success Annual Report

Transcription

1 ROAD TO success Annual Report 2017 ROAD to success Annual Report

2 ROAD to success Annual Report 2017

3 ROAD to success Contents Continuous Team Effort.. 01 at a Glance 1.1 Company Profile Destinations' Map Chairman's Note CEO's Letter Business Segments 2.1 Hotels Real Estate and Construction Destination Management Land Sales Other Operations Countries 3.1 Egypt Oman UAE Montenegro Switzerland Morocco UK INVESTOR Information consolidated Financial Statements Consolidated statement of comprehensive income F Consolidated statement of financial position F Consolidated statement of changes in equity F Consolidated statement of cash flows F Notes to the consolidated financial statements F statutory FINANCIAL Statements Income statement F Statutory balance sheet F Notes to the financial statements F GLOSSARY of Terms Corporate Governance 4.1 Group Structure and Significant Shareholders Capital Structure Board of Directors Executive Management Employees Compensation Shareholding and Loans Shareholders' Participation Changes of Control and Defense Measures External Auditors Information Policy Annual Report 3

4 ROAD to success 01 Orascom Development at a Glance CONFIDENCE BOOSTING 1.1 Company Profile 1.2 Destinations Map 1.3 Chairman's Note 1.4 CEO's Letter Annual Report 5

5 Orascom Development at a Glance ROAD to success 1.1 Company Profile BUSINESS MODEL Orascom Development Holding ( ODH or the Company ) is a leading developer of fully integrated destinations, with over 30 years of experience and a proven track record of sustainable development, including hotels, private villas and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group's diversified portfolio of destinations is spread over seven jurisdictions (Egypt, UAE, Oman, Switzerland, Morocco, Montenegro and United Kingdom), with primary focus on touristic destinations. The Group currently operates ten destinations; five in Egypt (El Gouna, Taba Heights, Fayoum Makadi, and Harram City), The Cove in the United Arab Emirates, Jebel Sifah and Hawana Salalah in Oman, Luštica Bay in Montenegro and Andermatt in Switzerland. Orascom Development is listed on the SIX Swiss Exchange. ODH currently owns a land bank of million sqm and a comprehensive hospitality portfolio of 8,284 rooms, which are either self-managed by Orascom Hotels Management or by third-party hotel managers under management contracts. Development Phase 1Initial destination concept 2Detailed destination concept 3Marketing concept and sales strategy 4Product sign-offs 5Start of sales 9Start of operation Acquisition Phase Real Estate Land Bank Value Creation Operational Phase RE Owner Services Countries 14 Destinations New destination identification acquisition & initial concept Hotel Development Destination Development Project Management Hotel Operations Destination Operations Operations Management One of the Largest Land Banks Presence 10 operating destinations Planning and Design Construction Property and Facility Management 8,284 Rooms 8,706 Employees 30 Years 6 Start of construction 7 8 Internal / Operator hand over Buyer hand over / opening 10 Periodic assessment of performance and service quality 35 hotels Employees in 2017 DEVELOPMENT EXPERIENCE Annual Report 7

6 Orascom Development at a Glance ROAD to success 1.2 Destinations Map The Group s diversified portfolio of destinations is spread over multiple jurisdictions such as Egypt, UAE, Oman, Switzerland, Morocco, Montenegro and United Kingdom % total LAND area COMPLETED area completed Egypt Oman UAE Montenegro Switzerland Operating Destinations El Gouna Taba Heights Harram City Makadi Fayoum Developing Destination Qena Gardens Other Hotels Operating Destinations Jebel Sifah Hawana Salalah Developing DESTINATION As Sodah Island Destination in the Pipeline City Walk, Muscat Operating DESTINATION The Cove Morocco Developing DESTINATION Chbika OPERATING DESTINATION Luštica Bay U.K. Destination in the Pipeline Eco-Bos Operating DESTINATION Investment Held in Associates Andermatt Swiss Alps Royal Azur and Club Azur Zahra Oberoi Citadel Azur Annual Report 9

7 Orascom Development at a Glance ROAD to success 1.3 Chairman s Note Samih O. Sawiris, Chairman of the Board of Directors This year s Group performance has indeed brought a big smile on my face. I truly believe that the CEO; Khaled Bichara has brought together a highly talented management team who worked diligently in delivering the objectives that have been set for the year. We can already witness operational and financial enhancement across all our destinations. The sense of work ownership and entitlement of each destination head and his fellow colleagues was evident in the positive KPIs and the overall results. This major improvement was also acknowledged by the markets reflected in the great jump in the share prices of both our listed companies. The Group holding company, Orascom Development Holding (ODHN) listed on the SIX recorded a return of 115.7% during the year and also our largest Egyptian Subsidiary, Orascom Development Egypt (ODE) listed on the EGX recorded a return of 279.1% during the year. Both companies were one of the top performers in their markets, respectively. We also felt the increased awareness and momentum around our destinations this year with more coming to life in El Gouna, Egypt has gained a lot of public exposure over the course of the past year where we have hosted the International Squash Open and Orascom Development PSA Women s World Championship, the first time to be held in Egypt and for which we have built four new high standard squash courts. We successfully hosted the first edition of El Gouna Film Festival (GFF) in September, with more than 1,000 attendees. Our hotel s occupancy at the time reached 100% and for that event, we have built four new high standard international cinemas. All local television channels and a large number of international channels aired the event and we are planning to host it this year as well. We also hosted the World Cup FIFA Trophy in March 2018, with more than 1,000 attendees including football stars, media celebrities and public figures. Hawana Aqua Park, set over 65,600 m 2, with an expected capacity of 500 visitors. In UAE, 142 rooms were annexed to The Cove Rotana in May 2017, bringing inventory to 487 rooms, recording an occupancy of 70% in the first 7 months of their operation. In summer 2018, we will open our first hotel in Lustica Bay, the Chedi with 110 rooms and launch the marina where we have already reserved 40 boats along with 1,000 m 2 of marina outlets. In Andermatt, we will launch our second hotel, the Radisson blu with 180 rooms that is being built together with the Gotthard Residences. Speaking on behalf of the Board, we all have great confidence in the current team to continue executing on the strategy announced in June 2016, which led to enhancement in the operation and financial performance across all destinations. We would also like to thank our diligent and hard-working employees around the world for continuing to provide the highest levels of service to our clients. To ODH customers and shareholders, thank you for choosing ODH as your partner to navigate an ever-changing and challenging world. Everyone at ODH is committed to continually improving our service and products to be our clients' most valued developer. Finally, to our shareholders, thank you for your support. We are committed to delivering value to you, both today and long into the future. Samih O. Sawiris Chairman of the Board of Directors On the Gulf level, we capitalized on the high demand and proven quick return on investment, whereby 263 rooms were constructed and put into operation. In Hawana Salalah, Oman, 120 rooms were added in December 2017, bringing total room inventory to 904 rooms. On their first week of operation, the new rooms ran an occupancy of 93%. We also launched Oman s first aqua park, the PwC Switzerland; photographer: Marc Welti Annual Report 11

8 Orascom Development at a Glance ROAD to success 1.4 CEO s Note Khaled Bichara, CEO of ODH I want to begin this letter with a sense of acknowledgment and appreciation to be part of the team that was able to turn around the company and to put Orascom Development Holding (ODH) on the right track for growth and sustainability-to reach profitability. Our successful execution of our three-pillar strategy that we communicated to the market back in June 2016 resulted into positive operational and financial results in ODH is a unique company with an exceptional record of accomplishment and a very promising future. Throughout a period of political and economic changes around the world, ODH has been growing its revenue stream from its different destinations and increasing its profitability from the Egyptian subsidiary. Evidently, this enhanced performance was reflected in both our stock prices (ODH) and the largest Egyptian listed subsidiary of the Group; Orascom Development Egypt (ODE) as a measure of the progress we have made over the year. This progress is a function of constantly making important investments tailored to each country where we are present, in good times and not so good times. In parallel, we are continuing to build our capabilities; people, systems and products to match the growth mode of the Group. These investments drive the future prospects of our company and position it to grow and prosper for years to come. Operational and Financial highlights of 2017 The year 2017 has been a year defined by sustainability, growth and success across our destinations, as we continue to successfully deliver on our strategy that we implemented across the Group starting June Our largest Egyptian subsidiary; ODE, reported a tremendous operational success with a 78.8% increase in revenues, in local currency, compared to FY 2016 accompanied by a huge boost in profitability compared to a loss in Yet, still this operational enhancement was not hugely reflected in the Group s revenues when being translated into CHF, due to the 50.0% EGP devaluation against the CHF. Overall, the Group revenues increased by 2.9% growing from CHF million in FY 2016 to CHF million in FY Adjusted EBITDA for the period continued to grow and reported an increase of 70.1% to CHF 33.4 million vs. CHF 19.6 million in FY The net loss for the reporting period was significantly reduced on the back of the enhanced operational performance across all business segments in our destinations and amounted to CHF 41.1 million compared to a net loss of CHF million in FY We successfully reached our real estate sales target of the year on the back of the targeted sales and marketing activities that we implemented with our launches across all destinations in Net sales increased by 9.5% to CHF million vs. CHF million in FY 2016 with more contribution from El Gouna, Hawana Salalah, Jebal Sifah and Montenegro. Real Estate revenues increased by 6.2% to CHF 69.5 million vs. CHF 65.4 million in FY 2016 on the back of increased unit deliveries in El Gouna and Luštica Bay. Total deferred revenue from real estate that is yet to be recognized until 2021 increased by 28.6% to reach CHF million in FY 2017 vs. CHF million in FY We have also managed to secure some successful hotel investments this year with the addition of 262 new rooms to our Gulf hotel inventory. We also worked on renovating and upgrading the hotel inventory in El Gouna to meet and exceed guest expectations and established more strategic partnerships with tour operators. All those initiatives, along with the pickup of the tourism industry in Egypt has reflected positively on our hotel s business performance, whereby occupancy increased to 62% versus 50% in FY 2016 and revenues increased by 9.1% to CHF million in FY 2017 vs. CHF million in FY Adjusted EBITDA doubled in value to reach CHF 40.8 million vs. CHF 20.3 million in FY Success stories under each pillar: Destination Based Model We have successfully implemented the destination-based structure in several destinations, pushing more authority and responsibility on the ground. Being more focused on each destination and providing a targeted strategy for its real estate, hotels and town management segments, helped us yield positive results and operational efficiency. Under that notion, El Gouna, Egypt managed to be our top contributor in terms of sales on the back of targeted sales and marketing activities in addition to the new tailored product offerings to our different clientele. Net sales figures for the year in EGP increased by 87.5% to EGP 1.5 billion versus EGP million in FY 2016 and remained almost stable in Swiss francs reaching CHF 79.1 million vs. CHF 80.6 million despite of the 50% devaluation of the EGP against the CHF. We launched two new projects throughout the year and added several phases to them. Projects included Fanadir Bay, Tawila, Um Jammar with a total inventory of USD 39.1 million offering a mix of luxurious villas and town homes. We also launched our highest end apartment project Abu Tig Hill overlooking the marina with an average selling price of USD 3,427 per m 2 and a total inventory of USD 22.0 million that was sold out within a month from its launch date. We continued to prove our trust and commitment to our clients with our timely construction activity, delivering our projects within 2 years from contracting, making us by far the fastest developer in Egypt. The Gouna hotels revenues jumped to EGP million (CHF 49.8 million) in FY 2017 vs. EGP (CHF 44.9 million) in FY 2016 with a Gross Operating Profit (GOP) of EGP million (CHF 23.4 million) from EGP million (CHF 13.9 million) in FY We managed to increase the room rates with the increasing occupancy levels, which reached 75% compared to 57% in 2016 and we are currently studying the addition of more hotel rooms to the existing inventory and will be considering adding a new complete hotel in 2019 to cope with the increasing demand. A lot of effort and dedication was put in improving the quality of the provided services to owners and residents and in parallel improving the profitability of the town management segment of the destination. We have successfully opened two phases of our G-Space offices in El Gouna. The complex offers flexible private office spaces, which are already rented out, in addition to co-working membership packages. We also launched the first electric bike-sharing system in Africa, and the largest in the Middle East. We hosted El Gouna International Squash Open and Orascom Development PSA Women s World Championship, the first time to be held in Egypt and for which we have built four new high standard squash courts Annual Report 13

9 Orascom Development at a Glance ROAD to success We also successfully hosted the first edition of El Gouna Film Festival (GFF) in September 2017, with more than 1,000 attendees. Our hotel s occupancy at the time reached 100% and for that event, we have built four new high standard international cinemas and built a new party venue, which was also used to host all seasonal parties and weddings. The town management revenues jumped to EGP million (CHF 21.8 million) compared to EGP million (CHF 27.4 million) with an Adjusted EBITDA of EGP 83.5 million (CHF 4.6 million) compared to EGP of 55.6 million (CHF 5.8 million) in FY Another successful destination, which benefited from this reorganization, was Hawana Salalah in Oman. We launched a new real estate product, our first launch since 2010, and worked on several touch ups of the existing inventory to match the real client demand. Both initiatives nailed great acceptance and success pushing our net sales to OMR 6.5 million vs. OMR 0.1 million in FY 2016 (CHF 16.6 million vs. CHF 0.3 million), 55 times increase. From the hotels side, we capitalized on the destination s high demand and proven quick return on investment and added 120 rooms to Al Fanar and Rotana hotels in December 2017, bringing inventory at Hawana Salalah to 904 rooms. On its first week of operation, the new rooms ran an occupancy of 93%. The hotels revenue from this destination jumped to OMR 13.1 million (CHF 33.5 million) compared to OMR 11.5 million (CHF 29.4 million in FY 2016) and the GOP increased by 20.6% to OMR 4.1 million (CHF 10.4 million) compared to OMR 3.4 million (CHF 8.7 million) in Hawana Salalah, Oman has established itself as the Sultanate of Oman s largest integrated community, being home to 904 hotel rooms in December We worked on the town management facilities of the destination and have successfully constructed and launched Oman s first aqua park, the Hawana Aqua Park, set over 65,600 sqm, with an expected capacity of 500 persons. The destination also welcomed five new retail outlets, opened its first clinic, as well as the floating liquid park alongside the marina. We launched Wateera Rental Office to provide homeowners and visitors with high-end rental services ranging from property management, furnishing packages, logistics, and cleaning services at the destination. This in turn increased the occupancy of short & long-term rentals in the destination. Strengthening ODH s Balance Sheet. An important element of the Group strategy is to continue to seek an optimal balance sheet structure. This year we have succeeded in paying of c. CHF 42.0 million of the debt held on our Egyptian subsidiary, which carries the 71.0% of the Group s total outstanding debt balance. We also got the regulatory approval in place to sell non-core assets and together with excess accumulated operational cash further reduce the debt balance of Egypt by c. CHF 56.0 million. This will result in interest savings of c. CHF 33.3 million in the aggregate till 2024, it will also reduce our total cost of debt and will allow us to reach more favorable debt ratios. In parallel, we are in negotiations with the banks to further restructure and optimize our remaining repayment schedule in Egypt and Oman and we are growing the balance elsewhere to match the Group s expansion plans in the other destinations during 2018 and Repositioning and enhancement of ODH s brand. One of the main initiatives that management took this year was to make sure that the Group Holding Company along with its largest Egyptian subsidiary were properly positioned and clearly perceived within the investment community. Accordingly, we delisted ODH s Egyptian Depository Receipts (EDRs) from the Egyptian Stock Exchange (EGX). The delisting took place in May 2017; and had a positive effect on ODH s and ODE s stock prices and trading volume. ODH s stock price recorded a return of 115.7% and ODE s stock priced recorded a return of 279.1% during the FY 2017 beating both indices the SPI and EGX 30. We also worked strongly on increasing our communication to the investor and shareholder community. We increased our conference participation attendance, arranged for targeted roadshows and we made sure that our story was heard on the PR level as well was truly a year of change, transition and growth. On behalf of Orascom Development s Management, I would like to thank all our employees for their tremendous efforts and commitment during those tough times and for their diligent execution of the Group s strategy. In 2018, we will continue to wisely invest our capital to drive growth, and prioritize our time and resources to build a stronger and sustainable organization. We will also continue to remain dedicated and to our clients, communities and the destinations we serve and most importantly, we will continue to increase our presence and communication to our shareholders and investor community who I would like personally to thank them all for believing in our story and commitment. Current Maturity & Balance in YE-2017 * FY 2017 Balance: CHF 378.1mn. Cost of Debt is 9.1% Maturity Profile after ODE Rescheduling & Oman Debt Reschedule FY 2017 Balance: CHF 335.8mn. Cost of Debt is 7.9% Khaled Bichara Chief Executive Officer CF CF * Including CHF 14.4 million debts held on Royal as of December 31, * Excluding CHF 11.1 million of H interest which will be settled in Q Annual Report 15

10 ROAD to success 02 Orascom Development Business Segments TOWRARDS STRONGER GROWTH 2.1 Hotels 2.2 Real Estate and Construction 2.3 Destination Management 2.4 Land Sales 2.5 Other Operations Annual Report 17

11 Orascom Business Segments ROAD to success 2.1 Hotels Profound analysis skillful administration positive results The increased number of flights from the German speaking markets in November 2016, as well as free-float of the EGP against the US Dollar are variables that collectively set a structured platform for an operational revenue boost. In parallel, over the last five years, the Group s Hotel management team have been working on several initiatives, which included: 1) establishing strategic partnerships with tour operators, 2) renovating and upgrading the Hotel inventory to meet and exceed guest expectations, and 3) reinforcing our market base with targeted marketing activities on both the B2B and B2C levels. All helped in paving the way for a successful swap up of the opportunity. That being mentioned; in 2017, El Gouna Hotels (39% of total Egypt s Inventory) occupancy went up from 57% to 75%, TRevPAR from CHF 46 in 2016 to CHF 50 in 2017 and GOP PAR from CHF 14 in 2016 to CHF 24 in In Makadi (17% of Egypt s Inventory), the lease agreement of the 3 hotels yielded CHF 3.3 million going up from a GOP loss of CHF 1.9 million in The lease agreement was put in effect on January 15, 2017 with a 3-year term and an annual return of Euro 3.3 million and a 5% annual increase. Taba Heights (35% of total Egypt s Inventory), continues to suffer the shortcomings of the travel bans; however, constant efforts to market the Destination locally, regionally, and internationally to some emerging markets, like China and some East European countries, afforded the opening of an additional 100 rooms. In 2017, Taba Heights operating rooms (1,265 out of 2,365) recorded a FY occupancy of 27%. In 2016, FY occupancy of the operating rooms (785 out of 2,365) was 30%. With this operational progress, as well as, the strict implementation of the cost-cutting measures that have been in place since 2014, GOP losses of Taba Heights were curbed from CHF 1.0 million in 2016 to CHF 0.6 million in 2017 and is expected to breakeven in For Citadel Azur Resort (8% of total Egypt s Inventory), a sale and lease back agreement with Corplease Group, one of the largest and leading leasing companies in Egypt, was signed with a total transaction value of USD 18.0 million to be repaid over 6 years with a residual value of 40% at the end of the tenor. Collectively, Egypt Hotels (82% of Group inventory), witnessed a notable boost in the bottom line results with a 63% increase in GOP going up from CHF 16.3 million in 2016 to CHF 26.6 million in On the Gulf level, capitalizing on the high demand and proven quick return on investment (Revenue Contribution: 49.1% of Group s Revenues), a total of 265 rooms were constructed and put into operation. In Oman, 120 rooms were annexed to Fanar and Rotana hotels in December 2017, bringing inventory at Hawana Salalah to 904 rooms. On its first week of operation, the new rooms ran an occupancy of 93%. In UAE, 142 rooms were annexed to The Cove Rotana in May 2017, bringing inventory at The Cove to 487 rooms. The new rooms in UAE recorded an occupancy of 70% in the first 7 months of their operation. Hawana Salalah, Oman the Group s rising destination, continued its positive performance with an occupancy going from 69% to 72%, and a GOP increase of 19.5% going from CHF 8.7 million in 2016 to CHF 10.4 million in Similarly, at the Cove, Rotana, GOP increased from CHF 27.1 million in 2016 to CHF 28.5 million in Generally, the Gulf hotels maintained their positive momentum reporting a GOP increase of 10% going from CHF 20.0 million in 2016 to CHF 22.0 million in On the Group level, the Hotel Segment reported a revenue increase of 9.1% growing from CHF million in 2016 to CHF million in For the GOP, the Segment reported a 33.6% increase, growing from CHF 36.3 million to CHF 48.5 million. Furthermore, the Segment reported a doubleup of the Adjusted EBITDA going up from CHF 20.3 million to CHF 40.8 million in Outlook 2018 In Egypt, we are capitalizing on the recovery of the tourism sector that started in 2017 and will continue throughout We are optimistic about the continuing increase in demand from Germany and the West European Countries in Egypt and working on its impact on the average selling rates. Hoping for a soon travel ban lift to be announced from Russia. Currently, Taba Heights is starting to receive Russian guests who fly to the Destination through Eilat and Aqaba, which promises a quick recovery once bans are lifted. In addition, the devaluation of the EGP against foreign currencies will continue to play in favor for our hotels as hotels prices are still very low compared to other countries, making Egypt a competitive destination to foreign tourists. In El Gouna, we will continue with the renovation works across some of our hotels to further upgrade the destination's positioning and we are also studying to add more rooms to cater the huge demand. With demand recently picking up in Taba Heights, we are planning to open more rooms to increase the product offerings for the different cliental. In Hawana Salalah, Oman we are working on the development plans of the new hotel to cater to the growing demand from families post the opening of the Aqua Park. In Montenegro, construction of the 5-star Chedi Hotel in Luštica Bay is quickly progressing, with plans to be finalized and opened in summer Hotels Revenue CHF mn CHF mn Nationalities of hotel guest Share of Groups Revenue % 50.6 % The Hotels Segment KPIs, as of December 31, 2017 Total number of hotel rooms Number of available hotel rooms Nationality of hotel guests (% total) Occupancyfor available rooms rooms (%) Adjusted EBITDA TRevPAR* (CHF) CHF 40.8 mn CHF 20.3 mn Germany Egypt Netherlands Switzerland Belgium UAE Poland UK Italy Jordan Oman Others GOP PAR ** (CHF) Country Destination FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 Egypt El Gouna 1 2,657 2,650 2,657 2, Taba Heights 2 2,365 2,365 1, )2( )5( Citadel Azur Fayoum )22( Floating Hotels )20( Oman Total Oman U.A.E UAE Makadi 6 1,113 1, ODH Group 8,184 7,916 5,966 5,647 1 In FY 17 we transferred 87 hotel rooms of Fanadir and Bellevue into real estate products and in Q Ancient Sands hotel rooms increased by 94 rooms. 2 During FY 2017, only 4 hotels were operating (Sofitel with 442 rooms, Strand Beach Hotel with 503 rooms, El Wekala Hotel with 215 rooms and 100 rooms in Bay View Hotel out of 394 existing rooms). Whereby, only 2 hotels were operating representing 718 rooms in FY In September 1 st, 2016, Byoum Lakeside Hotel was opened. 4 In December 23 rd, 2017, Al Fanar Hotel extension was opened with 98 rooms, thus brining total number of the hotel rooms to 400 rooms and also 22 new rooms were added to Rotana Hotel, thus bringing total number of rooms to 422 room. 5 In June 2017, we opened 142 new rooms in the Cove Hotel, thus brining total number of the hotel rooms to 487 rooms. 6 Our 3 hotels in Makadi were rented to FTI Group since Jan Whereby in FY 2016 only one hotel was operating Royal Azur (491 rooms). * Financial KPIs are calculated based on the number of available rooms during the reported period of FY ** Includes all expenses of the hotels in the destinations Annual Report 19

12 Orascom Business Segments ROAD to success 2.2 Real Estate and Construction Operational improvements across all destinations Segment operational highlights in 2017 The Group continued to record a strong increase in its real estate sales and has successfully achieved its target for the year. Net sales increased by 9.5% to reach CHF million in FY 2017 compared to CHF million in FY The enhanced sales performance during the year reflects the composed targeted sales and marketing activities that we implemented with our new launches throughout our destinations. Although 2017 posed many challenges for real estate developers in Egypt, with the increase in construction costs, the rise in land acquisition costs, and the high interest rate environment, nevertheless the developers managed to successfully bypass those challenges and recorded double digit growth in their sales figures compared to last year. Developers were able to increase the unit prices by 30-40% and changed the product mix by offering smaller-sized units to mitigate the price effect on affordability. Real estate was still regarded as a safe haven against the devaluation of the local currency. El Gouna, Egypt has continued its solid performance and managed to be our top contributor in terms of sales on the back of targeted sales and marketing activities in addition to the new product offerings that catered to our different clientele. Net sales figures for the year remained almost stable reaching CHF 79.1 million vs. CHF 80.6 million despite of the 50% devaluation of the EGP against the CHF. We launched two new projects throughout the year and added several phases to them. Projects included Fanadir Bay, Tawila, Um Jammar with a total inventory of USD 39.1 million offering a mix of luxurious villas and town homes. We also launched our highest end apartment project Abu Tig Hill overlooking the marina with a total inventory of USD 22.0 million which was successfully sold out within a month from its launch date. In Fayoum, Egypt, we started a new sales and marketing campaign and managed to increase our net sales figures to CHF 1.5 million compared to CHF 0.3 million in FY Overall in Egypt, we continued to prove our trust and commitment to our clients with our timely construction activity, delivering our projects within 2 years from contracting, making us by far the fastest developer in Egypt. In Hawana Salalah, Oman, net sales grew by 55 times to CHF 16.5 million in FY 2017 vs. CHF 0.3 million in FY The tremendous increase in sales is mainly driven by the great success of Lagoon Project that was launched in August 2017 with a total inventory of CHF 31.8 million offering 232 apartments. We also finalized the construction of the Hawana Aqua Park in December 2017 which is now capable of accommodating 500 people daily as of January In Jebel Sifah, Oman, we capitalized on the great success of the Golf Lake Residence real estate project that was launched in Q and launched second phase of the project in November 2017 with a total inventory of CHF 18.0 million and we were able to successfully sell and reserve 93% of the total project since its launch. The residential neighborhood consists of studio, one and two-bedroom apartments, as well as lofts. Net sales reached CHF 11.8 million compared to CHF 15.9 million in FY Ten title deeds were granted in 2017 for real estate units in both destinations, granting buyers residency in Oman. Total net sales from our destinations in Oman reached CHF 28.4 million an impressive 75.3% increase compared to CHF 16.2 million in FY It is important to note that all the units delivered in Oman during the period-included earlier units that incurred cost overruns. Moving forward, all new deliveries of the new launches will have a positive margin on the destinations results. In Luštica Bay, Montenegro, 2017 was a heavy year for construction as we managed to deliver the F and G Buildings comprising 88 apartments and finished the new access road to marina village. We are continuing with construction of the town-homes and the villas with plans to be finalized early We are also progressing ahead with the construction of the Chedi hotel and finalized the Marina superstructure with plans to be opened both by summer In addition, we successful launched the Centrale Phase 1; the town center concept, with approximately 60% contracted and reserved units out of the total inventory of EUR 11.0 million. Net sales in Luštica almost unchanged compared to last year and reached CHF 17.2 million vs. CHF 17.3 million in FY Financial Review 2017 Real estate revenues increased by 6.3% to reach CHF 69.5 million in FY 2017 compared to CHF 65.4 million in FY 2016 on the back of increased unit deliveries especially in El Gouna and Luštica Bay. Total deferred revenue from real estate that is yet to be recognized until 2021 increased by 28.6% to reach CHF million in FY 2017 vs. CHF million in FY Outlook for 2018 In El Gouna, Egypt we are capitalizing on the great success of our latest real estate launch in Q Abu Tig Hill with a total inventory of USD 22.0 million which showed a huge demand from our clients and was completely sold out. In January 2018 we launched Tawila phase III with inventory of USD 44.1 million. Phase III compromise of Town Houses and apartments. We are also working on new product offerings to cater our different cliental needs. In Makadi, Egypt we are planning to start an aggressive sales and marketing campaigns to revive the destination to push back sales during We are also progressing ahead with construction of the Club House with plans to be finalized during Finally, in Egypt, we are capitalizing on our strong tripod brand which starts with our Chairman Samih Sawiris, Orascom and El Gouna brand and are holding advanced discussions with private owners and government entities to acquire a land plot in Cairo and North Coast on a revenue share basis, marking out our first entrance in the first and second home market. In Oman, we are planning to launch more real estate products, catering for local, regional and international buyers. Construction on the Golf Lake project in Jebel Sifah commenced in 2017with plans to deliver Phase I of the project in Q In Montenegro, we are speeding up the construction progress, of the town-homes and the villas with plans to be finalized early We also initiated the construction of E and B building clusters comprising 68 apartments due for delivery in 2018 and early 2019; and over 1,000 square meters of marina retail due for delivery in summer We are also progressing ahead with the construction of the Chedi hotel and the Marina with plans to be opened both by summer Real Estate and Construction Revenues CHF 69.5 mn CHF 65.4 mn Share of Groups Revenue % 27.5 % Net Value of Contracted Units CHF mn CHF mn The Real Estate Segment KPIs, as of December 31, 2017 Net value of contracted units (CHF mn) Number of contracted units Adjusted EBITDA CHF 18.5 mn CHF 20.8 mn Value of Deferred Income Average Selling Price (CHF/m 2 ) CHF mn CHF mn Value of deferred Income (CHF mn) Country Destination FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 Egypt El Gouna ,945 2, Fayoum Makadi Gardania , Oman Jebel Sifah ,835 1, Hawana Salalah ,543 3, Montenegro Luštica Bay ,774 5, ODH Group ,950 2, Annual Report 21

13 Orascom Business Segments ROAD to success 2.3 Destination Management The Company has continued to implement its strategy towards the development of the destination s livelihood and town management. We have undertaken several initiatives to continuously uphold our town s livelihood and life as it should be slogan. Destination Management Environment in 2017 Following last year s successful restructuring reforms, El Gouna management team focused on streamlining operations, eliminating waste, improving profitability and quality of service. Various maintenance works and upgrades within El Gouna were performed during the year, including the renovation of the Kafr flooring, street sidewalks, and multiple road pavements, which enhanced the traffic and flow within the destination. Focusing on improving the quality of the provided services to owners and residents, though supporting the Customer Service unit with more tools and turning it into a one-stopshop catering all the needs of the owners and residents. We merged the info center, operator service under the umbrella of the Customer Service as well as launched El Gouna short number as the call center for El Gouna. In addition, the Group took several actions and initiatives to improve quality and profitability of the destination management segment of El Gouna. We had added 17 new berths in Abu Tig marina to improve the quality of services provided in Abydos marina (berthing and dry dock). We have successfully opened the first Phase of our G-Space offices in El Gouna. The complex offers flexible private office spaces, which are already rented out, in addition to co-working membership packages. Following the great success of Phase I of G-space, we launched Phase II by end of December 2017 offering more private offices, meeting rooms and a large chill out area and all offices were rented out. We also launched the first electric bike-sharing system in Africa, and the largest in the Middle East. The initial phase comprises 100 bikes, with 10 docking stations in locations spread all around El Gouna. We hosted El Gouna International Squash Open and Orascom Development PSA Women s World Championship, the first time to be held in Egypt and for which we have built four new high standard squash courts and hosted the top model of the world competition event in July We are also in negotiations with an international company to lease an office building in El Gouna to start a regional business hub. We successfully hosted the first edition of El Gouna Film Festival (GFF) in September 2017, with more than 1,000 attendees. Our hotel s occupancy at the time reached 100% and for that event, we have built four new high standard international cinemas and finished the party venue that will be later used to host all seasonal parties and weddings. Collaborated with the marketing and communication team on a number of branded El Gouna events namely: World Kiteboarding Championship, Wakeboarding Championship, Polo Championship, New Year s Party, Squash Tournament and Sandbox Party. Our destination Jebel Sifah in Oman is continually cementing its position as Muscat s holiday integrated community offering premium facilities. Most notably, in October 2017, the 9-hole Harradine Golf Course was launched and is managed by international golf experts Troon. It is worth noting that this is the only course in Muscat to be nestled between mountain and sea, offering magnificent golfing views, and has therefore quickly become a favorite amongst golfers in Muscat during weekends. The destination also installed new pontoons at the Jebel Sifah Marina, and upgraded the furnishing of apartments, yielding for an increase in short and long-term rentals. In November 2017, Jebel Sifah, Oman also opened its doors to the widely popular The Bank Beach Club. Offering exclusive 360 views of the Omani sea, Al Hajjar Mountains, Jebel Sifah s marina and stunning beach to its guests, the new Mediterranean-inspired venue sports an al-fresco lounge and restaurant overlooking its 500 sqm infinity pool lined with sprawling palm trees. A second venue which opened its doors to the Jebel Sifah community and visitors in 2017 is the marina-front Sky Lounge. On the sports front, Jebel Sifah hosted several sports events during 2017, most notably, in November 2017, the 2 nd edition of the popular XDubai Spartan Race with attendees of 3,500 more than the 1 st edition that we hosted in The destination also hosted the beginning of stage 4 of the tour of Oman race as well as a triathlon, organized by the Oman Triathlon Group. In addition, we opened the first 9 holes golf course in October 2017 and hosted the first Jebel Sifah Golf Course tournament October 2017 with 32 golfers, the FootGolf event in November 2017 with more than 500 attendees. Last but not least, a total of 5 new retail shops opened in Jebel Sifah in 2017, including the destination s first laundry. Hawana Salalah, Oman has established itself as the Sultanate of Oman s largest integrated community, being home to nearly 900 hotel rooms In September 2017, Fanar Hotel & Residences was awarded its 5-star rating from the Ministry of Tourism, following a reassessment of its services. After opening in 2016 as a 4-Star hotel, the property s additional star comes as a direct result of its superior services, amenities, and accommodation delivered to its guests, equally important, construction commenced and completed to launching Oman s first aqua park, the Hawana Aqua Park, set over 65,600 sqm, with an expected capacity of 500 persons. The destination also welcomed five new retail outlets, opened its first clinic, as well as the floating liquid park alongside the marina. In June 2017, we launched Wateera Rental Office for our destinations in Oman to provide homeowners and visitors with high-end rental services ranging from property management, furnishing packages, logistics, and cleaning services at the destination. This in turn increased the occupancy of short and long-term rentals in Hawana Salalah. The destination also upgraded several of its services and facilities including: adding more pontoons to the Hawana Salalah Marina, increasing production of water to cover the Fanar Hotel & Residences and Hawana Aqua Park needs. We also introduced the city bus service, transporting hotel guests on scheduled tours to the city, upgrading the lighting and landscape of the destination and upgrading the entrance of the destination. Outlook for 2018 In Egypt, specifically in El Gouna, we will continue to strengthen our brand awareness and ensure that guests/residents experience our life as it should be vision in our destinations. We will work Destination Management revenues CHF 14.1 mn (2016: CHF 15.9 mn) Destination Management Revenues by Destination (% total) 71 on positioning El Gouna as an all year round destination and widening the targeted audience by providing an all year round calendar of activities that lasts from morning till night for all age-groups, through different entertainment and sports events. In addition to focusing on creating more job opportunities through establishing a business park and startup hub to encourage more people to move to El Gouna (full-time basis) In 2018 Hawana Salalah is expected to upgrade its Marina services, to include a workshop and fuel station serviced full site, enabling the mooring of a larger number of boats. Retail and facilities to be opened include laundry, operational by April 2018 to accommodate to the growing number of hotel rooms and guests. Free wifi will be installed in the Marina area for destination guests to enjoy. To further enhance the rental experience, a new application system will be implemented. Hawana Salalah will also increase the capacity of the desalination plant, and upgrading the services of the maintenance team. On the events front, Share of GROUPS revenue 5.8% (2016: 6.7%) El Gouna Taba Heights Makadi Oman UAE Destination Management Revenues by Service Type (% total) 25 Hawana Salalah is planning a series of Hawana Fiesta events on a monthly basis to increase the promotion and income of retail shops across the Marina. As for Jebel Sifah, it will once again be host to the 2018 third edition of the XDubai Spartan Race, which will feature the first Trifector series in Oman. It will also host the first Sifah Stock Festival. Additional pontoons will be installed at the Marina, and its workshop will be operational, and an enhanced water taxi service is also scheduled to launch in The destination is set to welcome a new bar and restaurant, supermarket and new fishing charter business. The destination will start collecting General Service Fee (GSA) from villas in In Lustica Bay, Montenegro, we will launch the Marina and its accompanying retail outlets in the summer of 2018 we are also working on expanding our beach front to accommodate the growing number of homeowners. Adjusted EBITDA (CHF 11.2 mn) (2016 CHF 7.5 mn) Utilities Commercial Services Infrastructure and Maintenance Urban Services Community Services Others Annual Report 23

14 Orascom Business Segments ROAD to success 2.4 Land Sales 2.5 Other Operations Include sale of land and land rights to third parties on which the group have developed or will develop certain infrastructure facilities and where the group does not have further development commitments. As a part of the new management strategy that started in 2016, Moving forward, the company decided to be more selective in terms of land sales, opting to create the maximum value possible for its shareholders. As a result of this Land revenues segment has decreased in FY 2017 to reach CHF 0.5 million compared to CHF 2.0 million in FY The segment other operations combine those businesses of Orascom Development that are not classified in any of the other business segments. The segment includes activities such as mortgage financing, rental of villas and apartments, hospital and educational services, marina, limousine rentals, laundry and other services. During 2017, revenues of the segment Other operations decreased by 13.9% to reach CHF 29.2 million compared to CHF 33.9 million in The decrease is mainly due to the 50% devaluation of the EGP against the CHF. It is important to highlight that in-line with the company s initiative to focus on its core destinations in Egypt, Oman and Montenegro, the Group is undertaking efforts to sell its non-strategic assets and accordingly has reclassified Tamweel Group companies as an asset held for sale. It is worth mentioning that Tamweel Group revenues reached CHF 15.8 million in FY 2017 compared to CHF 18.6 million in FY Our other operations accounted for 11.9% of our total revenues in the financial year Land Sales Revenue Share of GROUPS revenue Adjusted EBITDA Other Operations Revenue Share of GROUPS revenue Adjusted EBITDA 2017 CHF 0.5 mn % 2017 CHF 0.4 mn 2017 CHF 29.2 mn % 2017 CHF 9.2 mn 2016 CHF 2.0 mn % 2016 CHF 2.4 mn 2016 CHF 33.9 mn % 2016 CHF 9.6 mn Annual Report 25

