Orascom Development Egypt Condensed Consolidated Interim Financial Statements Together with Review Report For the Period Ended June 30, 2018

Transcription

1 Orascom Development Egypt Condensed Consolidated Interim Financial Statements Together with Review Report For the Period Ended June 30, 2018

2 Contents Page Review Report -- Condensed consolidated statement of financial position 1 Condensed consolidated statement of comprehensive income 2 Condensed consolidated statement of other comprehensive income 3 Condensed Consolidated Interim Statement of Changes in Equity 4 Condensed consolidated statement of cash flow 5 Statements 6 to 23

3 Review s Report To: The Shareholders of Orascom Development Egypt S.A.E. Introduction We have reviewed the accompanying condensed consolidated interim financial position of Orascom Development Egypt S.A.E as of June 30, 2018, and the related condensed consolidated interim statements of comprehensive income, changes in equity and cash flow for the six-month period then ended. Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with the Egyptian Accounting Standards. Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our limited review. Scope of Review We conducted our review in accordance with the Egyptian Standard on Review Engagements No. (2410), Review of Interim Financial Information performed by the Independent Auditor of the Entity. A review of financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the Egyptian Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in audit. Accordingly, we do not express an audit opinion on this Consolidation Financial Statements. Conclusion Based on our limited review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements do not present fairly, in all material respects, in accordance with the Egyptian Accounting Standards. Cairo, 13 August, Farid Samir Farid, CPA F.E.S.A.A. (R.A.A. 8739) EFSA No. (210)

4 Orascom Development Egypt (S.A.E) Condensed consolidated statement of financial position At June 30, 2018 Note 30/06/ /12/2017 No. EGP EGP Assets Non-Current Assets Fixed assets (net) ) 13( Projects under construction Goodwill ) 15( Trade and notes receivable ) 18( Investments in associates ) 14( Other financial assets Deferred tax asset Investments property ) 16( Total non-current assets Current Assets Inventory ) 17( Trade and notes receivable (net) ) 18( Debtors and other debit balances Due from related parties Cash and cash equivalent Assets held for sale ) 19( Total current assets Total assets Equity and liabilities Issued and Paid-up Capital ) 22( Reserves Retained (losses) ( ) ( ) Net profits for the period / year Total equity (the holding company) Non-controlling interests ) 23( Total equity and minority interest Non-Current liabilities Long term loans ) 21( Land purchase creditors Deferred tax liabilities Total non-current liabilities Current Liabilities Provisions Credit facilities and bank's overdraft ) 20( Suppliers, contractors and notes payable Creditors and other credit balances Current tax liability Due to related parties Current portion of long-term loans ) 21( Liabilities directly associated with assets held for sale ) 19( Total current liabilities Total liabilities Total equity and liabilities The accompanying notes form an integral part of the financial statements and to be read therewith. Ashraf Nessim Group CFO Khaled Bichara CEO Review report "Attached" -1-

5 Orascom Development Egypt (S.A.E) Condensed consolidated statement of comprehensive income For the period ended June 30, 2018 Three months ended Six months ended Note 30/06/ /06/ /06/ /06/2017 No. EGP EGP EGP EGP Operating Revenues Revenues (5-1) Costs ( ) ( ) ( ) ( ) Gross Profit Investments revenues (6) Other gains / (losses) (7) ( ) ( ) Provisions ( ) ( ) ( ) ( ) Share of profits of associates (14) ( ) ( ) ( ) General and administrative expenses (8) ( ) ( ) ( ) ( ) Interest and financing expenses (9) ( ) ( ) ( ) ( ) Net Profit for the period before tax Income tax (10) ( ) ( ) ( ) ( ) Net Profit Distributed as follows : Majority interests Non-controlling interests (23) Basic Earning per share for the period (12) The accompanying notes form an integral part of the financial statements and to be read therewith. Ashraf Nessim Group CFO Khaled Bichara CEO -2-

6 Orascom Development Egypt (S.A.E) Condensed consolidated statement of other comprehensive income For the period ended June 30, 2018 Three months ended Six months ended Note No. 30/06/ /06/ /06/ /06/2017 EGP EGP EGP EGP Profit for the period Other comprehensive income Exchange differences on translating foreign operations ( ) ( ) Total other comprehensive income for the period Distributed as follows : Majority interests Non-controlling interests The accompanying notes form an integral part of the financial statements and to be read therewith. Ashraf Nessim Group CFO Khaled Bichara CEO -3-

