem b e r Notes A E D A E D ASSETS Non-current assets Equipm ent and fixtures 4 314, ,599 Property under developm ent 5 2,871,975 51,915 Investm ent properties 6 82,510,000 79,675,475 Investm ent properties under development 7 3,200,000 30,998,500 Advances for purchase o f investment properties 8 6, Current assets Accounts receivable and prepayments 9 26,938,463 1,502,308 Bank balances and cash 10 19, , , TOTAL ASSETS J_ EQUITY AND LIABILITIES Equity Share capital ,000, ,000,000 Shareholders current account , ,000 Statutory reserve , ,498 A ccum ulated losses (71, ) ( Equity attributable to parent 78,705,253 93,480,305 Shareholders loan 15 18,758,057 15,999,864 Non-controlling interests (1 5,577,44 n ( ) Total equity 81, Non-current liabilities Due to related parties 15 8,665,262 11,186,289 E m ployees end o f service benefits 88,032 57,028 Ijara financing arrangem ents 14 40, Current liabilities A ccounts payable and accruals 13 4,282,770 4,868,1 12 Deffered income 312,000 Due to related parties 15 1,568, ,292 Ijara financing arrangem ents 14 4,403, , Total liabilities 59, TOTAL EQUITY AND LIABILITIES , Chairman o f the)board The attached notes 1 to 19 form part o f these consolidated financial statements.

9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Y e a r en d ed 31 D ecem b e r 2011 Attributable to the equity holders o f the parent Share capital AEP Statutory resenv Shareholder*' current account Accumulated losses Total Shareholders' loan Noncontrolling interests Total Balance at 1 January ( ) ( ) l31.8iq.l51 Total comprehensive loss for ihe year Amounts drawn by shareholders - - (1.000) (24.618,205) ( ) (1.000) - (9, ) ( ) (I.000) Balance at 31 December 2010 IiO.OOOJJOO m.4 2 S m o o p ( ) J&L ( ) Total comprehensive loss for the year Shareholders' loan ( ) (14.775,052) ( ) ( ) Balance at iso.ono.ooo 3S (7l.8S4.24Si 7S JU5.75S.057 ( ) The attached notes 1 to 19 form part o f these consolidated financial statements.

10 CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 3 1 December 20] Notes A ED OPERATING ACTIVITIES Loss for the year (18,110,700) (34.610,775) Non-cash adjustm ents: Depreciation 4 286, Provision for em ployees' end o f service benefits, net 31, Decrease in fair value o f investm ent properties 6 10,094, Decrease in fair value o f investment properties under developm ent 7 1,800, Provision for loss on advances for purchase o f investment properties 8 2,049, Finance costs 3,830, ,662 Return on fixed deposits ( ) ( ) (297,920) (299,771) W orking capital changes: Accounts receivable and prepaym ents (i) 562, ,763 Due from related parties Accounts payable and accruals (585,342) (2.811,075) Deferred income 312,000 - Due to related parties ( ) (29.039,534) Net cash fused in) from operating activities (1.447,900) INVESTING ACTIVITIES Investm ent properties (ii) 6 (12,929,230) ( ) Property under developm ent 5 (2,820,060) (51,915) Investm ent properties under developm ent (i) 7 - (5, ) Advances for purchase o f investment properties (ii) 8 (854,022) (44,946,353) Purchase o f equipm ent and fixtures 4 (6,150) - Return on fixed deposits received 280, N et cash used in investing activities ( ) ( ) FINANCING ACTIVITIES N et m ovem ent in shareholders' current account - (1,000) Shareholders loan 2,758,193 - Ijara financing arrangem ents 12,266,382 30, Finance cost paid ( ) ( ) N et cash from financing activities , NET DECREASE IN CASH AND CASH EQUIVALENTS (6,583,068) ( ) Cash and cash equivalents at 1 January CASH AND CASH EQUIVALENTS AT 31 DECEMBER (i) Non-cash transactions include a net increase in accounts receivable and prepaym ent in the operating activities for the am ount o f against a decrease in investment properties under developm ent in the investing activities for the same am ount during 2011 ( 2010: nil). fii) N on-cash transactions in the investing activities include a decrease in advances for purchase o f investment properties for the am ount o f against an increase in investment properties for and an increase in accounts receivable and prepaym ents in the operating activities for 7.666,905 during The attached notes 1 to 19 form part o f these consolidated financial statements. 6