15 ROAD to success 03 Countries 3.1 Egypt 3.2 Oman 3.3 UAE CONTINIOUS COMMITMENT 3.4 Montenegro 3.5 Switzerland 3.6 Morocco 3.7 United Kingdom Annual Report 27

16 COUNTRIES ROAD to success 3. COUNTRIES Orascom Development Orascom Development has a diversified portfolio of destinations, which is spread over seven jurisdictions covering Egypt, UAE, Oman, Switzerland, Morocco, Montenegro and United Kingdom. It is a leading developer of fully integrated and infrastructure-supported destinations that include hotels, private villas, apartments and leisure facilities namely, golf courses and marinas. Our strategy is based on the creation of value in our land bank for the medium and long-term stakeholders. To that end, we accumulate large tracts of land with enough space to develop self-sufficient communities and towns. Subject to certain conditions, the Group has, up to this date, secured land banks of approximately in several jurisdictions. Moreover, Orascom Development holds its undeveloped land banks Operating Towns Total Land Bank primarily by way of contractual rights or usufructs, with the option to acquire legal title. The Group has also developed ten operating destinations including tourist destinations such as El Gouna on the Red Sea Coast, Taba Heights in the Sinai Peninsula, Makadi in the Red Sea district and Byoum in Fayoum, The Cove in Ras Al Khaimah in UAE, Jebel Sifah and Hawana Salalah in Oman, Luštica Bay in Montenegro and Andermatt in Switzerland, in addition to the budget housing community of Harram City in the Greater Cairo in Egypt. Furthermore, several destinations are currently in various stages of development and planning in Oman, Morocco, and the United Kingdom. Orascom Development s Land Bank Destination Name Total land bank Completed Under construction Under development Undeveloped EGYPT El Gouna Taba Heights Harram City Fayoum Qena Gardens Makadi UAE The Cove OMAN Jebel Sifah Hawana Salalah As Sodah Island City Walk SWITZERLAND Andermatt MOROCCO Chbika MONTENEGRO Luštica UNITED KINGDOM Eco-Bos Total Percentage of Total Land bank Size 18.77% 6.70% 8.34% 66.19% 8,284 Hotel Rooms operating 35 Hotels in 4 COUNTRIES Land categories Total Land Bank Completed Under construction Under Development Undeveloped Definition Any plot of land, developed or undeveloped, which is under the direct or indirect possession of Orascom Development by virtue of lease, usufruct and/or ownership rights and over which Orascom Development may have further rights to develop, fully own, lease to third parties, sell to third parties, grant sub-usufruct rights to third parties, or otherwise dispose to third parties. Each plot of land is governed by the respective agreement between Orascom Development (directly or indirectly) and the respective governmental entity, shareholders, and/or investors Any plot of land where infrastructure is completed and individual elements of the projects are completed Any plot of land where infrastructure is completed and individual elements of the projects are under construction Any plot of land where infrastructure is under construction but not yet completed Any plot with zero infrastructure (raw land) Annual Report 29

17 COUNTRIES ROAD to success El Gouna EGYPT Operating Destination El Gouna is Orascom Development s flagship town. The name of the town derives from the ancient Egyptian words for protected. El Gouna has a multinational community that continues to grow, the town covers 10 km of pristine shoreline on the beautiful Red Sea coast with a total land area of 36.92, of which 15.0 million sqm has so far been developed. El Gouna is a fully integrated, self-sufficient town, adhering to the highest global standards. El Gouna offers an unparalleled lifestyle that has attracted a growing multinational community. Year-round sunshine, shimmering lagoons, turquoise beaches and its location a mere 4-hour flight from Europe make El Gouna the ultimate paradise escape. It boasts world-class infrastructure and premium services, and is home to some of the world s most reputable brands in the tourism and leisure industries. interruption. El Gouna is a very child-centric community, providing safe environments for them to be pleasantly entertained so that children of all ages can have the time of their life. Residents and guests are spoilt for choice on the gastronomy front. Over 100 restaurants, bars and eateries make up a refined culinary scene. Cultural events and festivals are also popular occurrences. El Gouna offers a wide range of international-standard facilities, including a variety of properties from exclusive private villas to cozy apartments, all in harmony yet with a unique identity. The town boasts 17 hotels with 2,698 guest rooms with a mix of 5, 4 and 3-star accommodation, a world-class hospital, a nursing institute, two 18-hole championship golf courses, co-working facilities and a landing strip. The town is mindful to everybody s needs with conference and meeting facilities, beauty salons, spas, post office, and even a weather station. El Gouna also hosts a satellite campus of the Technische University Berlin (which offers three Masters degree programs), a variety of both international and Egyptian curriculum schools, and a library linked to the Bibliotheca of Alexandria. Home to 3 marinas, including the Abu Tig Marina, boat owners pursue their nautical adventures freely, without Reputed for its perfect year-round weather, shimmering turquoise lagoons, coral reefs and stretching coastlines, El Gouna is a destination conducive to healthy living. Watersports and aquatic activities are possible all year round due to the sheltering influence of a reef headland. Watersport facilities and dive centers are located throughout El Gouna, which is an international kite surfing destination. The town also hosts cultural festivals and other major events. El Gouna was honored to be the first destination in Africa and the Arab Region to receive the Global Green Award. Sponsored by the United Nations Environment Program, this award is handed to cities making substantial efforts, progress and improvements within the field of environmental sustainability To tal proj ect area 15.0 co mpleted 5.38 Under co nstruction 1.30 Under development Undeveloped Highlights 2017: Transferred some of the hotel rooms of Ocean View, Fanadir and Mosaique into real estate products and sold successfully. In April 2017, we launched Tawila Phase II with a total inventory of USD 22.4 million and was sold out completely. In April 2017, we launched Fanadir Bay II with a total inventory of USD 10.6 million, a successful project that was also completely sold-out. We have successfully opened the first Phase of our G-Space offices in El Gouna in April. The complex offers flexible private office spaces, which are already rented out, in addition to co-working membership packages. Following the great success of Phase I of G-space, we launched Phase II by end of December 2017 offering more private offices, meeting rooms and a large chill out area and all were rented out. Finalized the construction of Phase I expansion plan of Abydos Marina and added 10 new berths. We launched, in cooperation with Baddel and Commercial International Bank Egypt (CIB), the first electric bike-sharing system in Africa, and the largest in the Middle East. The initial phase comprises 100 bikes, with 10 docking stations in locations spread all around El Gouna. We hosted El Gouna International Squash Open and Orascom Development PSA Women s World Championship, the first time to be held in Egypt and for which we have built four new high standard squash courts. We also hosted the top model of the world competition event in July We successfully hosted the first edition of El Gouna Film Festival (GFF) in September 2017, with more than 1,000 attendees. Our hotel s occupancy at the time reached 100% and for that event, we have built four new high standard international cinemas. Finalized the construction of the party event area which will hold a capacity of 2,500 guests. We renewed the field s grass with moving El Gouna Stadium closer to hosting international teams and events. Successfully launched a new high-end real estate project over-looking the marina Abu Tig Hill in Q with a total inventory of USD 22.0 million and was sold out. Events 2017: Running marathon by Cairo runners El Gouna rally Spinning marathon Earth Week Holyfest at the Club House Spark Ventures EL Gouna International Squash championships Polo Event Easter Parties Spring Festival Sandbox Weekly Street Festival TMW El Gouna Film Festival Street Festival Halloween edition Europe & Africa Cable Wakeboard championships Kite surfing championships WKL El Gouna fishing competition Cheeky Monkeys Christmas bazar Winter Wonderland week Christmas bazar Spark kids camp (December) G Space Phase 2 Launch Party 2 events by Nacelle New Year s Day community run Hassan Abaza NYE event Masquerade NYE Annual Report 31

18 COUNTRIES ROAD to success Taba Heights EGYPT Operating Destination Taba Heights is our second fully self-sufficient resort town, located in Taba over a total land area of approximately 4.3, of which approximately 2.6 has been developed. The breathtaking natural setting is complemented by an offering of lavish four and five-star hotels. Worldwide hospitality leaders provide an unparalleled experience in relaxation and leisure. Taba Heights is located in Taba, a small Egyptian town near the northern tip of the Gulf of Aqaba on the Sinai Peninsula, approximately 200 km north of Sharm el-sheikh and 20 km south of the Israeli town of Eilat. Its position makes it a popular starting point for excursions to UNESCO World Heritage sites such as the monastery of Saint Catherine, the rose-red city of Petra, the desert of Wadi Rum, the holy city of Jerusalem and the Dead Sea. Taba International Airport is just 25 km from Taba Heights. The town offers six 4 and 5-star hotels with a total of 2,365 guest rooms and a wide range of international-standard facilities, including a medical center, child daycare services, 111 outlets including cafés, bars, restaurants and shopping facilities, 25 hotel swimming pools, various spas, a 5-star water sports center, tennis and squash courts, a man-made salt cave and an 18-hole championship golf course. In addition, Taba Heights offers a yacht marina with berthing capacity for 50 yachts and which provides overnight mooring Total project area completed Under development Undeveloped Highlights 2017: Taba Heights remains the most challenging destination for the group due to the extended travel bans on Sinai. Successfully curbed the GOP losses from CHF 1.0 million in FY 2016 to CHF 0.6 million in FY Re-opened another 100 rooms in Bay View Hotel out of the existing 394 rooms. To date, we have 1,260 operating rooms out of 2,365 rooms vs. 718 rooms operating in FY Annual Report 33

19 COUNTRIES ROAD to success Makadi HEIGHTS EGYPT ROYAL AZUR & CLUB AZUR EGYPT Grand Resorts Royal MAKADI BAY Club Club MAKADI BAY Operating Destination DEVELOPING Destination Settled in the heart of the Red Sea only 30 km away from Hurghada International Airport, lays the unique residential and touristic community, Makadi. As the only residential community in Makadi Bay, the destination adds a different flavor to the area when compared to its neighboring resort based communities. Located at Makadi bay, one of Hurghada s fascinating shores, 30 km away from Hurghada International airport. Royal Azur Hotel with 491 guest rooms and Club Azur Hotel with 339 guest rooms. Makadi stretches across approximately 3.39 providing both its residents and visitors all the services and facilities that they would require and desire. With a mission to provide upper middle class families the opportunity to own a home at affordable prices, the town resort is now featuring a variety of residential units, and an operating hotel with a total capacity of 283 rooms. Being the first gated community in Hurghada, Makadi is destined to provide the community with high quality services, among which is Hurghada s first club "club house" that offers social and sports activities, not to mention the spacious commercial area, hotels, medical center and school. With such services being provided, not only owners and hotel visitors of Makadi will enjoy their stay, but also all Hurghada will find something suitable in Makadi to fulfill their needs. The two hotels overlook their own spacious private sandy beach, offering sixteen restaurants and bars, fully equipped water sports center, tennis courts, squash court, billiards, a fully equipped fitness room and swimming pools. Hotels occupancies were affected from the ongoing Russian travel bans, as a result of this, the management took the decision to shut down Club Azur Hotel in December Nevertheless, we successfully introduced measures to overcome the drop-in business and have signed a 3-year lease agreement starting 1 st of November 2016, with FTI Group for 3 of our hotels in Makadi for a total of EUR 3.3 million per annum net to owner, subject to an annual increase of 5%. CITADEL AZUR EGYPT Operating Destination Citadel Azur is a 5-star deluxe resort, built in It is located in Sahl- Hasheesh which is 18 km South of Hurghada International Airport and 20 km south of Hurghada City itself. The total site area is approximately 553,448 sqm on which there are 8 buildings. These 8 buildings comprise of a total of 514 rooms. Citadel Azur has a private beach that extends to 1.6 km long on the Red Sea Coast, offering three swimming pools, restaurants and bars, fully equipped water sports center, a fully equipped fitness and many other amenities. In July 2016, we managed to take the full ownership of the hotel. In addition, in November 2017, we signed a sale and lease back agreement for the hotel with Corplease Group for a total value of USD 18.0 million to be repaid over 6 years with a residual value of 40.0% at the end of the tenor. Total project area completed Under construction Under development Undeveloped Highlights 2017: Progressing with the construction of the club house with plans to be finalized during We successfully got the OGM approval of our Egyptian Subsidiary Orascom Development Egypt (ODE) on the sale of Royal Azur, Club Azur and Makadi Gardens Hotels Annual Report 35

20 COUNTRIES ROAD to success Fayoum EGYPT Operating Destination Located 100 km southwest of Cairo in a fabulous location overlooking the historic lake of Qarun, two luxury residential communities are planned at Byoum and Al Roboua, in Al Fayoum. In 1998 the Group acquired land rights initially belonging to the Government of Egypt for a residential real estate development project at Al Fayoum. The area of land available for development is 1.08 million sqm. The Al-Roboua project offers 36 stand-alone villas in traditional Nubian style with all supporting amenities. During the third quarter of 2008, Byoum, a new residential real estate project, was launched, covering 446,507 sqm of the land available and offering real estate units, a 4-star hotel, a beach club, a hunting lodge, a pier and commercial areas Total project area completed Under construction Under development Undeveloped Highlights 2017: Opened Byoum Lakeside Hotel in September 2016 with 50 rooms recording an occupancy of 39% in FY 2017 vs 43% in FY Net sales increased to CHF 1.5 million in FY 2017 compared to CHF 0.3 million in FY 2016 on the back of the new sales and marketing campaign that was implemented during Events 2017 Paramotors event Ignite sports event. Orange company anniversary event Annual Report 37

21 COUNTRIES ROAD to success Harram City EGYPT Operating Destination During the last quarter of 2006, Orascom Development entered the budget housing arena, a business strategically focused on developing affordable income housing throughout Egypt by establishing through its subsidiary Orascom Development Egypt (ODE) the budget housing company Orascom Housing Communities (OHC). OHC is the first Egyptian company to focus on the development of high-quality affordable housing units within sustainable and fully-integrated townships in Egypt. Orascom Housing Communities, a 35.25% owned by Orascom Development Egypt (ODE), manages this line of business. Launched in 2007 as the first of its kind in Egypt, Harram City s award winning model of affordable housing within a sustainable and fully integrated township encourages social responsibility and civil engagement. Located in 6th of October, 20 km west of Cairo, Harram City spans over approximately 2.60 of land, and is now home to more than 40,000 residents. As a truly integrated development, Harram City offers comprehensive community facilities including schools, clinics, worship houses, sporting amenities, a cinema, police station, nurseries and commercial outlets. Beyond ensuring the town s self-sustainability through employment opportunities in commercial and industrial sectors, the city hosts various projects designed to stimulate job creation and benefits the overall community as well as underprivileged segments. In order to improve the quality of education of the town students, the Group subsidizes four public schools such as Harram City Language School and Orascom Language School, making them more affordable for the enrolled students to learn English, German, and Arabic Total project area completed Under construction Under development Undeveloped Highlights 2017: Started the construction of 240 units and 176 units to be delivered during 2018 and Delivered 198 units during Continued the infrastructure for 120 acres (including roads, hardscape, planting, plumping pipes, water and fire pipes, and medium and low voltage cables). Accomplished the installation and tested of Electric substitution and will start working on the first or the second quarter of Annual Report 39

22 COUNTRIES ROAD to success Qena Gardens EGYPT DEVELOPING Destination In 2010, following the success of Harram City, OHC was allocated 0.8 of land in the Qena Governorate, Upper Egypt, to provide a high-quality affordable housing units within sustainable and fully-integrated townships in Qena. The project is planned to incorporate residential units, a school, clinics, shopping areas, and an entertainment venue. ZAHRA OBEROI EGYPT Operating Destination Described as one of Egypt s most spacious cruise ships with 27 cabins, Oberoi Zahra offers the highest standards of hospitality and service. The Oberoi Zahra is the only Nile Cruiser with a full service spa and has been recognized by the Egyptian Ministry of Tourism as the Best Cruiser on the River Nile Total project area Under development Undeveloped Annual Report 41

23 COUNTRIES ROAD to success Jebel Sifah Oman Oper at i n g De stination Jebel Sifah is an Integrated Tourism Complex (ITC) that caters to international visitors and residents with its unique real estate, tourism and hospitality propositions. It has grown to become the home of a multicultural community and an expression of Oman s vibrant growth and culture. Jebel Sifah is home to a full-range of freehold waterfront and golf-front apartments and luxury villas that can be bought or rented at highly competitive rates. Its longlist of expertly crafted properties includes the landmark Golf Lake, a premium residential area comprised of 14 buildings and 131 studios, one and two bedroom apartments as well as lofts. The development is being expertly crafted to overlook the destination s 9-hole Harradine golf course, with stunning views of the greens. Golf Lake is scheduled to be completed on-time by Q The newest neighborhood, Jebel Sifah Heights will spread across 365,000 sqm and will offer a range of apartments with stunning sea and golf views with dedicated outdoor facilities and amenities. Phase I of Jebel Sifah Heights was launched in Q offering a selection of 90 sea and golf view apartments. Jebel Sifah s picturesque 84-berth Marina is a haven for yacht owners, guests and residents looking to unwind at the 4-Star Sifawy Boutique Hotel or its lively restaurants and shops. The sophisticated Marina entices people of all pallets and tastes with a host of first-class recreation and entertainment facilities. These include opportunities to dive and explore Oman s famous marine life, fun-filled water sports, and an exhilarating floating waterpark. As an ITC that is continually being upgraded as per its masterplan, Jebel Sifah s offerings are enhanced with new outlets launched all year round. These include the new The Bank Beach Club, a Mediterranean-inspired establishment featuring a new lifestyle concept to Oman with its 500-square metre infinity pool boasting 360 views of the mountains, stunning coastline and Jebel Sifah Marina, and Sky Lounge, with unparalleled marina views and offering a delectable mélange of Mediterranean and seafood cuisine. The growing destination offers something for homeowners and visitors of every segment, with added benefit of being easily accessible by car, water taxi, and private boats. Whether choosing to journey through the mountains or to get closer to the pristine turquoise waters of Oman, Jebel Sifah promises a captivating experience like no other, and a continuing reflection of life as it should be. 6.2 Total project area 0.97 completed 0.04 Under construction 0.82 Under development 4.41 Undeveloped Highlights 2017: Opened the Bank Beach Club in November 2017, a Mediterranean-inspired establishment featuring a new lifestyle concept to Oman with its 500-square meter infinity pool boasting 360 views of the mountains, stunning coastline and Marina. Launched Phase 2 of Golf Lake Residence a real estate project in November with a total inventory of CHF 21.3 million and succeeded to sell 93% of the total project since launch. Opened the first 9 holes golf course in October Hosted the first Jebel Sifah Golf Course tournament October 20, 2017 with 32 golfers. Hosted the FootGolf event in November 2017 with more than 500 attendees. Hosted the XDubai Spartan Race in November 24, 2017 with attendees of 3, Annual Report 43

24 COUNTRIES ROAD to success Hawana Salalah Oman Operating Destination Located in the Governorate of Dhofar, and stretching over seven kilometers of white Indian Ocean coastline and 13.6 of land, Hawana Salalah is Oman s largest tourism destination. It is our flagship destination in Oman and following the model successfully built in El Gouna. With a multinational homeowner community, Hawana Salalah s luxury freehold properties offer residency in Oman to all nationalities, all enjoying spectacular views of the breath-taking ocean, marina or the tranquil lagoons. Central to the destination are 900 hotel rooms spread across the luxurious 422-room 5-star Salalah Rotana Resort with its elegant waterways and coconut-fringed private beach, the popular 400-room 5-star Fanar Hotel and Residences, the 82-room marina-side Juweira Boutique Hotel and the newly opened Souly Lodge. Hawana Salalah offers residents, visitors and tourists an exceptional range of facilities and leisure options including its 170 berth superyacht marina. Additionally, the Hawana Aqua Park, Oman s first aqua park, is a main attraction for destination tourists as well as Dhofari locals. Brimming with life all year-round, Hawana Salalah, offers a variety of activities including an indulgent array of 17 unique restaurants and cafes. With its tropical weather and light breezes, there is no better place where visitors can discover the thrill of numerous water sports and channel into the world beyond the Indian Ocean Coastline. Hawana Salalah is tucked away just 20 minutes from Salalah s newly refurbished international airport, with regular direct flights from neighboring and European destinations Total project area 1.72 completed 0.12 Under construction 1.44 Under development Undeveloped Highlights 2017: Finalized the construction of the Hawana Aqua Park; operational January Finalized the construction of additional 98 rooms in Fanar Hotel and Residences and the 22 additional rooms in Salalah Rotana Resort; operational end of December Fanar Hotel and Residences was awarded a 5-Star rating following a reassessment of its services. The additional star comes as a direct result of its superior services. Launched with a successful sales Hawana Lagoons in August 2017 with a total inventory CHF 31.8 million. A real estate project offering 232 contemporary units comprising of apartments and twin houses, overlooking a turquoise lagoon. Launch of Wateera Rental Office in June Wateera s comprehensive expertise includes all aspects of rental services ranging from property management, furnishing packages, logistics, and cleaning services Annual Report 45

25 COUNTRIES ROAD to success As Sodah Island Oman Develo p i n g De stination Covering 1.0, As Sodah is located off the southern coast of Oman opposite to Hawana Salalah. The Island is set to be the region s niche destination, comprising a 32 rooms 5-stars luxury boutique hotel. The hotel spans an area of 1.0 and features exclusive pavilions with swimming pools and private access beach. The hotel s plan also includes a main lodge and a spa. City Walk Muscat Oman Destination in the pipeline City Walk Muscat, a vibrant beachfront commercial city complex located in North Al Hail, Muscat. The land covers an area of approximately 47,499 m 2 that will comprise a 355-meter water front, a retail area with shops and restaurants, as well as an upscale 5-star hotel. Additionally, the project will feature a commercial area with offices and a dedicated cinema complex. In November 2016, the Group has signed the development agreement based on a usufruct concession for 50 years with fees payable starting from year six Total project area Under development Undeveloped Total project area Undeveloped Annual Report 47

26 COUNTRIES ROAD to success The Cove UAE Operating Destination The Cove Rotana Resort is located on an idyllic water inlet on the Ras Al-Khaimah beachfront, offering spectacular views over the Arabian Gulf. Just 8 km from the City Centre, 20 km from the Ras Al-Khaimah Airport and an 87 km drive from Dubai. The Cove comprises a total area of around 290,000 m 2, of which approximately 285,000 m 2 have been developed. The Cove opening took place in early February 2009, offering 326 rooms. The total number of 346 rooms consists of 204 hotel rooms (hotel building) plus 142 rooms resulted from 80 residential units being leased back to the RAK TI and managed by Rotana as part of the hotel rooms inventory. Meanwhile, a new staff housing building was constructed and finished in November In addition to that, the Group decided to convert the old senior executives staff housing building into a 142-room hotel extension to increase the existing room capacity and was finalized and opened in June Now the hotel total number of rooms reached 487. The Cove Rotana Resort is an ideal destination for leisure travelers and weekend breakers. The Cove offers 3 fully-equipped and flexible meeting rooms with the latest audio-visual equipment, 6 attractive choices of restaurants, bars and lounges, the fully equipped Bodylines Fitness and Wellness Club, kids area, 600 meters of pristine beach, 3 swimming pools in addition to gorgeous 3 water slides along with its own swimming pool and 7 exquisitely designed massage treatment rooms are among the many facilities offered at The Cove Rotana Resort Ras Al Khaimah Total project area 0.29 completed 0.05 Under development 0.05 Undeveloped Awards Received for 2017: The World Travel Award 2017 The UAE Leading Family Resort Award 2017 World Luxury Restaurant Award The Regional Award for Mediterranean Cuisine in Middle East and North Africa 2017 World Luxury Hotel Award Luxury Coastal Resort BBC Good Food Award 2017 The Northern Emirates Restaurant of the year Annual Report 49

27 COUNTRIES ROAD to success Luštica Bay Montenegro Operating Destination Luštica Development A.D. is developing this luxury touristic destination on the Montenegrin Adriatic coast at the idyllic Trašte Bay with a land bank of 6.9, located a short distance from three international airports (only 10 km from Tivat airport, 90 km from Podgorica and 46 km from Ćilipi - Dubrovnik). The Group concluded the lease and development agreement with the Government of Montenegro and the Municipality of Tivat on the 23 rd of October The goal of Luštica Bay is to create a distinct community, within an extraordinary setting, where residents can create a home around the life they want to live. Combining Montenegro s beauty and culture with Orascom Development s experience of cultivating environmentallycentred, luxury residential living, it provides a foundation that will grow organically. Luštica Bay is set to become a sustainable, fully-integrated, state-of-theart touristic town. Designed to blend seamlessly into its surroundings it will become a permanent home to a few thousand residents. It comprises a variety of residential offerings, hotels and lifestyle facilities, offering both tranquility and privacy, discovery and adventure. A secluded oasis and a gateway to the rest of Montenegro. The integrated project is planned to offer more than 2000 residential units, villas and townhomes, 7 world class hotels, 2 marinas with mooring and docking support facilities on the Adriatic Sea, an 18-hole golf course with club house, commercial facilities, a town center, the necessary infrastructure requirements and many other amenities. Construction started in September 2013 and at this stage, the first four residential clusters (26 buildings comprising about 160 apartments) have been fully finished and delivered to their owners. After four years, Lustica Bay is now emerging as vibrant, living new town will see further heavy construction activity being carried out in all directions from the marina, golf course and the Chedi Hotel, to progress with other residential zones, especially in the Centrale Area Total project area completed Under construction Under development Undeveloped Highlights 2017: Delivered the new F and G buildings comprising 88 apartments in Successful launch of Centrale Phase 1a; the town center concept, with approx. 60% contracted and reserved during the first two months of launch. Finalized the marina superstructure, planning to launch the marina in the summer of Started the rough shaping works on phase 1 of the golf course. Finished the new access road to the marina village. Initiated construction of E and B building clusters comprising 68 apartments due for delivery in 2018 and early 2019; and over 1000 sq.m of marina retail due for delivery in summer The construction of the 5-star Chedi Hotel in Luštica Bay is quickly progressing, with plans to be finalized and opened in July Annual Report 51

28 COUNTRIES ROAD to success ANDERMATT SWITZERLAND Operating Destination The innovative and sustainable Holiday Village Andermatt Reuss a part of the traditional Swiss alpine village of Andermatt - became an attractive year-round destination. With a total land bank of approximately 1.57, Andermatt is situated at 1,440 meters above sea level and lies approximately 1.5 hours by car from Zurich and 2 hours from Milan. Its central location results in excellent connections to the major national and international transport routes. Every building in Andermatt Swiss Alps Development has been individually designed by one of over 30 selected Swiss and international architects to create a beautiful and eclectic appearance for the master-planned resort. To date seven apartment houses are finished and handed over. Another one will be finished in summer With the completion of the Radisson Blu Hotel and the Gotthard Residence in 2018 the Holiday Village Andermatt Reuss has a recreational Piazza. To maintain a perfectly harmonious and peaceful environment the village centre will be a car free zone and enough underground parking spaces are provided for visitors and residents. The new accommodation and sports facilities mean that whether you seek adrenalin or relaxation your needs are catered for in the most spectacular surroundings, from an ecologically designed 18-hole golf course meeting international tournament standards ideal for outdoor summer activities, to modernized ski facilities linking up with the neighboring ski area of Sedrun to form a 120-kilometer ski domain. The highly integrated infrastructure and state of the art facilities will also make the village the perfect location for cultural events and congresses. The Group has a share of interest of 49% in Andermatt Swiss Alps AG, remains committed to the project and will benefit from any future upside. In November 2015 ASA successfully sold bonds in the amount of CHF 50 million which will help in funding the necessary next steps of the development Total project area 1.29 completed 0.07 Under construction 0.27 Under development 0.00 Undeveloped Highlights 2017: The second time in a row the Andermatt Swiss Alps Golf Course has been voted the best Golf course in Switzerland by the World Golf Awards The Japanese Restaurant in the 5-star deluxe Hotel The Chedi Andermatt received a Michelin star There are only two Japanese Restaurants in the Swiss Alps with this honor and award Occupancy rates continue to increase significantly in The Chedi Andermatt Topping out ceremony of the apartment house Alpenrose took place Permission for two new apartment houses starting construction in spring 2018 as soon as the snow melts A new concept will be introduced with the apartment house Eisvogel a joint venture with Swiss Property AG. The apartments will be smart studio from 30 to 85 m 2. The house will have space-saving studios and generous common areas Starting to contract businesses for the available retail space at the village square (Piazza) 60% of all the apartments are sold with an increase in the number of rented apartments The underground walkway between the train station and the base station of the Gondola in Andermatt is finished and in use A new joint venture has been formed between the organization of the Matterhorn Gotthard Bahn, Schmid Immobilien and Andermatt Swiss Alps AG to build the new train station with an additional offer of apartments to rent. Opening of underground parking in the holiday village with 500 parking lots The SkiArena Andermatt-Sedrun started very well into the new season. The new Gondola Gütschexpress the core piece of the new skiing area from Andermatt to Gütsch has been inaugurated on the 23 rd December A second Aprés-Ski-Wagon has been introduced in the train from Andermatt to Dieni that is built like a bar and has a DJ playing on the weekends The final link to connect the two skiing areas Andermatt and Sedrun is on its way and the building of the top station Schneehüenerstock is already under way. The Gondola and with it the connection will be completed for the ski season 2018/19 The valley runs in Andermatt and Sedrun are snow secure thanks to technical snow making As part of the promotion Land of Quattro in cooperation with Audi, Andermatt will gain international attention The World Luxury Hotel Awards Association has chosen The Chedi Andermatt Hotel twice: once as a winner in the category Luxury Mountain Hotel and once as a winner in Europe in the category Luxury Ski Resort. But not only abroad wins the Chedi Andermatt award for distinction. The Tagesanzeiger has placed the 5-star deluxe hotel in second place in its ranking of the best Swiss winter hotels The Radisson Blu hotel with 180 rooms is being built together with the Gotthard Residences and is expected to open in October Annual Report 53

29 COUNTRIES ROAD to success Chbika Morocco Developing Destination Coming across a location of such untapped beauty along with the unique landscape of the ocean, mountains and sand harmoniously co-existing; has contributed to the molding of Chbika s architecture with the natural surroundings. Chbika is ideally located approximately 400 km south of Agadir directly in front of the Canary Island of Fuerteventura on the Atlantic Ocean, with a total land area of ECO-BOS UK Destination in the pipeline The Group formally established Eco-Bos Development Ltd in May 2010 as a joint venture with Imerys, a multinational industrial minerals company, to develop a series of sustainable communities in Cornwall United Kingdom. The total land bank is over 6.54 divided over 6 separate sites. The scheme was originally conceived as part of the UK Government s Eco-town competition to promote the growth of sustainable communities and the innovative Eco-Bos proposals to regenerate land formerly used for minerals extraction and processing reflects the potential and aspirations of such green development initiatives. The master plan of the project reflects a modern oasis of harmony characterized by a western, Moroccan cultural blend. Home to world class hotels, mix of villas and apartments, atmospheric riads, and even customizable mansions in the Kosour neighborhood, Chbika, like all other Orascom Development signature towns, will feature state-of-art facilities including a marina, shops, dining outlets, as well as a medina-style handcraft center and a medical facility. The project has been granted the status of new integrated tourism zone. The project company (Oued Chbika) has the right to acquire and transfer freehold title to the land area of approximately five (Phase 1) and approximately ten (Phase 2) subject to certain conditions, except for golf areas which will be subject to long term lease agreements. The project company has the right to transfer its rights under the development agreement subject to certain conditions. According to the development agreement signed with the Moroccan government and in line with its vision of sustainable development and having scored the Chbika project in the Moroccan 2020 vision for sustainable tourism. We aim at developing a tourist dynamic engine of social and cultural development in the provinces of southern Morocco, incorporating local people. The Eco-Bos proposals will offer a mixed portfolio of around 5,000 real estate dwellings across all market sectors along with associated retail and employment spaces. Leisure and recreation facilities are also planned with proposals for one ocean-facing site including a 5-star hotel and marina development. The company continues to work closely with the local authorities to complete the permitting process and commence development for the first phase of 1,500 homes in the near future Total project area Under development Undeveloped Total project area Undeveloped Annual Report 55

30 ROAD to success 04 Orascom Development Corporate governance 4.1 Group Structure and Significant Shareholders 4.2 Capital Structure ONGOING TRUST 4.3 Board of Directors 4.4 Executive Management 4.5 Employees 4.6 Compensation, Shareholdings and Loans 4.7 Shareholders' Participation 4.8 Changes of Control and Defense Measures 4.9 External Auditors 4.10 Information Policy Annual Report 57

31 Orascom Corporate Governance ROAD to success 4.1 Group structure and significant shareholders Group structure Significant shareholders The operating business of Orascom Development Holding AG ( Orascom Development or the Company ) is organized into the following segments: Hotels, Real Estate and Construction, Land Sales, Destination Management, and Other Operations. The Group operates pursuant to a destination based approach. The overall responsibility for each of the destinations operated by the Group lies with a destination CEO who reports to the Group CEO. The Group's hotels are operated by Orascom Hotels Management AG, a whollyowned subsidiary of the Group, or third parties, while overall hotel strategy is determined and monitored by the Group's Chief Hotel Officer who reports to the Group CEO. The shares of the Company are listed on the SIX Swiss Exchange. In addition, the shares of the Company's subsidiary Orascom Development Egypt S.A.E (previously Orascom Hotels and Development S.A.E) are listed on the EGX Egyptian Exchange. See below for more information on the listing. The following shareholders have disclosed as currently holding a participation in the Company of 3% or more in voting rights (in accordance with Art. 120 FMIA 1 ): Name of Shareholder Number of shares as of December 31, 2017 Percentage of ownership of the total equity capital and voting rights 2 Samih O. Sawiris and Onsi Sawiris 3 29,359, Company The market capitalization of Orascom Development as per December 31, 2017 is CHF million. The shares of Orascom Development are listed on the SIX Swiss Exchange according to the International Reporting Standard. The secondary listing in the form of EDRs (Egyptian Depositary Receipts) on the EGX Egyptian Exchange was discontinued as of May 24, 2017 and the EDRs delisted as of such date. Listing on the SIX Swiss Exchange Exchange SIX Swiss Exchange Aside from the above, the Company is not aware of a shareholder holding a participation of 3% or more voting rights as of December 31, No notifications regarding disclosure of shareholdings were received by the Company and published on the reporting platform of the SIX Swiss Exchange during the reporting year. Cross-Shareholdings There are no cross-shareholdings between the Company and any other entity that exceed 5% of capital or voting rights on both sides. Orascom Development Holding AG (Altdorf, Switzerland) Symbol ODHN Security number ISIN CH EGX Registration Orascom Development Egypt S.A.E. (Cairo, Egypt) Exchange Market capitalization Symbol ISIN EGX Egyptian Exchange EGP 5,269 million ORHD EGS70321C012 Orascom Development Egypt S.A.E. is 84.79% owned by Orascom Development. For a list of the group's unlisted subsidiaries see note 19 of the consolidated financial statements. 1 Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FMIA). 2 The table shows significant shareholders as last disclosed to the Company pursuant to Art. 120 FMIA. The number of shares and percentages shown conform to the situation at the time of the respective last disclosure. They do not necessarily conform to the situation as per December 31, 2017, given that a shareholder may have purchased or sold shares subsequent to the last disclosure, but may not have thereby reached or crossed a disclosure threshold. 3 The shares are held through the entities Thursday Holding, SOS Holding and OS Holding Annual Report 59