7 Orascom Development Egypt (S.A.E) Condensed consolidated statement of changes in equity For the period ended June 30, 2018 Description Issued and Paid-up Capital Legal Reserve General Reserve Common Control Transaction Reserve Foreign Currencies Translation Reserve Retained (losses) Net Profit Equity (the Holding Company) Non-controlling interests Total EGP EGP EGP EGP EGP EGP EGP EGP EGP EGP Balance as of January 1, ( ) ( ) ( ) Net profits for the period Foreign currencies translation reserve ( ) ( ) -- ( ) Total comprehensive income for the period ( ) Transferred to retained losses ( ) Dividends distribution ( ) -- ( ) ( ) ( ) Other Non-controlling interests changes (Note 23) ( ) ( ) Balance as of June 30, ( ) ( ) Balance as of January 1, ( ) ( ) Net profit for the period Foreign currencies translation reserve Total comprehensive income for the period Transferred to retained losses ( ) Other Non-controlling interests changes (Note 23) ( ) ( ) ( ) ( ) Dividends distribution to employees ( ) -- ( ) -- ( ) Dividends distribution ( ) -- ( ) -- ( ) Balance as of June 30, ( ) ( ) The accompanying notes form an integral part of the financial statements and to be read therewith. -4-

8 Orascom Development Egypt (S.A.E) Condensed Consolidated Interim Cash Flows Statement For the period ended June 30, /06/ /06/2017 EGP EGP Cash flows from Operating Activities Net cash generated from operating activities Interest paid ( ) ( ) Income tax paid ( ) ( ) Net cash generated from (used in) operating activities Cash flows from Investing Activities Payments for purchase of fixed assets and projects under construction ( ) ( ) Payments for purchase of financial assets Proceed from interest Net cash (used in) investing activities ( ) ( ) Cash flows from Financing Activities Dividend distribution ( ) - Acquisition of non-controlling interests of consolidated subsidiary ( ) - Payments for loans and credit facilities ( ) ( ) Proceeds from loans and credit facilities Net cash (used in) generated from Financing Activities ( ) Net change in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Group's cash & cash equivalents Included in assets held for sale Cash and cash equivalents at the end of the period Non-Cash Transactions -The effect of the revaluation of foreign currency exchange in the movement of the loans and credit facilities has been excluded from the financing activates. -An amount of EGP has been excluded from dividend distrubution against Due from related parties (ODH). The accompanying notes form an integral part of the financial statements and to be read therewith. -5-

9 Statements For the Period Ended June 30, Company Background and its Activities Orascom Development Egypt S.A.E. was established according to the provisions of the Investment Law No. 230 for 1989, and the General Authority for Investment Decree No. 1169, issued on December 11, The company s financial year begins at 1 st of January and ends at 31 st of December of each year. The company's purpose is the development of an initial area of million meter square (m2) for touristic purposes, and providing it by the utilities and infrastructure to El Gouna area Hurghada Red Sea Governorate, provided that the development of the region is on the basis of 50% hotels, and 50% touristic housing. The company may engage in other projects or amend its purpose within the framework of the Investment Law. It may also contribute or participate in any sub projects outside the Investment Law issued by Law No. 230 for 1989 provided that the approval of the General Authority for Investment is obtained, and the provisions of Law No. 95 for 1992 are observed. The company, through acquisition, increased its area with million m 2 for the same purpose to be million m 2. The company s head office is located in the Nile City Towers, South Tower, Cairo. The Chairman Dr/ Manal Hussein and Chief Executive Officer of the company is Mr./ Khaled Bichara. The consolidated financial statements for the period ended June 30, 2018, includes the financial statements of Orascom Development Egypt (Holding Company) and its subsidiaries (referred to as the Group ), in addition to the Group s share of the profits or losses of the associated companies. The Group is involved in many activities represented in hotels, real-estate, constructions, lands, tourism, and other. The extra ordinary general assembly meeting held on 21 June 2017, decided to amend article (2) of the Statute of the company to amend company name to be Orascom Development Egypt (S.A.E) instead of Orascom Hotels & Development (S.A.E), It has been recognized in the commercial register at 18 December Basis of Preparation The consolidated condensed financial statements have been prepared in accordance with the Egyptian Accounting Standard No. (30) Periodical Financial Statements. 3- Significant Accounting Policies The condensed consolidated interim financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value or amortized cost, as appropriate. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Group is not subject to any significant seasonality or cyclicality. The same accounting policies, presentation and methods of computation are followed in these condensed - 6 -