11 1 CORPORATE INFORM ATION Abu Dhabi Marina Real Estate Investment PJSC (the "C om pany") is a private joint stock com pany that was incorporated in Dubai, United Arab Emirates ( UAE ) in accordance with the provisions o f the UAE Federal Com mercial Com panies Law No (8) o f 1984 (as amended). The C om pany s registered office is at P O Box 474. Dubai. UAE. The consolidated financial statements com prise the financial statements o f the Com pany. Rkaiz Properties LLC, M arsa Jordan Real Estate Development LLC and M arsa Abu Dhabi Properties LLC and its subsidiary (the Group"). The beneficial interests o f Rkaiz Properties LLC, M arsa Jordan Real Estate Developm ent LLC and Marsa Abu Dhabi Properties LLC and its subsidiary are assigned to the Company. Accordingly, the consolidated financial statem ents o f the Group fully consolidate the financial statements o f Rkaiz Properties LLC. M arsa Jordan Real Estate D evelopm ent LLC and Marsa Abu Dhabi Properties LLC and its subsidiary. The principal activities o f the Group involve owning, selling, purchasing and leasing real estate, and carrying out business real estate project investment and all associated activities. As at the date o f reporting, the legal formalities to renew the subsidiary's license Rkaiz Properties LLC have not been finalized. The accom panying consolidated financial statem ents o f the Group for the year ended were authorised for issue by Board o f Directors on 26 March BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirem ents o f the UAE Commercial Com panies Law o f 1984 (as am ended). The consolidated financial statements have been prepared in UAE Dirhams (), which is the functional currency o f the Group. The consolidated financial statements are prepared on a historical cost basis, modified for re-m easurem ent o f investm ent properties and investment properties under developm ent, at fair value. Basis of consolidation The consolidated financial statements com prise the financial statements o f the Com pany and its subsidiaries as at 31 Decem ber each year. The consolidated financial statem ents include the follow ing subsidiaries: Name o f subsidiary Marsa Jordan Real Eastate Development Co. LLC Connin o f incorporation Jordan Principal activity' Real estate project investment % o f holding % 100% Rkaiz Properties Co. LLC UAE Selling, purchasing and leasing real estate 100% 100% Marsa Abu Dhabi Properties Co. LLC Marsa A1 Naked Properties LLC (subsidiary of Marsa Abu Dhabi Properties co LLC) UAE UAE Selling, purchasing and leasing real estate Selling, purchasing and leasing real estate 100% 51% 100% 51% 7

12 2.1 BASIS OF PREPARATION continued Basis o f consolidation- continued Subsidiaries are fully consolidated from the date o f acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements o f the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are elim inated in full. Total com prehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest o f a subsidiary, without a loss o f control, is accounted for as an equity transaction. If the G roup loses control over a subsidiary, it: D erecognises the assets (including goodwill) and liabilities o f the subsidiary. D erecognises the carrying am ount o f any non-controlling interest. D erecognises the cum ulative translation differences recorded in equity. Recognises the fair value o f the consideration received. Recognises the fair value o f any investm ent retained. Recognises any surplus or deficit in profit or loss. Reclassifies the parent s share o f com ponents previously recognised in other com prehensive income to profit or loss or retained earnings, as appropriate. 2.2 C H A N G ES IN ACCO UNTING POLICIES AND DISCLOSURES The accounting policies adopted are consistent with those o f the previous financial year, except for the following new- and am ended IFRS and IFR1C interpretations effective as o f 1 January 2011: IAS 24 Related Party Disclosures (am endm ent) effective 1 January 2011: IAS 32 Financial Instruments: Presentation (am endm ent) effective 1 February 2010; 1FRIC 14 Prepaym ents o f a Minimum Funding Requirement (am endm ent) effective 1 January 2011; and Im provem ents to IFRSs (M ay 2010). The adoption o f the above am endm ent did not have any effect on the financial perform ance or position o f the Group. 2.3 SIG N IFIC A N T ACCO UNTING ESTIM ATES AND JU DGEM ENTS Estim ation uncertainty The key assum ptions concerning the future and other key sources o f estim ation uncertainty at the date of consolidated statem ent o f financial position, that have a significant risk o f causing a material adjustm ent to the carrying am ounts o f assets and liabilities within the next financial year, are discussed below. R evaluation o f investm ent properties a nd investment properties under developm ent The Group carries its investment properties at fair value, with changes in fair value being recognized in the consolidated statem ent o f com prehensive income. The Group engaged independent valuation specialist to determ ine fair value as at. The valuer used com parable market data to determ ine the fair value o f the investm ent properties and investment properties under development. Im pairm ent on advances for purchase o f investm ent properties The Group treats advances for purchase o f investment properties as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence o f impairment exists. Any decline in value is considered as im pairm ent and is recognised in the consolidated statement o f com prehensive income.