32 Orascom Corporate Governance ROAD to success 4.2 Capital structure Capital As of December 31, 2017, the Company s issued share capital amounted to CHF 937,510, and was divided into 40,409,926 registered shares with a nominal value of CHF each. Authorized and conditional capital Authorized capital The ordinary meeting of shareholders held on May 18, 2015 authorized the Board of Directors to increase the share capital of the Company by a maximum of CHF 278,400, by issuing up to 12,000,000 fully paid-up registered shares with a par value of CHF each until May 18, Following the expiry of the authorization on May 18, 2017, the Company no longer has any authorized capital. Conditional capital Pursuant to Art. 4b of the Articles of Incorporation (available on the Company's website following the links to "Investor Relations" and "Corporate Fillings") regarding conditional capital, the Company's share capital may be increased by a maximum amount of CHF 139,200,000 through the issuance of up to 6,000,000 fully paid registered shares with a nominal value of CHF each, (a) up to the amount of CHF 23,200,000 corresponding to 1,000,000 fully paid registered shares through the exercise of option rights granted to the members of the board and the management, further employees and/or advisors of the company or its subsidiaries, (b) up to the amount of CHF 116,000,000 corresponding to 5,000,000 fully paid registered shares through the exercise of conversion rights and/or warrants granted in connection with the issuance of newly or already issued bonds or other financial instruments by the Company or one of its group companies. The amount of CHF 139,200,000 corresponds to around 14.8% of the existing share capital. The subscription rights of the shareholders shall be excluded. The Board of Directors may restrict or withdraw the right for advance subscription (Vorwegzeichnungsrecht) of the shareholders in connection with (i) the financing (refinancing inclusively) of acquisitions of enterprises or parts thereof, participations or other investment projects of the company and/or its subsidiaries or (ii) the placement of convertible bonds or financial instruments with conversion or option rights on the national or international capital market. As of December 31, 2017, no option rights, conversion rights, or warrants had been granted on the basis of Art. 4b. For the full wording regarding the conditional share capital, see Art. 4b of the Articles of Incorporation which are available on the Company's website com, following the links to "Investor Relations" and "Corporate Filings". Changes in capital in the past three years 2015 The Company's annual general meeting held on May 18, 2015, resolved to increase the authorized share capital pursuant to Art. 4a of the Articles of Incorporation (available on the Company's website com, following the links to "Investor Relations" and "Corporate Filings") from CHF 10,000, to CHF 278,400,000.00, corresponding to 12,000,000 shares with a par value of CHF each, to extend the authorization until May 18, 2017, and to amend article 4a of the Articles of Incorporation accordingly. On December 14, 2015, the Company completed a capital increase from authorized share capital in the amount of CHF 275,309, through the issuance of 11,866,779 registered shares with a par value of CHF each. Accordingly, the Company's authorized share capital of the Company decreased in an equivalent amount to CHF 3,090,272.20, corresponding to 133,221 shares with a par value of CHF each. The new shares were offered to the existing shareholders by way of a rights offering. The new shares were paid up in cash, by conversion of a loan from the Company s major shareholder, Samih O. Sawiris, and by conversion of capital contribution reserves into equity There were no changes in the ordinary share capital and the authorized share capital during The Company's annual general meeting held on May 9, 2016, resolved to increase the conditional share capital pursuant to article 4b lit. a of the Articles of Incorporation (available on the Company's website following the links to "Investor Relations" and "Corporate Filings") from CHF 14,489, to CHF 23,200,000.00, corresponding to 1,000,000 shares with a par value of CHF each, and to amend article 4b lit. a of the Articles of Incorporation accordingly There were no changes to the ordinary share capital or the conditional share capital during the reporting year. As described under the heading "Authorized Capital" above, the Company's authorized share capital expired on May 18, Shares and participation certificates The 40,409,926 registered shares with a par value of CHF are fully paid in. They are in the form of dematerialized securities (Wertrechte, within the meaning of the Swiss Code of Obligations) and intermediated securities (Bucheffekten, within the meaning of the Swiss Federal Intermediated Securities Act). Each registered share carries one vote and an equal right to dividend payments. No preferential or similar rights have been granted. As of December 31, 2017, no participation certificates (Partizipationsscheine) have been issued. Profit sharing certificates The Company has not issued any profit sharing certificates (Genussscheine). Limitations on transferability and nominee registrations Limitations on transferability for each share category; indication of statutory group clauses and rules for granting exceptions. The Company maintains a share register in which the full name, address and nationality (in case of legal entities, the company name and registered office) of the holders and usufructuaries of registered shares are recorded. Upon application to the Company, acquirers of registered shares will be recorded in the share register as shareholders with the right to vote, provided that they explicitly declare to have acquired the shares in their own name and for their own account. Acquirers who do not make this declaration will be recorded in the share register as shareholders without the right to vote (for an exception to permit nominee registrations, see below). Exemptions in the year under review No exemptions from the limitations on transferability of shares have been granted in the year under review. Permissibility of nominee registrations; indication of any percent clauses and registration conditions Pursuant to the Company s Regulations on the Registration of Nominees, the Company may register a nominee in its share register as a shareholder with the right to vote if either such nominee s shareholdings do not exceed 5% of the issued share capital as set forth in the Commercial Register, or, if such nominee s shareholdings exceed that threshold, the respective nominee discloses to the Company the names, addresses, locations or registered offices, nationalities and the number of shares held on behalf of all beneficial owners whose beneficial shareholdings exceed 0.5% of the issued share capital. Procedure and conditions for cancelling statutory privileges and limitations on transferability The Articles of Incorporation do not provide for any privileges. The limitations on transferability of the Company s shares, as described above, may be cancelled by a resolution (amending the Articles of Incorporation) of an ordinary general meeting of shareholders reuniting the absolute majority of votes represented at the meeting, or by a resolution of an extraordinary general meeting of shareholders reuniting a majority of two thirds of the votes represented (see Section 4.7 below). Convertible bonds and warrants/options The Company has not issued any convertible bonds, warrants or options Annual Report 61

33 Orascom Corporate Governance ROAD to success 4.3 Board of Directors Samih O. Sawiris Chairman Franz Egle Non-Executive Member After receiving his Diploma in economic engineering from the Technical University of Berlin in 1980, Mr. Sawiris founded his first company, National Marine Boat Factory. In 1996, he established Orascom Projects for Touristic Development and in 1997 Orascom Hotel Holdings, the two companies later merged to form Orascom Hotels and Development S.A.E. (OHD) which now listed on the Egyptian Stock Exchange under the name of Orascom Development Egypt (ODE). Furthermore, Mr. Sawiris established El Gouna Beverages Co. in 1997, which he sold in 2001 when it was the largest beverage company in Egypt. As of April 1, 2014, Mr. Sawiris took over the position of the CEO on ad-interim basis of Orascom Development until December 31, He also serves as Chairman of the Board of Directors. Mr. Egle s background is in strategic development, corporate communications, media and PR. After holding senior positions in the private sector, he was Head of Communications at the Swiss Federal Department of Foreign Affairs and an advisor to the Minister of Foreign Affairs from 1993 to Between 1999 and 2006 Mr. Egle was a partner of Hirzel.Neef.Schmid.Konsulenten, a communication and financial consultancy, and is a co-founder and a member of the Board of Directors of Dynamics Group, a Swiss company providing strategic consulting, communication management and research analysis. Mr. Egle holds a Doctorate in Sociology from the University of Zurich. Adil Douiri Non-Executive Member Jürgen Fischer NON-Executive Member Mr. Douiri is the founding shareholder and CEO of Mutandis, a Moroccan consumer goods manufacturing group established in Mr. Douiri served in His Majesty King Mohamed VI s Government as Minister of Tourism ( ) and later as Minister for Tourism, Crafts and Social Economy ( ). In 1992 Mr. Douiri founded Casablanca Finance Group (later renamed CFG Group), the country s first investment bank. Today CFG Goup has become CFG Bank, a full-fledged Moroccan technology driven bank, of which Mr Douiri currently serves as chairman of the board. He is also a board member of Residences Dar Saada, a publicly listed Moroccan real estate developer. Mr. Douiri graduated as an engineer from the Ecole Nationale des Ponts and Chaussees (ENPC) in Paris. Jürgen Fischer is founder of Dubai-based Pearl Management Consultants and was previously CEO of Dubai Properties LLC, a major real estate developer in the UAE which managed 20,000 residential leasing units, 50,000 sqm of retail space, thousands of Built to Sell apartments and villas and several master developments in Dubai. He was also involved in the Sama Dubai Group s international developments in Morocco, Oman and elsewhere. During his time with Dubai Properties, Mr. Fischer oversaw several theme park and tourist projects. Between 1995 and 2008 he held several senior positions with Hilton International, including President for Commercial Operations and President for Continental Europe, Middle East and Africa, as well as President of Scandic Hotels AB. Mr. Fischer has been a non-executive board member of Movenpick Hotels and Resorts since 2008, and non-executive Chairman since Prior to joining Hilton International he held the roles of Vice President of Sales and Marketing and Director of Resort Development for Disneyland Paris, and General Manager of the Grand Floridian Beach Resort and Spa at Walt Disney World in Florida. Mr. Fischer held several hotel management positions in Europe and the Middle East after starting his professional life as a chef in He later graduated from the Ecole Hoteliere de Lausanne, Switzerland and was awarded an MBA with Honors from IMEDE/IMD, Lausanne in Annual Report 63

34 Orascom Corporate Governance ROAD to success 4.3 Board of Directors Carolina Müller-Möhl Non-Executive Member Naguib S. Sawiris Non-Executive Member Ms. Müller-Möhl is a Swiss founder, investor and philanthropist. Since 2000, Carolina Müller- Möhl has managed and presided over the Müller-Möhl Group, a single-family office that actively manages the family's investments. She currently serves on the Board of Directors of Gebrüder Müller Immobilien AG (since 2000), Neue Zürcher Zeitung (since 2010), a major media group in Switzerland, and in 2015 also became a board member of Fielmann AG, Europe's largest optician. Ms. Müller-Möhl is highly committed to address socio-political causes and brings her efforts under the Müller-Möhl Foundation, which focuses on compatibility of work and family life, education, promotion of a free market in Switzerland and philanthropy in general. Furthermore, she sits on various foundation and advisory boards that support the above causes such as Department of Economics, University of Zurich, University of St. Gallen, MBA for Women Foundation, EDGE, Avenir Suisse, Swiss Economic Forum, Schweizerische Management Gesellschaft and Bertelsmann Stiftung, Germany. Ms. Müller-Möhl studied politics, history and law and graduated as M.A. Political Science from Freie Universität Berlin. In recognition of her success and her philanthropic commitment, the World Economic Forum nominated her as a Young Global Leader in Mr. Naguib S. Sawiris is the Founder and CEO of Yup (2014-present), a San Francisco based education technology company. Yup provides on-demand personalized learning through mobile chat with over 500,000 student sign-ups. Yup has raised USD 7.5 million from leading tech and education investors including Index Ventures, Floodgate Fund, and Stanford University's StartX Fund. Mr. Naguib S. Sawiris attended Stanford University where he designed his own major, Economic and Enterprise Engineering. He is an active angel investor, having invested in over 20 companies including DoctorOnDemand, Transcriptic, and Womply. His investments have raised more than USD 200 million in subsequent rounds. Marco Sieber Non-Executive Member Jürg Weber Non-Executive Member Mr. Sieber, born in Lucerne, Switzerland, studied economics at the Business School in Lausanne. After graduating with a business degree, in 1989 he took over the family owned company SIGA Holding Ltd. together with his brother, transforming it into a company which operates internationally. SIGA develops and produces products for the construction sector, namely in the field of energy-saving sealings. Mr. Weber holds an MBA with a Major in Finance and Strategic Planning from the Wharton School, University of Pennsylvania. Mr. Weber previously studied Civil Engineering at the School of Engineering in Switzerland and Microeconomics and English at the University of California, Santa Barbara. Before his recent position as Division CEO of SIX Payment Services and Chairman of the Board of TWINT, the Swiss mobile payment solution, Mr. Weber was CEO and partial owner of Boyner Financial Services in Istanbul and an entrepreneur in card issuing, purchase finance and payment services. Previously he was a consultant at McKinsey and Company where he served Swiss banking clients and later co-lead the founding of the Istanbul Office, leading to his nomination for Partner. Before that Mr. Weber served as project assistant to the Vice Chairman of UBS Phillips and Drew in London and as project manager for the CEO of UBS North America in New York, where he was elected into the UBS Leadership Program with a sponsorship for his MBA Annual Report 65

35 Orascom Corporate Governance ROAD to success Members of the Board of Directors Name Function Nationality Birth Elected first The current members of the Board of Directors are all non-executive. Mr. Sawiris served as Chief Executive Officer of the Company on an ad interim basis from April 1, 2014 to December 31, With the exception of the Chairman, none of the current members of the Board of Directors held executive positions with Orascom Development during the three Elected until Samih O. Sawiris Chairman Egyptian Audit Committee Adil Douiri Member Moroccan Member Nomination and Compensation Committee Franz Egle Member Swiss Member Jürgen Fischer Member Swiss Carolina Müller-Möhl Member Swiss Naguib S. Sawiris Member Egyptian Member 1 Marco Sieber Member Swiss Chair Jürg Weber Lead Director Swiss Chair financial years preceding the year under review. Other than as individually mentioned above, none of these members, and no enterprise or organization represented by them maintains any substantial business relationship with the Company or any of its subsidiaries. External mandates For restrictions regarding the number of external mandates see Art. 20 of the Articles of Incorporation which are available on the Company's website com, following the links to "Investor Relations" and "Corporate Filings". Elections and terms of office The members of the Board of Directors and its Chairman are elected by the general meeting of shareholders individually for a term of one year until the completion of the next ordinary general meeting. The Board is composed of a minimum of three and a maximum of fifteen members. The members may be re-elected. Internal organizational structure Board of Directors The Board of Directors governs the Company and is ultimately responsible for the Company s business strategy and management. It has the authority to decide on all corporate matters not reserved by law or the Articles of Incorporation to the general meeting of shareholders or to another body. Subject to its inalienable duties pursuant to the law and to a number of additional matters, the Board of Directors has delegated the management of the Company s business to the CEO. The Board of Directors appoints the CEO and the other members of Executive Management. Subject to the power of the general meeting, the Board of Directors constitutes itself autonomously and appoints its Secretary, who does not have to be a member of the Board of Directors. The Chairman of the Board of Directors calls the meetings. It is quorate if a majority of members are present at a meeting. Decisions are taken by the majority of votes cast. In case of a deadlock, the Chairman has a casting vote. A member of the Board of Directors shall abstain from voting if he or she has a personal interest in a matter other than an interest in his or her capacity as shareholder of the Company. Committees Two permanent committees have been formed to support the Board of Directors; these are the Audit Committee and the Nomination & Compensation Committee. The duties and competences of both committees are outlined below. Audit Committee The Audit Committee currently consists of three (two as of December 31, 2017) non-executive members of the Board of Directors. The members and the chairman of the Audit Committee are elected by the Board of Directors. The chairman of the Committee appoints a secretary, who does not have to be a member of the committee. The members of the Audit Committee have broad experience in finance and accounting on the basis of their professional backgrounds. The mission of the Audit Committee is to assist the Board of Directors in the discharge of its responsibilities with respect to financial reporting and audit. The committee reports and issues recommendations to the Board of Directors regarding yearly and interim financial statements, the auditing process, the internal control system, the integrity and effectiveness of the Company s external and internal auditors and other topics submitted to it by the Board from time to time. The Audit Committee has no decision-making power. Nomination & Compensation Committee The Nomination & Compensation Committee currently consists of two non-executive members of the Board of Directors. The members are elected by the general meeting of shareholders individually for a term of one year until the completion of the next ordinary general meeting. The chairman of the Nomination & Compensation Committee is appointed by the Board of Directors. The chairman of the Committee appoints a secretary, who does not have to be a member of the committee. The mission of the Nomination & Compensation Committee is to assist the Board of Directors in the discharge of its responsibilities and to discharge certain responsibilities of the Board relating to compensation and nomination of members of the Board of Directors and of Executive Management. The Nomination & Compensation Committee issues recommendations to the Board of Directors regarding matters of the compensation of executive members of the Board of Directors and members of Executive Management and regarding other matters of compensation. It also issues recommendations regarding the nomination of members of the Board of Directors and of Executive Management, and other topics submitted to it by the Board for the committee s consideration. The Nomination & Compensation Committee has no decision-making power. The Articles of Incorporation containing the principal duties of the Nomination & Compensation Committee (Art. 16) are available on the Company's website orascomdh.com, following the links to "Investor Relations" and "Corporate Filings". 1 Since February 8, Annual Report 67

36 Orascom Corporate Governance ROAD to success Work methods of the Board of Directors and its committees Definition of areas of responsibility Information and control instruments vis-a-vis senior management Invitations to attend meetings of the Board of Directors or the committees are extended by the respective chairman or secretary. Any member of the Board of Directors or a committee may request the chairman of the Board of Directors or the committee, respectively, to convene a meeting. The members of the Board of Directors and the committees are provided with all necessary supporting material before a meeting is held, enabling them to prepare for discussion of the relevant agenda items. The Board of Directors meets as often as business requires, but as a general rule at least six times per year. In average, meetings therefore take place approximately every two months. Pursuant to their respective Charters, the committees of the Board of Directors shall in principle convene at least once (in the case of the Nomination & Compensation Committee) or twice a year (in the case of the Audit Committee), but can be summoned by their respective chairman as often as the business requires. Following meetings of the committees, the committee chairman informs the Board of Directors at its next meeting about the matters discussed in the committee meeting. In the 2017 financial year, the Board of Directors convened for eight meetings, and passed one circular resolution. Of the eight meetings, three were held as physical meetings and five meetings were held by telephone conference. The Audit Committee convened for seven meetings. There were no meetings of the Nomination & Compensation Committee during 2017, but the committee did convene the first quarter of 2018 for two meetings regarding matters pertaining to the 2017 financial year. Meetings of the Board of Directors and its committees may, upon invitation by the chairman, be attended by members of Executive Management. As a rule, the Company's CEO and CFO attend meetings of the Board of Directors, which was the case in seven of the eight meetings held in the reporting year. In addition, other members of the Executive Management were present during four meetings. Further, the Company's CFO attended all meetings of the Audit Committee in the reporting year. No advisors attended any meetings of the Board of Directors or the committees, other than representatives of the Company's auditors who attended five of the seven meetings of the Audit Committee in The Company's auditors are also in regular contact with the chairman of the Audit Committee and have the right to have items added to the agenda. The Board of Directors has entrusted the preparation and the execution of its decisions, the supervision of certain tasks, as well as certain decision-making powers to the permanent committees. The Board of Directors has delegated the management of the Company's business to the CEO, who may further delegate any of his duties and competencies to Executive Management and other members of the Company's management although the CEO remains fully responsible for all duties and competencies delegated to him by the Board of Directors. In addition to the inalienable duties of the Board of Directors pursuant to statutory law (Art. 716a para. 1 of the Swiss Code of Obligations) and the duties of the Board of Directors permanent committees (as described above), certain important matters have been excluded from such delegation to the CEO and thus remain reserved to the Board of Directors, including the following: - Issuance of securities or other capital market transactions in excess of a certain threshold; - Granting of material loans; - Approval of material investments, acquisitions, divestments and disposals; - Provision of material guarantees, suretyships, liens, pledges and other securities; - Approval of material inter-company agreements; - Decisions with respect to conflicts of interests and related party transactions. To ensure that comprehensive information is provided to the Board of Directors on the performance of the functions delegated by it, members of Executive Management are regularly invited to attend meetings of the Board of Directors, or to participate when individual agenda items are discussed, as described above. Individual members of the Board of Directors also support the Executive Management from time to time in various projects. Furthermore, members of the Board of Directors cultivate an informal exchange of ideas with the Company's management. The Company s management has been managing to enhance the internal governance by increasing the capacity of the internal audit functions. During the year under review, PwC Muscat has been appointed to provide the services of internal audit in Oman. In general, the internal audit function performs ad-hoc assignments in addition to the pre-planned assignments. For each assignment, a report of major findings is presented to and discussed with the management on the entity level, and corrective actions are agreed. Executive Management meetings, chaired by the CEO, are held at least on a monthly basis in which performance of operating projects is reviewed alongside the budget and previous financial year. Key performance indicators are reviewed and updates on new projects, whether off-plan or under construction, are shared and future steps agreed upon Annual Report 69

37 Orascom Corporate Governance ROAD to success 4.4 Executive Management Definition of areas of responsibility Members of Executive Management The CEO who is responsible for the day-today operational management of the Company is supported by the Executive Management. The Executive Management assists the CEO in developing and implementing the strategic business plans for the Company overall as well as for the principal businesses, subject to approval by the Board of Directors. The Executive Management further reviews and coordinates significant initiatives, projects and business developments in the segments, regions and in the corporate services functions and implements Company-wide policies. Khaled Bichara Chief Executive Officer An Egyptian national, born 1971, Mr. Khaled Bichara currently holds the positions of Chief Executive Officer of Orascom Development Holding and its largest Egyptian subsidiary Orascom Development Egypt. He is also a Co-Founder of Accelero Capital. Mr. Bichara previously served as Group President and Chief Operating Officer of VimpelCom Ltd ( VimpelCom ). He was also Chief Executive Officer of Orascom Telecom Holding S.A.E. ( OTH ) as well as Chief Operating Officer of Wind Telecomunicazioni S.p.A. ( Wind Italy ). He played a pivotal role in the merger of VimpelCom with Wind Telecom S.p.A, ( Wind Telecom ) for a total consideration of $25.7Bn to create the world s sixth largest telecommunications carrier. Mr. Bichara managed ten operations across the globe through OTH and Wind Italy and 22 operations across the globe through VimpelCom. In 2009, Mr. Bichara was appointed Chief Executive Officer of OTH and Wind Telecom, bringing with him a wealth of experience in both telecommunication and information technology coupled with strong management and entrepreneurial expertise. Prior to this position, Mr. Bichara was Chief Operating Officer ( COO ) of Wind Italy, which he joined in 2005, heading the fixed line and portal business unit before being promoted to COO of the company. He played a key role in restructuring the company s organization, resulting in the successful turnaround of Wind Italy from a continuously loss-making company to a leading mobile, fixed line and broadband integrated operator in Europe within a threeyear time span. Prior to joining Wind Italy, he was the co-founder, Chairman and CEO of LINKdotNET ( LDN ), one of the largest private Internet Service Providers in the Middle East. In 2001, following successful negotiations, Microsoft chose to partner with LDN to launch MSN Arabia, the Middle East s first global portal, bringing the full internet experience of MSN to users in the region. In 2011, Mr. Bichara also served as Group Executive Chairman of OTH as well as Chairman of Wind Italy. Mr. Bichara currently serves as a board member of various telecom and IT companies, including Orascom Telecom Media and Technology Holding S.A.E.; and SUPERNAP International S.A., the developer of the worldrenowned SUPERNAP data centers. He is also a board member of Orascom Construction Limited, a company dually listed on NASDAQ Dubai and the Egyptian Stock Exchange, as well as a board member of Orascom Development Egypt S.A.E., a company listed on the Egyptian Stock Exchange. Mr. Bichara is also a member of the Advisory Board for the Computer Science and Engineering Department of the American University in Cairo. He was previously a member of the GSMA board. Mr. Bichara holds a Bachelor of Science degree from the American University in Cairo. Ashraf Nessim Chief Financial Officer An Egyptian national, born 1965, Mr. Nessim has more than 20 years of experience in various fields including finance, infrastructure and hospitality. He currently holds the position of the Group s Chief Financial Officer of Orascom Development Holding. He is also the Chief Financial Officer of Orascom Development Egypt the Egyptian largest subsidiary of the group. Prior to joining the group, he was the Chief Financial Officer representing Beltone Private Equity in their Pick Albatros Investment. From 2007 to 2010 he was the Group Chief Financial Officer of Mobiserve, a key player in the mobile telecom network infrastructure in 9 countries within the Middle East and South Asia. Prior to shifting his career to finance he established the operation of Raya Distribution in Algeria and managed merchandising activities in all 34 shops in of Nokia and Samsung in Egypt. Mr. Nessim holds a Bachelor degree in Mechanical Engineering and he is also one of the earlier people in Egypt to hold the CFA designation in Abdelhamid Abouyoussef Chief Hotel Officer An Egyptian national, born 1975, Mr. Abouyoussef is a tourism entrepreneur who started his career in design and installation of hotel electro-mechanical systems in 1998 moving on to Project Management and Owner s Representation till 2004 when he founded his first company Shores Hotels to manage a single hotel of 200 guestrooms. With the growth of Shores Hotels portfolio, Mr. Abouyoussef pursued Hotel Development developing three hotels in three different destinations across Egypt. Mr. Abouyoussef is a holder of a B.S. in Mechanical Engineering from the American University in Cairo and a Master s of Science from the University of California at Berkeley. He is also a commission member of the International Federation of the Automobile (FIA) Annual Report 71

38 Orascom Corporate Governance ROAD to success 4.4 Executive Management 4.5 Employees External mandates For restrictions regarding the number of external mandates see Art. 20 of the Articles of Incorporation which are available on the Company's website following the links to "Investor Relations" and "Corporate Filings". As of December 31, 2017, the Company had 8,706 employees worldwide, of which 6,754 were in Egypt. The number of employees increased by 157 employees, compared to the end of Changes in the Executive Management in 2017 and subsequent events Effective April 1, 2017, Ashraf Nessim was appointed as Chief Financial Officer and member of the Executive Management after having already served in this function on an ad interim basis since May As of the same effective date, Nermine Faltas, Group Chief Human Resources & Organization Development Officer, and Tarek Gadallah, Group General Counsel, were also appointed as members of the Executive Management. Nermine Faltas Chief Human Resources & Organization Development Officer Mrs. Faltas serves as Chief Human Resources & Organization Development Officer. She has more than 20 years of multidisciplinary experience in Human Capital, Organizational Development, IT and Process Re-engineering. Prior to joining Orascom Development Holding, Mrs. Faltas was the VP for Operations & Human Capital in A15, where she led all centralized supporting Operations including; Human Resources, Administration and Management Information Systems, serving 10+ subsidiaries, 16 regional offices and with more than 1000 employees. Mrs. Faltas has managed multiple strategic initiatives and change management projects including mergers, regional expansion, restructuring and many other organizational development initiatives. She started her career in 1995 as Software Engineer. In 1997, Mrs. Faltas joined LINKdotNET as Project Manager, working on many process and quality improvement assignments. As the company was expanding, she grew interest in organization development, where she was appointed HR & Operations Sr. Manager. She started her career in 1995 as Software Engineer. Mrs. Faltas is PROSCI Certified change management practitioner and a Certified Trainer/Facilitator. She is also a corporate Co-active coach, accredited by the International Coaching Federation. Additionally, she holds a certification in HR competency analysis profiling from HRCG Canada. She obtained her Bachelor of Science, Computer Science from the American University in Cairo in Tarek Gadallah Group General Counsel Tarek Gadallah serves as General Counsel of the Orascom Development Group. He has extensive experience in mergers and acquisitions, private equity, restructuring, and debt and equity capital markets transactions. His experience also includes project financing and PPP projects covering all stages of the process from inception to commercial operations. Prior to joining the group, Tarek spent eight years in private practice as senior partner with a top tier law firm in Egypt where he advised local and international clients on high value, complex and cross-border transactions across a wide range of industries including financial services, real estate, tourism, energy, and pharmaceuticals. He also advised public companies on regulatory, compliance, and corporate governance issues. In conjunction with his corporate practice, Tarek has handled a number of high value and complex international commercial arbitration and represented financial institutions and investors in several securities and capital markets litigation. Prior to his private practice, he worked as Group General Counsel of a regional investment bank where he handled a variety of debt and equity transactions in Egypt and GCC region. Tarek received his Mater of Law from Cairo University and Executive Education in accounting and finance from Wharton Business School and Cambridge Judge Business School Annual Report 73

39 Orascom Corporate Governance ROAD to success 4.6 COMPENSATION, SHAREHOLDINGS AND LOANS 4.7 Shareholders' participation For detailed information on compensation paid to members of the Board of Directors and to members of Executive Management for the financial year 2017, and on shares and options held by and loans granted to these persons as of December 31, 2017, please refer to the Compensation Report pages 7 and 8 and to note 13 of the consolidated financial statements. The compensation of the members of the Board of Directors and of Executive Management is determined as specified below. It does not currently employ any external advisors or systematically use external benchmarks for fixing compensation. Board of Directors For their service on the Board and its committees in 2017, the Board of Directors decided to pay compensation of gross CHF 120,000 for all members of the Board of Directors. The compensation is paid out in the form of shares of the Company. The shares of the Company allocated to the members of the Board of Directors as compensation are, for that purpose and if not available to the Company already, purchased by the Company on the market. The valuation of the shares (for purposes of the calculation of the number of shares allocated to each member of the Board of Directors) is determined by reference to a market price of the Company's shares on SIX Swiss Exchange. In addition to the base compensation for all members of the Board of Directors, members (and chairs) of one of the Committees receive an additional compensation of gross CHF 20,000. The Lead Director receives an additional compensation of gross CHF 40,000. Executive Management Compensation of the members of Executive Management for their service in Executive Management consists of a base salary which is annually reviewed, and a bonus payment which is annually determined, as further described below. The compensation of the members of Executive Management is based on an evaluation of the Company's performance, of the individual performance of each member, as well as of the performance of the business area for which each member is responsible. The Nomination and Compensation Committee discusses the proposals presented by the CEO and, if deemed fit, submits them to the Board of Directors for approval. Members of Executive Management do not have a right to attend meetings of the Nomination and Compensation Committee at which decisions are taken in respect to their compensation, or otherwise to participate in the decision-making process. Performance related remuneration In 2014, the Board of Directors revised the Company s bonus policy. The policy includes a cash-bonus and a deferred share-bonus. 100% of the cash-bonus and 40% of the sharebonus are based on the Executive Member s Management s personal performance. 60% of the share-bonus is based on the financial performance of the Group. The cash-bonus can reach at maximum 25% of the Executive Member s annual gross base salary. The share-bonus can reach at maximum 100% of the Executive Member s annual gross base salary. The share price that is relevant to determine the number of ODH shares to be granted to the member of the Executive Management is the average share price of the shares of the Company on the SIX Swiss Exchange during the last six months of the performance year. Contingent compensation of the CEO In addition to the base salary, the CEO was granted a contingent compensation which is dependent solely on the development of the share price of the Company. The contingent compensation is determined according to a formula which takes into account the development of the Company's share price. In essence, the new CEO shall be entitled to 10% of the incremental market capitalization of the Company above a hurdle rate or minimum yield of 8% per annum. The award accrues over a vesting period of six years and is subject to usual forfeiture and acceleration provisions. For example, the contingent compensation will be forfeited and lost in case the CEO terminates his employment relationship with the Company without cause. The contingent compensation may be paid in cash or, at the Company's discretion, in (whole or in part in) shares of the Company. If payment is made in shares, the number of shares will be calculated according to a formula which is based on an average of the share price at the time immediately prior to the delivery of the shares. If the market capitalization of the Company does not exceed the hurdle rate of 8% per annum, the CEO does not receive any payments under the contingent compensation. The Board of Directors believes that a vesting period of six years rewards a long-term performance and shows a long-term commitment of the new CEO towards the Company. The award of 10% of the incremental market capitalization of the Company above a hurdle rate of 8% per annum aims ensures that the new CEO is paid for his contribution to Company performance. Principles on compensation in the Articles of Incorporation See Art. 21 of the Articles of Incorporation which are available on the Company's website following the links to "Investor Relations" and "Corporate Filings". Shareholder approval of compensation See Art. 22 of the Articles of Incorporation which are available on the Company's website following the links to "Investor Relations" and "Corporate Filings". Loans, credit and pension contributions See Art. 26 of the Articles of Incorporation which are available on the Company's website following the links to "Investor Relations" and "Corporate Filings". Voting rights and representation restrictions With the exception of restrictions on the registration of shares (see Section 4.2. above), there are no limitations on voting rights. At a general meeting of shareholders, each share entitles its owner to one vote. By means of a written proxy, each shareholder may be represented by a third person who need not himself be a shareholder. Statutory quora According to Art. 10 of the Articles of Incorporation (available on the Company's website following the links to "Investor Relations" and "Corporate Filings"), the holders of at least 25% of issued shares must be present or represented at an ordinary general meeting of shareholders for the meeting to be validly constituted. Similarly, holders of at least 50% of issued shares must be present or represented at an extraordinary general meeting of shareholders for the meeting to be validly constituted. Resolutions are generally passed, in the case of an ordinary general meeting of shareholders (except for matters subject to a higher majority requirement by law), with the absolute majority of the shares represented. In the case of an extraordinary general meeting of shareholders, resolutions are generally passed with a majority of two-thirds of the shares represented. Resolutions relating to the following matters, however, require a majority of 75% of shares represented at the meeting: (a) capital increases pursuant to Art. 650 CO and reductions of the share capital pursuant to Art. 732 CO; (b) dissolving the Company before its termination date or changing its duration (which is 99 years from its formation); (c) changing the Company s purpose; and (d) any merger with another company. Convocation of the general meeting of shareholders An ordinary general meeting of shareholders is to be held annually following the close of the financial year. It is called by the Board of Directors or, if necessary, by the auditors. Extraordinary general meetings may be called by the Board of Directors, the auditors, the liquidators, creditors or by the general meeting of shareholders itself. One or more shareholders representing at least 10% of the share capital may request in writing that the Board of Directors call an extraordinary general meeting of shareholders. The request must state the purpose of the meeting and the agenda to be submitted. General meetings of shareholders are held at the statutory seat of the Company or at such other place as determined by the Board of Directors. Notice of a general meeting of shareholders is given by means of a single publication in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt) or by registered letter to the shareholders of record. There must be a time period of not less than 20 calendar days between the day of the publication or the mailing of the notice and the scheduled date of the meeting. The notice of the general meeting of shareholders must indicate the agenda and the motions by the Board of Directors. Agenda Shareholders who represent shares with a par value of at least CHF 1,000,000 may request that an item be placed on the agenda. The request must be communicated to the Board of Directors in writing, stating the item to be placed on the agenda and the shareholder s corresponding motion, at least 45 days prior to the general meeting of shareholders. Record date for entry into the share register Only shareholders who are registered in the share register as shareholders with voting rights at the record date are entitled to attend an ordinary general meeting and to exercise their voting rights. The Board of Directors ensures that the record date is set as close as possible to the date of the ordinary general meeting. The record date is published together with the invitation to the ordinary general meeting in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt) Annual Report 75

40 Orascom Corporate Governance ROAD to success 4.8 Changes of control and defense measures 4.10 Information Policy Duty to make an offer The Company's Articles of Incorporation do not provide for any opting out or opting up arrangements within the meaning of Art. 125 and Art. 135 FMIA. Clauses of change of control No change of control clauses benefiting members of the Board of Directors, Executive Management or other members of the Company s management have been agreed upon. The CEO, the CFO, and the Investor Relations Department are primarily responsible for the communication with investors and media. The Company updates the financial community through press releases, personal contacts, discussions, and presentations held through various road shows as well as earnings results and other investor conferences. the SIX Swiss Exchange (ad hoc publicity). Any such releases can be accessed on the Company's website (following the links to "Investor Relations" and "Press Releases"). In addition, interested parties can subscribe to receive any releases by on the Company's website (following the links to "Investor Relations" and "Contact IR"). The statutory publication organ of the Company is the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt). 4.9 External Auditors Duration of the mandate and term of office of the lead auditor Since the foundation of the Company on January 17, 2008, Deloitte AG, Zurich, has been the statutory auditor with responsibility for the audit of the Company s non-consolidated and consolidated financial statements. The Company s Egyptian subsidiary ODE is audited by Deloitte Saleh, Barsoum and Abdel Aziz, Cairo. The auditor in charge for the Company at Deloitte AG currently is Roland Muller since the 2013 financial year. A rotation cycle of 7 years is foreseen for the position of the auditor in charge. The Board of Directors will propose to the ordinary general meeting of shareholders on May 8, 2018 to reelect Deloitte AG, Zurich as the statutory auditor for the 2018 financial year. Auditing fees Informational instruments pertaining to the external audit Deloitte received the following fees for its services as the statutory auditor of the Company and the majority of Orascom Development companies on the one hand, and for non-audit services on the other hand: In Audit Services 1,405,673 1,860,000 Audit Related Services 50,650 - Tax Advisory Services - 12,228 Total 1,456,323 1,872,228 The Board of Directors Audit Committee has the task of ensuring the effective and regular supervision of the statutory auditors reporting with the aim of ensuring its integrity, transparency and quality. In advance of each financial year, the proposed auditing schedule is presented to and discussed with the Audit Committee. After each audit, important observations by the statutory auditor, together with appropriate recommendations, are presented to the Audit Committee (after discussions with the CFO) during its relevant meeting. Subsequently, members of the Audit Committee receive the statutory auditors management letter in final form. During the year, the statutory auditor is in regular contact with the chairman of the Audit Committee to discuss matters arising in the performance of its task. Based on these communications the Audit Committee discusses its impression of the integrity, effectiveness and independence of the statutory auditors work, and issues a recommendation to the Board of Directors concerning the proposal to the general meeting of shareholders whether to re-elect the statutory auditors for the following year. In 2017 representatives of the statutory auditor attended five of the seven meetings of the Audit Committee. Orascom Development is committed to an open information policy and provides shareholders, the capital market, employees and all stakeholders with open, transparent and timely information. The information policy accords with the requirements of the Swiss stock exchange as well as the relevant statutory requirements. As a company listed on SIX Swiss Exchange, Orascom Development also publishes information relevant to its stock price in accordance with Art. 53 of the Listing Rules of Corporate Calendar Annual general meeting of shareholders: May 8, 2018 First quarter 2018 results: June 6, 2018 First half 2018 results: August 14, 2018 Third quarter 2018 results: November 13, 2018 The financial reporting system is comprised of quarterly, interim (semiannual), and annual reports. Consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) in compliance with Swiss law and the rules of the SIX Swiss Exchange. Further information and contact Investors and other interested stakeholders can find further information on Orascom Development online at Stakeholders may subscribe to the Company s alert service to receive news releases at en/media-center/news-alert.html. Investors may also contact the Investor Relations Department as follows: Sara El Gawahergy Head of Investor Relations T. : T. : ir@orascomdh.com Registered office The Company's registered office is at Gotthardstrasse 12, 6460 Altdorf, Switzerland Annual Report 77