10 consolidated interim financial statements as were applied in the preparation of the Group's consolidated financial statements for the year ended 31 December Use of Estimates and Judgement The condensed consolidated interim financial statements include all the subsidiaries controlled by the Parent Company and are presented in Egyptian Pound (EGP). The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses, as well as the disclosure of contingent liabilities. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgments made by management in the application of EAS and key sources of estimation uncertainties were the same as those applied to the consolidated financial statements of the year ended 31 December Segment Information The Group has four reportable segments which are its strategic divisions. The strategic divisions offer different products and services and are managed separately because they require different skills or have different customers. For each of the strategic divisions, the Country CEOs and the Head of Segment review the internal management reports at least on a quarterly basis. The accounting policies of the reportable segments are the same as the Group s accounting policies described in the consolidated financial statements for the year ended 31 December Segment profit represents the profit earned by each segment without allocation of central administration costs and directors salaries, share in associates results, gain recognised on disposal of interest in former associates, investment income, other gains and losses, finance costs and income tax expense, as included in the internal management reports that are regularly reviewed. This measure is considered to be most relevant for the purpose of resources allocation and assessment of segment performance

11 Orascom Development Egypt "S.A.E." Statements For the Period Ended June 30, Segment Income Statement EGP Total segment revenue Inter-segment revenue Revenue from external customers Segment result 30/06/ /06/ /06/ /06/ /06/ /06/ /06/ /06/2017 Hotels (i) ( ) ( ) Real estate and construction (ii) ( ) ( ) Land ( ) -- Town management ( ) ( ) ( ) ( ) Other operations ( ) ( ) Total ( ) ( ) Share of gains / (losses) of investments in associates ( ) Other gains (losses) ( ) ( ) Investment Revenue Provisions ( ) ( ) General and Administrative Expense ( ) ( ) Finance Costs ( ) ( ) Net Profit before tax Income Tax ( ) ( ) Net Profit after tax i) The increase in hotel revenue came as an accumulated result of the newly implemented hotel management strategy for the group, which afforded an increase in GOP compared to Q ii) There were significant increase in the real estate sector because of delivering more units in the current period compared to the comparative period. -8-

12 Orascom Development Egypt "S.A.E." Statements For the Period Ended June 30, Segment Balance Sheet Segment Assets EGP 30/06/ /12/2017 Hotels Real estate and construction Land Town management Other operations Segment asset before elimination Intersegment elimination ( ) ( ) Segment assets after elimination Non-current assets held for sale Unallocated assets Total Consolidated assets

13 6- Investment Income The first six months of 2018 resulted in a net amount of EGP (six months ended June 30, 2017: EGP ) which increased mainly due to the increase in interest rates of long term receivables and interest on deposits. 7- Other gains & (losses) The first six months of 2018 resulted in a net amount of other losses amounted to EGP (six months ended June : net gains amounted to EGP ), which mainly includes the following: - Losses from foreign exchange rates amounted to EGP 41 million (six months ended June 30, 2017: net loss amounted to 15 million EGP). - Gains during 2017 include gains in relation to settlement of borrowings for subsidiary by EGP 114 million, which results from a waiver agreement with the debtor for part of the principle. 8- General and administrative expenses The general and administrative expenses amounted to EGP during the six months ended June 30, 2018 (EGP for the six months ended June 30, 2017). The expenses are significantly affected by inflation rate and the increase in prices during the period, in addition to the business expansion during the period. 9- Interest and Finance Expenses The interest and financing expenses during the six months ended June 30, 2018 amounted to EGP (EGP for the six months ended June 30, 2017) the main reason for the increase is due to increase of interest on foreign currency loans due to increase in the corridor rate. 10- Income Tax The tax expense recognized during the period amounted to EGP (six months ended June 30, 2017: EGP ) based on the estimated average annual effective income tax charge expected for the full year, applied to the pre-tax income for the six-month period. 11- Dividends The ordinary general assembly meeting held on 28 April 2018 has approved a cash dividend distribution for the shareholders and employees for the year ended 31 December