13 2.3 SIGNIFICANT ACCO UNTING ESTIM ATES AND JU D G EM ENTS continued Estim ation uncertainty - continued Classification o f property' The Group determ ines w hether a property is classified as investment property or developm ent property: Investment property com prises land and buildings (principally offices, residential and retail property) which are not occupied substantially for use by. or in the operations of. the Group, nor for sale in the ordinary course o f business, but are held prim arily to earn rental income or capital appreciation or undetermined use. Development property com prises property that is held for sale in the ordinary course o f business. Principally, this is a property that the Group develops and intends to sell before or on com pletion of construction. Judgm ents In the process o f applying the G roup's accounting policies, m anagem ent has made the following judgm ents, apart from those involving estimations, which have the most significant effect in the am ounts recognised in the consolidated financial statements: O perating leases The Group has entered into com mercial property leases on its investment property portfolio. The Group has determined, based on an evaluation o f term s and conditions o f the arrangem ents, that it retains all the significant risks and rewards o f ow nership o f these properties and so accounts for the contracts as operating leases. 2.4 SUM M ARY OF SIG NIFICANT ACCOUNTING POLICIES Revenue recognition Sale o f properties Revenues on sale o f plots are recognised on the basis o f the full accrual method as and when all o f the following conditions are met: A sale is consummated and contracts are signed; The buyer's initial investment, to the date o f the financial statements, is adequate to demonstrate a com mitm ent to pay for the property': and The Group has transferred to the buyer the usual risks and rewards o f ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. Revenues on sale o f units or apartments are recognised when equitable interest in a property vests in the buyer and all the follow ing conditions have been satisfied: The Group has transferred to the buyer the significant risks and rewards o f ownership o f the property; The Group retains neither continuing managerial involvem ent to the degree usually associated with ow nership nor effective control over the property sold; The am ount o f revenue can be measured reliably; It is probable that the econom ic benefits associated with the transaction will flow to the Group: and The costs incurred or to be incurred in respect o f the transaction can be measured reliably. Rental income Rental income is recognised over the life of the lease term. Incom e fro m deposits Profit on deposits is recognised as the profit accrues using the effective interest method. 9

14 2.4 SUM M ARY OF SIG NIFICANT ACCO UNTING PO LICIES continued Cost of revenues Cost o f sale o f land and property represent the cost at which they were originally purchased. Equipm ent and fixtures Equipment and fixtures are stated at cost less accum ulated depreciation and any impairment in value. Depreciation is calculated on a straight line basis over the estimated useful lives o f assets as follows: Computers Telephone systems Furniture and fixtures Leasehold improvements 2 years 2 years 4 years 4 years Expenditure incurred to replace a component o f an item o f equipment and fixtures, that is accounted for separately, is capitalised and the carrying amount o f the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits o f the related item o f equipment and fixtures. All other expenditure is recognised in the consolidated statement o f com prehensive income as the expense is incurred. Capital work in process Capital work-in-progress is recorded at cost and represents costs based on contractual paym ents for the decoration o f the property. The capital work-in-progress is transferred to the appropriate asset category and depreciated in accordance with the G roup's policies when construction o f the asset is com pleted and commissioned. Property under developm ent Properties acquired, constructed or in the course o f construction for sale are classified as property under development. Those are stated at the lower o f cost or net realizable value. The cost o f those properties includes the cost o f land and other related expenditures which are capitalized as and when activities that are necessary to get the properties ready for sale are in progress. The properly is considered to be com plete when all related activities, including the infrastructure and facilities for the entire project, have been com pleted. Investm ent properties Initially, investment properties are measured at cost including transaction costs. Subsequent to initial recognition investment properties are stated at fair value which reflects market conditions at the reporting date. Gains and losses arising from changes in fair value o f investment properties are included in the consolidated statement o f com prehensive income in the year in which they arise. Investment properties are derecognised when either they have been disposed o f or when the investment properties are permanently withdrawn from use and no future economic benefits are expected from their disposal. Any gains or losses on the retirement or disposal o f investment properties are recognised in the consolidated statement o f com prehensive income in the year o f retirement or disposal. Transfers are made to investment property when, and only when, there is a change in use. evidenced by the end o f ow ner occupation, com m encem ent o f an operating lease to another party or completion o f construction or development. Transfers are made from investment properties when, and only when, there is a change in use. evidenced by com m encem ent o f owner occupation or com m encem ent o f developm ent with a view to sale. For a transfer from investment property to owner occupied property or inventories, the deemed cost o f property for subsequent accounting is its fair value at the date o f change in use. If the property occupied by the Group as an ow ner occupied property becomes an investment properly, the Group accounts for such property in accordance with the policy stated under property, and equipm ent up to the date o f change in use. 10