41 ROAD to success 05 Orascom Development investor information MEETING OUR EXPECTATIONS Annual Report 79

42 Orascom Investor Information ROAD to success 5. Investor Information Orascom Development Holding AG has a primary listing on the main board of the SIX Swiss Exchange. Following the delisting approval issued by the Listing Committee of the Egyptian Exchange (EGX) on the 24 th of May 2017, Orascom Development Holding (ODH) has successfully completed the delisting of the company's Egyptian Depositary Receipts (EDRs) from the EGX. The majority of the EDR holders have chosen to swap their EDRs into shares of ODH that had previously been underlying the EDRs and only 9.9% out of the 189,123,620 EDRs were tendered to the company for repurchase at a price of EGP 5.25 (CHF 0.29) per EDR or CHF 5.79 per ODH share (1 ODH share is underlying 20 EDRs). Overview Per share data 2 Date Date 31/12/ /12/2016 Switzerland Shares held with SIS and registered in the share register 17,659,757 26,735,126 Dispo shares 22,750,169 3,739,307 EGYPT 1 Share equivalents in custody of MCDR s depositary bank (EDRs) - 9,060,077 Shares in custody of MCDR (Not Traded) - 875,416 Total Shares 40,409,926 40,409,926 Market capitalization (in CHF Million) Share price at year-end (in CHF) Highest share price during the year (in CHF) Lowest share price during the year (in CHF) Number of traded shares (in millions) Value of traded shares (in CHF million) Average number of traded shares per day 25,058 19,433 Average traded value per day (in CHF) 214, Source: Thomson Reuters. Share information 1 Shares listing Zurich, Switzerland Number of shares 40,409,926 ISIN code Currency Ticker code (Bloomberg) Ticker code (Reuters) CH Swiss Franc ODHN:SW ODHN.S 1 As at end of Annual Report 81

43 Orascom Investor Information ROAD to success 5.1 Shareholding structure A) Shares B) EDRs Shareholders by type Shareholders by country EDRs holders by type Categories Number of shareholders Number of Registered shares Natural persons 3,633 11,413,259 Legal persons 64 3,090,538 Banks 19 2,407,881 Investment funds ,727 Public corporations 3 9,990 Pension funds 6 22,679 Foundations 2 3,401 Insurance companies 1 11,282 Total 3,751 17,659,757 Country Number of shareholders Number of Registered shares Egypt 6 7,214,327 Switzerland 3,620 4,000,785 United Kingdom 2 2,336,648 Belgium 2 492,572 Cayman Islands 3 2,100,725 United States of America 2 347,634 Liechtenstein 3 386,050 Malta 1 25,000 Luxembourg 1 10,118 Austria 18 32,440 Italy 15 13,533 Germany ,839 France 4 96,868 Spain 6 1,973 Denmark 1 2 Name of major shareholders Number of shares issued Percentage of ownership (%) Number of shares issued Percentage of ownership (%) Samih O. Sawiris 2 27,406, ,391, OS Holding 2,049, ,049, Others 10,953, ,968, Total 40,409, ,409, Distribution of shareholdings 1 Canada 2 4,341 China Corporate Calendar Number of shareholders Number of Registered shares , ,018 56, ,000 1, ,256 1,001 10, ,748,361 10, , ,329,428 Croatia 3 2,791 Czech Republic 1 90 Hungary Macedonia Montenegro 1 375,000 Netherland Turkey 2 2,121 Portugal 1 35 Date Event 8 May th Annual General Meeting 15 May 2018 First Quarter 2018 Results 14 Aug 2018 First Half 2018 Results 13 Nov 2018 Nine Months 2018 Results Investor Contacts Sara El Gawahergy Head of Investor Relations T: ir@orascomdh.com For publications and further information visit 100,001 1,000, ,732,004 1,000,001 10,000, ,012,060 Slovakia 1 50 Slovenia Others 2 90,980 Total 3,751 17,659,757 Total 3,751 17,659,757 1 Overview of significant shareholders as at 31 December Distribution of registered shares as at 31 December The shares of Samih O. Sawiris are held directly and through his entities Thursday Holding and SOS Holding Annual Report 83

44 ROAD to success 06 Orascom Development FINANCIAL STATMENTS Success comes with dedication Annual Report 85

45 CONTENTS 06 ORASCOM DEVELOPMENT HOLDING AG Orascom Development Holding AG (consolidated financial statements) Consolidated statement of comprehensive income F-3 Consolidated statement of financial position F-4 Consolidated statement of changes in equity F-6 Consolidated statement of cash flows F-7 CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH AUDITOR'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2017 Notes to the consolidated financial statements F Orascom Development Holding AG Income statement F-85 Statutory balance sheet F-86 Notes to the financial statements F-87 F Annual Report F- 2

46 Orascom Development Holding AG Consolidated statement of comprehensive income for the year ended 31 December 2017 CHF Notes CONTINUING OPERATIONS Revenue 6/7 244,445, ,361,504 Cost of sales 7.2 (207,540,762) (226,055,966) GROSS PROFIT 36,904,483 11,305,538 Investment income 9 6,912,718 6,370,112 Other gains 10 11,260,572 3,064,859 Administrative expenses (37,406,435) (46,710,878) Finance costs 11 (35,870,455) (44,800,269) Share of losses of associates 20 (16,910,741) (17,299,645) Other losses 12 (313,038) (147,414,540) (LOSS) BEFORE TAX (35,422,896) (235,484,823) Income tax expense 14 (5,632,519) (8,351,012) (LOSS) FOR THE YEAR (41,055,415) (243,835,835) OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX Items that will not be reclassified subsequently to profit or loss Gain on revaluation of property, plant and equipment reclassified to investment property ,554,571 - Net (loss) on revaluation of financial assets at FVTOCI 1,203,236 (2,666,099) Remeasurement of defined benefit obligation ,430 (14,281) 17,007,237 (2,680,380) Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations (7,862,574) (124,790,087) (7,862,574) (124,790,087) TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX 9,144,663 (127,470,467) Orascom Development Holding AG Consolidated statement of financial position at 31 December 2017 CHF Notes 31 December December 2016 ASSETS NON- CURRENT ASSETS Property, plant and equipment ,121, ,596,957 Investment property 17 7,500,868 5,501,334 Goodwill 18 2,829,971 2,893,347 Investments in associates 20 60,822,300 78,551,111 Non- current receivables 21 38,078,230 42,450,100 Deferred tax assets ,007, ,920 Other financial assets ,388 3,516,633 TOTAL NON- CURRENT ASSETS 876,037, ,502,402 CURRENT ASSETS Inventories ,583, ,960,013 Trade and other receivables 24 68,881,179 55,834,930 Current receivables due from related parties 40 23,715,470 19,930,353 Other current assets 25 45,093,158 40,055,756 Cash and bank balances 26 99,454,931 80,834, ,727, ,616,004 Assets held for sale ,977,030 67,230,735 TOTAL CURRENT ASSETS 471,704, ,846,739 TOTAL ASSETS 1,347,742,646 1,285,349,141 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (31,910,752) (371,306,302) (Loss)/profit attributable to: Owners of the Parent Company (41,361,129) (196,415,554) Non- controlling interests 305,714 (47,420,281) (41,055,415) (243,835,835) Total comprehensive income attributable to: Owners of the Parent Company (34,781,514) (274,771,316) Non- controlling interests 2,870,762 (96,534,986) (31,910,752) (371,306,302) Earnings per share from continuing operations Basic 15 (1.04) (4.86) Diluted 15 (1.04) (4.86) Khaled Bichara Group CEO Ashraf Nessim Group CFO F Annual Report F- 4

47 Orascom Development Holding AG Consolidated statement of financial position at 31 December 2017 CHF Notes 31 December December 2016 EQUITY AND LIABILITIES CAPITAL AND RESERVES Issued capital ,510, ,510,283 Reserves 29 (347,312,031) (365,520,995) (Accumulated losses) 30 (177,726,563) (120,782,194) Equity attributable to owners of the Parent Company 412,471, ,207,094 Non- controlling interests ,135, ,467,237 TOTAL EQUITY 561,607, ,674,331 NON- CURRENT LIABILITIES Borrowings ,966, ,631,013 Trade and other payables 33 11,472,492 11,576,940 Retirement benefit obligation , ,232 Notes payable 358,173 - Deferred tax liabilities ,423,374 22,925,809 TOTAL NON- CURRENT LIABILITIES 145,729, ,780,994 CURRENT LIABILITIES Trade and other payables 33 39,574,361 24,690,585 Borrowings ,782, ,937,486 Due to related parties 40 3,598, ,940 Current tax liabilities ,663,966 2,128,992 Provisions 34 65,558,335 68,626,934 Other current liabilities ,820, ,530, ,998, ,774,923 Liabilities directly associated with assets held for sale 27 84,407,246 54,118,893 TOTAL CURRENT LIABILITIES 640,405, ,893,816 TOTAL LIABILITIES 786,135, ,674,810 TOTAL EQUITY AND LIABILITIES 1,347,742,646 1,285,349,141 Khaled Bichara Group CEO Ashraf Nessim Group CFO Orascom Development Holding AG Consolidated statement of changes in equity for the year ended 31 December 2017 Total Non- controlling interests Attributable to owners of the Parent Company (Accumulated losses) Equity swap settlement Reserve from common control transactions Foreign currency translation reserve General reserve Investments revaluation reserve PP&E revaluation reserve Share- based payment reserve Treasury shares Share premium Issued Capital CHF Balance at 1 January ,510,283 98,570,244 (3,268,681) - - (14,590,160) 4,916,868 (275,993,824) (98,692,949) (2,114,229) 78,164, ,502, ,127, ,629,996 Loss for the year (196,415,554) (196,415,554) (47,420,281) (243,835,835) Other comprehensive income for the year, net of income tax (2,666,099) - (75,675,382) - - (14,281) (78,355,762) (49,114,705) (127,470,467) Total comprehensive income for the year (2,666,099) - (75,675,382) - - (196,429,835) (274,771,316) (96,534,986) (371,306,302) Distribution of ordinary shares - - 3,241, (2,517,189) 724, ,695 Transactions costs in relation to delisting of EDRs in Egypt - (82,000) (82,000) - (82,000) Share- based payments (note 39) , , , ,874,609 4,874,609 Non- controlling interests share in equity of consolidated subsidiaries Balance at 31 December ,510,283 98,488,244 (26,797) 833,333 - (17,256,259) 4,916,868 (351,669,206) (98,692,949) (2,114,229) (120,782,194) 451,207, ,467, ,674,331 Balance at 1 January ,510,283 98,488,244 (26,797) 833,333 - (17,256,259) 4,916,868 (351,669,206) (98,692,949) (2,114,229) (120,782,194) 451,207, ,467, ,674,331 Loss for the year (41,361,129) (41,361,129) 305,714 (41,055,415) Other comprehensive income for the year, net of income tax ,978,470 1,203,236 - (4,851,521) ,430 6,579,615 2,565,048 9,144,663 Total comprehensive income for the year ,978,470 1,203,236 - (4,851,521) - - (41,111,699) (34,781,514) 2,870,762 (31,910,752) - - (5,421,560) (5,421,560) - (5,421,560) Acquisition of ordinary shares through delisting of EDRs (note 1) Distribution of ordinary shares , , , ,727 Share- based payments (note 39) , , ,332 Losses from sale of financial assets at FVTOCI ,880, (15,880,794) (291,390) - - (291,390) 274,409 (16,981) Acquisition of non- controlling interests of subsidiary through swap of shares of investments in associates (note 20) ,523,474 5,523,474 Non- controlling interests share in equity of consolidated subsidiaries Balance at 31 December ,510,283 98,488,244 (4,570,754) 1,666,665 9,978,470 (172,229) 4,916,868 (356,520,727) (98,984,339) (2,114,229) (177,726,563) 412,471, ,135, ,607,571 F Annual Report F- 6

48 Orascom Development Holding AG Consolidated cash flow statement for the year ended 31 December 2017 CHF Notes Orascom Development Holding AG Consolidated cash flow statement for the year ended 31 December 2017 CHF Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year (41,055,415) (243,835,835) Adjustments for: Income tax expense recognized in profit or loss ,632,519 8,351,012 Share of losses of associates 20 16,910,741 17,299,645 Finance costs recognized in profit or loss 11 35,870,455 44,800,269 Investment income recognized in profit or loss 9 (6,912,718) (6,370,112) Write down on inventory 23-13,529,631 Impairment loss on receivables and other current assets 24-6,360,984 Reversal of impairment loss on trade receivables ,435 (109,181) Impairment loss of receivables on acquisition of subsidiary - 843,588 Impairment loss on property, plant and equipment 12/16-18,611,089 Gain on sale or disposal of property, plant and equipment 10 (17,255) (14,944) Gain in relation to settlement of borrowings 10 (6,313,871) - Gain on disposal of financial investments 10 - (2,888,614) Gain on revaluation of investment properties 17 (616,649) (161,301) Depreciation and amortization of non- current assets 16 24,458,515 35,958,484 Share- based payments , ,333 Unrealized net foreign exchange losses (4,299,773) 113,243,690 MOVEMENTS IN WORKING CAPITAL (Increase) in trade and other receivables (679,305) (26,113,426) Decrease/(increase) in finance lease receivables 4,759,269 (1,800,511) (Increase) in inventories 5,173,473 7,344,753 (Increase)/decrease in other assets (10,858,228 15,628,489 Increase/(decrease) in trade and other payables 56,071 (5,316,634) (Decrease) in provisions (3,068,599) (14,458,403) Increase in other liabilities 9,335,427 22,891,260 Cash generated by operations 29,994,424 4,627,266 Interest paid (7,815,303) (9,701,214) Income tax paid (3,209,708) (3,980,401) Net cash generated by/(used in) operating activities 18,969,413 (9,054,349) CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment 16 (37,156,116) (41,684,521) Proceeds from disposal of property, plant and equipment - 452,858 Proceeds on sale of financial assets 3,341,013 2,888,614 Interest received 1,919,593 6,370,112 Net cash inflow from acquisition of subsidiaries 36-2,516,016 Net cash (used in) investing activities (31,895,509) (29,456,921) CASH FLOWS FROM FINANCING ACTIVITIES Payments for transaction costs due to capital increase (1,873,095) Payments for treasury shares (5,421,560) - Non- controlling interests shares in change of equity for consolidated subsidiaries 31 5,523,475 4,874,609 Repayment of borrowings 32 (21,114,120) (45,695,877) Proceeds from borrowings 32 57,011,138 18,013,828 Net cash generated by/(used in) financing activities 35,998,933 (24,680,535) Net increase/(decrease) in cash and cash equivalents 23,072,836 (63,191,805) Cash and cash equivalents at the beginning of the year 82,172, ,636,917 Effects of exchange rate changes on the balance of cash held in foreign currencies (1,573,515) (22,272,800) Cash and cash equivalents at the end of the year 103,671,633 82,172,312 Included in cash and cash equivalents 26 99,454,931 80,834,952 Included in assets held for sale 27 4,216,702 1,337,360 F Annual Report F- 8

49 Index to the notes to the consolidated financial statements Page 1 General information 10 2 Application of new and revised International Financial Reporting Standards 10 3 Significant accounting policies 14 4 Critical accounting judgments and key sources of estimation uncertainty 26 5 The group and major changes in group entities 28 6 Revenue 28 7 Segment information 28 8 Employee benefits expense 32 9 Investment income Other gains Finance costs Other losses Compensation of key management personnel Income taxes relating to continuing operations Earnings per share Property, plant and equipment Investment property Goodwill Subsidiaries Investments in associates Non- current receivables Other financial assets Inventories Trade and other receivables Other current assets Cash and cash equivalents Assets held for sale Capital Reserves (net of income tax) (Accumulated losses) Non- controlling interests Borrowings Trade and other payables Provisions Other current liabilities Acquisition of a subsidiary Retirement benefit plans Financial instruments Share- based payments Related party transactions Non- cash transactions Operating lease arrangements Commitments for expenditure Litigation Subsequent events Approval of financial statements 75 Notes to the consolidated financial statements for the year ended 31 December GENERAL INFORMATION Orascom Development Holding AG ( ODH or the Parent Company ), a limited company incorporated in Altdorf, Switzerland, is a public company whose shares are traded on the SIX Swiss Exchange. In addition, Egyptian Depository Receipts ( EDRs ) of the Parent Company were traded at the EGX Egyptian Exchange. One EDR represents 1/20 of an ODH share. On 1 March 2017, the Extraordinary General Meeting of ODH approved the Board of Directors' proposal regarding the voluntary delisting of the Egyptian Depositary Receipts (EDRs) from the Egyptian Exchange. The Board of Directors called the meeting in accordance with the requests of the relevant authorities in Egypt to present to the shareholders of the Company the proposal to approve the delisting. Based on the Extraordinary General Meeting's approval, the Company undertook all further actions required to complete the delisting of the EDRs. On 24 May 2017, the Listing Committee of the Egyptian Exchange approved the delisting, which was completed as at 30 May The majority of the EDR holders have chosen to swap their EDRs into shares of ODH that had previously been underlying the EDRs and only 9.9% out of the 189,123,620 EDRs were tendered to the Company for repurchase at a price of EGP 5.25 (CHF 0.29) per EDR or CHF 5.79 per ODH share. As a result, the Company acquired 935,486 own shares at the total value of CHF 5.4 million. The ODH shares remain listed at the SIX Swiss Exchange. The Company and its subsidiaries (the Group ) is a leading developer of fully integrated towns that include hotels, private villas and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group s diversified portfolio of projects is spread over seven jurisdictions, with primary focus on touristic towns and recently affordable housing. The Group's diversified portfolio of destinations is spread over seven jurisdictions (Egypt, UAE, Oman, Switzerland, Morocco, Montenegro and United Kingdom), with primary focus on touristic destinations. The Group currently operates nine destinations; four in Egypt (El Gouna, Taba Heights, Fayoum Makadi, and Harram City), The Cove in the United Arab Emirates, Jebel Sifah and Salalah Beach in Oman, Luštica Bay in Montenegro and Andermatt in Switzerland. The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report. 2 APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS ( IFRS ) 2.1 Amendments to IFRSs and the new Interpretation that are mandatorily effective for the current year In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for the current year. None of the revised Standards and the new Interpretation has had a material effect on these consolidated financial statements. The details of the revised Standards and the new Interpretation are as follows: Amendments to IFRS 12 Disclosure of Interests in Other Entities The Group has applied the amendments to IFRS 12 Disclosure of Interests in Other Entities for the first time in the current year. The amendment to IFRS 12 Disclosure of Interests in Other Entities clarifies the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10- B16, apply to an entity s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5. The application of these amendments has had no impact on the disclosures or on the amounts recognised in the Group s consolidated financial statements. Amendments to IAS 7 Statement of Cash Flows Disclosure Initiative The Group has applied the amendments to IAS 7 Statement in Cash Flows in relation to the disclosure initiative for the first time in the current year. IAS 7 Statement of Cash Flows is amended to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non- cash changes. The application of these amendments led to the reconciliation table shown within note 32.3 but did not have any impact on the amounts recognised in the Group s consolidated financial statements. Consistent with the transition provisions of the amendments, the Group has not disclosed comparative information for the prior period. F Annual Report F- 10

50 Amendments to IAS 12 Income Taxes The Group has applied the amendments to IAS 12 Income Taxes in relation to the recognition of deferred tax assets for unrealised losses for the first time in the current year. IAS 12 Income Taxes is amended to clarify the following aspects: - Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use. - The carrying amount of an asset does not limit the estimation of probable future taxable profits. - Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. - An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. The application of these amendments has had no impact on the disclosures or on the amounts recognised in the Group s consolidated financial statements. 2.2 Standards and Interpretations in issue but not yet effective At the date of authorisation of these consolidated financial statements, the Group has not adopted the following Standards and Interpretations that have been issued but are not yet effective. They will be effective for annual periods beginning on or after the dates indicated below, with earlier application permitted. IFRS 9 Financial Instruments 1 January 2018 IFRS 15 Revenue from Contracts with Customers (and the related clarifications) 1 January 2018 IFRS 16 Leases 1 January 2019 Amendments to IFRS 2 Classification and Measurement of Share- based Payment Transactions 1 January 2018 Amendments to IFRS 9 Prepayment Features with Negative Compensation 1 January 2019 Amendments to IAS 19 Plan Amendment, Curtailment or Settlement 1 January 2019 Amendments to IAS 28 Sale or Contribution of Assets between an investor and its Associate 1 January 2019 Amendments to IAS 40 Transfer of Investment Property 1 January 2018 Various Annual Improvements to IFRS Standards Cycle 1 January 2019 IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 IFRS 9 Financial Instruments The Group has not yet applied the requirements for general hedge accounting (issued in November 2013), another revised version of IFRS 9 issued in July 2014 which mainly includes a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a fair value through other comprehensive income (FVTOCI) measurement category for certain simple debt instruments. As the Group does not apply hedge accounting and does not measure any simple debt instruments at FVTOCI, the only requirements of IFRS 9, which are not yet applied by the Group are those on impairment of financial assets. IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Trade and other receivables (note 24), which are measured at amortised cost, are mainly impacted by the impairment provisions of IFRS 9. The Group will apply the simplified approach to recognise lifetime expected credit losses for its trade and other receivables as required or permitted by IFRS. For all other financial assets, the Group expects to recognise 12- month expected credit losses if there are any in the future. In general, management of the Group anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses and will increase the amount of bad debt allowance. IFRS 15 Revenue from Contracts with Customers The new Standard IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5- step approach to revenue. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. Unlike the scope of IAS 18, the recognition and measurement of interest income and dividend income from debt and equity investments are no longer within the scope of IFRS 15. Instead, they are within the scope of IFRS 9 Financial Instruments. In April 2016, the IASB issued Clarifications to IFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. The Group recognises revenue from the following sources: Revenue from rendering of services and rental income which includes various revenue streams in relation hotel services, destination managements and other operations directly related to managing holiday destinations; Revenue from real estate constructions; and Revenue from land sales So far, revenue from construction of real estate was recognised over time using a milestone approach. Under the new requirements of IFRS 15, land related to the construction of villas is recognised when the land is sold (point in time) whereas all other revenue from construction of apartment units and villas are recognised over time using a percentage of completion approach (output method). Management expects, that this results in revenue recognised earlier under the new revenue requirements compared to the actual revenue requirements, however the detailed analyses are not yet finalised. On transition to IFRS 15, management decided to apply the modified approach, where any impact on initial application of IFRS 15 are recognised through retained earnings as at 1 January 2018 and prior year comparatives are therefore not adjusted. For all other revenue streams, management does not expect any significant impact, except for additional disclosures in the notes to the consolidated financial statements. The presentation and disclosure requirements in IFRS 15 are more detailed than under current IFRS. The presentation requirements represent a significant change from current practice and significantly increases the volume of disclosures required in the Group s consolidated financial statements. IFRS 16 Leases The new Standard provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. It supersedes IAS 17 Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between leases and service contracts on the basis of whether there is an identified asset controlled by the customer. Significant changes to lessee accounting are introduced, with the distinction between operating and finance leases removed and assets and liabilities recognised in respect of all leases (subject to limited exceptions for short- term leases and leases of low value assets). In contrast, the Standard does not include significant changes to the requirements for accounting by lessors. As at 31 December 2017, the Group has non- cancellable operating lease commitments of CHF 3.7 million. IAS 17 does not require the recognition of any right- of- use asset or liability for future payments for these leases; instead, certain information is disclosed as operating lease in note 42. A first assessment indicates that these arrangements will meet the definition of a lease under IFRS 16 and therefore the Group will recognise a right- of- use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short- term leases upon the application of IFRS 16. Even though it is not practicable to provide a reasonable estimate of the financial effect until management of the Group completes their review, the new requirements are expected to have some impact on the amounts recognised in the Group s consolidated financial statements. In contrast, for finance leases where the Group is a lessee and in cases where the Group is a lessor (for both operating and finance leases), management of the Group does not anticipate that the application of IFRS 16 will have a significant impact on the amounts recognised in the Group s consolidated financial statements. It is expected that the Group will apply the modified retrospective approach, which would mean that the cumulative effect of initially applying the standard is recognised at the date of initial application and there is no restatement of comparative information. Amendments to IFRS 2 Share- based Payments Amends IFRS 2 Share- based Payment to clarify the standard in relation to the accounting for cash- settled share- based payment transactions that include a performance condition, the classification of share- based payment transactions with net settlement features, and the accounting for modifications of share- based payment transactions form cash- settled to equity- settled. Management of the Group does not expect any significant changes from the amended Standard. Amendments to IFRS 9 Financial Instruments Amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Management of the Group does not expect any significant changes from the amended Standard. F Annual Report F- 12

51 Amendments to IAS 19 Employee Benefits The amendments in Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) are: if a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement. in addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. Management of the Group does not expect any significant changes from the amended Standard. Amendments to IAS 28 Investments in Associates and Joint Ventures The amendment clarifies that an entity applies IFRS 9 Financial Instruments to long- term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. Management of the Group does not expect any significant changes from the amended Standard. Amendments to IAS 40 Investment Property Amend IAS 40 Investment Property to state that and entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management s intentions for the use of a property by itself does not constitute evidence of a change in use. The list of examples of evidence is now presented as a non- exhaustive list of examples instead of the previous exhaustive list. Management of the Group does not expect any significant changes from the amended Standard. Annual Improvements to IFRS Standards Cycle Makes amendments to the following standards: IFRS 3 and IFRS 11 - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. IAS 12 - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. IAS 23 - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. Management of the Group does not expect any significant changes from the amended Standards. IFRIC 22 Foreign Currency Transactions and Advance Consideration The interpretation addresses foreign currency transactions or parts of transactions where: there is consideration that is denominated or priced in a foreign currency; the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and the prepayment asset or deferred income liability is non- monetary. The Interpretations Committee came to the following conclusion: the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non- monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. Management of the Group does not expect any significant changes from this new interpretation. IFRIC 23 Uncertainty over Income Tax Treatments The interpretation addresses the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. It specifically considers: whether tax treatments should be considered collectively assumptions for taxation authorities' examinations the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates the effect of changes in facts and circumstances Management of the Group does not expect any significant changes from this new interpretation. 3 SIGNIFICANT ACCOUNTING POLICIES 3.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). 3.2 Basis of preparation The consolidated 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 and investment properties that are measured at fair value as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The principal accounting policies are set out below. 3.3 Basis of consolidation The consolidated financial statements of the Group incorporate the financial statements of the Parent Company and entities (including special purpose entities) controlled by the Parent Company (its subsidiaries). Control is achieved when the Company has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its returns The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: The size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Company, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non- controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non- controlling interests even if this results in the non- controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of a group entity to bring its accounting policies into line with the Group s accounting policies. All intra- group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group's ownership interests in existing subsidiaries Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non- controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non- controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Parent Company. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received or receivable and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non- controlling interests. When assets of the subsidiary are carried at re- valued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Parent Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. 3.4 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition- date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition- related costs are generally recognised in profit or loss as incurred. F Annual Report F- 14

52 At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; liabilities or equity instruments related to share- based payment arrangements of the acquiree or share- based payment arrangements of the Group entered into to replace share- based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share- based Payment at the acquisition date; and 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 are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition- date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition- date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non- controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non- controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction- by- transaction basis. Other types of non- controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is re- measured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3. The policy described above is applied to all business combinations that took place on or after January For common control transactions in which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not transitory, the Group recognises the difference between purchase consideration and carrying amount of net assets of acquired entities or businesses as an adjustment to equity. This accounting treatment is also applied to later acquisitions of some or all shares of the non- controlling interests in a subsidiary. 3.5 Investments in associates An associate is an entity over which the Group has significant influence and 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 is not control or joint control over those policies. The results, assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate. When the Group's share of losses of an associate exceeds 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 the associate), the Group discontinues recognising its share of further losses. Additional losses 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 an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount 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 profit or loss. The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. 3.6 Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 3.4) less accumulated impairment losses, if any. synergies of the combination. When assessing each unit or group of units to which the goodwill is so allocated, the Group s objective is to test goodwill for impairment at a level that reflects the way the Group manages its operations and with which the goodwill would naturally be associated under the reporting system in place. A cash- generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than its carrying amount, 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 based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods. The Group s policy for goodwill arising on the acquisition of an associate is described in note Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Different policies for revenue recognition apply across the Group's business segments. The following table shows the link between the accounting policies for revenue recognition and segment information. Accounting policies Revenue on sale of land Sale of land Segments classified by type of activity Revenue from agreements for construction of real estate Real estate and construction Construction revenue Real estate and construction Revenue from the rendering of services Hotels Destination management Other operations Dividend and interest income Other operations Rental income Other operations Revenue on sale of land Revenue from sale of land, sale of land right and associated cost are recognised when land is delivered and the significant risks, rewards of ownership and control have been transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Management uses its judgment and considers the opinion obtained from the legal advisors in assessing whether the Group s contractual and legal rights and obligations in the agreements are satisfied and the above criteria are met Revenue from agreements for construction of real estate Management uses its judgment to analyze the Group's agreements for the construction of real estate and any related agreements to conclude whether or not the contractual terms of such agreements indicate that they are, in substance, for the provision of construction services or for the delivery of goods that are not complete at the time of entering into the agreement. Such conclusion depends on the terms of the agreement and all the surrounding facts and circumstances and on whether such an agreement meets the definition of a construction contract, as described in below. In accordance with IFRIC 15, an agreement for the construction of real estate will meet the definition of a construction contract when the buyer is able to specify the major structural elements of the design of the real estate before construction begins and / or specify major structural changes once construction is in progress, whether it exercises that ability or not. Where such conditions are met, revenue and costs associated with such contracts are accounted for in accordance with IAS 11 Construction Contracts (see 3.7.3). Where an agreement for the construction of real estate does not meet the definition of a construction contract and is not for the rendering of services, then it is accounted for as a sale of goods under the scope of IAS 18 Revenue. Management concluded that all contracts entered into for the construction of real estate meet the revenue recognition criteria for the sale of goods. Accordingly, revenue from the sale of real estate is recognised when all the following conditions are satisfied: the Group has transferred to the buyer the significant risks and rewards of ownership of the real estate, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the real estate sold, the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity. For the purposes of impairment testing, goodwill acquired in a business combination is allocated, starting from the acquisition date, to each of the Group s cash- generating units (or groups of cash- generating units) that is expected to benefit from the F- 16 F Annual Report F- 16

53 3.7.3 Construction revenue A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in term of their design, technology and function or their ultimate purpose or use. 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 end of the reporting period measured based on the completion of a physical proportion of the contract work. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer, their amount can be measured reliably and its receipt is considered probable. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that is probable to be recovered. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When contract costs incurred to date plus recognized profits less recognized losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized profits less recognized losses, the surplus is shown as amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statement of financial position under trade and other receivables. Construction contract revenue comprises revenue arising from finishing of sold units, extra works requested by customers and any construction agreement with third parties Revenue from the rendering of services Revenue from services is recognised in the accounting periods in which the services are rendered Dividend and interest income Dividend income from investments other than in associates is recognised when the shareholder s right to receive payment has been established, provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on original recognition Rental income The Group s policy for recognition of revenue from operating leases is described in Cost of sales Cost of sales comprises costs related directly to the sale of goods or rendering of services. These costs include also administration expenses of revenue generating entities in the Group. Under administration expenses are costs allocated for corporate and head quarter functions as well as non revenue generating entities, such as corporate companies, holding companies and start up companies. Companies providing these services are marked as HQ in the subsidiaries' list in note Leasing Leases are classified as finance leases whenever the terms of the lease substantially transfer all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases The Group as lessor Amounts due from lessees under finance leases are recognised 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. Rental income from operating leases is recognized on a straight- line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight- line basis over the lease term The Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group s general policy on borrowing costs (see 3.10 below). Contingent rentals are recognised as expenses in the periods in which they are incurred. If a sale and leaseback transaction results in a finance lease, the asset is recognized at its previous carrying amount and any gain/loss recognized over the lease term. In case of a loss, management assesses whether the asset is impaired. Operating lease payments are recognised as an expense on a straight- line basis over the lease term, except when another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight- line basis, except when another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 3.9 Foreign currencies The individual financial statements of each subsidiary are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the preparation of the Group s consolidated financial statements, the results and financial position of each subsidiary are translated into Swiss Franc (CHF), which is the Group s presentation currency. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that 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 on monetary items are recognised in profit or loss in the period in which they arise except for: Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; Exchange differences on monetary items that qualify as hedging instruments in transactions entered into to hedge certain foreign currency risks (see below for hedging accounting policies); and Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group s foreign operations are translated into Swiss Francs (CHF) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the Group s foreign currency reserve, a separate component in equity (attributed to non- controlling interests as appropriate). On the disposal of a foreign operation (i.e. disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in other comprehensive income in respect of that operation attributable to the owners of the Parent are reclassified to profit or loss. In the case of a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re- attributed to non- controlling interests and are not recognized in profit or loss. For all other partial disposals (i.e. reductions in the Group's ownership interest in associates that do not result in the Group losing significant influence), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the end of each reporting period. Exchange differences arising are recognised in equity. The exchange rates for the major foreign currencies against CHF relevant to the annual consolidated financial statements were: Currency table Average Year end Average Year end 1 EGP Egyptian Pound USD US Dollar EUR Euro OMR Oman Rial AED United Arab Emirates Dirham MAD Moroccan Dirham JOD Jordanian Dinar F Annual Report F- 18

54 3.10 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. The following principles apply when borrowing costs are partly or fully capitalized by the Group as part of a qualifying asset: Where hedge accounting is not applied to minimize the interest rate risk on borrowings used to fund that asset and, therefore derivatives are classified as at fair value through profit or loss, all gains / losses on non- hedging derivatives are immediately recognized in profit or loss. Where variable rate borrowings are used to finance a qualifying asset and a derivative is designated to cash flow hedge the variability in interest rates on such borrowings, any gain or loss on the hedging derivative that is effective and, therefore previously recognized in other comprehensive income, is reclassified from equity to profit or loss when the hedged risk impacts profit or loss. The hedged interest component of the qualifying asset (hedged risk) impacts profit or loss when the qualifying asset is amortized, impaired or sold. Where fixed rate borrowings are used to finance a qualifying asset and a derivative is designated to hedge the fair value exposure to changes in interest rates of such borrowings, the synthetic floating interest rate that is achieved as a result of a highly effective hedge is capitalized, so that borrowing costs always reflect the hedged interest rate. The amount of borrowing costs capitalized in such a case comprises the actual fixed rate on the borrowings plus the effect of swapping this fixed rate into floating rates. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. As the financing activity is co- ordinated centrally and generally by the parent and some of the main subsidiaries, the group determines the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The group includes all borrowings of the parent and its subsidiaries when computing the weighted average of the borrowing costs applicable to the borrowings that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that an entity capitalises during the period shall not exceed the amount of borrowing costs it incurred during that period, provided that the carrying amount of the qualifying asset on which eligible borrowing costs have been capitalized does not exceed its recoverable amount (being the higher of fair value less costs to sell or amount in use for that asset) Retirement benefit costs Employee pension and retirement benefits are based on the regulations and prevailing circumstances of those countries in which the Group is represented. In Switzerland, ordinary pension and retirement benefit plans qualify as defined- benefit plans and are accounted for in conformity with IAS 19 Employee Benefits. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Actuarial gains and losses are recognized immediately through other comprehensive income, whereas past service- costs (vested and unvested) are recognized immediately in profit or loss. The retirement benefit obligation recognised in the consolidated statement of financial position represents the present value of the defined benefit obligation reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan. Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contribution Taxation Income tax expense represents the sum of the tax currently payable and deferred tax Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the Balance Sheet Liability Method. Such deferred tax liabilities are not recognised if the temporary difference arises from goodwill and no deferred tax assets or liabilities are recognised for temporary differences resulting from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis Current and deferred tax for the year Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination Property, plant and equipment Buildings, plant and equipment, furniture and fixtures held for use in the production, supply of goods or services or for administrative purposes are stated in the consolidated statement of financial position at cost less any accumulated depreciation and accumulated impairment losses. Properties in the course of construction for production, administrative purposes or for a currently undetermined future use are carried at cost less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Group s accounting policy as described in note Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation of buildings, plant and equipment as well as furniture and fixtures commences when the assets are ready for their intended use. Freehold land is not depreciated. Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their estimated useful lives, using the straight- line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership of the leased asset will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the net sales proceeds and the carrying amount of the asset and is recognised in profit or loss. The following estimated useful lives are used in the calculation of depreciation: Buildings Plant and equipment Furniture and fixtures years 4 25 years 3 20 years Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. F Annual Report F- 20

55 3.14 Investment property Investment properties are properties (land or a building or part of a building or both) held by the Group entities to earn rentals and / or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value at the end of each reporting period. Gains and losses arising from changes in the fair value of investment properties are recognised in profit or loss including an adjustment to the related deferred tax position in the period in which they arise. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The fair value of investment properties reflects market conditions at the end of each reporting period and is determined without any deduction for transaction costs which the Group may incur on sale or other disposal. The fair value of investment properties is determined based on evaluations performed by independent valuators or internal valuations. Property is only transferred to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. If property becomes an investment property which is carried at fair value, any difference at the date of change in use between the carrying amount of the property and its fair value is recognised through other comprehensive income. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de- recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised Impairment of tangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine 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. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. 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 (or cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or 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 (or cash- generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss Inventories Inventories are stated at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable production overheads as well as other costs incurred in bringing the inventories to their present location and condition, are assigned to inventories by the method most appropriate to the particular class of inventory, with the majority being valued on a weighted average basis. For items acquired on credit and where payment terms of the transaction are extended beyond normal credit terms, the cost of that item is its cash price equivalent at the recognition date with any difference from that price being treated as an interest expense on an effective- yield basis (see note 11). Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Estimates of net realisable value are generally made on an item- by- item basis, except in circumstances, where it is more appropriate to group items of similar or related inventories. The net realizable value of an item of inventory may fall below its cost for many reasons including, damage, obsolescence, slow moving items, a decline in selling prices, or an increase in the estimate of costs to complete and costs necessary to make the sale. In such cases, the cost of that item is written- down to its net realizable value and the difference is recognized immediately in profit or loss. Properties intended for sale in the ordinary course of business or in the process of construction or development for such a sale are included in inventories. These are stated at the lower of cost and net realizable value. The cost of development properties includes the cost of land and other related expenditure attributable to the construction or development during the period in which activities are in progress that are necessary to get the properties ready for its intended sale Provisions Provisions 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When 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 (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a 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 Financial instruments Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the timeframe established by regulation or convention in the market place. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets Classification of financial assets Debt instruments that meet the following conditions are subsequently measured at amortised cost less impairment loss (except for debt investments that are designated as at fair value through profit or loss on initial recognition): the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at fair value Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees or points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments measured subsequently at amortised cost. Interest income is recognised in profit or loss and is included in the investment income line item Financial assets at fair value through other comprehensive income (FVTOCI) On initial recognition, the Group can make an irrevocable election (on an instrument- by- instrument basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading. A financial asset is held for trading if: it has been acquired principally for the purpose of selling it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a recent actual pattern of short- term profit- taking; or it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the investments. The Group has designated all investments in equity instruments that are not held for trading as at FVTOCI on initial application of IFRS 9. F Annual Report F- 22