14 12- Earnings per Share in Profits during the Period The basic earnings per share was calculated by dividing earnings of common shareholders by the weighted average of the current shares during the period. The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Three months ended Six months ended EGP 30/6/ /6/ /6/ /6/2017 Profit for the period Deduct: Employees Dividend ( ) - ( ) - Adjusted Profit for the period attributable to the equity holders of the Parent Company Weighted average number of shares for the purpose of basic EPS* Basic earnings per share in Profit * Note (25)

15 Orascom Development Egypt "S.A.E." Statements For the Period Ended June 30, Fixed Assets ( Net ) Lands Buildings and Constructions Machinery and Equipments Furniture and Fixtures Total EGP EGP EGP EGP EGP Cost Cost as of 1/1/ Additions during the period Transferred from property under construction Foreign currencies translation Cost as of 30/06/ Accumulated depreciation Balance as of 1/1/ ( ) ( ) ( ) ( ) Depreciation for the period -- ( ) ( ) ( ) ( ) Foreign currencies translation -- ( ) ( 2 919) ( 2 746) ( ) Balance as of 30/06/ ( ) ( ) ( ) ( ) Net book value as of 30/06/ Cost Cost as of 1/1/ Additions during the period Transferred to investment properties ( ) ( ) ( ) ( ) ( ) Transferred to inventory ( ) ( ) ( ) ( ) ( ) Transferred from PUC Foreign currencies translation Cost as of 30/06/ Accumulated depreciation Balance as of 1/1/ ( ) ( ) ( ) ( ) Depreciation for the period -- ( ) ( ) ( ) ( ) Transferred to investment properties Transferred to inventory Foreign currencies translation -- ( 5 804) ( 620) ( 804) ( 7 228) Balance as of 30/06/ ( ) ( ) ( ) ( ) Net book value as of 30/06/ During 2017, Three hotels at Makadi has been transferred to investment properties which has been rented out to FTI company - Related party - Note (26) -12-

16 14- Investments in Associates Ownership Percentage (%) Carrying Value (EGP) Associate name Incorporation Place Segment 30/6/ /12/ /6/ /12/2017 Orascom Housing Real estate & Egypt Communities (i) Construction 35.25% 35.25% Red Sea for Real estate & Construction & Egypt Construction Development (ii) 40.20% 40.20% Orascom for Housing & Real estate & Egypt Establishment (iii) Construction 39.90% 39.90% Total Below is a summary of financial information with respect to the group s investment in the associate companies in the June 30, 2018: EGP 30/6/ /6/2017 Total Assets Total Liabilities ( ) ( ) Net Assets Total Revenue Net gains (losses) of the period ( ) Group s share in the gains of the associate companies ( ) (i) Orascom Housing Communities The company develops real estate and housing projects located in Egypt for the Budget Housing Sector. There were no changes in the proportion of ownership interest held by the Group compared to the prior year. (ii) Investment in Red Sea for Construction & Development During Q3 2016, Red Sea for Construction & Development, of which the Group held a direct interest of 0.4% as well as an indirect interest of 14% through OHC, increased its share capital from EGP 25 million to EGP 50 million. Of these EGP 25 million, the Group invested EGP 20 million, resulting in a total interest of 40.20%. Hence, the investment is now classified as an associate. The investment in associates is initially recognised at the consideration paid for the capital increase with any previously acquired interests recognised at fair value