15 2.4 SUM M ARY OF SIG NIFICANT ACCO UNTING POLICIES continued Investm ent properties under developm ent Investm ent properties under developm ent represent land and developm ent works performed. These are initially recorded at cost, representing purchase price o f land and costs based on contractual paym ents for the design, procurement, developm ent and construction. Subsequent to initial recognition, investment properties under developm ent are stated at fair value. Gain and losses arising from changes in fair values o f investment properties under developm ent are included in the consolidated statem ent o f com prehensive income in the year in which they arise. Investm ent properties under developm ent are derecognized when either they have been disposed of or the investment properties under developm ent are perm anently withdrawn from use and no future economic benefit is expected from their disposal. Any gains or losses on the retirem ent or disposal are recognised in the consolidated statement of com prehensive income in the year o f disposal. Financial instrum ents - recognition, de-recognition and offsetting A financial asset or a financial liability is recognised when the Group becomes a party to the contractual provisions o f the instrument. All regular wav *purchases and sales o f financial assets are recognised on the trade date (i.e. the date that the Group com mits to purchase or sell the asset). Regular way purchases or sales are purchases or sales of financial assets that require delivery o f assets within the time frame generally established by regulation or convention in the m arket place. A financial asset (or where applicable a part o f a financial asset or a part o f group o f financial assets) is derecognised either when: (i) (ii) (iii) the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through" arrangement; or the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards o f the asset, or (b) has neither transferred nor retained substantially all the risks and rewards o f the asset, but has transferred control o f the asset. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different term s or the terms o f an existing liability are substantially modified, such an exchange or modification is treated as a derecognition o f the original liability and the recognition o f a new liability, and the difference in the respective carrying am ounts is recognized in the consolidated statem ent o f com prehensive income. Financial assets and financial liabilities are only offset and the net am ount reported in the consolidated statem ent o f financial position when there is a legally enforceable right to set o ff the recognised am ounts and the Group intends to settle on a net basis or to realise the asset and settle the liability sim ultaneously. Im pairm ent of financial assets The Com pany assesses at each reporting date w hether there is any objective evidence that a financial asset or a group o f financial assets is impaired. A financial asset or a group o f financial assets is deemed to be impaired if, and only if, there is objective evidence o f impairment as a result o f one or more events that has occurred after the initial recognition o f the asset and that loss event has an effect on the estimated future cash flows o f the financial asset or the group o f financial assets that can be reliably measured.