56 Dividends on these investments in equity instruments are recognised in profit or loss when the Group s right to receive the dividends is established in accordance with IAS 18 Revenue. Dividends earned are recognised in profit or loss and are included in the investment income line item Financial assets at fair value through profit or loss (FVTPL) Investments in equity instruments are classified as at FVTPL, unless the Group designates an investment that is not held for trading as at fair value through other comprehensive income (FVTOCI) on initial recognition. Debt instruments that do not meet the amortised cost are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL. Debt instruments are reclassified from amortised cost to FVTPL when the business model is changed such that the amortised cost criteria are no longer met. Reclassification of debt instruments that are designated as at FVTPL on initial recognition is not allowed. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss is included in the 'other gains and losses' line item in the consolidated statement of comprehensive income. Fair value is determined in the manner described in note Interest income on debt instruments as at FVTPL is included in the net gain or loss described above. Dividend income on investments in equity instruments at FVTPL is recognised in profit or loss when the Group's right to receive the dividends is established in accordance with IAS 18 Revenue and is included in the net gain or loss as described above Impairment of financial assets Financial assets that are measured at amortised cost are assessed for impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as a default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re- organisation; or the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, 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 of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows reflecting the amount of collateral and guarantee, 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 profit or loss. 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 profit or loss 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 De- recognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when 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 and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset measured at amortised cost, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. On derecognition of a financial asset that is classified as FVTOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is reclassified to retained earnings Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met: a) The instrument includes no contractual obligation: i. to deliver cash or another financial asset to another entity; or ii. to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the issuer. b) If the instrument will or may be settled in the issuer s own equity instruments, it is: i. a non- derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments; or ii. a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. A contract that will be settled by the Group entity receiving or delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or another financial asset is an equity instrument. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company s own equity instruments Financial liabilities All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. A financial liability is classified as current liability when it satisfies any of the following criteria: It is expected to be settled in the entity s normal operating cycle It is held primarily for the purposes of trading; It is due to be settled within twelve months after the reporting period; The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. All other financial liabilities are classified as non- current. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Group, and commitments issued by the Group to provide a loan at below- market interest rate are measured in accordance with the specific accounting policies set out below. Financial liabilities subsequently measured at amortised cost Financial liabilities that are not held- for- trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the 'finance costs' line item. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non- cash assets transferred or liabilities assumed, is recognised in profit or loss Derivative financial instruments If required, the Group enters into derivative financial instruments mainly to manage its exposure to interest rate and foreign exchange rate risk. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re- measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or F Annual Report F- 24

57 loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial liability. A derivative that has a remaining maturity of less than twelve months from the end of the reporting period or has a remaining maturity greater than twelve months but is expected to be settled within twelve months is presented as current asset or liability. A derivative that is designated and effective in a hedging relationship with a non- current hedged item is presented as a non- current asset or liability in accordance with the presentation of the hedged item. A derivative that has a maturity of more than twelve months from the end of the reporting period and is not intended to be settled within twelve months is presented as a non- current asset or liability, even if that derivative is not part of a designated and effective hedge accounting Assets held for sale Non- current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non- current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When a Group entity acquires a non- current asset (or disposal group) exclusively with a view to its subsequent disposal, it classifies the non- current asset (or disposal group) as held for sale at the acquisition date only if the one- year requirement above is met and it is highly probable that the other criteria above that are not met at that date will be met within a short period following the acquisition. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non- controlling interest in its former subsidiary after the sale. Non- current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. When the above criteria required for the held for sale classification are no longer met, the Group ceases to classify the asset (or disposal group) as held for sale. At that date, the Group measures any non- current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at the lower of: Its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or revaluations that would have been recognized had the asset (or disposal group) not been classified as held for sale; and Its recoverable amount at the date of subsequent decision not to sell. The Group includes any required adjustment to the carrying amount of a non- current asset (or disposal group), that ceases to be classified as held for sale, in profit or loss from continuing operations in the period in which the criteria of held for sale classification are no longer met. The Group presents that adjustment in the same caption in the statement of comprehensive income used to present any gain or loss recognized on the remeasurement of that non- current asset (or disposal group) that had been previously classified as held for sale provided that it had not met the definition of a discontinued operation upon initial classification as held- for- sale. Comparative figures in the financial statements for prior periods presented are not restated as a result of the change in the plan to sell unless the non- current asset (or disposal group) had previously met the definition of a discontinued operation, in which case, the results of operations of the component previously presented in discontinued operations is reclassified and included in income from continuing operations for the prior period presented in the statement of comprehensive income. This also applies to the presentation of the statement of cash flows Share- based payment arrangements Share- based payment transactions of the Parent Company Share- based payment transactions in which the terms of the arrangement provide the entity with the choice to settle the transaction in cash (or other assets) or in equity instruments issued by the entity, are accounted for as a cash- settled share- based payment transaction if, and to the extent that, the entity has incurred a liability to settle in cash or other assets, or as an equity- settled share- based payment transaction if, and to the extent that, no such liability has been incurred. Share- based payment arrangements whose terms provide the Company with the choice to settle the transaction in cash or, at its discretion, in its own equity shares issued to employees are accounted for as equity- settled and measured at the fair value of the contingent consideration by reference to the market price of the Company's equity shares at the grant date. Details regarding the determination of the fair value of equity- settled share- based payment transaction are set out in note 39. The fair value determined at the grant date of the equity- settled share- based payments is expensed on a straight- line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimate, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity- settled share- based payment reserve in equity. Upon settlement of a share- based payment transaction in which the terms of the arrangement provide the entity with a choice of settlement, then: if the entity elects to settle in cash, the cash payment is accounted for as the repurchase of an equity interest (i.e. as a deduction from equity, except as noted in (c) below. if the entity elects to settle by issuing equity instruments, no further accounting is made (other than a transfer from one component of equity to another, if necessary), except as noted in (c) below. if the entity elects the settlement alternative with the higher fair value, as at the date of settlement, an additional expense is recognized for the excess value given (i.e. the difference between the cash paid and the fair value of the equity instruments that would otherwise have been issued, or the difference between the fair value of the equity instruments issued and the amount of cash that would otherwise have been paid, whichever is applicable. 4 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. 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. 4.1 Critical judgments in applying accounting policies The following are the critical judgments, apart from those involving estimations (see note 4.2), that management has made in the process of applying the Group s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements Revenue recognition Real estate sales The operating cycle of residential construction projects predominantly starts when the Group enters into agreements to sell the real estate units off- plan. The Group treats the sale of real estate units as sale of goods in accordance with IAS 18 Revenue and IFRIC 15 Agreements for the Construction of Real Estates. Management takes the view that the critical event of revenue recognition hinges on the transfer of significant risks and rewards of ownership and control to the buyer. When management makes this assessment it ensures that the detailed criteria for revenue recognition from the sale of goods as set out in IAS 18 and IFRIC 15 - including the transfer of significant risks and rewards of ownership and control to the buyer - are satisfied and that recognition of revenue from the sale of real estate is appropriate in the current reporting period. Given the structure of the real estate sale contracts and the application of IAS 18 and IFRIC 15 as described above, revenue recognition from residential construction projects can occur in independent stages which consist of the sale of land, constructed, but unfinished units and finished units. The transfer of significant risks and rewards of ownership and control of each stage is documented in an official delivery protocol and signed by representatives of the Group as well as the buyer Deferred taxation on investment property For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties management concluded that the Group s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sales. Therefore, in determining the Group s deferred taxation on investment properties, management has determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recovered entirely through sale is rebutted. As a result, the Group has recognised deferred taxes on changes in fair value of investment properties. 4.2 Key sources of estimation uncertainty The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year Impairment of tangible assets and investments in associates At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets and investments in associates to determine 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 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 F- 26 F Annual Report F- 26

58 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. In light of the political development in Egypt, management reconsidered the recoverability of the Group's significant items of property, plant and equipment and its investments in associates, which are included in the consolidated statement of financial position at 31 December 2017 at CHF 765,121,094 and CHF 60,822,300 respectively (31 December 2016: CHF 762,596,957 and CHF 78,511,111). In 2016, the impairment reviews resulted in total impairment losses of CHF 18.6 million on property under construction. The impairment reviews in 2017 did not result in any impairment losses of property, plant and equipment or investments in associates. Management is aware that the slow- down in processes and logistics still impacts the business operations considerably. Therefore, they periodically reconsider their assumptions in light of the macroeconomic developments regarding future anticipated margins on their products. Detailed sensitivity analysis has been carried out and management is confident that the carrying amount of these assets will be recovered in full, even if returns are reduced. This situation will be closely monitored, and adjustments made in future periods if future market activity indicates that such adjustments are appropriate Useful lives of property, plant and equipment The carrying value of the Group's property, plant and equipment at the end of the current reporting period is CHF 765,121,094 (31 December 2016: CHF 762,596,957). Management s assessment of the useful life of property, plant and equipment is based on the expected use of the assets, the expected physical wear and tear on the assets, technological developments as well as past experiences with comparable assets. A change in the useful life of any asset may affect the amount of depreciation that is to be recognized in profit or loss for future periods Provisions The carrying amount of provisions at the end of the current reporting period is CHF 65,558,335 (31 December 2016: CHF 68,626,934). This amount is based on estimates of future costs for infrastructure completion, legal cases, government fees, employee benefits and other charges including taxes in relation to the Group s operations (see note 34). As the provisions cannot be determined exactly, the amount could change based on future developments. Changes in the amount of provisions due to change in management estimates are accounted for on a prospective basis and recognized in the period in which the change in estimates arises Impairment of trade and other receivables An allowance for doubtful receivables is recognized to record foreseeable losses arising from events such as a customer s insolvency. The carrying amount of the allowance for trade and other receivables at the end of the current reporting period is CHF 17,692,833 (31 December 2016: CHF 18,340,388) (see note 24). In determining the amount of the allowance, several factors are considered. These include the aging of accounts receivables balances, the current solvency of the customer and the historical write- off experience Classification and valuation of investment property Generally real estate units are constructed either for the Group s own use or for the sale to third parties and carried at cost. However, when a unit may not be sold, as soon as a long term rent contract over more than 1 year is agreed with a third party at market conditions, the unit is classified as an investment property and measured at the fair value obtained from independent, third party valuation experts. The fair value of investment properties at 31 December 2017 is CHF 7,500,868 (31 December 2016: CHF 5,501,334). The fair values at 31 December 2017 were determined based on an internal valuation model. Note 17 provides detailed information about the valuation techniques applied and the key assumptions used in the determination of the fair value of each investment property Net realisable value of inventory Inventory mainly includes real estate construction work under progress which is recognised at cost or net realisable value. The majority of real estate under construction (approximately three quarters) is already sold at market prices which are significantly higher than construction cost. Therefore, the estimation uncertainty only relates to the unsold real estate under construction. In general, the profit margins on these real estate projects are high and management currently does not expect any of these projects to be sold below cost except for the following: In 2017, no impairment (2016: CHF 13.5 million) was made in relation to inventory of development projects Infrastructure cost The 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 of the future budgeted costs to be incurred in relation to the project including, but are not limited to, future subcontractor costs, estimated labour costs, and planned other material costs. 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 Liquidity shortages and related uncertainties For further details on management s plans to manage liquidity shortages and related uncertainty please refer to note Minimum building obligations One part of the Group s business is to acquire land for the development of tourism projects. Out of these business opportunities often no legally binding commitments incur however the Group has unbinding business opportunity commitments in relation to their projects. These contingent liabilities are further explained in note Due to the complexity of the projects and the ongoing negotiations, estimation of the contingent liability involves a high degree of uncertainty. 5 THE GROUP AND MAJOR CHANGES IN GROUP ENTITIES The Group comprises the Parent Company and its subsidiaries operating in different countries. Except for the acquisition of Mozn Investment & Tourism S.A.E. ( Mozn ), the entity owning the Citadel Azur hotel, in 2016 (for further details see note 36) there have been no major changes in the group structure in 2017 and Orascom Hotels & Development SAE ( OHD ), which changed its name to Orascom Development Egypt SAE ( ODE ), remains the principal operating subsidiary and is located in Egypt. The group controls its subsidiaries directly and indirectly. 6 REVENUE An analysis of the Group s revenue for the year is as follows: Revenue from the rendering of services and rental income 174,370, ,916,662 Revenue from agreements for construction of Real Estate and construction revenue 69,523,826 65,432,308 Revenue on sale of land 551,232 2,012,534 TOTAL 244,445, ,361,504 7 SEGMENT INFORMATION 7.1 Products and services from which reportable segments derive their revenues The Group has four reportable segments, as described below, which are the Group s 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 Segments review the internal management reports at least on a quarterly basis. The following summary describes the operation in each of the Group s reportable segments: Hotels Include provision of hospitality services in two- to five- star hotels owned by the Group which are managed by international or local hotel chains or by the Group itself. Real estate and construction Include acquisition of land in undeveloped areas and addition of substantial value by building residential real estate and other facilities in stages. Land sales Include sale of land and land rights to third parties on which the Group have developed or will develop certain infrastructure facilities and where the Group does not have further development commitments. Destination management Include provision of facility and infrastructure services at operational resorts and towns. The real estate and construction segment includes two lines of business each of which is considered as a separate operating segment. For financial statements presentation purposes, these individual operating segments have been aggregated into a single operating segment taking into account the following factors: These operating segments have similar long- term gross profit margins; The nature of the products and production processes are similar. Other operations include the provision of services from businesses not allocated to any of the segments listed above comprising rentals from investment properties, mortgages, sports, hospital services, educational services, marina, limousine rentals, laundry services and other services. None of these segments meets any of the quantitative thresholds for determining a reportable segment in 2017 or F Annual Report F- 28

59 The following is an analysis of the Group's revenue from continuing operations by its major products and services. Segment Product Revenue from external customers Hotels Hotels managed by international chains 70,394,423 66,032,406 Hotels managed by local chains 18,279,971 16,139,841 Hotels managed by the Group 42,437,235 38,002,104 Segment total 131,111, ,174,351 Real estate and construction Tourism real estate 69,523,826 64,932,570 Construction work - 499,738 Segment total 69,523,826 65,432,308 Land sales Sales of land and land rights 551,232 2,012,534 Destination management Utilities (e.g. water, electricity) 14,108,422 15,866,467 Other operations Mortgage (Real estate financing) 15,680,350 8,022,882 Sport (Golf) 1,011, ,121 Rentals (i) 2,699,781 3,662,727 Hospital services 4,118,983 3,718,242 Educational services 1,202,338 2,120,816 Marina 3,614,855 4,568,022 Limousine 16,790 34,905 Laundry services - 28,444 Others 805,042 10,964,685 Segment total 29,150,136 33,875,844 TOTAL 244,445, ,361,504 (i) Rentals include income from investment property of CHF 2,699,781 (2016: CHF 3,662,727). 7.2 Segment revenue and results The following is an analysis of the Group s revenue and results from continuing operations by reportable segments: Total segment revenue Inter- segment revenue Revenue external customers Cost of revenue Depreciation Gross profit/(loss) Segment result CHF Hotels 131,847, ,248,448 (735,421) (1,074,097) 131,111, ,174,351 (88,459,597) (96,008,534) (15,579,386) (13,416,235) 27,072,646 10,749,582 23,187,618 (24,833,860) Real estate and construction 103,000,587 72,560,397 (33,476,761) (7,128,089) 69,523,826 65,432,308 (49,999,041) (48,539,736) (433,759) (134,226) 19,091,026 16,758,346 23,520,182 51,245,283 Land sales 2,313,811 1,331,418 (1,762,579) 681, ,232 2,012,534 (781,879) (1,802,755) (260,536) (686,887) (491,183) (477,108) (675,820) 24,819,389 Destination management 28,526,269 33,356,556 (14,417,847) (17,490,089) 14,108,422 15,866,467 (18,834,581) (19,237,488) (3,795,060) (6,336,559) (8,521,219) (9,707,580) (8,470,781) (11,926,561) Other operations 40,619,840 43,343,053 (11,469,704) (9,467,209) 29,150,136 33,875,844 (25,007,149) (24,508,969) (4,389,774) (15,384,577) (246,787) (6,017,702) 450,060 (2,510,767) Total 306,307, ,839,872 (61,862,312) (34,478,368) 244,445, ,361,504 (183,082,247) (190,097,482) (24,458,515) (35,958,484) 36,904,483 11,305,538 38,011,259 36,793,484 Unallocated items 1) : Share of (losses) of associates (16,910,741) (17,299,645) Other gains 5,256,342 2,901,393 Other losses (1,266,220) (181,316,575) Investment income 715,508 1,542,885 Central administration costs and directors salaries (37,406,435) (46,710,878) Finance costs (23,822,609) (31,395,487) Loss before tax (continuing operations) (35,422,896) (235,484,823) Income tax expenses (5,632,519) (8,351,012) Loss for the year (continuing operations) (41,055,415) (243,835,835) For the purposes of segment reporting, part of the amounts reported for these items in the consolidated statement of comprehensive income have been allocated in the table above to their relevant segments. 1) The accounting policies of the reportable segments are the same as the Group s accounting policies described in note 3. Segment result represents the profit earned by each segment without allocation of central administration costs and directors salaries, share of profits (losses) of associates, investment income, other gains and losses, finance costs and income tax expense, as included in the internal management reports that are regularly reviewed by the Board of Directors. This measure is considered being most relevant for the purposes of resources allocation and assessment of segment performance. Except for the impairment loss of CHF 18.6 million on property under construction of development projects in 2016, no impairment loss in respect property, plant and equipment as well as goodwill was recognized in 2017 and Further, a write- down of CHF 13.5 million was made in relation to inventory of development projects in 2016 (note 23). In 2017, no write- down was made. The impairment losses have been allocated to the real estate and construction segment. F Annual Report F- 30

60 7.3 Segment assets and liabilities Segment assets and liabilities CHF 31 December December 2016 SEGMENT ASSETS Hotels 525,422, ,382,904 Real estate and construction 506,542, ,610,543 Land sales 190,262, ,273,533 Destination management 76,135,895 79,635,393 Other operations 41,185, ,022,695 Segment assets before elimination 1,339,547,753 1,504,925,068 Inter- segment elimination (517,643,154) (684,242,468) Segment assets after elimination 821,904, ,682,600 Unallocated assets 418,861, ,435,806 Assets held for sale 106,977,030 67,230,735 CONSOLIDATED TOTAL ASSETS 1,347,742,646 1,285,349,141 CHF 31 December December 2016 SEGMENT LIABILITIES Hotels 258,196, ,545,744 Real estate and construction 307,527, ,393,094 Land sales 50,939,385 52,001,900 Destination management 81,174,357 73,322,825 Other operations 22,178, ,579,803 Segment liabilities before elimination 720,015, ,843,366 Inter- segment elimination (427,134,521) (522,967,523) Segment liabilities after elimination 292,880, ,875,843 Unallocated liabilities 408,847, ,680,074 Liabilities directly associated with assets held for sale 84,407,246 54,118,893 CONSOLIDATED TOTAL LIABILITIES 786,135, ,674,810 For the purposes of monitoring segment performance and allocation of resources between segments, all assets and liabilities are allocated to reportable segments except for the assets of holding companies or companies which are not yet operational. Goodwill is allocated to reportable segments as described in note 18. It is the Group s policy to reassess the classification of certain assets and liabilities within the reporting segments once a certain development stage of the destination is achieved. In 2016 and 2015 no such transfers were made Additions to non- current assets Hotels 26,062,398 22,857,636 Real estate and construction 651, ,910 Destination management 24,618,640 15,191,687 Other operations 4,071,614 3,897,173 TOTAL 55,404,173 42,191, Geographical information The Group currently operates in eight principal geographical areas Egypt, Oman, United Arab Emirates, Jordan, Switzerland, UK, Montenegro and Morocco. The Group's revenue from continuing operations from external customers by location of operations and information about its non- current assets by location of assets are detailed below: Revenue Non- current assets Egypt 151,234, ,982, ,109, ,613,535 Oman 39,770,321 47,233, ,381, ,502,323 United Arab Emirates 30,282,051 28,903,499 62,629,915 58,822,085 Montenegro 21,050, ,639 94,678,223 61,663,108 Morocco 11,882 40,123 92, ,511 Others 2,095,601 3,017,043 67,560,578 67,147,076 TOTAL 244,445, ,361, ,451, ,991,638 The revenue realized from a single client did not exceed the rate of 10% or more of the total Group s revenue during 2017 and Non- current assets exclude investments in associates, financial instruments and deferred tax assets. 7.5 Additional information on segment results Total segment result of CHF 38.0 million (2016: CHF 36.8 million) mainly increased due to the following: There was a small increase in the real estate and construction segment revenue as more units were delivered in Montenegro compared to prior year. The increase was partly netted off by less units delivered in Oman compared to prior year. However, segment profit decreased significantly mainly due to units delivered in Montenegro which had a lower margin than the units delivered in Egypt and Oman in the comparative period. Further, the devaluation of the EGP increased the construction cost while revenue which was deferred is impacted less. The hotel segment had a successful year closing and a notable performance boost. In 2017, the hotel segment reported a revenue increase of 9.1% growing from CHF million to CHF million, and a corresponding growth in gross profit of 153.3% growing from CHF 10.7 million to CHF 27.1 million. El Gouna in Egypt was a key contributor to this performance boost reporting a GOP growth of 67% growing from CHF 13.9 million to CHF 23.3million. Also at Makadi, the yields from the lease agreement that was put into action in January 2017 amounted to CHF 3.3 million going up from a GOP loss of CHF 1.9 million in Hawana Salalah continued to be one of the Group s highly rewarding destinations reporting a GOP growth of 19% growing from CHF 8.7 million to CHF 10.4 million. The Cove, on the other hand, maintained its positive momentum with a slight GOP increase going from CHF 10.8 million to CHF 11.1 million. No significant sale of land incurred in 2017 and The segment profit in 2016 mainly results from foreign exchange gains in Egyptian subsidiaries due to outstanding receivables in USD. 8 EMPLOYEE BENEFITS EXPENSE Employee benefits expense 67,135,358 78,124,234 Thereof included in cost of sales 50,052,533 60,577,748 Thereof included in administration expenses 17,082,825 17,546,486 F Annual Report F- 32

61 9 INVESTMENT INCOME Interest income: - Bank deposits 1,919,593 2,253,002 - Other loans and receivables 4,993,125 4,104,644 Dividends received from equity investments - 12,466 TOTAL 6,912,718 6,370,112 Investment income earned on financial assets by category of assets is CHF 6,912,718 (2016: CHF 6,357,646) for loans and receivables including cash and bank balances as well as CHF 0 (2016: 12,466) for financial assets at fair value through other comprehensive income. Gains or (losses) relating to financial assets classified as at fair value through profit or loss is included in Other gains in note OTHER GAINS Gain in relation to settlement of borrowing with a third party (i) 6,313,871 - Net foreign exchange gains 4,299,781 - Gain from change in fair value of investment property (note 17) 616, ,301 Gain on disposal of property, plant and equipment 17,255 14,944 Gain on disposal of financial investments (ii) - 2,888,614 Other gains 13,016 - TOTAL 11,260,572 3,064,859 (i) Med Taba for Hotels signed a full settlement agreement with Proparco by agreeing to pay one lump sum final payment of EUR million (CHF 13.3 million) corresponded to 66% of the total outstanding principle which amounted to EUR million (CHF 20.2 million) in addition to paying 100% of the due interest till settlement date. The company paid part of the said 66% in 2016 and the final payment took place in February The 34% remaining of total outstanding principle amounting to EUR 5.87 million (CHF 6.3 million) is booked as other gain in Q (ii) Gain from selling shares in stock exchange 11 FINANCE COSTS Interest on bank overdrafts and loans (37,542,292) (47,429,715) Total interest expense for financial liabilities not classified as at fair value through profit or loss (37,542,292) (47,429,715) Less: amounts included in the cost of qualifying assets (i) 1,671,837 2,629,446 TOTAL (35,870,455) (44,800,269) 12 OTHER LOSSES Write- down on inventory(i) - (13,529,631) Loss on disposal of financial assets (313,038) - Net foreign exchange (losses) (note 29.6) - (113,243,690) Impairment related to property under construction (ii) - (18,611,089) Impairment loss of receivables on acquisition of subsidiaries (note 36) - (843,588) Other losses - (1,186,542) TOTAL (313,038) (147,414,540) (i) In 2017, there were no impairment losses on inventory. In 2016, CHF 13.5 million were recognised on inventory of development projects. (ii) In 2016, impairment losses on property under construction of 18.6 million were recognised on development projects. In 2017, no such losses incurred. 13 COMPENSATION OF KEY MANAGEMENT PERSONNEL Salaries 4,519,999 3,485,161 Other short- term employee benefits 216, ,290 Post- employment benefits 36,000 48,968 TOTAL COMPENSATION OF KEY MANAGEMENT PERSONNEL 4,771,999 3,675,419 In addition to the amounts mentioned above, the CEO was granted a contingent compensation which is dependent solely on the development of the share price of the Company. For further details on this share- based payment refer to notes 29.3 and 39. There is a compensation plan in place for the Board of Directors which consists of a fixed compensation subject to an annual review. As to the compensation of the members of Executive Management, the base salary is either (in case of members who have served in that capacity since the Company was formed in 2008) carried over from their previous employment with ODE, or (in case of members appointed at a later time) determined in a discretionary decision of the CEO approved by the Nomination & Compensation Committee. In respect of the bonus part of the compensation, proposals by the CEO are presented to the Nomination & Compensation Committee which discusses such proposals and approves them if deemed fit. The annual proposals and decisions concerning the compensation of the members of Executive Management are based on an evaluation of the individual performance of each member, as well as of the performance of the business area for which each member is responsible (in case of the executive members of the Board, the performance of the Orascom Development Group as a whole). The CEO forms the respective proposals in his discretion, based on his judgment of the relevant individuals' and business areas' achievements. The disclosures required by the Swiss Code of Obligations on Board and Executive committee compensation are shown in the compensation report. Total compensation of directors and Executive Management is part of the employees benefit expense allocated between cost of sales and administrative expenses (see note 8). (i) The amount of capitalization cost of qualifying assets (project under construction and work in progress) has decreased compared to prior year. This is mainly due to decreased activities in relation to the current hotel projects and real estate projects in Egypt and Oman, which are eligible for the capitalization of interest expense. However, overall finance cost decreased by CHF 8.9 million from CHF 44.8 million to CHF 35.9 million as the devaluation of the Egyptian Pound in the last 2 years led to a significant decrease in finance cost. The rate used by the Group to determine the amount of borrowing costs eligible for capitalization is 9% per annum (2016: 7.75% per annum). F Annual Report F- 34

62 13.1 Holding of Shares BOARD OF DIRECTORS Samih Sawiris 1 Chairman 27,406,233 27,391,814 Franz Egle Member 78,849 51,285 Adil Douiri Member 42,191 25,379 Carolina Müller- Möhl Member 54,600 36,272 Naguib S. Sawiris 2 Member 9,613 - Marco Sieber Member 48,577 27,195 Jürgen Fischer Member 113,196 94,868 Jürg Weber Member 51,451 23,929 TOTAL BOARD OF DIRECTORS 27,804,710 27,650,742 EXECUTIVE MANAGEMENT Khaled Bichara 3 CEO - - Ashraf Nessim 4 CFO - - Abdelhamid Abouyoussef Chief Hotels Officer 100, ,000 Nermine Faltas 5 Chief Human Resources & Organization Development Officer Tarek Gadallah 5 Group General Counsel - - TOTAL EXECUTIVE MANAGEMENT 100, ,000 total includes direct and indirect holding ownership as per note During the Annual General Meeting on 10 May 2016, Naguib S. Sawiris was elected as new member of the Board of Directors. As at 1 January 2016, Khaled Bichara was appointed as Group CEO As at 10 May 2016, Ashraf Nessim was appointed as interim Group CFO Member of the Executive Management since 1 April 2017 As at 31 December 2017, an amount of CHF 0.2 million was due from key executives relating to the allocation of ODE shares in No other loans or credits were granted to members of the Board, the Executive Management or parties closely linked to them during 2017 and INCOME TAXES 14.1 Income tax recognised in profit or loss CURRENT TAX Current tax (income)/expense for the current year 6,774,555 4,563,472 6,774,555 4,563,472 DEFERRED TAX Deferred tax (income)/expense recognized in the current year (1,142,036) 3,787,540 Adjustments to deferred tax attributable to changes in tax rates and laws - - (1,142,036) 3,787, The following table provides reconciliation between income tax expense recognized for the year and the tax calculated by applying the applicable tax rates on accounting profit: Profit/(loss) before tax from continuing operations (35,422,896) (235,484,823) Income tax expense/(benefit) calculated at 16.10% (2016: 13.25%) (5,703,140) (31,203,798) Unrecognized deferred tax assets during the year 14,005,457 42,637,842 Effect of income that is exempt from taxation (10,846,156) (9,860,142) Effect of (income)/expenses that are not (added)/deductible in determining taxable profit 8,176,358 6,777,110 INCOME TAX EXPENSE RECOGNIZED IN PROFIT OR LOSS 5,632,519 8,351,012 The average effective tax rate of 16.10% (2016: 13.25%) is the effective tax rate from countries in which the company generates taxable profit. The average effective tax rate mainly decreased due to the following: 14.2 Income tax recognized in other comprehensive income DEFERRED TAX Remeasurement of property, plant and equipment reclassified to investment property (4,552,950) - TOTAL INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME (4,552,950) Current tax assets and liabilities Current tax expense 6,774,555 4,563,472 Foreign currency difference (1,110,589) (2,434,480) CURRENT TAX LIABILITIES 5,663,966 2,128, Deferred tax balances Deferred tax assets and liabilities arise from the following: 2017 CHF Opening balance Charged to income Exchange difference Reclassified as assets held for sale Closing balance ASSETS Temporary differences Property, plant & equipment 992,920 6,352 8,592-1,007,864 Tax losses carried forward - 2,236,517 (150,387) (2,086,130) - 992,920 2,242,869 (141,795) (2,086,130) 1,007,864 LIABILITIES Temporary differences Property, plant & equipment 21,999,483 1,559,228 (465,670) (2,115,140) 20,977,901 Investment property 926,326 (458,395) (22,458) - 445,473 22,925,809 1,100,833 (488,128) (2,115,140) 21,423,374 NET DEFERRED TAX LIABILITY 21,932,889 (1,142,036) (346,333) (29,010) 20,415,510 TOTAL INCOME TAX EXPENSE RECOGNIZED IN THE CURRENT YEAR RELATING TO CONTINUING OPERATIONS 5,632,519 8,351,012 F Annual Report F- 36

63 2016 CHF Opening balance Charged to income Exchange difference Recognized in other comprehen- sive income Closing balance ASSETS Temporary differences Property, plant & equipment 4,521,152 (2,959,192) (569,040) - 992,920 Tax losses 8,172,331 (6,852,186) (1,320,145) ,693,483 (9,811,378) (1,889,185) - 992,920 LIABILITIES Temporary differences Property, plant & equipment 40,865,187 (6,020,209) (14,065,385) 1,219,890 21,999,483 Investment property 2,182,089 (3,628) (1,252,135) - 926,326 43,047,276 (6,023,837) (15,317,520) 1,219,890 22,925,809 NET DEFERRED TAX LIABILITY 30,353,793 3,787,541 (13,428,335) 1,219,890 21,932, EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings from continuing operations attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. As the Company does not have any dilutive potential, the basic and diluted earnings per share are the same. The earnings from continuing operations and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: EARNINGS (for basic and diluted earnings per share) (Loss)/profit for the period attributable to owners of the parent (41,361,129) (196,415,554) NUMBER OF SHARES (for basic and diluted earnings per share) Weighted average number of ordinary shares for the purposes of EPS 39,913,457 40,399,443 EARNINGS PER SHARE FROM CONTINUING OPERATIONS (1.04) (4.86) 14.5 Unrecognized deferred tax assets Deferred tax assets not recognized at the reporting date: Tax losses in Parent Company (expiry 2018) (i) 846,695, ,695,821 Tax losses in Parent Company (expiry 2019) (i) 1,032,630,753 1,032,630,753 Tax losses in Parent Company (expiry 2020) (i) 29,383,250 29,383,250 Tax losses in Parent Company (expiry 2021) (i) 86,373,116 86,373,116 Tax losses in Parent Company (expiry 2022) (i) 2,955,358 2,955,358 Tax losses in Parent Company (expiry 2023) (i) - - Temporary differences in subsidiaries (ii) 90,070, ,045,729 (i) At 31 December 2016, the Parent Company s tax losses amounted to CHF 1,998,038,298 which mainly related to tax losses caused by impairment charges recognized on investments as result of the original restructuring of the Group. The historical cost value of these investments was the fair value of the investments at the date of the stock market listing in Switzerland. The Parent Company incorporated in Switzerland is a holding company and enjoys a privileged taxation for dividend income from subsidiaries, as such income is tax exempted if certain criteria are met. The Parent Company does not expect to have any substantial income streams other than tax exempted dividend income in the foreseeable future and therefore it is not probable that the unused tax losses can be utilized. Therefore, and unchanged to prior year, all tax losses accumulated in the Parent Company which amounted to CHF 1,988,038,298 at 31 December 2017 were treated as unrecognized deferred tax assets. (ii) At 31 December 2017, the Group has not recognised deferred tax assets for gains recognized at the subsidiaries level on intercompany land sales which took place in During 2017, the Group has not recognised any deferred tax asset on the sale transaction as the development of this land either has not yet been started or is still in the early stages of development and therefore it is not evident that future taxable profits are probable. The residual temporary differences in 2106 were unrecognized tax losses in subsidiaries which expired in F Annual Report F- 38

64 16 PROPERTY, PLANT AND EQUIPMENT CHF Freehold land Buildings Plant and equipment Furniture and fixtures Property under construction Assets under finance lease Total COST Balance at 1 January ,736, ,475, ,047,563 74,936, ,876,796 6,936,223 1,225,008,586 Additions 784,909 18,255,345 6,193,555 5,302,377 11,215,734-41,751,920 Acquired through business combination (note 36) 29,362,420 23,254, ,539 35,107 1,719,654-54,544,821 Transfer from property under construction - 24,807, (24,807,267) - - Transfer from inventory (note 23) 2,246 2,369, , ,539,198 Reclassified to assets held for sale (note 27) (5,296) (152,881) (182,574) (157,933) - (498,684) Disposals (191,536) (440,721) (318,071) (40,188) - (990,516) Foreign currency exchange differences (28,302,160) (232,113,279) (41,574,945) (24,573,326) (23,144,505) (4,051,138) (353,759,353) Balance at 31 December ,583, ,851,720 83,413,473 55,199, ,662,291 2,885, ,595,972 Additions 816,278 17,606,569 7,447,453 2,735,540 26,798,333-55,404,173 Transfer to investment property (note 17) (135,182) (16,806,084) (6,145,834) (4,087,248) - (27,174,348) Transfer from property under construction - 35,189, ,727 - (36,130,218) - - Transfer to inventory (note 23) (229,103) (3,528,856) (118,692) (138,580) (4,460,873) - (8,476,104) Disposals (5,827) - (79,619) (428,905) - (514,351) Foreign currency exchange differences (4,436,111) (13,444,095) (2,495,350) (1,434,584) 1,244,668 (63,196) (20,628,668) Balance at 31 December ,593, ,868,745 82,962,158 51,845, ,114,201 2,821, ,206,674 CHF Freehold land Buildings Plant and equipment Furniture and fixtures Property under construction Assets under finance lease Total ACCUMULATED DEPRECIATION AND IMPAIRMENT Balance at 1 January ,601,948 90,949,869 63,930,080 16,286,128 1,884, ,652,118 Eliminated on disposals of assets - (15,782) (266,380) (203,041) - - (485,203) Reclassified to assets held for sale (note 27) - (221) (135,921) (167,358) - - (303,500) Depreciation expense - 14,957,404 8,689,680 12,009, ,353 35,958,484 Impairment loss (note 12) - 18,611,089 18,611,089 Foreign currency exchange differences - (56,196,500) (39,345,656) (32,275,845) (3,254,091) (1,361,881) (132,433,973) Balance at 31 December ,346,849 59,891,592 43,292,883 31,643, , ,999,015 Eliminated on disposals of assets - (64,604) (261,811) - - (326,415) Transfer to investment property (note 17) - (10,841,825) (4,826,849) (3,656,882) - - (19,325,556) Transfer to inventory (note 23) (432,918) (137,247) (109,316) - - (679,481) Depreciation expense - 13,868,240 6,853,727 3,497, ,848 24,458,515 Foreign currency exchange differences - (3,339,865) (2,093,221) (1,611,753) (969,956) (25,703) (8,040,498) Balance at 31 December ,600,481 59,623,398 41,150,821 30,673,170 1,037, ,085,580 CARRYING AMOUNT At 31 December ,583, ,504,871 23,521,881 11,906, ,019,165 2,060, ,596,957 At 31 December ,593, ,268,264 23,338,760 10,695, ,441,031 1,784, ,121,094 At 31 December 2017, property, plant and equipment (PPE) of the Group with a carrying amount of CHF million (31 December 2016: CHF 88.3 million) were pledged to secure borrowings of the Group as described in note 32. See note 11 for the capitalized finance cost during the year. During 2017, three hotels in Makadi in the total fair value amount of CHF 27.9 million were transferred to investment property as they were rented out to FTI, a related party tour operator, for three years. The gain on revaluation of property reclassified to investment property of CHF 15.6 million is shown net of tax within other comprehensive income (note 29.4). In 2016, impairment losses on property under construction of CHF 18.6 million were recognised on development projects. In 2017, no such impairment losses incurred. F Annual Report F- 40