17 (iii) Orascom for Housing and Establishment The company develops real estate and housing projects located in Egypt for the Budget Housing Sector. There were no changes in the proportion of ownership interest held by the Group compared to the prior year. 15- Goodwill No movement occurred on the balance of goodwill during the period ended on June 30, Investments property The following table summarizes the movement which occurred during the current period, and its effect on the real estate investment: Cost 30/6/ /12/2017 EGP EGP Balance as of January Additions Transferred from fixed assets* Transferred to assets held for sale** -- ( ) Total Accumulated depreciation Balance as of January 1 ( ) ( ) Depreciation for the period ( ) ( ) Transferred from fixed assets* -- ( ) Transferred to assets held for sale** Total ( ) ( ) Balance at the end of the period / year *During the period the company has transferred 3 hotels from PPE (Note 13) as per a rent agreement with FTI company a related party (Note 26). **ODE has signed final offer for the sale of 100% of its equity stake in Royal for Investment and Touristic which owns Royal Azur and Club Azur hotels, and Makadi Gardens hotel, accordingly they have been reclassified to assets held for sale (Note 19). The cost model has been used for valuation purpose while the fair value option has been used for disclosure purpose only. The fair value as of December 31, 2016, was determined with an amount of EGP based on an internal valuation model. which relied on the Discounted Cash Flow (DCF) method to determine the fair value of the investment property. The Discounted Cash Flow (DCF) approach describes a method to value the investment property using the concepts of the time value of money. All future cash flows are estimated and discounted to provide a present value. This valuation method is in conformity with the Egyptian Accounting Standards. The same

18 method was used for the previous external valuations. As investment property only consists of a few properties in Egypt, management has decided to use an internal valuation model due to efficiency and cost saving reasons. For the valuation of the investment property which is located in Egypt, the model used the cash flow projections based on financial budgets for the following five years and an average discount rate of 21.9% (cost of equity) (2016: 22.7%). For the terminal value, a perpetual growth rate of 2% was used (2016:3%). 17- Inventories Inventory consists of construction work in progress in the amount of EGP and lands held for development under a purchase agreements of EGP as well as, other inventory and hotel inventory in the amount of EGP Trade and Other Receivables (Net) The increase in this balance was due to the increase in deliverables during the period. 19- Assets held for sale 30/6/ /12/2017 Assets classified as non-current assets EGP EGP held for sale related to: Tamweel Group Royal for Investment and Touristic Makadi Gardens Hotel Total Assets classified as non-current assets held for sale Liabilities associated with assets classified as non-current assets held for sale Tamweel Group Royal for Investment and Touristic Makadi Gardens Hotel Total Liabilities associated with assets classified as non-current assets held for sale Planned disposal of Tamweel In the second half of 2016, the Board of Directors decided to sell its Tamweel Group companies ( Tamweel ) and management has engaged a third party as sell side advisor. On May 24 th,2018 ODE signed the final sale contract of all its stake in Tamweel Group for a value of EGP 360 million to a consortium of investors the consortium includes (Ebtikar for Financial investment S.A.E (Related party), TCV and Acquire) the sale is expected to be finalised during

19 Tamweel does not qualify as discontinued operation as it is neither a separate major line of business nor a geographical area of operations. Planned disposal of Royal for Investment and Touristic & Makadi Gardens Hotel During 2017 ODE has signed final offer for the sale of 100% of its equity stake in in Makadi Gardens, Royal Azur and Club Azur. Further, the General Assembly Meeting has approved the decision and related contract had been signed. All related required procedures are in process to be finalized before the end of The non-current assets held for sale and the liabilities associated with non-current assets held for sale were reclassified from the following categories of assets and liabilities:

20 Description 30/6/ /12/2017 EGP Tamweel Group Royal for Makadi Gardens Royal for Makadi Gardens Tamweel Investment and Hotel Investment and Hotel Group Touristic Touristic PPE (net) Investment property Deferred tax assets Non-current receivables (net) Total Non-current assets Inventories Trade and other receivables (net) Due from Related Parties Other financial assets Cash and bank balances Other debit balances Total Current Assets Total Assets classified as noncurrent assets held for sale

21 Description 30/6/ /12/2017 EGP Tamweel Group Royal for Makadi Gardens Royal for Makadi Gardens Tamweel Investment and Hotel Investment and Hotel Group Touristic Touristic Borrowings Trade and other payables Deferred tax liabilities Total Non-current liabilities Trade and other payables Current borrowings Current tax liabilities Provisions Other current liabilities Total Current liabilities Total Liabilities associated with assets classified as non-current assets held for sale Net assets classified as disposal group ( ) ( )