16 2.4 SUM M ARY OF SIG NIFICANT ACCO UNTING POLICIES continued Im pairm ent of non-financial assets At each reporting date, the Com pany reviews the carrying amounts o f its non financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable am ount o f the asset is estimated in order to determine the extent o f the impairment loss (if any). W here it is not possible to estim ate the recoverable am ount o f an individual asset, the Com pany estimates the recoverable am ount o f the cash-generating unit to which the asset belongs. W here a reasonable and consistent basis o f allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the sm allest group o f cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable am ount is the higher o f fair value less costs to sell and value in use. In assessing value in use. the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessm ents o f the tim e value o f money and the risks specific to the asset. If the recoverable am ount o f an asset (or cash-generating unit) is estimated to be less than its carrying am ount, the carrying am ount o f the asset (cash-generating unit) is reduced to its recoverable amount. An im pairment loss is recognised imm ediately in the consolidated statem ent o f com prehensive income. For assets excluding goodwill, an assessm ent is made at each reporting date whether there is any indication that previously recognised im pairm ent losses may no longer exist or may have decreased. If such indication exists, the Group estim ates the asset s or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assum ptions used to determ ine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying am ount o f the asset does not exceed its recoverable amount, nor exceed the carrying am ount that would have been determined, net o f depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognized in the consolidated statem ent o f com prehensive income unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Cash and cash equivalents For the purpose o f the consolidated statem ent of cash flows, cash and cash equivalents consist o f cash at banks and on hand and short term deposits with an original maturity o f three months or less. Accounts receivable Accounts receivable are stated at original invoice am ount less a provision for any uncollectible amounts. An estimate for doubtful debts is m ade when collection o f the full am ount is no longer probable. Bad debts are written o ff when there is no possibility o f recover). Em ployees pension and end o f service benefits The Group provides end o f service benefits to its expatriate employees. The entitlement to these benefits is based upon the em ployees final salary and length o f service, subject to the completion o f a minimum service period. The expected costs o f these benefits are accrued over the period o f employment. With respect to its UAE national em ployees, the Group makes contributions to a pension fund established by the General Pension and Social Security Authority calculated as a percentage o f the em ployees' salaries. The G roup's obligations are limited to these contributions, which are recognised in the consolidated statement o f com prehensive income when due. Borrowing costs Borrowing costs that are directly attributable to the acquisition or construction o f an asset are capitalized (net o f interest income on temporary investment o f borrowings) as part o f the cost o f the asset until the asset is commissioned for use. Borrowing costs in respect o f completed assets or not attributable to assets are expressed in the period in which they are incurred. 12

17 Abu Dhabi M arina Real Estate Investment PJSC 2.4 SUM M ARY OF SIGNIFICANT ACCO UNTING POLICIES continued Ijara financing arrangem ents Profit-bearing Ijara financing is recorded at the proceeds received, net o f direct issue costs. bearing Ijara financing is measured using the effective profit method. Subsequently, profit- Finance charges are accounted for on an accrual basis. Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Provisions Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured. Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date o f the transaction. M onetary assets and liabilities denom inated in foreign currencies are retranslated at the rate o f exchange ruling at the reporting date. All differences are taken to the consolidated statem ent o f com prehensive income. Leases The determ ination o f whether an arrangement is. or contains a lease is based on the substance o f the arrangem ent at inception date o f whether the fulfilm ent o f the arrangem ent is dependent on the use o f a specific asset or assets or the arrangem ent conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. For arrangem ents entered into prior to 1 January the date o f inception is deemed to be 1 January 2005 in accordance with the transitional requirem ents o f IFR1C 4. Group as lessee Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership o f the leased item, are capitalised at the com m encem ent o f the lease at the fair value o f the leased property or, if lower, at the present value o f the minimum lease payments. Lease paym ents are apportioned between finance charges and reduction o f the lease liability so as to achieve a constant rate o f interest on the rem aining balance o f the liability. Finance charges are recognised in finance costs in the consolidated statem ent o f com prehensive income. A leased asset is depreciated over the useful life o f the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end o f the lease term, the asset is depreciated over the shorter o f the estimated useful life o f the asset and the lease term. O perating lease paym ents are recognised as an operating expense in the consolidated statement o f com prehensive income on a straight-line basis over the lease term. Group as a lessor Leases in which the Group does not transfer substantially all the risks and benefits o f ownership o f an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying am ount o f the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Fair values Fair values are calculated using methods such as net present value o f future cash flows. 13

18 2.5 FUTURE C H A N G ES IN A C CO UN TING POLICIES - STANDARDS ISSUED BUT NOT YET EFFECTIVE Standards issued but not yet effective up to the date o f issuance o f the G roup's consolidated financial statements are listed below: IAS 1 Financial Statement Presentation - Presentation o f Items o f Other Com prehensive Effective date: 1 July IAS 12 Income Taxes - Recovery o f U nderlying Assets Effective date: 1 January' IAS 19 Employee Benefits (A m endm ent) Effective date: 1 January IAS 27 Separate Financial Statem ents (as revised in 2011) Effective date: 1 January IAS 28 Investm ents in Associates and Joint Ventures (as revised in 201 1) Effective date: 1 January IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirem ents Effective date: 1 July IFRS 9 Financial Instruments: Classification and M easurem ent Effective date: 1 January * IFRS 10 Consolidated Financial Statem ents Effective date: 1 January IFRS 11 Joint A rrangem ents Effective date: 1 January IFRS 12 Disclosure o f Involvem ent with O ther Entities Effective date: 1 January * IFRS 13 Fair Value M easurem ent Effective date: 1 January The Group does not expect these am endm ents to have any significant impact on the financial statements, when implem ented in future periods. 3 G ENERAL AND A DM INISTRATIVE EXPENSES Staff costs 880, Legal and professional fees 973, Rentals 696, Others 584, *13.5,