65 17 INVESTMENT PROPERTY The following table summarizes movements, which have occurred, during the current reporting period, on the carrying amount of investment property. FAIR VALUE OF COMPLETED INVESTMENT PROPERTY Balance at the beginning of the year 5,501,334 10,981,552 Addition - 439,486 Transfer from property, plant and equipment (note 16) 27,956,313 - Reclassified to assets held for sale (note 27) (27,956,313) - Revaluation gain (through P&L) (note 10) 616, ,301 Foreign currency translation adjustment 1,382,885 (6,081,005) Balance at the end of the year 7,500,868 5,501,334 The fair values at 31 December 2017 were determined based on an internal valuation model performed by Group management. In estimating the fair value of the investment properties, management considers the current use of the properties as their highest and best use. The internal valuation model relies 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 give them a present value. This valuation method is in conformity with the International Valuation Standards. The same method was used for any 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 situated in Egypt the model used cash flow projections based on financial budgets for the next five years and an average discount rate of 21.9% (cost of equity). For the terminal value a perpetual growth rate of 3% was used. In 2016 an average discount rate of 22.7% and a perpetual growth rate of 3% were used. All of the Group s investment property is held under freehold interests. The following table summarizes income and direct operating expenses from investment properties rented out to third parties Allocation of goodwill to cash- generating units Annual test for impairment An impairment test of goodwill was performed by the Group to assess the recoverable amount of its goodwill. No impairment was recorded as result of this test. All cash- generating units were tested for impairment using the Discounted Cash Flow (DCF) method in accordance with IFRS. The Group s business segments have been identified as cash generating units. The DCF model utilized to evaluate the recoverable amounts of these units was based on a five- year projection period. A further description of the assumptions used in the model is given in the following paragraphs. The carrying amount of goodwill that has been allocated for impairment testing purposes is as follows: CHF Segment Hotel companies * Hotels 2,829,971 2,893,347 *Each subsidiary considered separately Hotels 2,829,971 2,893,347 The recoverable amount of each cash- generating unit has been determined based on a value in use calculation which uses cash flow projections based on the financial budgets approved by management covering a five- year period with an average discount rate of 21.9% per annum (2016: 22.7% per annum) was used for the value in use calculation. The discount rate is based on a risk free post- tax interest rate of 11.6% (the pre- tax risk free rate used is 14.5%; applying the 20% Egyptian tax rate for sovereign bonds, the post- tax risk free rate of 11.6% resulted), a beta of 1.3 (2016: 1.27) as well as a risk premium of 8% (2016: 7%). For the terminal value calculation, a terminal growth rate of 2% (2016 3%) was used. Sensitivity analysis, where the average discount rate was increased by 4.5% and the growth rate reduced by 0.5%, which according to management is a reasonably possible change in key assumptions, did not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash- generating unit. Furthermore, management believes that any reasonably possible change in the key assumptions (sensitivity analysis) on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash- generating unit. Rental income from investment properties (i) 2,699,781 3,662,727 Direct operating expenses (including repairs and maintenance) arising from investment properties that generated rental income during the period 195, ,832 (i) See note 7.1 for further information on the Group s rental income. 18 GOODWILL Cost 2,829,971 2,893,347 Accumulated impairment losses - - Carrying amount at end of year 2,829,971 2,893,347 COST Balance at beginning of year 2,893,347 6,476,682 Effect of foreign currency exchange differences (63,376) (3,583,335) Balance at end of year 2,829,971 2,893,347 F Annual Report F- 42

66 19 SUBSIDIARIES The Group has control over all the subsidiaries below either directly or indirectly through subsidiaries controlled by the Parent Company. Details of the Group s significant subsidiaries at the end of the reporting period are as follows: Country Company name Domicile FC Egypt Share/paid- in capital Proportion of ownership interest and voting power held by the Group Abu Tig for Hotels Company Red Sea EGP 3,412, % 2 Accasia for Hotels Company Cairo EGP 25,000, % 5 Arena for Hotels Company S.A.E Cairo EGP 20,000, % 4 Azur for Floating Hotels Company 1) Cairo EGP 3,000, % 5 S.A.E Captain for Hotels Company Red Sea EGP 768, % 3 El Dawar for Hotels Company Cairo EGP 9,560, % 3 El Khamsa for Hotels & Touristic Establishments El Golf for Hotels Company & Touristic Establishments Red Sea EGP 48,000, % Cairo EGP 22,000, % 5 El Gouna for Hotels Company S.A.E Cairo EGP 79,560, % 5 El Gouna Hospital Company Red Sea EGP 19,000, % El Gouna Services Company Red Sea EGP 250, % El Mounira for Hotels Company S.A.E Red Sea EGP 14,000, % 4 El Tebah for Hotels & Touristic Establishments Company Cairo EGP 52,000, % 5 El Wekala for Hotels Company Cairo EGP 39,000, % 4 International Company for Taba Touristic Projects (Taba Resorts) Cairo EGP 96,000, % 5 International Hotel Holding Cairo EGP 452,367, % Marina 2 for Hotels & Touristic Establishments Company Marina 3 for Hotels & Touristic Establishments Company Cairo EGP 19,250, % 4 Cairo EGP 26,000, % 4 Med Taba for Hotels Company S.A.E Cairo EGP 51,000, % 4 Misr El Fayoum for Touristic Development Company S.A.E Cairo EGP 28,000, % Mokbela for Hotels Company S.A.E Cairo EGP 85,000, % 5 Orascom Development Egypt S.A.E Cairo EGP 1,108,307, % Orascom Housing Company Cairo EGP 22,000, % Paradisio for Hotels & Touristic Establishments Company S.A.E Red Sea EGP 18,500, % 4 Rihana for Hotels Company S.A.E Red Sea EGP 13,000, % 4 Roaya for Tourist & Real Estate Development SAE Royal for Investment & Touristic Development S.A.E Red Sea EGP 50,000, % Cairo EGP 50,000, % 4 Taba First Hotel Company S.A.E Cairo EGP 105,000, % 5 Taba Heights Company S.A.E South Sinai EGP 157,510, % Tamweel Leasing Finance Co. ILC Cairo EGP 50,000, % Tamweel Mortgage Finance Company S.A.E Cairo EGP 100,000, % Tawila for Hotel Company S.A.E Cairo EGP 68,000, % 5 Mozn Investment and Tourism S.A.E. Red Sea EGP 268,520, % 5 Segment HO* R&C LS DM Other HQ Country Company name Domicile FC Montenegro Lustica Development Ad Podgorica Morocco Oued Chibika Development (SA) Chbika Rive Hotel Oman Madrakah Hotels Management Company LLC Muriya Tourism Development Company (S.A.O.C) Salalah Beach Tourism Development Company (S.A.O.C) Sifah Tourism Development Company (S.A.O.C) Podgo- rica Casa- blanca Casa- blanca Share/paid in capital Proportion of ownership interest and voting power held by the Group EUR 11,025, % MAD 367,420, % MAD 66,000, % UC Muscat OMR 4,350, % Muscat OMR 25,525, % Muscat OMR 35,922, % Muscat OMR 42,947, % Soda Tourism Development Co. 2) Muscat OMR 12,646, % Wateera Property Management Company LLC United Arab Emirates RAK Tourism Investment FZC Muscat OMR 270, % Ras al Khaimah AED 7,300, % 5 United Kingdom Eco- Bos Development Limited Cornwall GBP 10,000, % Segment HO* R&C LS DM Other HQ 1) The direct ownership of ODE in in Azur for Floating Hotels Company S.A.E. is 51% therefore the Group has control over this company even though from a Group perspective the ownership is below 50%. 2) The Group has control over Soda Tourism Development Company as one of Group s subsidiaries holds a 70% interest. Abbreviations: HO Hotels R&C Real estate and construction LS Land sales DM Destination management HQ Headquarter or not yet operational Other Other operations * Number of stars the hotel holds UC Hotel under construction F Annual Report F- 44 F- 44

67 19.1. Details of non- wholly owned subsidiaries that have material non- controlling interests The table below shows details of non- wholly owned subsidiaries of the Group that have material non- controlling interests. The assessment whether a non- controlling interest is material is based on the carrying amounts of such non- controlling interests. Name of subsidiary Proportion of ownership interest and voting power held by non- controlling interests Profit/(loss) allocated to non- controlling interests Accumulated non- controlling interests 31/12/ /12/ /12/ /12/ /12/ /12/2016 Orascom Development Egypt S.A.E % 15.21% 3,648,362 (26,021,932) 31,058,373 20,137,970 Sifah Tourism Development Co % 30.00% (4,889,586) (4,012,170) 23,708,323 30,541,755 RAK Tourism Investment FZC 27.00% 27.00% (150,315) (87,553) 12,461,818 13,133,936 Individually immaterial subsidiaries with non- controlling interests 81,907,368 76,653,576 TOTAL 149,135, ,467,237 Summarised financial information in respect of each of the Group s subsidiaries that has material non- controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations. ODE Sifah RAK 31/12/ /12/ /12/ /12/ /12/ /12/2016 Current assets 306,605, ,194,040 66,314,322 82,734,908 10,411,272 7,717,081 Non- current assets 229,312, ,291,944 93,896, ,417,943 78,801,530 76,399,769 Current liabilities (403,449,128) (330,161,230) (80,824,590) (83,316,341) (18,586,965) (32,559,943) Non- current liabilities (34,195,887) (82,077,620) (358,173) (30,661) (24,470,955) (2,912,700) Equity attributable to owners (67,214,637) (41,109,164) (55,319,419) (71,264,094) (33,693,064) (35,510,271) Non- controlling interests (31,058,373) (20,137,970) (23,708,323) (30,541,755) (12,461,818) (13,133,936) Revenue 140,872, ,479,624 7,296,611 6,976,443 30,282,051 28,903,499 Profit/(loss) for the year 23,986,600 (171,084,363 (16,298,620) (13,373,899) (556,723) (324,272) attributable to owners 20,338,238 (145,062,431) (11,409,034) (9,361,729) (406,408) (236,719 attributable to non- controlling interests 3,648,362 (26,021,932) (4,889,586) (4,012,170) (150,315) (87,553) Other comprehensive income for the year 91,692,090 (155,029,062) - 1,170,814-1,498,512 attributable to owners 77,745,723 (131,449,142) - 819,570-1,093,914 attributable to non- controlling interests 13,946,367 (23,579,920) - 351, ,598 Total comprehensive income for the year 115,678,690 (326,113,425) (16,298,620) (12,203,085) (556,723) 1,174,240 attributable to owners 98,083,961 (276,511,573) (11,409,034) (8,542,159) (406,408) 857,195 attributable to non- controlling interests 17,594,729 (49,601,852) (4,889,586) (3,660,926) (150,315) 317,045 Net cash inflow/(outflow) 24,204,292 7,732,041 1,563,536 2,090,211 2,512,310 38,454 from operating activities 29,306,416 75,596,834 1,563,536 2,090,211 2,512,310 4,366,440 from investing activities (5,383,471) (38,140,967) (4,327,986) from financing activities 281,347 (29,723,826) Except for exchange differences arising on translating the foreign operations there are no other items of other comprehensive income Changes in the Group s ownership interests which have occurred during the year In 2017, the 30% interest in Garranah Group subsidiaries, was swapped into a 3% interest in the share capital of Royal for Investment & Touristic Development S.A.E., a consolidated subsidiary of the Group. 20 INVESTMENTS IN ASSOCIATES Details of the Group s associates at the end of the reporting period are as follows: Name of associate Place of incorporation/ business Proportion of ownership interest and voting power held by the Group Carrying value (CHF ) Andermatt Swiss Alps AG (i) Switzerland 49.00% 40,450,887 56,549,204 Orascom Housing Communities (ii) Cairo 35.25% 3,676,791 4,497,608 Jordan Company for Projects and Touristic Development (iii) Jordan 18.33% 14,136,976 15,820,535 Red Sea for Construction & Deveolpment (iv) Cairo 40.20% 2,557,646 1,683,764 Orascom for Housing and Establishments (v) Cairo 39.90% - - International Stock Company for Floating Hotels & Touristic Establishments (vi) Cairo 30.00% - - Mirotel for Floating Hotels Company (vi) Cairo 30.00% - - Tarot Garranah & Merotil for Floating Hotels (vi) Cairo 30.00% - - Tarot Tours Company (Garranah) S.A.E (vi) Cairo 30.00% - - Al Tarek for Tourist & Hotel Cruises (vi) Cairo 30.00% - - TOTAL 60,822,300 78,551,111 The Group measures all its associates using the equity method of accounting as described in policy 3.5 of the notes to the consolidated financial statements. None of the Group s equity- method investments are listed on Stock Exchanges and, accordingly, they do not have quoted market prices. Management considers ASA, OHC and JPTD as the only associate that are material to the Group. The Group did not receive any dividends during the current year from its material investments (2016: none). (i) Andermatt Swiss Alps AG On 25 June 2013, the Group lost control over Andermatt Swiss Alps AG ( ASA ) due to various capital increases in ASA in which the Group did not fully participate. With a remaining share of interest of 49% in ASA, the investment is classified as investment in associates. The fair value of ASA on initial recognition as investment in associates is based on a third- party valuation which supported the transaction price paid by Mr. Samih Sawiris. ASA is not subject to any restrictions on transferring funds to ODH whether resulting from regulatory requirements, borrowing arrangements or contractual arrangements between ASA and ODH. Summarised financial information in respect of ASA is set out below: Current assets 196,032, ,613,209 Non- current assets 345,963, ,235,099 Current liabilities (84,089,539) (73,194,325) Non- current liabilities (386,339,753) (295,142,870) Net assets 71,567, ,511,113 Revenue for the year 72,575,125 80,725,764 (Loss) for the year (32,853,708) (34,045,191) Other comprehensive income for the year - Total comprehensive income for the year (32,853,708) (34,045,191) Group s share of comprehensive income for the year (16,098,317) (16,682,144) In 2016, the Group has acquired a 100% stake in Mozn Investment & Tourism S.A.E. (refer to note 36 for further details). F Annual Report F- 46

68 Reconciliation of the above summarised financial information to the carrying amount of the interest in ASA recognised in the consolidated financial statements: Net assets of the associate over Group level 82,552, ,406,539 Proportion of the Group s ownership interest in ASA 49% 49% Carrying amount of the Group s interest in ASA 40,450,887 56,549,204 (ii) Orascom Housing Communities ( OHC ) In June 2014, the Group lost control over OHC as they did not participate in the capital increase of OHC. With a remaining share of interest of 35.25% in OHC, the investment is classified as investment in associates. The fair value of OHC on initial recognition as investment in associates is based on a fair value which has been determined by Fincorp, an accredited valuation specialist in Egypt, using a DCF model. With a remaining share of interest of 35.25% the fair value on initial recognition as at 30 June 2014 was CHF 14.6 million. Summarised financial information in respect of OHC is set out below: Current assets 23,644,459 14,441,830 Non- current assets 12,009,769 18,911,772 Current liabilities (42,566,574) (29,190,252) Non- current liabilities (1,646,628) (3,119,514) Net assets 8,558,974 1,043,836 Revenue for the year 3,117,983 5,878,339 Profit/(loss) for the year (2,039,700) (5,520,591) Other comprehensive income for the year - - Total comprehensive income for the year (2,039,700) (5,520,591) Group s share of comprehensive income for the year (718,902) (1,945,759) Reconciliation of the above summarised financial information to the carrying amount of the interest in OHC recognised in the consolidated financial statements: Net assets of the associate over Group level 10,430,613 12,759,173 Proportion of the Group s ownership interest in OHC 35.25% 35.25% Carrying amount of the Group s interest in OHC 3,676,791 4,497,608 (iii) Jordan Company for Projects and Touristic Development (JPTD) JPTD is investing in property, destination management and development in Aqaba in Jordon. Since 2008 the Group exercised significant influence with their two active board members out of eleven leading to changes in the JPTD s Executive Management and provision of essential technical information. Summarised financial information in respect of JPTD is set out below: Current assets 44,432,071 46,303,928 Non- current assets 126,104, ,416,736 Current liabilities (28,194,386) (29,382,174) Non- current liabilities (56,667,036) (59,054,335) Net assets 85,674,803 89,284,155 Group s share of net assets of associate 15,704,191 16,365,786 Revenue for the year 30,239,944 30,322,208 Profit/(loss) for the year (5,455,537) 1,740,317 Other comprehensive income for the year - - Total comprehensive income for the year (5,455,537) 1,740,317 Group s share of comprehensive income for the year (1,000,000) 319,054 Reconciliation of the above summarised financial information to the carrying amount of the interest in JPTD recognised in the consolidated financial statements: Net assets of the associate over Group level 77,124,801 86,309,520 Proportion of the Group s ownership interest in JPTD 18.33% 18.33% Carrying amount of the Group s interest in JPTD 14,136,976 15,820,535 (iv) Red Sea for Construction & Development ( RSCD ) During 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 (CHF 2.2 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. Summarised financial information in respect of RSCD is set out below: Current assets 41,795,236 18,591,781 Non- current assets 5,440,747 1,234,697 Current liabilities (42,527,348) (17,446,344) Non- current liabilities - - Net assets 4,708,635 2,380,134 Group s share of net assets of associate 2,221,534 1,122,914 Revenue for the year 51,243,357 55,482,195 Profit/(loss) for the year 2,254,919 2,139,111 Other comprehensive income for the year - - Total comprehensive income for the year 2,254,919 2,139,111 Group s share of comprehensive income for the year 906,478 1,009,203 F Annual Report F- 48

69 Reconciliation of the above summarised financial information to the carrying amount of the interest in RSCD recognised in the consolidated financial statements: Net assets of the associate over Group level 6,362,301 3,568,809 Proportion of the Group s ownership interest in RSCD 40.20% 47.18% Carrying amount of the Group s interest in RSCD 2,557,645 1,683,764 (v) Orascom for Housing and Establishment The company develops real estate and housing projects located in Egypt for the low cost sector. The proportion of ownership interest held by the Group at 31 December 2017 is unchanged to prior year. In previous years, the investment was reduced to CHF nil as the losses in their last financial statements exceeded the carrying amount of the investment. (vi) ODH investments in Garranah Group subsidiaries The 30% interest in the share capital of these companies was swapped into a 3% interest in the share capital of Royal for Investment & Touristic Development S.A.E., a consolidated subsidiary of the Group. The swap of the previously fully impaired investments in associates as made without any further consideration paid. 21 NON- CURRENT RECEIVABLES Trade receivables 20,352,879 33,058,066 Notes receivable 17,725,351 9,392,034 TOTAL 38,078,230 42,450,100 Non- current receivables include long term receivables for land and real estate contracts, which will be collected over an average collecting period of 5.5 years (2016: 5.5 years). None of these non- current receivables is impaired and/or overdue. The decrease in non- current receivables is mainly due to reclassifications within the real estate segment as well as foreign currency exchange losses. Receivables with a carrying amount of CHF 13.4 million (2016: CHF 12.1 million) have been pledged to secure borrowings. 22 OTHER FINANCIAL ASSETS Details of the Group s other financial assets are as follows: CHF Current Non- current Financial assets carried at fair value through other comprehensive income (FVTOCI) Nasr City company for Housing & Development (N.C.H.R.) - - 2,548 2,545 Egyptian Resort Company (i) ,889,523 Reclaim Limited , ,604 Desert Cruise LLC , ,921 Camps and Lodges Company ,612 14,152 Palestine for Tourism Investment Company - - 9,483 9,696 El Koseir Company TOTAL ,388 3,516,633 (i) Egyptian Resort Company In September 2017, the Group sold its million shares in the listed Egyptian Resort Company, the Group s most significant financial asset within other financial assets for total proceeds of CHF 3.3 million. Accumulated losses of CHF 15.9 million, which were accumulated within reserves, were reclassified to retained earnings upon sale of the shares. Prior to the sale of the shares, a total of CHF 1.2 million was recorded in net losses on financial assets at FVTOCI within other comprehensive income in INVENTORIES (i) Construction work in progress (i) 78,022,922 84,300,498 Land held for development under purchase agreements (ii) 25,443,635 24,695,522 Other inventories (iii) 24,116,606 15,963,993 TOTAL 127,583, ,960,013 This amount includes real estate construction work under progress. The real estate units are sold off plan. The main reasons for the decrease in inventory compared to 31 December 2016 is a decrease in construction work in progress in Oman. This decrease was partly netted- off by the transfer of assets from property, plant and equipment of CHF 7.8 million (note 16). For further details on the net realisable value of construction work in progress refer to note (ii) In 2008, the finance leases between ODE and General Authority for Touristic and Development ( GATD ) in Egypt for development of land were terminated and replaced with purchase agreements with GATD. On May 2008, ODE signed a new purchase agreement with GATD to purchase a plot of land and paid a down payment of 27% and the remaining balance is payable in equal annual instalment commencing upon the expiry of the grace period of three years. In addition, ODE is required to pay an annual interest at the rate of 5% after the grace period with each instalment. The value of land shown above is for those plots of land assigned for development and not yet sold by ODE. (iii) This amount includes hotels inventory of CHF 15.2 million (2016: CHF 9.7 million) as well as completed but unsold units of CHF 8.9 million (2016: CHF 8.2 million) In 2017, no inventory was written down. In 2016, inventory of development projects was written down by CHF 13.5 million. 24 TRADE AND OTHER RECEIVABLES Trade receivables (i) 52,946,546 46,171,705 Notes receivable 33,627,466 28,003,613 Allowance for doubtful debts (see below) (17,692,833) (18,340,388) TOTAL 68,881,179 55,834,930 (i) Trade and other receivables increased by CHF 13.5 million due to reclassification from non- current receivables as well as due to increased operating activities. The increase was partly netted of by foreign currency translation losses due to the devaluation of the Egyptian Pound (note 29.6). The average credit period on sales of real- estate is 5.5 years. No contractual interest is charged on trade receivables arising from the sale of real estate units. Interest is only charged in case of customer s default. The Group has recognised an allowance for doubtful debts of 21% (2016: 25%) based on individual bad debts and allowances due to past due amounts. Allowances for doubtful debts are recognised against trade receivables based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty's current financial position. Movement in the allowance for doubtful debt: Balance at beginning of year (18,340,388) (20,959,808) Impairment losses recognised on receivables (786,435) (6,360,984) Amounts written off during the year as uncollectable 306, ,424 Impairment losses reversed (allowance no longer used) 365, ,181 Reclassified (from)/to assets held for sale 952,388 1,576,401 Foreign exchange translation gains and losses (190,206) 7,148,398 Balance at end of year (17,692,833) (18,340,388) Included in the Group s trade and other receivable balance are debtors with a carrying amount of CHF 37.5 million (2016: CHF 29.0 million) which are past due but not impaired at the reporting date. The Group has not built an allowance for impairment loss for the past due amounts reported below as there has not been a significant change in credit quality and the amounts are still considered recoverable (see note 38). F Annual Report F- 50

70 Aging of receivables that are past due but not impaired: Less than 30 days 9,658,241 7,788,904 Between 30 to 60 days 5,201,801 4,195,001 Between 60 to 90 days 3,415,125 2,754,133 Between 90 to 120 days 2,592,139 1,687,209 More than 120 days 16,616,829 12,594,217 TOTAL 37,484,135 29,019, OTHER CURRENT ASSETS Advance to suppliers (i) 17,521,523 16,844,505 Deposit with others 6,341,227 5,471,972 Prepaid sales commissions related to uncompleted units 5,825,684 4,005,504 Withholding tax 5,390,628 3,629,337 Prepaid expenses 5,109,475 5,000,567 Other debit balances 3,270,349 3,496,691 Cash imprest 655, ,582 Accrued revenue 460, ,923 Letters of guarantee cash margin 340, ,201 Amounts due from employees and the management team (ii) 177, ,227 Down payments for investments - 16,247 TOTAL 45,093,158 40,055,756 (i) Advance to suppliers relates to advances paid in Oman, Egypt and Montenegro. The decrease is mainly due to a decrease in advances in Montenegro and Oman. (ii) This amount is due from employees and management team including executive board members as a result of receiving two million ODE shares in These shares were previously issued based on a general assembly resolution in ODE dated 13 February 2006 authorizing the company to issue 2 million shares at par to be used to allocate to employees and management team (see note 39). All shares were swapped at a rate of 1:10 for ODH shares in On one side payment of the share price was deferred and payback period was extended each year, on the other side employees and management were instructed not to sell their unpaid shares. As the share price decreased substantially since the allocation of the shares, provisions against these receivables were recognized in 2011 and In March 2013, the terms and conditions of the final settlement were ultimately determined by the Board of Directors based on the share price as at 31 December This resulted in a residual amount of CHF 177,893 (2016: 247,227) which is due from employees and management team including executive board members and a residual provision of CHF 177,893 (2016: CHF 247,227). All other amounts due were netted off. 26 CASH AND CASH EQUIVALENTS 26.1 Management s plans to manage liquidity shortages and related uncertainty The operational performance of the group largest subsidiary was enhanced during 2017 yet, still this operational enhancement was not hugely reflected in the Group s when being translated into CHF due to the 50.0% EGP devaluation against the CHF. However, Oman continued its positive contribution in terms of real estate sales and hotels operations. In addition, Montenegro has also contributed positively in terms of real estate sales and revenues. During 2016 our initial focus was on identifying our organizational challenges and development areas related to strategy, visibility and accountability. Accordingly, we started implementing on re- organizing the current segment structure to a destination based structure, pushing more authority and responsibility on the ground of each destination, to better increase operational efficiency, shorter the decision- making process and improve market transparency. We now have a clear view of where each destination is going to be over the short- term course 5 years and we have also indicated the needed sources of funding that we have been working on diligently to make sure the plan unfolds in the direction we want it to. The actions taken by the Group so far towards managing this situation are as follows: Commitment from Chairman In February 2017, the Chairman signed a letter of commitment in favour of the Group to avail up to CHF 60 million until end of December Of the committed amount CHF 27.8 million were drawn- down by the Group until end of December In April 2018, the Chairman signed a new letter of commitment to avail up to CHF 30 million until end of December Monetization plan, financing and loans The monetization initiatives that the management started since 2012 to generate cash to be injected into the business of the Group is continuing and has proved its success. Under this notion, in 2016 Tamweel Holding Group was identified as a non- core asset to the Group and has been put in the monetization list and assigned as an asset held for sale. By selling Tamweel to third parties including a related party we will be able to deconsolidate its debt from our books and the proceeds of its sale are earmarked to further reduce the debt balance (note 27). Further, refer to note 27 on the planned sale of Royal and Makadi. Moreover, ODE the largest subsidiary of ODH signed a CHF million debt refinancing package with its banks allowing the company to postpone its principal payments for the coming 3 years and its interest payments for financial year 2016 with an option to postpone the interest payments for financial year Thus, the balance sheet of the company will be strengthened and thereby lead to more flexibility to advancing its projects. Even though the refinancing package has successfully been concluded, we still plan to further reduce our debt balance to levels that we foresee as sustainable enough to be covered by the projected levels of operations. Please note, that the refinancing package is not yet effective. At the same time, Orascom Development will continue to seek an optimal balance sheet structure and will continue its plans to reduce and restructure the debt held at the Egyptian subsidiary level. For 2018 it is planned to reduce the balance through the sale of non- core assets and excess cash from operations. In 2018, Orascom Development will further advance its growth plans in Oman and Montenegro, building on the successful returns that were achieved last year and adding more hotel rooms and amenities in both destinations. We are currently finalizing the construction of the Chedi hotel, the Marina and retail outlets in Montenegro, all planned to be launched in the summer of We are also planning to add more rooms and a new hotel in Hawana Salalah, Oman. The financing of these planned expansions will be secured through different mid to long term financing instruments that are being evaluated at both the Group and the destination level. Accordingly, the Group will enter in discussions with certain financial intermediaries and capital providers regarding the potential issue of public or private fixed income financing instruments. Management believes that these plans are sufficient to substantially mitigate the liquidity risk. Given that there is a certain degree of uncertainty in major countries where the Group operates, especially Egypt, the loan from our Chairman as noted above is extended to support the company in the coming few months should such uncertainties prevail. However, management keeps monitoring the events as they unfold in case further immediate action is required. For the purposes of the consolidated cash flow statement, cash and cash equivalents include cash on hand, demand deposits and balances at banks. Cash equivalents are short- term, highly liquid investments of maturities of three months or less from the acquisition date, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents at year end as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows: Cash and cash equivalents 99,454,931 80,834,952 Cash and cash equivalents included in assets held for sale 4,216,702 1,337,360 Balance at the end of the year 103,671,633 82,172,312 F Annual Report F- 52

71 27 ASSETS HELD FOR SALE ASSETS HELD FOR SALE Related to Royal (i) 26,423,943 - Related to Makadi (i) 5,271,224 - Related to Tamweel (ii) 75,281,863 67,230,735 Total assets held for sale 106,977,030 67,230,735 LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE Related to Royal (i) (21,711,826) - Related to Makadi (i) (23,878) - Related to Tamweel (ii) (62,671,542) (54,118,893) Total liabilities associated with assets held for sale (84,407,246) (54,118,893) (i) Planned disposal of Royal and Makadi As part of the Group s strategy to enhance its balance sheet, management of ODH, in Q4 2017, decided to sell three hotels (Makadi Gardens ( Makadi ), Royal Azur and Club Azur ( Royal )) and a land plot in Makadi destination. The Board of Directors approved the sale of these assets in its meeting on in December In February 2018, ODH, through its largest subsidiary in Egypt, Orascom Development Egypt (ODE), signed a final offer for the sale of its stake in the three hotels and the land plot. All due diligence and related paperwork for the deal were finalized by end of February 2018 and the Company successfully got the approval of the ordinary General Assembly Meeting of its largest Egyptian subsidiary, ODE. Conclusion of the sale is only pending on the regulatory entity approvals in Egypt. The offer was signed with Meeting Point International Egypt, the Egyptian subsidiary of FTI (a related party of the Group). Royal and Makadi not qualify as discontinued operation as they are neither separate major lines of business nor geographical areas of operations. (ii) 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. The sale process has started in July 2016 after all necessary documentation had been prepared by the sell side advisor. So far, the Group received a binding offer from a third party which was accepted by management of the GroupThe subsidiary ODE signed a final binding offer and the sale is expected to be finalised in Therefore, even though the sale is taking more than 12 months since the reclassification as held for sale, the planned sale of Tamweel still qualifies as held for sale Tamweel does not qualify as discontinued operation as it is neither a separate major line of business nor a geographical area of operations. 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: CHF 31 December December 2016 Non- current assets Royal Makadi Tamweel Tamweel Property, plant and equipment , ,184 Investment property 22,685,089 5,271, Non- current receivables ,104,069 21,752,349 Finance lease receivables ,651,469 28,553,814 Current assets Inventories , ,431 Trade and other receivables ,303,374 6,403,184 Finance lease receivables - - 8,627,401 7,254,695 Other financial assets ,499 1,047,635 Other currents assets 1,453,446-1,012, ,083 Cash and bank balances 2,285,408-1,931,294 1,337,360 Assets classified as assets held for sale 26,423,943 5,271,224 75,281,863 67,230,735 Non- current liabilities Non- current borrowings (11,266,012) - (42,244,751) (35,712,509) Deferred tax liabilities (4,917,902) (23,878) (265) (380) Current liabilities Trade and other payables (191,569) - (1,334) (1,440) Current borrowings (3,135,150) - (16,904,409) (16,441,930) Current tax liabilities - - (876,114) (651,419) Provisions - - (332,749) (267,638) Other current liabilities (2,201,193) - (2,311,920) (1,043,577) Liabilities associated with assets classified as assets held for sale - (21,711,826) (23,878) (62,671,542) (54,118,893) Net assets classified as disposal group 4,712,117 5,247,346 12,610,321 13,111,842 The above amounts represent the carrying amounts on date of reclassification. No adjustments to fair value less costs to sell had to be made. 28 CAPITAL 28.1 Issued capital Par value per share CHF CHF Number of ordinary shares issued and fully paid 40,409,926 40,409,926 Issued capital 937,510, ,510, Fully paid ordinary shares There were no changes to the share capital in 2017 and F Annual Report F- 54

72 28.3 Authorized capital The ordinary meeting of shareholders held on 18 May 2015 authorized the Board of Directors to increase the share capital of the Company by a maximum of CHF 278 million by issuing up to 12,000,000 fully paid- up registered shares with a par value of CHF each until 18 May Partial increases are permitted. Following an increase of the share capital out of the authorized share capital on 15 December 2015, the Board of Directors remains authorized to increase the capital of the Company by a maximum of CHF 3,090, by issuing of up to 133'221 fully paid- up registered shares with a par value of CHF each until 18 May As the authorized capital was not renewed in 2017, there is no such capital as at 31 December Conditional capital The share capital may be increased by a maximum amount of CHF million through the issuance of up to 6 million fully paid registered shares with a nominal value of CHF each a) up to the amount of CHF 23 million corresponding to 1 million fully paid registered shares through the exercise of option rights granted to the members of the Board and the management, further employees and / or advisors of the Parent Company or its subsidiaries. b) up to the amount of CHF 116 million corresponding to 5 million fully paid registered shares through the exercise of conversion rights and / or warrants granted in connection with the issuance of newly or already issued bonds or other financial instruments by the Parent Company or one of its group companies. The subscription rights of the shareholders shall be excluded. The Board of Directors may restrict or withdraw the right for advance subscription ( Vorwegzeichnungsrecht ) of the shareholders in connection with (i) the financing (refinancing inclusively) of acquisitions of enterprises or parts thereof, participations or other investment projects of the company and/or its subsidiaries or (ii) the placement of convertible bonds or financial instruments with conversion or option rights on the national or international capital market. At 31 December 2017, no option rights, conversion rights or warrants had been granted on that basis Significant shareholders The following significant shareholders are known to us. (i) CHF Number of shares % Number of shares % Samih Sawiris (i) 25,075, % 15,575, % Thursday Holding 2,316, % 7,807, % OS Holding 2,049, % 2,049, % SOS Holding 14, % 4,009, % Others 10,953, % 10,968, % TOTAL 40,409, % 40,409, % The shares of Samih Sawiris are held directly and through his entities Thursday Holding, OS Holding and SOS Holding. 29 RESERVES (NET OF INCOME TAX) Share premium (note 29.1) 98,488,244 98,488,244 Treasury shares (note 29.2) (4,570,754) (26,797) Share- based payment reserve (note 29.3) 1,666, ,333 PP&E revaluation reserve (29.4) 9,978,470 - Investments revaluation reserve (note 29.5) (172,229) (17,256,259) General reserve (note 29.6) 4,916,868 4,916,868 Foreign currencies translation reserve (note 29.7) (356,520,727) (351,669,206) Reserve from common control transactions (note 29.8) (98,984,339) (98,692,949) Equity swap settlement (note 29.9) (2,114,229) (2,114,229) TOTAL (347,312,031) (365,520,995) 29.1 Share premium Balance at beginning of year 98,488,244 98,570,244 Transaction costs in relation to delisting of EDRs in Egypt - (82,000) Balance at end of year 98,488,244 98,488, Treasury shares Balance at beginning of year (26,797) (3,268,681) Acquisition of treasury shares (i) (5,421,560) - Distribution of treasury shares (ii) 877,603 3,241,884 Balance at end of year (4,570,754) (26,797) As of 31 December 2017, the Company owned 785,234 own shares (31 December 2016: 516). (i) During 2017, ODH acquired a total of 935,486 treasury shares at a total amount of CHF 5.4 million (ii) During 2017, ODH transferred a total of 150,768 own shares to the members of the Board of Directors as part of their remuneration (CHF 0.9 million). The treasury shares reserve, which values the shares at original purchase price (CHF 0.9 million), has been reduced accordingly and the resulting difference has been recognized as gain directly through retained earnings (CHF 48,124). During 2016, ODH transferred a total of 62,361 own shares to the members of the Board of Directors as part of their remuneration (CHF 0.7 million). The treasury shares reserve, which values the shares at original purchase price (CHF 3.2 million), has been reduced accordingly and the resulting difference has been recognized as loss directly through retained earnings (CHF 2.5 million) Share- based payment reserve Balance at beginning of year 833,333 - Share- based payments (note 39) 833, ,333 Balance at end of year 1,666, , PP&E revaluation reserve Balance at beginning of year - - Revaluation gain on property reclassified from PP&E to investment property 9,978,470 - Balance at end of year 9,978,470 - On reclassification of property from property, plant and equipment to investment properties (see notes 16 and 17), the property was revalued at its fair value with the revaluation gain recognised through other comprehensive income. For the revaluation a DCF model was used using a 5- year cash flow plan. The cost of capital used was 21.87% of which the pre- tax risk free rate is 15.0% (post- tax risk free rate 12%) and the risk premium 8%. Further a beta of 1.23 as used 29.5 Investments revaluation reserve Balance at beginning of year (17,256,259) (14,590,160) Reclassification of accumulated losses to retained earnings on sale of investment 15,880,794 - Net gain/(loss) arising on revaluation of financial assets at FVTOCI 1,203,236 (2,666,099) Balance at end of year (172,229) (17,256,259) The investments revaluation reserve represents the cumulative gains and (losses) arising on the revaluation of financial assets at fair value through other comprehensive income ( FVTOCI ). F Annual Report F- 56