22 20- Credit Facilities and Bank Overdrafts The main reason for the decrease is due to repayment of some facilities through medium-term loan according to syndication agreement (Note 21). 21- Loans The main reason for the decrease is due to payments of some instalments during the period. Loans Agreement In Q4 2016, ODE signed a syndication agreement with all its short-term lenders while subsequently signing a common terms and inter-creditor agreement (CTIA) with all lenders (including both the short-term lenders and exiting medium term lenders). The syndication agreement groups all shortterm lenders under one legal document and is rescheduling the debt from short term loans (overdraft lines) to one single medium-term loan with a door to door tenor of 8.5 years from the date of signing the CTIA. The CTIA is a document that governs the terms of all ODE loans (the newly signed syndication agreement and the existing bilateral medium-term loans) so that terms are unified except for the collateral structure which is unique to each individual legal document. It is worth to mention that the previously mentioned cash proceeds from the ODE relisting was used to pay down the bank debt balances of ODE in 2016 on a pro-rata basis and that ODE rescheduled all its existing bilateral medium-term loans to loans with a door to door tenor of 7.5 years from the date of signing the CTIA. All ODE loans after the signed transaction were granted a 3-years grace period of loan principal repayment from 30 June 2016 and the ability to capitalize the interest expense for the full year 2016 as well as to capitalize the interest expense for the first half year of In Q2 2018, all conditions required to effect the terms under both loan agreements were finalized, and the company has settled EGP from loans and banks overdrafts, accordingly, the effectiveness letter has been received from the inter-creditor agent confirming the effectiveness of both agreements at 14 May Issued and Paid-up Capital The company s issued capital amounted to EGP (one billion one hundred eight million, three hundred seven thousand and three hundred and eighty-five Egyptian pounds) divided among (one billion one hundred eight million, three hundred seven thousand and three hundred and eighty-five) shares for EGP 1 (One Egyptian pound) per share instead of shares (two hundred twenty-one million, six hundred sixty-one thousand, and four hundred seventy-five shares), as per the decision of the extraordinary general assembly meeting held on 19 March 2018 for the stock split of the company s share at a ratio of 5:1. All necessary legal procedures with the Egyptian Central Clearing, Depository and Registry Company and the Egyptian Stock Exchange had finalized and the new shares has been traded as of May 7 th,

23 23- Non-controlling interests 30/6/ /12/2017 EGP EGP Balance at the beginning of the period / year Change in non-controlling interests* ( ) Non-controlling interests share in profits for the period / year Dividends distribution -- ( ) *ODE has increased its ownership in one of its subsidiaries. 24- Assets and liabilities measured at fair value Fair value of financial instruments carried at amortised cost Except as detailed in the following table, management considers that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values. EGP Financial liabilities Borrowings/bank loans 30 June December 2017 Carrying Carrying Fair value Fair value amount amount Valuation techniques and assumptions applied for the purposes of measuring fair value The fair values of financial assets and financial liabilities are determined as follows: The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes unlisted and listed equity investments classified as at FVTPL and FVTOCI respectively). The fair values of other financial assets and financial liabilities (excluding those described above) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. Specifically, significant assumptions used in determining the fair value of the following financial assets and liabilities are set out below. Fair value measurements recognised in the consolidated statement of financial position The following table provides an analysis of assets and liabilities that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities

24 Level 2: fair value measurements are those derived from inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 30 June 2018 EGP Level 1 Level 2 Level 3 Total Financial assets at FVTOCI Listed and unlisted shares measured at FV December 2017 EGP Level 1 Level 2 Level 3 Total Financial assets at FVTOCI Listed and unlisted shares measured at FV There were no transfers between Level 1 and 2 in the period. The unlisted financial assets at FVTOCI were measured at fair value based on a method that combined the earning and net equity book values of the companies. 25- Significant Events during the Financial Period - The ordinary general assembly meeting held on 28 April 2018 has approved auditor s report, financial statements and profits and losses for the year ended 31 December The GAM also approved a cash dividend distribution for the shareholders and employees for the year ended 31 December The ordinary general assembly meeting held on 19 March 2018 agreed on the company s decision to sale 100% of its equity stake in in Makadi Gardens, Royal Azur and Club Azur. The CEO has been delegated to negotiate and sign the sale contract and to insert any amendments or annexes to the contract (Note 26). - The extraordinary general assembly meeting held on 19 March 2018 agreed on: 1- The stock split proposal of the company s share is at a ratio of 5:1, reducing the par value from EGP 5 to EGP 1 per share, and amending Articles 6 and 7 of the Articles of Association of the company. As a result, the authorized company's capital become EGP 5 billion (five billion Egyptian Pounds) and the Company's issued capital reaches EGP (one billion one hundred and eight million three hundred and seven thousand three hundred and seventy five Egyptian Pounds) distributed on (one billion one hundred and eight million three hundred and seven thousand three hundred and seventy five Egyptian Pounds) shares where the value of each share is 1 EGP, all of which are cash shares. On 24/4/2018, The Financial Regulatory Authority issued a no objection to proceed with the

25 procedures of splitting the nominal value of the share from five EGP to one EGP. The company has finalized all necessary legal procedures with the Egyptian Central Clearing, Depository and Registry Company and the Egyptian Stock Exchange, and the new shares had been traded since May 7 th, The Proposed Employee Stock Ownership Program (ESOP), through the promise to sell to employees, managers and executive board members some shares at nominal value per share in accordance with Ministerial Resolution No. 282 of 2005 amending certain provisions of the executive regulations of the Companies Law, Joint Stock Companies and Limited Liability Companies No. 159 of In its meeting held on February 15, 2018, the Monetary Policy Committee (MPC) decided to cut the overnight deposit rate, overnight lending rate, and the rate of the Central Bank of Egypt's (CBE) main operation by 100 basis points to 17.75%, 18.75%, and 18.25%, respectively. The discount rate was also cut by 100 basis points to 18.25%. 26- Transaction with related parties Details of transactions of Engineer / Samih Sawiris the main shareholder of the company. a. Taba Heights Company One of the Group companies had been granted the right to acquire freehold title to the project's land by the Tourism Development Authority. Due to foreign ownership restrictions on the Sinai Peninsula becoming applicable in connection with the reorganization, the respective Group company had to be transferred to Mr. Samih Sawiris, major shareholder and of Egyptian nationality. Mr. Samih Sawiris entered into a binding agreement to retransfer these shares subject to approval of the competent authorities, and that until such retransfer, the Group would be put into a position as the full economic beneficiary of these shares. This entails, inter alia, an irrevocable assignment of dividends and the authorization to collect dividends, exercise voting rights related to these shares and cause the sale of shares with no additional rights of Mr. Samih Sawiris in any value received. b. Other Transactions The company leased its administration location in Nile City from a joint stock company, owned by the main shareholder and others. Part of the amount due from El Gouna Football Club was settled by Mr. Samih Sawiris which will be settled by him through the sponsorship agreement over the next five years starting from 2013 through the settlement of Orascom Hotels and Development dues with El Gouna Sports Club through sponsorship agreement. During 2014, The main shareholder of the Holding Company Engineer / Samih Sawiris acquired a 35% stake in FTI the fourth largest tour operator in Europe. In 2017, transactions in the amount of EGP 350 million were concluded with FTI

26 During Q1 2017, The Group has rented out 3 hotels at Makadi destination to FTI an entity owned by the main shareholder of the Company Mr. Samih Sawiris with an interest of 35 %. FTI is the fourth largest tour operator in Europe. The annual rent is fixed at EUR 3.3 million (CHF 3.6 million) for 3 years to be renewed with the agreement of both parties with a 5 % annual increase. The ordinary general assembly meeting held on 19 March 2018 agreed on the company s decision to sale 100% of its equity stake in in Makadi Gardens, Royal Azur and Club Azur to FTI by USD 23 million. The total amount of construction work and services with Red sea for Construction & Development S.A.E (Subsidiary 40.20%) reached EGP 210 million as of 30 June Events Subsequent to the Financial Statements date No Events. 28- Date of approval of Financial Statements. The condensed consolidated interim financial statements were approved by the Board of Directors and authorized for issuance on August 13,