19 Abu Dhabi M arina Real Estate Investment PJSC EQ UIPM ENT AND FIXTURES Telephone systems ' Furniture and Capital and fixtures decorations Computers Total 2011 Cost: At I January 2011 Additions At , ^ , ,983 Depreciation: At 1 January 2011 Charge for the year At , Net carrying amount: At Cost: At 1 January At 31 December Depreciation: At 1 January 2010 Charge for the year At 31 December Met carrying amount: At 31 December _i4l I PROPERTY UNDER DEV ELO PM ENT At 1 January A dditions during the vear 51, At 31 D ecem ber The Group acquired a real property parcel o f land in West Khalda Area in Jordan (parcel num ber 220) on which a building has been erected. The construction o f the building is still under developm ent as of the reporting date.

20 Abu Dhabi M arina Real Estate Investment PJSC INVESTM ENT PROPERTIES At 1 January Additions during the year Transfers from advances for purchase o f investment properties during the year (note 8) N et decrease in fair value At 31 December ,475 12,929,230 (10, ) , ,454,790 ( ) Investm ent properties are stated at fair value, which has been determined based on valuations perform ed by Asteco Real Estate Properties, an accredited independent valuer, as at 31 Decem ber Asteco Real Estate Properties is an industry specialist in valuing these types o f investm ent properties. The fair values o f the properties have been determined by using the com parable method o f valuation on transactions observable in the market. Investment properties are stated at fair value, with changes in fair value being recognised in the consolidated statement o f com prehensive income. Investm ent properties represent the carrying value o f the 10'1' floor and the 13th floor in the Infinity Tow er and the nine villas A064. A092. E012, S518, D070. A072, D021. A058 and E3D589. The 10th and 13th floors are subject to a first degree m ortgage up to ,910 in favour o f a local Islamic bank against financing liabilities, w'hile there is an undertaking to mortgage the villas in local Islamic bank favour upon final issuance o f title deeds o f the mentioned villas except for villas S 5 18 and E3D589 which are fully paid. 7 IN VESTM ENT PROPERTIES UNDER DEVELO PM ENT At 1 January Additions during the year Transfer to trade and other receivables (note 9) N et decrease in fair value At 31 December ,998,500 (25,998,500) ( ) , ,701,822 ( ) Investment properties under development com prise land, which is stated at fair value, with changes in fair value being recognized in the consolidated statement o f com prehensive income. ADVANCES FOR PURCHASE OF INVESTM ENT PROPERTIES At 1 January A dditions during the year Transfers to investm ent properties (note 6) Transfer to other receivables (note 9) N et loss on im pairm ent ,378, ,022 (2, ) , ( ) ( ) ( ) At 31 D ecem ber