73 29.6 General reserve Balance at beginning of year 4,916,868 4,916,868 Balance at end of year 4,916,868 4,916,868 On 3 December 2010, the Parent Company borrowed 1,286,353 ODH shares from Mr. Samih Sawiris free of charge under a securities lending agreement. These shares were intended to be used for the tender offer regarding the buy- out of the remaining shareholders of ODE, a company listed at the EGX. The borrowed ODH shares were not accounted for as treasury shares by the Group, as Mr. Samih Sawiris retained the significant rights, such as dividend and voting rights, during the borrowing period as per contractual provisions. Under the above- mentioned securities lending agreement the Parent Company has returned of the borrowed ODH shares to Mr. Samih Sawiris on 28 July 2011 by way of capital increase, which is further explained in note 40. All of the remaining 956,324 shares, which were not used during the above mentioned tender offer, were returned to Mr. Samih Sawiris by 31 December The difference between the balance, which was reported in equity as equity swap settlement, measured at the fair value of the share at the end of the tender offer, and the fair value amount of the capital increase was recognised as general reserve Foreign currencies translation reserve Balance at beginning of year (351,669,206) (275,993,824) Exchange differences arising on translating the foreign operations (4,851,521) (75,675,382) Balance at end of year (356,520,727) (351,669,206) Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (CHF) are recognized directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve in respect of translating the results and net assets of foreign operations are reclassified to profit or loss on the disposal and/or deemed loss of control of a foreign operation. In 2017, the Egyptian Pound dropped by 2% against the Swiss Franc. Compared to this significant devaluation, the decrease of the Swiss Franc against the US Dollar only had an insignificant positive impact. This resulted in a net loss for the year of CHF 8.2 million. The devaluation of the Egyptian Pound was initiated in the first half of 2016 by the decision of the Egypt Central Bank to devalue the Egyptian Pound against USD by approximately 14% compared to the foreign exchange rate as at 31 December 2015 resulting in a similar devaluation of the Egyptian Pound against the Swiss Franc. In 2016, the decision taken by the central bank of Egypt in November to float the Egyptian pound in an attempt to stabilize the economy has had a significant impact on many companies that operate in Egypt including the Group Reserve from common control transactions Balance at beginning of year (98,692,949) (98,692,949) Acquisition of non- controlling interests in subsidiary through swap of shares of investments in associates (291,390) - Balance at end of year (98,984,339) (98,692,949) The reserve from common control transactions mainly relates to the restructuring of the group and the set- up of a new holding company during May This new structure became effective by way of a share exchange between the shareholders of the initial holding company (ODE) and the new holding company (ODH). Following this acquisition through exchange of equity instruments, ODH became the parent of ODE with an ownership stake of 98.05%, later increased to 98.16% at 31 December Whereas the new holding company (ODH) is ultimately owned and controlled by the same major shareholders, management decided that this Group reorganisation was for the purpose of capital restructuring and it has been accounted for as a continuation of the financial statements of the initial holding Group (ODE) in the 2008 consolidated financial statements Management concluded that the above Group restructure is classified as a transaction under common control since the combining entities are ultimately controlled by the same parties both before and after the combination and that control is not transitory. However, since IFRS 3 Business Combinations excludes from its scope business combinations involving entities or businesses under common control (common control transactions), IAS 8 requires management to develop and apply an accounting policy that results in information that is relevant and reliable. Management used its judgment in developing and applying an accounting policy for common control transactions arising from the Group s capital restructuring as follows: Recognition of the assets acquired and liabilities assumed of the initial holding Group (ODE) at their previous carrying amounts; Recognition of the difference between purchase consideration and the previous carrying amount of net assets acquired as an adjustment to equity; Transaction costs, which were incurred in relation to the issuance of ODH shares, have been recognised as a reduction to the reserve from common control transaction. Amount included in the consolidated statement of changes in equity Equity swap settlement Balance at beginning of year (2,114,229) (2,114,229) Balance at end of year (2,114,229) (2,114,229) The consolidated statement of changes in equity includes a balance of CHF 2.1 million outstanding at 31 December 2017 which has originally arisen from the Group s sale of the six percent stake in Garranah companies to the Garranah family during The unsettled consideration at 31 December 2012 amounted to CHF 10.6 million of which CHF 10.2 million were reported as a negative component in equity. The remaining balance arising from such sale of CHF 0.4 million was classified as trade and other receivables. On 12 November 2013, the Garranah family has settled part of the outstanding consideration by transferring 124,441 ODH shares. This led to a corresponding transfer of CHF 8.1 million from this reserve to treasury shares (note 29.2). The residual amount as at 31 December 2017 is due to EDRs which are held in an escrow account and remained unchanged since 31 December ACCUMULATED LOSSES Balance at beginning of year (120,782,194) 78,164,830 Loss attributable to owners of the Parent Company (41,361,129) (196,415,554) Remeasurement gain/(loss) on defined benefit obligation 249,430 (14,281) Reclassification of accumulated losses from investment revaluation reserve on sale of investment (15,880,794) - Distribution of treasury shares (note 29.2) 48,124 (2,517,189) Balance at end of year (177,726,563) (120,782,194) During 2016 and 2017 no dividends had been paid. In respect of the current year, the Board of Directors does not propose a dividend or a capital reduction to the shareholders at the Annual General Meeting. 31 NON- CONTROLLING INTERESTS Balance at beginning of year 140,467, ,127,614 Share of gain/(loss) for the year 305,714 (47,420,281) Revaluation gain on property reclassified from PP&E to investment property 5,576,101 - Exchange differences arising on translation of foreign operations (3,011,053) (49,114,705) Acquisition of non- controlling interests in subsidiary through swap of shares of investments in associates 274,409 - Other non- controlling interest share in equity of consolidated subsidiaries 5,523,474 4,874,609 Balance at end of year 149,135, ,467, BORROWINGS Current Non- current Secured - at amortized cost Credit facilities (i) 117,783,982 94,290, Bank loans (ii) 144,462, ,137, ,450, ,504,475 Finance lease 536, , ,659 1,126,538 TOTAL 262,782, ,937, ,966, ,631,013 F Annual Report F- 58

74 32.1 Summary of borrowing arrangements The weighted average contractual effective interest rate for all credit facilities and loans are 8.75% (2016: 7.40%). It is calculated by dividing the forecasted contractual interest expense due next year by the total outstanding credit facilities and bank loans at the end of the current reporting period. For a breakdown of debts bearing variable and fixed interest see note (i) Credit facilities used by the group are revolving facilities used to finance working capital requirements and they are available in multiple currencies. The average interest rate for the credit facilities for year 2017 is 10.78% (2016: 9.13%). (ii) Bank loans are current and non- current loans and have in general variable interest rates including a mark- up. Property, plant and equipment with a carrying amount of CHF million (2016: CHF 88.3 million) and receivables with a carrying amount of CHF 13.4 million (2016: CHF 12.1 million) have been pledged to secure borrowings (see notes 16 and 21). In 2017, borrowings increased by CHF 3.5 million mainly due to new loan agreements in Egypt, Oman, UAE and Montenegro. The increase was partly set- off by the devaluation of the Egyptian Pound, the reclassification of Royal and Makadi hotels (note 27) and repayment of loans in Egypt and Oman Breach of loan agreement In Q4 2016, ODE, an Egyptian subsidiary, 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 terms lenders). The syndication agreement groups all short- term lenders under one legal document and converts 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 various 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 mentioning that the previously mentioned cash proceeds from the ODE relisting was used to pay down the bank debt balances of ODE 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- year 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 the option to capitalize the interest expense for the full year 2017 if ODE elects to, based on performance. ODE is still working with the lender s legal counsel to finalize the conditions required to effect the terms under both these loan agreements which is expected during H1 of the year It is also worth mentioning that in addition to the above, and until these loan agreements become effective, all covenant breaches were waived by every ODH lender for the year 2016 and Reconciliation of liabilities arising from financing activities CHF 1 January 2017 Financing Cash- flows FX Non- cash changes Accrued Interest Other 31 December 2017 Credit facilities 94,290,856 5,565,159 (2,267,111) 20,195, ,783,982 Bank loans and finance leases 275,277,643 3,226,107 (7,697,394) 1,855,138 (15,696,646) 256,964,848 Borrowings of disposal groups (note 27) 52,154,439 (648,780) (1,104,114) - 23,148,777 73,550,322 Shareholder s loan (note 35) 20,730,879 27,754,532 1,214,950 - (2,266,679) 47,433,682 TOTAL 442,453,817 35,897,018 (9,853,669) 22,050,216 5,185, ,732, PROVISIONS Current 65,558,335 68,626,934 Non- Current - - TOTAL 65,558,335 68,626,934 CHF Provision for infrastructure completion Provision for legal cases Provision for governmental fees Provision for employee benefits Other provisions (i) (ii) (iii) (iv) (v) Balance at 1 January ,637,620 20,400,754 2,581,926 5,872,156 26,134,478 68,626,934 Additional provisions recognized Reductions arising from payments Total - 1,249, ,599 1,073,471 2,256,888 4,711,399 (1,351,795) (1,591,550) (353,726) (201,633) (1,995,473) (5,494,177) Exchange differences (162,590) (854,854) (245,066) (258,358) (764,953) (2,285,821) Balance at 31 December ,123,235 19,203,791 2,114,733 6,485,636 25,630,940 65,558,335 (i) Provision for infrastructure completion relates to committed cash outflows for the development of the necessary infrastructure to make the project area that is usually located in remote regions, habitable and attractive. Such provisions are recorded for land and real estate sales on the date on which all the criteria for revenue recognition are met. (ii) Provision for legal cases consists of expected cash outflows for the settlement of pending litigations. The increase is primarily due to various new legal cases in Egypt and Oman. (iii) Provision for government fees relates to cash outflows for fees due on the sale of land and / or any profit thereon which were recorded during the current year. Such provision is calculated and recorded using the locally enacted fee structures. (iv) Provision for employee benefits partly relates to compulsory termination payments to foreign employees in Oman. The provision is based on their actual salaries. As the work permits for these employees are reconsidered by the Government on annual basis. (v) This provision mainly includes charges, services and consultancy fees for the Group's current year's operations which have not yet been finally negotiated as well as provisions in relation to various assets of the Group. In addition, it covers the Group s exposures to tax risks. Management annually reviews and adjusts these provisions based on the latest developments, discussions and agreements with the involved parties. Other non- cash changes mainly include reclassifications as disposal group. 33 TRADE AND OTHER PAYABLES Non- current trade payables 11,472,492 11,576,940 Current trade and other payables 39,574,361 24,690,585 TOTAL 51,046,853 36,267,525 Trade and other payables increased by CHF 13.8 million mainly due to increased operating activities. This increase was partly set- off by foreign currency exchange differences based on the devaluation of the Egyptian Pound (note 29.6). There were no other significant changes in F Annual Report F- 60

75 35 OTHER CURRENT LIABILITIES Advances from customers (i) 69,771,218 61,945,102 Amounts due to shareholders (ii) 50,952,940 21,913,765 Other credit balances 17,028,412 20,041,084 Accrued expenses (iii) 16,744,504 19,262,811 Deposits from others 16,061,812 8,291,650 Taxes payable (other than income taxes) 7,482,690 6,478,813 Due to management companies 779, ,761 TOTAL 178,820, ,530,986 (i) Advances from customers include amounts received (progress payments) from buyers of real estate units between the time of the initial agreement and contractual completion. The increase related to advances from customers in Montenegro, Oman and Egypt was netted off by foreign currency exchange gains based on the devaluation of the Egyptian Pound (note 29.6). (ii) Amounts due to shareholders include amounts owed to Mr. Samih Sawiris in the total of CHF 47.7 million (2016: CHF 20.7 million) as well as amounts owed to other shareholders in the total of CHF 3.3 million (2016: 0.6 million). (iii) Accrued expenses mainly include operating costs for the hotel and destination management activities. The decrease is mainly due to foreign currency exchange gains based on the devaluation of the Egyptian Pound (note 29.6) 36 ACQUISITION OF A SUBSIDIARY 36.1 Description of transactions On 27 July 2016, based on the settlement agreement with Falcon, the full control and ownership of the entity owning the Citadel Azur hotel was transferred to ORH Investment Holding Company, a subsidiary of ODH, as compensation for the amount due from the settlement agreement of USD 60 million (CHF 58.2 million). For further details on the settlement agreement refer to note Consideration transferred The amount due from the settlement agreement with Falcon of USD 60 million (CHF 58.2 million), which was classified as other current asset in the balance sheet is the consideration transferred Analysis of assets acquired and liabilities recognised at the date of acquisition CHF 2016 Non- current assets Property, plant and equipment 54,544,821 Current assets Inventories 211,054 Trade and other receivables 2,185,062 Other currents assets 461,503 Cash and bank balances 2,516,016 Non- current liabilities Deferred tax liabilities (1,103,765) Current liabilities Trade and other payables (552,102) Provisions (831,200) Other current liabilities (86,977) Net assets acquired 57,344, Impairment of receivable amount due CHF 2016 Receivable amount due at acquisition (other current assets) 58,188,000 Less: Fair value of identifiable net assets (consideration received) (57,344,412) Impairment of receivable amount due 843, Net cash inflow on acquisition of the subsidiary CHF 2016 Cash and cash equivalent balances acquired 2,516,016 Less: consideration paid in cash Net cash inflow on acquisition of subsidiary 2,516, Impact of acquisition on the results of the Group Included in the result for the year in 2016 is a profit of CHF 4.3 million attributable to the additional business generated in the acquired hotel business. 37 RETIREMENT BENEFIT PLANS 37.1 Defined benefit plans The Group operates fund defined benefit plans for qualifying employees in Switzerland. Under the plans, the employees are entitled to retirement benefits and risk insurance for death and disability. No other post- retirement benefits are provided to these employees. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on 31 December Swiss pension plans need to be administered by a separate pension fund that is legally separated from the entity. The law prescribes certain minimum benefits. The pension plans of the employees of the Swiss entities are carried out by collective funds with Allianz Suisse Lebensversicherungs- Gesellschaft. Under the pension plans, the employees are entitled to retirement benefits and risk insurance for death and disability. The boards of the various pension funds are composed of an equal number of representatives from both employers and employees. Due to the requirements of IAS 19 the above- mentioned pension plans are classified as defined benefit plans. The pension plans are described in detail in the corresponding statues and regulations. The contributions of employers and employees in general are defined in percentages of the insured salary. The retirement pension is calculated based on the old- age credit balance on retirement multiplied by the fixed conversion rate. The employee has the option to withdraw the capital at once. The death and disability pensions are defined as percentage of the insured salary. The assets are invested directly with the corresponding pension funds. The pension funds can change their financing system (contributions and future payments) at any time. Also, when there is a deficit which cannot be eliminated through other measures, the pension funds can oblige the entity to pay a restructuring contribution. For the pension funds of the Group such a deficit currently cannot occur as the plans are fully reinsured. However, the pension funds could cancel the contracts and the entities of the Group would have to join another pension fund. In the current and comparative period no plan amendments, curtailments or settlements occurred. The fully reinsured pension funds have concluded insurance contracts to cover the insurance and investment risk. The board of each pension fund is responsible for the investment of assets and the investment strategies are defined in a way that the benefits can be paid out on due date. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. Amounts recognised in profit or loss in respect of these defined benefit plans are as follows: Current service cost 203, ,116 Past service cost - (128,390) Net interest expense 2,803 6,202 Administration cost excl. cost for managing plan assets F Annual Report F- 62

76 Expense recognised in profit or loss 207, ,677 Amounts recognised in other comprehensive income in respect of these defined benefit plans are as follows: Remeasurement (gain)/loss on defined benefit obligation (243,282) 15,864 Return on plan assets excl. interest income (6,148) (1,583) Expense recognised in other comprehensive income (249,430) 14,281 The amount included in the consolidated statement of financial position arising from the Group s obligation in respect of its defined benefit plans is as follows: CHF 31 December December 2016 Present value of funded defined benefit obligation 1,699,265 1,808,042 Fair value of plan assets (1,190,303) (1,160,810) Net liability arising from defined benefit obligation 508, ,232 Movements in the present value of the defined benefit obligation in the current year were as follows: Opening defined benefit obligation 1,808,042 1,497,229 Current service cost 203, ,116 Past service cost - (128,390) Interest expense on defined benefit obligation 7,484 15,308 Contributions from plan participants 96, ,519 Benefits (paid)/deposited (173,452) 53,647 Remeasurement (gain)/loss on defined benefit obligation (243,282) 15,864 Administration cost (excluding cost for managing plan assets) Closing defined benefit obligation 1,699,265 1,808,042 Movements in the present value of the plan assets in the current period were as follows: Opening fair value of plan assets 1,160, ,436 Interest income on plan assets 4,681 9,106 Return on plan assets excluding interest income 6,148 1,583 Contributions from the employer 96, ,519 Contributions from plan participants 96, ,519 Benefits (paid)/deposited (173,452) 53,647 Closing fair value of plan assets 1,190,303 1,160,810 The respective insurance company is providing reinsurance of these assets and bears all market risk on these assets. The actual return on plan assets was CHF 10,829 (2016: CHF 10,689). The principal assumptions used for the purposes of the actuarial valuations were as follows: Discount rates 0.70% 0.40% Expected rates of salary increase 1.00% 1.00% Expected pension increases 0.00% 0.00% Mortality table BVG2015 GT BVG2015 GT The following sensitivity analyses - based on the principal assumptions - have been determined based on reasonably possible changes to the assumptions occurring at the end of the reporting period: If the discount rate would be 25 basis points (0.25 percent) higher (lower), the defined benefit obligation would decrease by CHF 0.1 million (increase by CHF 0.1 million if all other assumptions were held constant If the expected salary growth would increase (decrease) by 0.25%, the defined benefit obligation would increase by CHF 0.0 million (decrease by CHF 0.0 million if all other assumptions were held constant If the life expectancy would increase (decrease) with one year for both men and women, the defined benefit obligation would increase by CHF 0.0 million (decrease by CHF 0.0 million if all other assumptions were held constant The average duration of the defined benefit obligation at the end of the reporting period is 19.8 years (2016: 19.5 years) The Group expects to make a contribution of CHF 91,694 to the defined benefit plans during the next financial year (2016: CHF 116,123). 38 FINANCIAL INSTRUMENTS 38.1 Capital risk management The Group manages its capital to ensure that entities in the Group 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 since The capital structure of the Group consists of net debt (borrowings, as detailed in note 32, offset by cash and bank balances) and equity of the Group (comprising issued capital, share premium, reserves, retained earnings and non- controlling interests as detailed in notes 28 to 31). The Group is not subject to any externally imposed capital requirements. According to the Group s internal policies and procedures, the Executive Management reviews the capital structure on a regular basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group has a target gearing ratio of 40% to 45% determined as the proportion of net debt to equity. The gearing ratio at 31 December 2017 of 61.36% (see below) increased due to the losses for the year and was above the target recommended by the committee. The gearing ratio at the end of the reporting period was as follows: Debt (i) 448,299, ,722,938 Cash and cash equivalents (note 26) (103,671,633) (82,172,312) Net debt 344,627, ,550,626 Equity (ii) 561,607, ,674,331 Net debt to equity ratio 61.36% 57.39% (i) Debt is defined as long- and short- term borrowings (excluding derivatives), as detailed in (note 32) as well as long- and short- term borrowings included in disposal groups classified as held for sale (note 27). (ii) Equity includes all capital and reserves of the Group and non- controlling interests that are managed as capital excluding equity of disposal groups Significant accounting policies Details 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 3.18 Financial instruments. F Annual Report F- 64

77 38.3 Categories of financial instruments Financial assets Cash and bank balances 103,671,633 82,172,312 Fair value through other comprehensive income (FVTOCI) 677,388 3,516,633 Financial assets measured at amortised cost (i) 221,249, ,139,536 Financial liabilities At amortised cost (ii) 617,058, ,481,304 (i) Includes trade and other receivables, finance lease receivables as well as those other non- current and current assets that meet the definition of a financial asset. A total of CHF 28.5 million (2016: CHF 25.9 million) of other current assets does not meet the definition of a financial asset. (ii) Includes trade and other payables, borrowings, notes, other financial liabilities as well as other current liabilities that meet the definition of a financial liability. A total of CHF 69.8 million (2016: CHF 61.9 million) of other current liabilities does not meet the definition of a financial liability Financial risk management objectives In the course of its business, the Group is exposed to a number of financial risks. This note presents the Group s objectives, policies and processes for managing its financial risk and capital. The Group s Corporate Treasury function provides services to the business, co- ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. Other price risk includes equity price risk, settlement risk and commodity price risk. It is, and has been throughout 2017 and 2016, the Group s policy not to use derivatives without an underlying operational transaction or for trading (i.e. speculative) purposes. The Group seeks to minimise the effects of these risks mainly through operational and finance activities and, on occasional basis, using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group s internal policies and procedures approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non- derivative financial instruments, and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Corporate Treasury function reports monthly to the Executive Management. The Group Treasury Director carries out risk management under the Group s guidelines Market risk The Group s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see note 38.6 below) and interest rates (see note 38.7 below). Driven by the need, the Group s policy is to enter into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including: forward foreign exchange contracts to hedge the exchange rate risk arising on sales in foreign currency to the tourism / real estate industry; interest rate swaps to mitigate the risk of rising interest rates 38.6 Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. The currencies, in which these transactions primarily are denominated, are US Dollar (USD), Euro (EUR) and Egyptian Pound (EGP). Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. The Group s main foreign exchange risk arises from sales in foreign currency to the tourism / real estate industry, which generates a net foreign currency surplus for the Group. The Group has strong inflows in foreign currency, mainly US Dollar, Euro, Oman Rial and Egyptian Pound. Borrowing USD 200,676,030 54% 191,109,413 51% OMR 76,145,140 20% 84,462,594 23% EGP 47,042,502 13% 42,131,008 12% AED 26,636,000 7% 17,476,168 5% EUR 24,223,292 6% 34,268,406 9% CHF 25,866 0% 120,910 0% Total 374,748, % 369,568, % At the end of the reporting period, the carrying amounts of the Group s major foreign currency denominated monetary assets (mainly receivables) and monetary liabilities (mainly borrowings), at which the Group is exposed to currency rate risk, are as follows: CHF Liabilities Assets Currency- USD 200,676, ,109,413 71,153,696 67,493,643 Currency OMR 76,145,140 84,462,594 10,011,052 10,767,206 Currency- EGP 47,042,502 42,131,008 14,795,441 11,447,801 Currency- EUR 24,223,292 34,268,406 7,545,537 3,145,093 Residual foreign exchange exposure is managed by hedging through entering into foreign currency forward contracts if needed. Currency risk has also recently developed due to the Group s investments in different markets such as those in Egypt, UAE, Oman, Morocco and the UK. Again, the Group borrows in the local currency of the investment and uses the above- mentioned strategies to mitigate residual currency risk Foreign currency sensitivity analysis As discussed above, the Group is mainly exposed to the US Dollar (USD), Euro (EUR) and Egyptian Pound (EGP) arising from sales in these currencies to the tourism / real estate industry. The following table details the Group s sensitivity to a 5% increase and decrease in CHF against the relevant foreign currencies. The (5%) is the sensitivity rate used when reporting foreign currency risk internally to key management and represents management s assessment of the reasonably expected change in foreign exchange rates (excluding any one- off influences due to decisions by government or central banks). The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. The sensitivity analysis includes outstanding borrowings, impact of the changes in the fair value of derivative instruments designated as cash flow hedges and receivables in foreign currencies and, where appropriate, loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity where the CHF strengths 5% against the relevant currency. For a 5% weakening of the CHF against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative. CHF Currency USD Impact Currency EUR Impact Currency EGP Impact Currency OMR Impact Profit or loss 6,476,115 6,047, ,888 1,556,105 1,612,353 1,526,688 3,306,704 3,684,769 Equity The Group's sensitivity to foreign currency has changed in accordance with the changes in EGP, USD, EUR and OMR borrowings. Out of the total receivables on hand at the end of the reporting period, receivables in USD have accounted for 67% (2016: 71%), in EUR for 7% (2016: 3%), in EGP for 14% (2016: 12%), in OMR 9% (2016: 11%) and in AED 3% (2016: 3%) respectively. To mitigate the above risk exposures, where possible, the Group borrows in matching currencies to create a natural hedge. The following table shows the carrying amounts of borrowings, at the end of the reporting period, in the major currencies in which they are issued. F Annual Report F- 66

78 38.7 Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost- effective hedging strategies are applied. The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. During 2017 and 2106 the Group did not hold any derivative financial instruments Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non- derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the end of reporting period was outstanding for the whole year. A 100 basis point (1%) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management s assessment of the reasonably possible change in interest rates. If interest rates had been 100 basis points higher / lower and all other variables were held constant, the Group s profit for the year ended 31 December 2017 would decrease / increase by CHF 2.8 million (2016: decrease / increase by CHF 2.2 million). This is mainly attributable to the Group s exposure to interest rates on its variable rate borrowings Other price risks The 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 Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group credit risk arises from transactions with counterparties, mainly individual customers and corporations. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group s exposure to credit risk is, to great extent, influenced by the individual characteristics of each customer. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience, other publicly available financial information, its own trading records and other factors, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group s exposure is continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Trade receivables consist of a large number of customers, spread across various industries and geographical areas. The Group does not have any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. The credit risk on sales of real estate is limited because the Group controls this risk through the property itself by registering the unit in the name of the customer only after receiving the entire amount due from the customer. Counterparty risk is also minimized by ensuring that 80% of derivative financial instruments, money market investments and current account deposits are placed with financial institutions whose credit standings are above Aa1 and 20% above BB+. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group s maximum exposure to credit risk without taking account of the value of any collateral obtained Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established 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. Regarding management s plans to manage liquidity shortages and related uncertainty please refer to note As of 31 December 2017, total un- drawn facilities, that the Group has at its disposal in order to further reduce liquidity risk, are CHF 26.7 million (31 December 2016: CHF 40.2 million) Liquidity and interest risk tables The following tables detail the Group's remaining contractual maturity for its non- derivative financial liabilities with agreed repayment periods. 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 tables include both interest and principal cash flows. To the extent that interest cash flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay. Maturities of non- derivative financial liabilities 2017 Weighted average Less than 6 6 months to effective CHF month one year interest 1 5 years 5 + years Total rate Non- interest bearing - 152,222,479-11,830, ,053,144 Variable interest rate instruments 9.56% 126,799, ,467,173 33,527,731 9,015, ,809,824 Fixed interest rate instruments 6.76% 11,099,062 20,959,279 75,705,934 16,922, ,686,605 TOTAL 290,121, ,426, ,064,330 25,937, ,549, Weighted average effective CHF interest rate Less than 6 month 6 months to one year 1 5 years 5 + years Total Non- interest bearing - 102,136,409-11,576, ,713,349 Variable interest rate instruments 7.75% 103,760, ,552,453 61,136,151 1,425, ,874,129 Fixed interest rate instruments 6.51% 18,408,389 14,205,153 71,044,064 21,785, ,442,987 TOTAL 224,304, ,757, ,757,155 23,210, ,030,465 Counterparty Rating Credit limit Carrying amount Credit limit Carrying amount Bank 1 B- 63,363,373 74,186,175 26,324,162 12,115,917 * Bank 2-5,426,260 6,231,994 5,547,888 5,167,594 * Bank 3-23,431,289 25,092,410 34,511,370 24,256,533 Bank 4 AA- 10,335,780 11,946,049 24,252,196 10,254,875 * Bank 5 B- 11,184,740 11,204,658 11,605,276 10,903,908 * Outstanding amounts includes interest charged The amounts included above for variable interest rate instruments for liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period Impairment losses on financial assets Impairment loss on trade receivables 786,435 7,204,572 TOTAL 786,435 7,204,572 F Annual Report F- 68

79 38.12 Fair value measurement 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. 31 December December 2016 CHF Carrying amount Fair value Carrying amount Fair value Financial liabilities Borrowings/bank loans 448,299, ,547, ,722, ,917, 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 Group receives the fair values of foreign currency forward contracts and interest rate swaps from the counterparty banks. Foreign currency forward contracts are usually measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are usually measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. 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 financial and non- financial instruments 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. 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) CHF Level 1 Level 2 Level 3 Total Financial assets at FVTOCI Listed and unlisted shares measured at FV 33, , ,388 33, , ,388 Other assets at fair value Investment property 1) - - 7,500,868 7,500, ,500,868 7,500, CHF Level 1 Level 2 Level 3 Total Financial assets at FVTOCI Listed and unlisted shares measured at FV 2,892, ,566 3,516,633 2,892, ,566 3,516,633 Other assets at fair value Investment property 1) - - 5,501,334 5,501, ,501,334 5,501,334 Reconciliation of Level 3 fair value measurements of financial assets Unquoted equity securities Opening balance 624, ,085 Additions - 118,921 Total gains/(losses) recognized in other comprehensive income 52,822 (109,440) Closing balance 677, , SHARE- BASED PAYMENTS The Company has contractually granted a variable compensation amount to its new CEO, Khaled Bichara ( Contingent Compensation ). The compensation amount is due 6 years after the start date (1 January 2016) or earlier if an acceleration event occurs. In summary, the compensation amount is 10% of the share price increase above an annual average increase of 8% (based on the fixed spot share price of CHF 11.37). The Contingent Compensation will be paid in cash or, at ODH s discretion, in shares if the annual average increases in the share price are met. As of 9 May 2016, the General Assembly of ODH approved the abovementioned compensation plan. The calculated fair value of the Contingent Compensation as at grant date of CHF 5.0 million, which was calculated by an independent third- party valuation company, is recognised over the 6- year vesting period on a linear basis within profit or loss. The accumulated amount is shown as a separate share- based payment reserve within equity. The Group compensates the members of the Board with a fixed fee of CHF 1.o million (note 13.1) which is payable in unrestricted shares of the Parent Company based on the quoted market price at grant date as well as in cash. The amount has been recognized in the consolidated statement of comprehensive income as part of administrative expenses. It will be transferred to the members of the Board in RELATED PARTY TRANSACTIONS A party (a company or individual) is related to an entity if: a) directly, or indirectly through one or more intermediaries, the party: i. controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); ii. has an interest in the entity that gives it significant influence over the entity; or iii. has joint control over the entity; b) the party is an associate of the entity or a joint venture in which the entity is a venturer (both defined in IAS 28 Investments in Associates and Joint Ventures); c) the party is a member of the key management personnel of the entity or its parent; d) the party is a close member family of any individual referred to in (a) or (b); e) the party is an entity that is controlled, jointly controlled or significantly influenced by, or which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (a) or (b); or f) the party is a post- employment benefit plan for the benefit of employees of the entity, or of any entity that is related party of the entity. Balances and transactions between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. During the year, the Group purchased services from companies in which members of the Board have a partnership or significant influence through ownership during the reporting period. These services related to the leasing of office space in Cairo. Compensation of key management personnel is disclosed in note 13. There were no transfers between Level 1 and 2 in the period. The 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. F Annual Report F- 70

80 The following balances were outstanding at the end of the reporting period: Due from related parties Due to related parties Financial instruments Three Corners Company 5,299,826 4,439, Red Sea Company for Construction & Develop. 4,565,327 4,391, Orascom Housing Community 2,995,370 2,563, El Gouna Football Club 901, , Kingdom Co. 618, , Camps and lodges 518, , Iskan International Projects 6,599 42,336 2,691,572 14,206 Andermatt Swiss Alps 355, Other (balances less than CHF each) 515, ,766 66,943 38,499 Non- controlling shareholders Mirotel For Floating Hotels 185, , Tarot & Merotil Garranah for hotels 69,948 71, Tarot Garranah for touristic transportation 34,352 35, Tarot Tours Garanah 16,503 16, , ,235 Close family members Samih Sawiris (i) Close family companies Meeting Point Egypt 5,064,902 4,413, FTI 2,085, , Orascom for Touristic Establishments company (OTEC) 440, , TU Berline University 40,612 26, Orascom International Hotels & Development - 24, Total 23,715,470 19,930,353 3,598, ,940 Current 23,715,470 19,930,353 3,598, ,940 Non- current Total 23,715,470 19,930,353 3,598, ,940 (i) Current accounts due to Mr. Samih Sawiris are disclosed in note 35. Transactions involving Mr. Samih Sawiris, Chairman and major shareholder: Falcon During previous financial periods Orascom Development & Management Ltd ( ODM ), a Group s subsidiary, entered into a development agreement with Falcon for Hotels S.A.E. ( Falcon ), under which ODM was to undertake the development activities of the land bank owned by Falcon. Due to Falcon s non- compliance with the terms of the development agreement, ODM filed a legal claim against Falcon asking for remuneration for profits ODM missed out on as a result of the non- compliance with the said agreement. In June 2014 the final settlement agreement regarding all the litigation proceedings in relation to the securities purchase agreement and the development of the land bank as well as the proceeds from sale of Joud Funds was signed by both parties. The residual amount due from Falcon of USD 60 million (CHF 58.2 million) was due at 31 December 2015 but was extended until Q It was shown in the consolidated statement of financial position as other current assets (at amortised cost of CHF 58.0 million) and is secured by hotel property. In accordance with the settlement agreement both parties have opened an escrow account and placed in escrow the shares of the company that ultimately holds Citadel Azur hotel. As the 15 months period in which the payment should have been effected in cash or in kind, has lapsed subsequent to 30 June 2016 as the amount in cash was not settled, in accordance with the terms and conditions of the Settlement Agreement, the full ownership of the special purpose vehicle owning the Citadel Azur hotel has been transferred on 27 July 2016 to ORH Investment Holding Company, a subsidiary of ODH. Purchase of shares from ODE On 17 January 2007 ODE allocated to employees and the management team (including the chairman and the executive board members) an amount of 2 million shares for full consideration being the market price as of that day. Mr. Samih Sawiris acquired under this transaction 330,000 shares at the market price. Amounts due from Mr. Samih Sawiris under this transaction are included in Other assets as amounts due from employees and management team and amounted to CHF 0.2 million at 31 December 2017 (31 December 2016: CHF 0.3 million). There are no amounts due from executive board members under this transaction in 2017 and (see note 25(ii)). Taba Heights Company transactions 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 in 2008, 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. Securities lending agreement For further details on this transaction refer to note Rental contract for office building in Cairo Orascom Hotel and Development, a major subsidiary of Orascom Development Holding AG, has rented part of its administrative headquarter in Nile City from a joint stock company owned by the major shareholders and others. FTI 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 (note 16). The group has signed a final offer for the sale of 100% of its equity stake inroyal Azur and Club Azur as well as hotel of Makadi Gardens and piece of land. All due diligence and related paperwork for both deals have been finalized. General assembly meeting has approved the decision (note 27). All other related regulatory approvals are in process. Red Sea The total amount of construction work and services with Red Sea for Construction & Development S.A.E (note 20) reached EGP 279 million (CHF 15.4). 41 NON- CASH TRANSACTIONS During the current year, the Group entered into the following non- cash investing and financing activities which are not reflected in the consolidated statement of cash flow: Capitalization of interest of CHF 1.3 million over projects under constructions (note 11). Capitalization of interest of CHF 22.1 million on borrowings (note 32.3) Transfer of assets from property, plant and equipment to inventory of CHF 7.8 million (notes 16 and 23) Transfer of hotels and land from property, plant and equipment to investment property of CHF 7.8 million (notes 16 and 17) Transfer of treasury shares to Board of Directors as part of their remuneration of 2016 which was paid in 2017 (note 29.2) 42 OPERATING LEASE ARRANGEMENTS 42.1 The Group as lessee Leasing arrangements Operating leases relates to car lease with lease terms of between 2 to 4 years and office facilities with lease terms of 25 years. The Group (as a lessee) does not have an option to purchase these leased assets at the expiry of the lease periods Payments recognised as an expense in the period Minimum lease payments 485, ,061 TOTAL 485, ,061 F Annual Report F- 72