21 8 ADVANCES FOR PURCHASE OF INVESTM ENT PROPERTIES continued Advances against purchase o f investment properties represent paym ents in advance by the Group for the purchase o f properties that are under construction. Advances also include certain contractual obligations relative to the respective properties. In 2010, advances totalling ,790 relating to the purchase o f Infinity Tow er Floor 10 and Floor 13 am ounting and advances relating to unites in Burooj views am ounting 10, have been transferred to investment properties. 9 ACCO UNTS RECEIVABLE AND PREPAYM ENTS AE D Trade receivables (*) 49,600,374 O ther receivables 156, ,651 A ccrued income 24,052 61,829 Prepaym ents and other receivables 759, Transfer from advances for purchase o f investm ent properties (note 8) 7,186, ,905 Less: Provision for loss on im pairm ent o f accounts receivable (7,186,908) (7, ) Less: Provision for impairment o f investment properties transferred to provision on trade receivables (*) (23,601,874) - 26, As at 31 Decem ber other receivables at nominal value o f 7.186,908 (2010: ) were impaired. (*) In 2010, the Com pany ( first party ) signed an agreement with Al Jazeera International Development Com pany LLC and Sama Emirates Real Estate LLC and International Green Touch LLC ( second parties ) to buy the C20 land in Reem Island for an am ount o f ,374. The second parties were not able to honour the terms and conditions o f the agreements, and were not able to transfer the ownership o f the land to the name o f the first party. In October the Com pany filed a law suit against the second parties to term inate the agreem ent to buy the C20 land. The court has issued its preliminary ruling at 11 January 2012 in the favour o f Marsa Marina Real Estate Investment PJSC to term inate the agreem ent and request Al Jazeera International Development to pay the full amount received from the Company plus a com pensation am ount o f I million and a 5% delay interest starting from 27 October 2011 and up to the final settlem ent date. In February 2012, the first party appealed the first ruling and requested all the second parties collectively to fulfil the liabilities due to the Company. On 28 February the appeal was ruled in the C om pany s favour, whereby Al Jazeera International Development Com pany LLC will pay an am ount o f , Emirates Real Estate LLC will pay an amount o f and International Green Touch LLC will pay an am ount o f whereby these amounts will be subject to a 5% delay interest starting from 27 O ctober 2011 and up to the final settlem ent date. At the reporting date, the land has been transferred from investment properties under developm ent to trade receivables with the carrying value o f the land as o f 31 Decem ber (note7). Upon settlement o f the receivable balance, any excess provision will be reversed to the consolidated statem ent o f com prehensive income. 17

22 Abu Dhabi M arina Real Estate Investment PJSC 10 CASH AND CASH EQ UIVALENTS Cash and cash equivalents com prise o f the follow ing consolidated statements o f financial position amounts: Bank balances and cash Included in bank balances and cash are short-term deposits with original maturities less than 3 months o f (2010: 23,286,889). These are denom inated in UAE Dirhams and carry profit at m arket rates ranging from 1.9% to 3% (2010: 2% to 4%). 11 SHARE CAPITAL authorised, issued and fully paid ordinarv shares o f 1 each STATUTO RY RESERVE As required by the UAE Federal Com mercial Com panies Law No (8) o f 1984 (as amended) and the G roup's Articles o f Association, 10% o f the net profit for the year is transferred to the statutory reserve. The Group may resolve to discontinue such annual transfers when the reserve totals 50% o f the paid-up share capital. The statutory reserve is not available for distribution. 13 ACCO UNTS PAYABLE AND ACCRUALS Trade payables Accrued expenses Rental income received in advance Other payables ,581, , ,933 71, ,

23 14 IJARA FINANCING ARRANGEM EN TS Effective profit rate % Maturity A ED Current Ijara( 1) 10% ljara(2) 10% , Ijara (3) 9% , Ijara (4) 8.75% , Ijara (5) 8.75% LQ 12J21 Non-current Ijara( 1) 10% ,510, Ijara(2) 10% , Ijara (3) 9% ,475, Ijara (4) 8.75% ,470, Ijara (5) 8.75% , Total The Group entered into different Ijara financing arrangem ents with a local Islamic bank to finance the purchase o f investm ent properties. The Ijara financing facilities are repayable in different sem i-annual rental instalments. These financing arrangem ents are secured by the corporate guarantees o f the shareholders and a first degree mortgage on the investment properties and a com prehensive insurance over the mortgaged villas the Group owns as o f the reporting date. 15 RELATED PARTY TRANSACTIO NS Related parties represent associated companies, shareholders, directors and key management personnel o f the Group, and companies o f which they are principal owners. Pricing policies and terms o f these transactions are approved by the G roup's management. Balances with related parties reflected in the consolidated statement o f financial position as o f 31 December are as follows: Due to related parties Current liabilities: Aayan Properties M r M oham m ed Kamal Al Hashimi Mr Ali Al Khaja Mr Adel Al Zarouni 2011 A ED 1.200, , , A ED Non-current liabilities. Aayan Properties Mr M ohammed Kamal Al Hashimi Mr Ali Al Khaja 2,493,887 2,083,583 4, ,

24 Abu Dhabi M arina Real Estate Investment PJSC 15 RELATED PARTY TRANSACTIO NS continued Equity: Al N akheel United Real Estate PSJC 1S Shareholders' current account: Em irates N ational Investm ents 100, M azava N ational Investm ents Com pensation o f key m anagement personnel The rem unerations o f directors and other members o f key m anagem ent during the year were as follows: Short-term benefits 880, End o f service benefits G U A R A N TEES AND COM M ITM ENTS As at 31 D ecem ber the G roup's future com m itm ents in respect of purchase of properties amounted to (2010: ,520). O perating leases - G roup as Lessee: Total operating lease expenditures contracted for at the consolidated statem ent o f financial position date are as follows: AE D N ot later than 1 year O perating leases - C om pany as lessor: The Group has entered into leases on its investment properties. The leases typically have lease terms between 1 year and 4 years and include clauses to enable periodic upward revision o f the rental charge according to prevailing m arket conditions. The Group does not have non-cancellabie operating leases as o f 31 December 201 I. 20

25 17 RISK M ANAGEM ENT The G roup s principal financial liabilities com prise accounts payable, amounts due to related parties and bank borrowings. The main purpose o f these financial liabilities is to raise finance for the G roup's operations. The Group has various financial assets such as bank balances and cash, amounts due from related parties and other receivables, which arise directly from its operations. The main risks arising from the G roup's financial instruments are interest rate risk, credit risk, foreign liquidity risk and foreign currency risk. The Board o f Directors reviews and agrees policies for managing each o f these risks which are summarised below: Interest rate risk Interest rate risk is the risk that the fair value o f future cash flows o f a financial instrum ent will fluctuate because o f changes in m arket interest rates. The G roup's interest rate risk arises from bank deposits and bank borrow ings. The G roup m anages its interest rate risk by having a fixed rate Ijara financing arrangem ents. The G roup analyses its interest rate exposure on a dynam ic basis. The G roup calculates the im pact on profit and loss o f a defined interest rate shift based on the sim ulations perform ed, the impact on profit on a 0.1% shift in the interest would be a maxim um increase or decrease o f (2010: ). Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group attem pts to control credit risk by lim iting transactions with specific counterparties, and continually assessing the creditw orthiness o f counterparties. With respect to credit risk arising from financial assets o f the Group, the G roup's exposure to credit risk arises from default o f the counterpart), with a maximum exposure equal to the carrying am ount o f these instruments. Liquidity risk Liquidity risk is the risk that an institution will be unable to meet its net funding requirem ents. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources o f funding to dry up immediately. To guard against this risk, m anagem ent has diversified funding sources and assets are managed with liquidity in mind, m aintaining a healthy balance o f cash and cash equivalents. The table below summarises the maturities o f the G roup s financial liabilities at 31 December, based on contractual undiscounted paym ents. Less than 3 months 3 to 12 months 1 to 5 vears > 5 vears ' Total At Accounts payable Ijara financing arrangements 3.015,707 Due to related parties _; 2.652, , , ,652,327 60,528,513 10,233, IL& At 31 December 2010 Accounts payable Ijara financing arrangements Due to related parties

26 17 RISK M A NAGEM ENT continued Foreign currency risk Foreign currency risk is the risk that financial instrument will fluctuate due to changes in foreign exchange rates. Assets are typically funded in the same currency as that o f the business being transacted to eliminate exchange exposures. Management believes that there is a minimal risk of significant loss due to exchange rate fluctuations and consequently the Group does not hedge its foreign currency exposure. Capital m anagem ent The primary objective o f the Group's capital m anagem ent is to ensure that it maintains healthy capital ratios in order to support its business and m aximise shareholder value. The Group monitors capital on the basis o f the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total Islamic financing arrangem ents (including current and non-current as shown in the consolidated statem ent o f financial position) trade and other payables less cash and bank balances. Total capital is calculated as equity as shown in the consolidated statem ent o f financial position plus net debt. The gearing ratios at 31 December were as follows: Total Ijara financing arrangem ents (note 14) 44,767, T rade and other payables 4,282, Due to related parties 10, Less: cash and bank balances (19, ) ( ) N et debt 39,732,116 22, Total equity attributable to parent 78, Total capital G earing ratio 33,5% 19.7% 18 FAIR VALUES OF FINANCIAL INSTRUM ENTS Financial instrum ents com prise financial assets and financial liabilities. Financial assets o f the Group com prise o f bank balances and cash, amounts due from related parties and other receivables. Financial liabilities o f the Group com prise o f accounts payable, amounts due to related parties and bank borrowings. The fair values o f the financial assets and liabilities o f the Group are not materially different from their carrying values. 19 C O M PA R A TIV E FIGURES Certain com parative figures have been reclassified to conform to the current year presentation. Such reclassification has no effect on the previously reported profit or equity o f the Group. 22