81 Non- cancellable operating lease commitments Total of future minimum lease payments Not longer than 1 year 232, ,800 Longer than 1 year and not longer than 5 years 931, ,200 Longer than 5 years 2,560,800 2,793,600 TOTAL 3,724,800 3,957,600 In respect of non- cancellable operating leases, no liabilities have been recognised The Group as lessor Leasing arrangements Operating leases relate to the investment property owned by the Group with lease terms of between 1 and 4 years for premises in El Gouna (Egypt) and Makadi (Egypt). These lease contracts do not include a lease extension option and are subject to renegotiation at the end of the lease term. The lessee does not have an option to purchase the property at the expiry of the lease period. No material non- cancellable operating lease receivables exist as at 31 December Rental income earned by the Group from its investment properties and direct operating expenses arising on the investment properties for the year are set out in note COMMITMENTS FOR EXPENDITURE The following commitments for expenditure have been made for the future development of the respective projects: CHF 2017 Eco- Bos Development Limited (i) 4,234,005 (i) As per the property management agreement between Eco- Bos and Imerys (shareholder in Eco- Bos). Eco- Bos has the right but not the obligation (American call option maturing in 2030) to purchase part or all of 6.6 million square meters (divided on 7 independent plots), which is currently owned by Imerys Mineral Limited. An annual option premium is paid to retain the rights and the purchase price is calculated based on an agreed dynamic pricing formula. The trigger event of the option(s) is at the full discretion of Eco- Bos and shall only be exercised when building permits are attained. Currently Eco- Bos is in negotiations with the local authorities and other investors and is taking its time to optimize on the best alternatives for the development Minimum Building Obligations Beside the legally binding commitment for expenditure mentioned above the, following should be considered: One part of the Group s business is to acquire land for the development of tourism projects. Out of these business opportunities often no legally binding commitments are incurred. However, the Group has non- binding business opportunity commitments in relation to their projects. In particular, the Group has minimum building obligations ( MBOs ) which are included in their development agreements ( DAs ) with the relevant governments in Oman, Morocco and Montenegro. The contingent liabilities in relation to the MBOs in Montenegro, Oman and Morocco are assessed by the management of the Group as follows: Oman According to the DAs for Salalah and Sifah, the project companies, which are subsidiaries of the Group, shall use their best efforts to substantially complete a defined number of Hotels and Golf Courses within an indicative timeline. Based on this indicative timeline, the project companies have been initially granted an extension of time for the substantial completion (which is defined as the material elements of the specific MBOs) of the MBOs that elapses on 1 January Based on the right to request an extension of the completion date, which is included in the DAs, the Group has requested an extension for the time of completion of the residual MBOs until The Sifah and Salalah project companies engaged in exhaustive negotiations with the Omani Government. Finally, on 30 June 2015, the Group and the Omani Government signed the Addenda in which they officially agreed on the extension of the deadline for completion of the MBOs to be 1st January 2020 and 1st January 2018 for Sifah and Salalah respectively. Furthermore, the Parties agreed to amend certain elements of the MBOs. With regards to Sifah project, the Parties agreed that the Project Company shall deliver 500 hotel keys over three hotels instead of four hotels. The project company has so far finalized 68 rooms. Additionally, the project company shall be required to either develop an aquarium or a waterpark or increase the number of hotel keys by 60 rooms, at its sole discretion. Similarly, with regards to Salalah project, it was agreed in the Addendum that the project company would deliver 700 hotel keys and replace the 18- hole golf course with a waterpark while the remaining MBO requirements remain unchanged. The Salalah Addendum also stipulates that the project company shall grant, transfer and assign to the Omani Government an area of land amounting to two million square meters, while the Omani Government undertook to provide all pending licenses to the Project Company. To date, the project company in Salalah has completed 3 hotels with a total number of 904 keys. The Group has requested the Omani Government to merge the required minimum number of keys, and as such the Project Companies shall be required to complete a total number of 1200/1260 keys among both Sifah and Salalah projects. Moreover, the Group requested the Omani Government to reduce the required number of holes in the golf course contemplated in the Sifah project from 18 to 9. The said request was due to the anticipated shortage in the water resources in the area as suggested by the experts. In March 2017, the Omani government approved both requests and sent a letter to that effect to be finalized by January Morocco The DA of Morocco does not contemplate the concept of MBOs. However, it sets out a timeline for the performance of the essential elements of a development plan. These essential elements have no fixed dates but are rather governed by interconnected milestones that change the date automatically on the occurrence of an agreed milestone. In 2010, the project company obtained an exception entitling it to finalize three hotels in 2013 and the remaining two in Since then the project company has created the organisational structure for the creation of three hotels and the related infrastructure. However, further process by the project companies was delayed by various factors outside the control of the project companies and they therefore have solid grounds for requesting further extensions. In addition, the DA states that in the event the delay is for reasons outside of the control of the project company, this would be taken into consideration when assessing whether the project company has fulfilled its obligations or not. All infrastructures, hotels and real estate units constructions are in discussions to be postponed, taking into account the Moroccan Government s delay in issuing the necessary permits. Although, the Government has been receptive of the project company s several requests, the Moroccan Government has not communicated any official response to the project company to date. Montenegro In Montenegro, the investment obligations contemplated by the DAs span over three phases of development, namely the initial phase, second phase and third phase. The date of completion of the initial phase is due by The initial phase of the project entails the completion of a four- star hotel, in addition to a main mooring area, an 18- hole golf course and a club house, as well as a town centre with several facilities. However, due to the Government s delay in fulfilling its obligations specified in the DA and the Closing Protocol signed between the Government of Montenegro, Municipality of Tivat and the project company, the time for completing and finalizing the MBO shall be extended proportionally to the time consumed by the Government in fulfilling the said obligations. To that effect, the project company has notified the Government several times in writing with the delay of the Government in fulfilling its obligation. The notification included reference to the finalization of the infrastructure and undertaking the required action by the Government with regard to the land expropriations on the quarry area and the main hotel site in order to enable the project company to start the construction of the hotel as required under the abovementioned initial phase. It should be noted that, to date, no official response has been received from the Government. However, to prove its goodwill, the project company is currently developing a hotel, on a land adjacent to the quarry area, with a capacity of 111 rooms, which is expected to be finalized by July The main mooring area is also expected to be finalized by July As for the golf course, the heavy excavation is 100% completed and the project company started the rough shaping of 4 holes. Based on the foregoing, the project company shall be entitled to get a 4- years extension of the deadline of delivering the initial phase so long as the Government did not fulfil its obligations as detailed hereinabove. Accordingly, the remaining phases shall, also be, automatically extended. Risk assessment of contingent liability The Management has analysed the various MBOs and is comfortable with the current status of the MBOs and the minimum investment obligations. Albeit that certain delays have or may potentially occur, all such delays, as described herein, were well founded and are premised on legal grounds that would protect the Group from any exposure. The Group has exerted a great deal of negotiations in all destinations to ensure that any delays are communicated to the relevant local authorities and thereby working alongside each concerned government in rescheduling and extending the completion dates. Additionally, the Group has worked on securing finance schemes to accommodate the newly developed restructuring of the investment obligations, or in cases were completion dates are at risk, expending the necessary amounts to comply with the contractual obligations. F Annual Report F- 74

82 44 LITIGATION There were no significant open litigations at 31 December SUBSEQUENT EVENTS Sale of non- core assets As a part of the Group strategy to seek an optimal balance sheet structure, the Company successfully got the approval of the ordinary General Assembly Meeting of its largest Egyptian subsidiary, ODE, on 19 March 2018 on the sale of non- core assets to third parties including a related party, which included Royal Azur, Club Azur and Makadi Gardens Hotels (note 27 and note 40). ODE will only be selling its stake in Royal Azur and assets in hotel and land of Makadi, which will result in total cash proceeds of CHF 27.4 million. The sale will also result in the deconsolidation of CHF 14.4 million of debt. Statutory Auditor s Report To the General Meeting of ORASCOM DEVELOPMENT HOLDING AG, ALTDORF Report on the Audit of the Consolidated Financial Statements Deloitte AG General-Guisan-Quai Zürich Schweiz Telefon: +41 (0) Fax: +41 (0) ESOP On 19 March 2018, the Extraordinary General Assembly Meeting of the Egyptian subsidiary ODE approved the five years ESOP program presented by management which includes the issuance of shares of up to 2.0% of the company s capital at the time of execution. There have been no other significant events subsequent to 31 December APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the directors and authorized for issue on 4 April Opinion We have audited the consolidated financial statements of Orascom Development Holding AG and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2017, and the consolidated statements of profit or loss and other comprehensive loss, statement of changes in equity, statement of cash flows and notes to the consolidated financial statements for the year then ended, including a summary of significant accounting policies. In our opinion the consolidated financial statements (pages F-3 to F-75) give a true and fair view of the consolidated financial position of the Group as at December 31, 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. F Annual Report F- 76

83 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition Key audit matter As at 31 December 2017, the Group consolidated statement of comprehensive income included revenue of CHF million. The revenue is measured at the fair value of the consideration received, such revenue is reduced for rebates, estimated customer returns, and other similar allowances. Different policies for revenue recognition apply across the Group's business segments. The two major streams are revenue from services and revenue from agreements for constructions of real estate. Some terms of the sales arrangements within each of the Group s companies, including the timing of transfer of risk and rewards, the nature of discount and rebates arrangements and the measurement of the construction progress, generate complexity and judgment in determining occurrence and cut-off for revenues. The risk is, therefore, that revenue is not recognised in the correct period, or did not occur. Refer to Note 3.7 Revenue recognition, Note Revenue recognition Real estate sales, Note 6 Revenue, and Note 7 Segment information. How the scope of our audit responded to the key audit matter We tested the design and implementation of the Group s relevant controls in respect of revenue recognition. We evaluated whether the revenue recognition approach applied by the Group comply with IFRS requirements. More specifically, we evaluated each different revenue stream for its own. In addition to substantive analytical reviews to understand how the revenue has trended over the year, we performed a detailed testing on transactions through out to the year to address occurrence and on transaction specifically around the year-end to address cut-off, ensuring revenues were recognised in the correct accounting period. Further, our detail test for construction/real estate revenues included comparisons against the contractual terms. Impairments of property, plant and equipment Key audit matter How the scope of our audit responded to the key audit matter The Group s statement of financial positions includes CHF million of property, plant and equipment (PP&E), representing 56.8% of total Group assets. In accordance with IFRS, these balances are tested annually for impairment, if there are triggering events present. A deficit in recoverable value would result in impairment. The Group achieved to generate positive cash inflows from operations. However, the Group does still realizes a loss for the year. This prevailing condition is an indicator for impairments on the assets used to generate sufficient operating cash flows to realize a profit. Refer to Note 16 Property, plant and equipment. We tested the design and implementation of the Group s relevant controls in respect of the impairment process. Our audit procedures on the impairments, amongst others, included: corroborating impairment tests with management and members of the Board of Directors auditing the specific valuation for land auditing the valuations of the hotels and verify the value of the hotel is higher than the PP&E allocated to the respective hotel obtaining assistance from internal valuation specialists to evaluate valuation models for the significant locations Egypt, Oman, and Montenegro challenging the destinations under development with the current year s progress, its own plans and the outlook to generate positive cash-flows F Annual Report F- 78

84 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Impairment of receivables Key audit matter How the scope of our audit responded to the key audit matter Impairments of work in progress included in inventories Key audit matter How the scope of our audit responded to the key audit matter The Group s statement of financial positions includes CHF 38.1 million non-current receivables and CHF 68.9 trade and other receivables representing 7.9% of total Group assets. The Group records required allowance at each month-end. The Group needs to execute significant judgement in assessing the collectability of the receivables, because a material portion of the receivables are collected over an average collecting period of 5.5 years. The main markets of the Group have significant uncertainty around recoverability predictions for a such periods. Refer to Note 21 Non-current receivables, and Note 24 Trade and other receivables. We tested the design and implementation of the Group s relevant controls in respect of the impairment process. Our audit procedures on the impairments, amongst others, included: corroborating allowance for doubtful accounts with management perform detail test for receivables assessing the counterparties credit risk based on publicly available information and historical information/experience for receivables obtaining appropriate evidence for any reversals of impairments The Group s statement of financial positions includes CHF 78.0 million work in progress included in total inventory of CHF million representing 5.8% of total Group assets. In accordance with IFRS, these balances are tested annually for impairment, if there are triggering events present. The Group is not generating positive cash inflows from operations. This prevailing condition is a fundamental indicator for impairments on the assets used to generate operating cash flows. Further, the current market conditions in main markets indicate a significant risk for uncollectible receivable balances. Refer to Note 23 Inventories. We tested the design and implementation of the Group s relevant controls in respect of the impairment process. Our audit procedures on the impairments, amongst others, included: evaluating the work in progress balance whether it represents the non-sold projects only performing detail tests for work in progress requesting the test of net realizable value from the Group. obtaining a copy of the quantity survey reports (if market practice) or construction company progress billing with approval of consultant to assess work in progress is accounted correctly understanding year on year movements to assess if any projects have been put on hold and to evaluate potential effects on costs to date as well as the capitalization of interest F Annual Report F- 80

85 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, 2017 Financing and Liquidity Key audit matter We identified that the most significant assumption in the assessment on its ability to continue as a going concern is liquidity within the Group, which is ensured by the commitment from the chairman to provide up to CHF 30 million in cash until December The calculations supporting the assessment require management to make judgments on estimated future cash-inflows and cash-outflows. The Group s cash projection is fundamental to assess the appropriateness of the basis adopted for the preparation of the financial statements and therefore represents a key audit matter. Refer to Note 26.1 Management s plans to manage liquidity shortages and related uncertainty. How the scope of our audit responded to the key audit matter We tested the design and implementation of the Group s relevant controls and assessed the appropriateness of the methodology applied for the cash projection that builds the basis for the Group s going concern conclusion. Our audit procedures on the cash projection underlying the going concern conclusion, amongst others, included: corroborating cash projection with management and members of the Board of Directors testing mechanical accuracy of the liquidity forecast critically assessing how the Group s assumptions tie back to the budget approved by the Board of Directors audit that the necessary waivers are obtained which support exclusion of cash-outflow for loan repayments and interest payments performing historical back testing to obtain an understanding of the past precision for the commitments from the chairman to identify potential management bias effects included in the cash projections Other Information in the Annual Report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements of the Company and our auditor s reports thereon. The annual report is expected to be made available to us after the date of this auditor s report. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Responsibility of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. F Annual Report F- 82

86 Orascom Development Holding AG Report of the Statutory Auditor for the Year Ended December 31, ORASCOM DEVELOPMENT HOLDING AG Auditor s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse: description forms part of our auditor s report. STATUTORY FINANCIAL STATEMENTS TOGETHER WITH AUDITOR'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2017 Report on Other Legal and Regulatory Requirements In accordance with article 728a paragraph 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. Deloitte AG Roland Mueller Licensed Audit Expert Auditor in Charge Adrian Kaeppeli Licensed Audit Expert Zurich, April 5, 2018 F Annual Report F- 84

87 Orascom Development Holding AG Income statement CHF Notes Gross revenue from services 158, ,954 Net proceeds from services 158, ,954 Staff costs (5,651,075) (4,452,683) Other operational costs (2,774,402) (3,423,285) Depreciation on fixed assets items (4,805) (3,801) Provisions (built)/released, net 3.4/3.8 (6,705,000) 24,056 Total operating expenditure (15,135,282) (7,855,713) Operating Loss (14,977,025) (7,698,759) Financial expenses 3.12 (486,929) (701,637) Financial income ,206,238 5,445,038 Total financial income / (expenses) 19,719,309 4,743,401 Annual gain/loss 4,742,284 (2,955,358) Orascom Development Holding AG Statutory balance sheet CHF Notes 31 December December 2016 Assets Current assets Cash at bank 3.1 4,136,744 4,230,381 Other current receivables - Related parties 8,876 11,836 - Third parties , ,322 Total current assets 4,386,804 4,477,539 Non- current assets Other non- current receivables Affiliated Companies ,907, ,249,263 Investments in subsidiaries 3.4 1,463,297,834 1,193,546,736 Tangible fixed assets , ,937 Total non- current assets 1,475,298,169 1,464,920,936 Total assets 1,479,684,973 1,469,398,475 Liabilities and shareholders equity Current liabilities Trade creditors 87, ,535 Current interest- bearing liabilities - Shareholder ,746,695 20,730,879 Other current liabilities ,866 95,044 Provision and similar items required by law , ,383 Accrued expenses 2,654,050 3,587,348 Total current liabilities 46,091,515 25,507,189 Khaled Bichara Group CEO Ashraf Nessim Group CFO Non- current liabilities Non- current interest- bearing liabilities Affiliated Companies 21,454,390 16,366,281 Other non- current liabilities - 25,866 Deferred currency translation gain 520,749 16,127,271 Total non- current liabilities 21,975,139 32,519,418 Total liabilities 68,066,654 58,026,607 Shareholders equity 3.9 Share capital ,510, ,510,283 Statutory capital reserves Capital contribution reserve (privileged) of which reserves from tax privileged capital 3.11 contributions 2,858,520,175 2,858,520,175 Statutory retained earnings 12,543,438 12,543,438 Accumulated losses (2,392,399,984) (2,397,193,303) Own shares (4,555,593) (8,725) Total shareholders' equity 1,411,618,319 1,411,371,868 Total liabilities and shareholders equity 1,479,684,973 1,469,398,475 Khaled Bichara Group CEO Ashraf Nessim Group CFO F Annual Report F- 86

88 Notes to the financial statements 1 GENERAL INFORMATION Orascom Development Holding AG was established in Switzerland as Joint Stock Company and is domiciled in Altdorf, Uri. The purpose of the Company is the direct or indirect acquisition, durable management and disposal of participations in domestic or foreign enterprises, in particular in the field of real estate, tourism, hotels, construction, resort management, financing of real estate and related industries as well as the provision of related services. The accounts for the period from 1 January to 31 December 2017 were approved by the Board of Directors on 4 April The Company has an annual average of less than 10 full- time employees (previous year: less than 10 full- time employees). 2 KEY ACCOUNTING AND VALUATION PRINCIPLES 2.1 Principal of financial reporting The present accounts for Orascom Development Holding AG have been prepared in accordance with the requirements of the Swiss Financial Reporting Law. The main accounting and valuation principles used, which are not already specified by the Swiss Code of Obligations, are described as follows. 2.2 Estimates and Assumptions made by management Financial reporting under the Swiss Code of Obligations requires certain estimates and assumptions to be made by management. These are on- going and are based on past experience and other factors (e.g. expectations of future results for investments and budget). The result subsequently achieved may change from these estimates. Items in the accounts, which are based on the estimates and assumptions made by management, are as follows: Investments Direct taxes Tangible fixed assets Provisions 2.3 Foreign currency items The currency in which Orascom Development Holding AG operates is Swiss Francs (CHF). Transactions in foreign currencies are converted into the currency in which the company operates (CHF) at the exchange rate on the day of the transaction takes place. Monetary assets and liabilities in foreign currencies are converted into CHF at the exchange rate on the balance sheet date. Any profit or losses from the exchange are recorded in the income statement except net unrealized gain from non- current items, which are deferred in the balance sheet. Non- monetary assets and liabilities at historical costs are converted at the foreign exchange rate at the time of the transaction. 2.4 Related parties Related parties include subsidiary companies (affiliated companies), members of the Board of Directors and Orascom Development Holding AG shareholders. Transactions with related parties take place under proper market conditions (dealing at an arm s length). 2.5 Cash and cash equivalents and current assets with a stock exchange price The cash and current assets with a stock exchange price include cash holdings, bank deposits and short- term money market investments maturing in a maximum of 3 months. They are recorded at their nominal value. 2.6 Current assets with a stock exchange price and financial assets Current assets with a stock exchange price are valued at the stock exchange price on the balance sheet closing date. There is no provision for a fluctuation reserve. Financial assets include long- term securities without a stock exchange price or an observable market price. These are valued no higher than the acquisition cost less any value adjustment. 2.7 Tangible Fixed Assets The straight- line depreciation method is used for tangible fixed assets according to their expected useful life. Useful life is established as follows and is revised each year: Machinery and Equipment 5 Years Office Equipment and Computers 3 Years Furniture and fixtures 3 Years 2.8 Own shares Own Shares are recorded at acquisition cost on the balance sheet as a deduction to equity. If they are resold at a later date, the profit or loss is recorded in retained earnings, respectively accumulated losses. 2.9 Shareholder rights and options Own shares are allocated to management and administrative bodies or to employees as shareholder rights or options. The difference between the acquisition value and any payments to counterparties during share allocation is shown as staff costs Leasing transactions Leasing and rental contracts are accounted for in accordance with legal ownership. Expenses as a lessee or tenant are recorded corresponding as expenditure in the relevant period Contingent compensation The company performs an assessment for their contingent compensation arrangement and disclose it as contingent liability as long as the compensation is not probable. If the assessment comes to the conclusion that the compensation is more likely than not, the company is recording an accrual for the estimated compensation. 3 INFORMATION RELATING TO ITEMS ON THE BALANCE SHEET AND INCOME STATEMENT 3.1 Cash and cash equivalents CHF 31 December December 2016 of which in CHF 215, ,750 of which in USD 1,288,698 3,347,297 of which in EUR 2,388, ,924 of which in GBP 13,768 13,447 of which in EGP 230, ,963 Total cash and cash equivalents 4,136,744 4,230, Other current receivables third parties Accounts receivables include a position in the amount of CHF 207,308 (31 December 2016: CHF 203,383), whose value was determined by the market value of ODH EDRs until delisting of EDRs. Since delisting of EDRs, this position is valued at lower of historical value as per delisting of the EDRs or of market value of the corresponding ODH shares. A provision is formed for the whole outstanding amount of CHF 207, Other non- current receivables affiliated companies The significant decrease compared to prior year is related to liability to equity conversion at ORH Investment Holding Ltd ( ORH ) in the amount of CHF 260 million. The Company converted their receivables due from ORH into equity, which increased the investment value of ORH. 3.4 Investments in subsidiaries Investments are valued at acquisition cost less adjustments for impairment. On a regular basis the Company s management reviews the recoverable value of the Company s investments in the various destinations, and accordingly reduces the carrying value by the amount of any impairment losses. F Annual Report F- 88

89 The Egyptian revolution in 2011 has negatively affected the performance of the Company s Egyptian arm under Orascom Development Egypt S.A.E. ( ODE, formerly Orascom Hotels & Development S.A.E OHD ). ODE s different operating segments, especially real estate and hotels being the key revenue and value drivers of ODE, have been negatively affected by the deteriorated economic conditions that took place in Egypt. This is represented in downsized demand for real estate purchases and declined flow of tourists. The valuation model of the Company captures the different investments, whether greenfield projects, brownfield projects, or operating projects. The valuation model adopts various approaches depending on the category of the project: as for the greenfield projects and brownfield projects, the model keeps it at investment cost given the uncertainty of the future assumptions and the absence of track record for those projects. One of the major contributors to the investments value is land banks in Egypt, for which valuation depends very much on developments and sales that are achievable over a long- term period. Due to this long- term view and the current political and economic situation, there remains a significant uncertainty. For the operating projects, DCF valuation techniques applying a two- phase model for the hotels segment were used. The first phase is a 5- year period which shows the evolving status of the hotel segment indicated by being back to the operating standards of before the 2011 revolution. And the second phase is a 5- year period which shows the steady performance of the hotel operations. Major underlying assumptions are occupancy and average room rates for hotels and the number of real estate units to be sold. The various assumptions and future projections incorporate the various political, economic and operational facts prevailing at the time of preparing the valuations. Future developments may impact the value. In 2016, the Egyptian pound dropped by 55% against the Swiss Franc. The devaluation of the Egyptian pound was initiated in the first half of 2016 by the decision of the Egypt Central Bank to devalue the Egyptian Pound against the USD by approximately 14% compared to the foreign exchange rate as at 31 December 2015 resulting in a similar devaluation of the Egyptian Pound against the Swiss Franc. On 3 November 2016, the Central Bank of Egypt decided to float the Egyptian pound and allowed banks to deal in the foreign currencies with flexible rates, which led to a further devaluation of the Egyptian Pound. In addition, Central Bank of Egypt raised interest rate for deposits in EGP by approximately 3% to face the rise in prices a currency devaluation may bring. As at 31 December 2017, the Company directly holds the following investments: Company, domicile, purpose Ownership %* Share capital 31 December December 2016 Orascom Development Egypt S.A.E % 84.79% EGP 1,009,811,630 (previously: Orascom Hotels & Development S.A.E.), Egypt Real estate development, hotel management Arena for Hotels Company S.A.E., Egypt 99.85% 99.85% EGP 20,000,000 Hotel operation Orascom Development & Management Limited, Cyprus % % EUR 1,000 Management company ORH Investment Holding Ltd, BVI % % USD 385,000,000 International holding company Lustica Development AD, Montenegro 90.82% 90.82% EUR 11,025,000 Real estate development, hotel management Andermatt Swiss Alps AG, Switzerland (ASA) 49.00% 49.00% CHF 231,147,000 Real estate development Orascom Development International AG, Switzerland % % CHF 1,400,000 Real estate development Orascom Hotels Management AG, Switzerland % % CHF 13,000,000 Hotel Management * The voting rights are equal to the ownership percentage The share capital for the investments is unchanged except for ORH Investment Holding Ltd. and Orascom Hotels and Management AG (OHM). The increase of CHF 4 million in OHM s share capital is related to a capital contribution and the increase of USD 260 million is related to liability to equity conversion at ORH level. In 2017, the Company built a provision of CHF 7 million against the investment in OHM because it is unclear whether OHM will be able to generate sufficient future profits from revenue with Orascom Group to support its carrying value. 3.5 Tangible fixed assets CHF 31 December December 2016 Machinery and equipment 24, ,459 Office equipment and computers 5,672 10,478 Total tangible fixed assets 29, , Current interest- bearing liabilities shareholder The balance of Current interest- bearing liabilities Shareholder as at 31 December 2017 is due to Mr. Samih O. Sawiris in the amount of CHF 42,746,695 (31 December 2016: CHF 20,730,879). 3.7 Other current liabilities CHF 31 December December 2016 Third parties 25,866 95,044 Total other current liabilities 25,866 95, Provisions and similar items required by law CHF 31 December December 2016 Provision for disputes 370, ,000 Bad debt provision 207, ,383 Total provisions and similar items required by law 577, , Shareholders equity movements The following table shows the shareholders equity movement: CHF Balance at 01/01/2016 Distribution to Board Members and revaluation Loss for the period Balance at 31/12/2016 Balance at 01/01/2017 Acquisition of own shares Distribution to Board Members and revaluation Profit for the period Balance at 31/12/2017 Share capital Statutory capital reserves (tax privileged) Statutory retained earnings Accumulated losses Own shares Total 937,510,283 2,858,520,175 12,543,438 (2,393,941,791) (1,029,575) 1,413,602, (296,154) 1,020, , (2,955,358) - (2,955,358) 937,510,283 2,858,520,175 12,543,438 (2,397,193,303) (8,725) 1,411,371, ,510,283 2,858,520,175 12,543,438 (2,397,193,303) (8,725) 1,411,371, (5,421,560) (5,421,560) , , , ,742,284-4,742, ,510,283 2,858,520,175 12,543,438 (2,392,399,984) (4,555,593) 1,411,618,319 F Annual Report F- 90

90 3.10. Share Capital As at 31 December 2017 the Company s share capital of CHF 937,510,283 (31 December 2016: CHF 937,510,283) was divided into 40,409,926 (31 December 2016: shares 40,409,926) registered shares with a par value of CHF each. The share capital is fully paid- in. The registered shares of the Company are listed on the Swiss Exchange (SIX). On 30 May 2017 Following the delisting approval issued by the Listing Committee of the Egyptian Exchange (EGX) on 24 May 2017, Orascom Development Holding (ODH) has successfully completed the previously announced delisting of the company's Egyptian Depositary Receipts (EDRs) from the EGX. The majority of the EDR holders have chosen to swap their EDRs into shares of ODH that had previously been underlying the EDRs and only 9.9% out of the 189,123,620 EDRs were tendered to the company for repurchase at a price of EGP 5.25 (CHF 0.29) per EDR or CHF 5.79 per ODH share (1 ODH share is underlying 20 EDRs) Statutory capital reserves from tax contributions As of 1 January 2011, Swiss tax authorities have introduced a regulation concerning capital contribution reserves. Distributions from such reserves are exempt from Swiss income and withholding tax. In order to reflect this regulation, capital contribution reserves have been classified separately in the balance sheet. The capital contribution reserves in the amount of CHF 2,999,972,181 have been approved by the tax authorities. An amount of CHF 141,452,006 out of this statutory capital reserves from tax contributions has been used in the capital increase through converting it in share capital, as the offering price was CHF 11.28, which was below the par value CHF Therefore, the capital contribution reserves from tax contributions decreased to CHF 2,858,520,175 as per 31 December Finance expenses Interest expense 486, ,637 Total finance expenses 486, , Finance income Interest income 2,559,663 3,523,020 Foreign exchange gain, net 17,646,575 1,922,018 Total finance income 20,206,238 5,445,038 4 OTHER INFORMATION, WHICH IS NOT ALREADY VISIBLE IN THE BALANCE SHEET OR INCOME STATEMENT 4.1 Residual amount of leasing liabilities Leasing liabilities, which will not expire and may not be terminated within twelve months, are subject to the following repayment structure: CHF 31 December December 2016 < 1 year 232, , years 931, ,200 > 5 years 2,560,800 2,793,600 Total 3,724,800 3,957, Total amount of assets pledged or assigned to secure own liabilities and assets under reservation of ownership Andermatt Swiss Alps (ASA) Andermatt Swiss Alps AG (ASA) has obligations towards the canton of Uri and the municipality of Andermatt. ASA is responsible for the construction of certain parts of the tourism resort Andermatt. Within certain periods or should the construction work be stopped for whatever reason, ASA has the obligation to rebuild the relevant plots of land to the original state. As at 31 December 2017, 36,985 ASA shares owned by the Company (31 December 2016: 36,985) with a net book value of CHF 957 each, amounting to a total book value of CHF 35,384,945 (31 December 2016: CHF 35,384,945), have been pledged as a security to the canton and municipality. Additionally, land with a value of CHF 1,000,000 has been pledged (31 December 2016: CHF 1,000,000). Orascom Development Egypt S.A.E. (ODE) As at 31 December 2017, 34,512,392 ODE shares owned by the Company (31 December 2016: 34,512,392) with a net book value of CHF 4.60 each, amounting to a total book value of CHF million (31 December 2016: CHF million), have been pledged as a security. Island Lastavica with fortress Mamula in Herceg Novi As at 31 January 2014, Orascom Development Holding submitted a bid pursuant to the invitation to tender issued by the tender committee for valorisation of tourism location for the purpose of long- term lease of the site island lastavica with fortress Mamula in Herceg Novi with an amount of EUR 300,000 and in April 2017 Orascom Development Holding submitted a Performance Bond for The Government of Montenegro for the purpose of long term lease by EUR 1,500,000 (10% of total investment commitment which is EUR ) in addition to 10% the bank margin so the pledged amount for the performance bond is Euro 1,650, Shareholder rights and options held by management and Board of Directors and information on allocation of shares and options to executive officers, directors and employees Shareholder Rights and Allocation of Shares to Board of Directors: The compensation of the members of the Board of Directors amounts to gross CHF for each member. In addition to this base compensation, the members (and chairmen) of the Audit Committee and of the Nomination and Compensation Committees receive an additional compensation of gross CHF 20,000. The Lead Director receives an additional compensation of gross CHF 40,000. For 2017, the base compensation and additional compensation for the Lead Director and committee members are fully paid in shares. The shares of the Company allocated to the members of the Board of Directors as compensation are, for that purpose and if not available to the Company already, purchased by the Company on the market and their valuation (for purposes of the calculation of the number of shares allocated to each member of the Board of Directors) is based 20% discount from the closing share price of the ODH share (ODHN) at SIX Swiss Exchange as March 29, 2018.The members of the Board of Directors do not have any specific further shareholder rights and do not participate in any additional share allocation plans. Shareholder Rights and Allocation of Shares to Members of the Executive Management: The bonus policy of the Group for members of the Executive Management includes a cash- bonus and a deferred share- bonus. 100% of the cash- bonus and 40% of the share- bonus are based on the member of the Executive Management s personal performance. 60% of the share- bonus is based on the (financial) performance of the Company. The cash- bonus can reach at maximum 25 % of the Executive Member s annual gross base salary. The share- bonus can reach at maximum 100 % of the Executive Member s annual gross base salary. The share price that is relevant to determine the number of ODH shares to be granted to the member of the Executive Management is the average share price of the ODH share (ODHN) at Zurich Stock Exchange during the last six months of the performance year (closing prices of all trading days between July 1 and December 31). The members of the Executive Management do not have any specific further shareholder rights and do not participate in any additional share allocation plans. 4.4 Liabilities towards staff pension schemes There are no liabilities as at 31 December 2017 (31 December 2016: CHF 0). 4.5 Joint liability in favour of third party The Company, together with certain Swiss subsidiaries, is part of a Swiss value added tax (VAT) group, resulting in a joint liability for taxation for VAT purposes. F Annual Report F- 92

91 4.6 Contingent liability The Company has contractually granted a variable compensation amount to its new CEO, Khaled Bichara ( Contingent Compensation ). The Compensation amount is due 6 years after the start date (1 January 2016) or earlier if an acceleration event occurs. In summary, the compensation amount is 10% of the share price increase above an annual average increase of 8% (based on the fixed spot share price of CHF 11.37). The contingent Compensation will be paid in cash or, at ODH s discretion, in shares if the annual average increases in the share price are met. As of 9 May 2016, the General Assembly of ODH approved the abovementioned compensation plan. 4.7 Subsequent events There have been no significant events subsequent to 31 December Statutory Auditor s Report To the General Meeting of ORASCOM DEVELOPMENT HOLDING AG, ALTDORF Deloitte AG General-Guisan-Quai Zürich Schweiz Telefon: +41 (0) Fax: +41 (0) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Orascom Development Holding AG, which comprise the balance sheet as at December 31, 2017 and the income statement and notes for the year then ended, including a summary of significant accounting policies. In our opinion the financial statements (pages F-85 to F-93) as at December 31, 2017 comply with Swiss law and the Company s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. F Annual Report F- 94

92 ORASCOM DEVELOPMENT HOLDING AG Statutory Auditor s Report for the Year Ended December 31, 2017 ORASCOM DEVELOPMENT HOLDING AG Statutory Auditor s Report for the Year Ended December 31, 2017 Investments in subsidiaries Key audit matter The statutory balance sheet presents investments in subsidiaries amounting to CHF 1,463.3 million as at December 31, 2017, which is further explained in Note 3.4 Investments in subsidiaries. There are triggering events present indicating that investments in subsidiaries are potentially impaired. Management s annual impairment test for investments in subsidiaries is considered to be judgmental, as the value investments in subsidiaries is depending on political and economic assumptions for middle east and especially Egypt, which are inherently uncertain. As the balance is material to the statutory financial statements as a whole, the impairment testing for investments in subsidiaries represents a key audit matter. How the scope of our audit responded to the key audit matter We tested the design and implementation of the Company s relevant controls. We assessed the appropriateness of management s accounting policies regarding the valuation of investments in subsidiaries. We challenged the impairment tests for investments in subsidiaries, and critically assessed whether the assumption are appropriate for the different valuations that support the value of investments in subsidiaries. We validated the appropriateness and completeness of the related disclosures in the financial statements. Liquidity and financing Key audit matter We identified that the most significant assumption in the Company s assessment of its ability to continue as a going concern is liquidity within the Group, which is ensured by the commitment from the chairman to provide up to CHF 30 million in cash until December The calculations supporting the assessment require management to make judgments on estimated future cash-inflows and cashoutflows. Liquidity cannot just be considered from a stand-alone perspective, it needs to be addressed for the whole Group, as if liquidity issues on subsidiaries level result in going concern issues for subsidiaries such going concern issues could trigger impairments on the Company s level (ultimate holding), which could impact the Company s going concern. The Group s cash projection is fundamental to assess the appropriateness of the basis adopted for the preparation of the financial statements and therefore represents a key audit matter. Refer to Note 26.1 of the Group s financial statements for the commitment and Note 3.6 Current interest-bearing liabilities - shareholder for the actual shareholder s loan from Chairman. How the scope of our audit responded to the key audit matter We tested the design and implementation of the relevant controls and assessed the appropriateness of the methodology applied for the cash projection that builds the basis for the Group s going concern conclusion and consequently also for the stand-alone conclusion. Our audit procedures on the cash projection underlying the going concern conclusion, amongst others, included: corroborating cash projection with management and members of the Board of Directors testing mechanical accuracy of the liquidity forecast critically assessing how the Group s assumptions tie back to the budget approved by the Board of Directors audit that the necessary waivers are obtained which support exclusion of cash-outflow for loan repayments and interest payments performing historical back testing to obtain an understanding of the past precision for the commitments from the chairman to identify potential management bias effects included in the cash projections Responsibility of the Board of Directors for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. F Annual Report F- 96

93 Glossary of Terms ORASCOM DEVELOPMENT HOLDING AG Statutory Auditor s Report for the Year Ended December 31, GLOSSARY OF TERMS In preparing the financial statements, the Board of Directors is responsible for assessing the entity s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse: description forms part of our auditor s report. Report on Other Legal and Regulatory Requirements In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We recommend that the financial statements submitted to you be approved. Furthermore, we draw attention to the fact that half of the share capital and legal reserves are no longer covered (article 725 paragraph 1 CO). Deloitte AG Roland Mueller Licensed Audit Expert Auditor in Charge Adrian Kaeppeli Licensed Audit Expert AG: Aktiengesellschaft (abbr. AG) is the German name for a stock corporation. ARR: Average Room Rate is a statistical unit often used in the lodging industry. The ARR is calculated by dividing the room revenue (excluding services and taxes) earned during a specific period by the number of occupied rooms. Company: Orascom Development Holding AG. EBIT: Earnings Before Interest and Taxes is an indicator of a company s profitability, calculated as total revenue minus total expenses, excluding tax and interest. EBIT is also referred to as Operating Earnings, Operating Profit and Operating Income. The indicator is also known as Profit before Interest and Taxes (PBIT), and is equal to the net income with interest and taxes added back to it. EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization is an indicator of a company s financial performance, calculated as total revenue less total expenses, excluding tax, interest, depreciation and amortization. EBITDA is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. EBITDA Adjusted: Earnings Before Interest, Taxes, Depreciation and Amortization adjusted to better reflect optimization of core operating activities net of any extraordinary items such as Provisions and impairments, FOREX losses, Capitalized G&A expenses, Share in associates and Fair value differences EDRs: Egyptian Depository Receipts EFSA: Egyptian Financial Supervisory Authority EGX: The Egyptian Exchange is one of the oldest stock markets established in The Middle East. The Egyptian Exchange traces its origins to 1883 when the Alexandria Stock Exchange was established, followed by the Cairo Stock Exchange in GOP: Gross Operating Profit means the profit of our hotel business after deducting operating costs and before deducting amortization and depreciation expenses. It excludes all costs related to non-hotel operations. GOP PAR: Gross Operating Profit per Available Room a key performance indicator for the hotel industry, defined as total gross operating profit (GOP) per available room per day Group: Orascom Development Holding AG and its subsidiaries. KPI: Key Performance Indicators are financial and non-financial metrics used to help an organization define and measure progress toward organizational goals. M 2 : square meter M 3 : cubic meter MBA: The Master of Business Administration is a master s degree in business administration. MCDR: Misr for Central Clearing, Depository and Registry provides securities settlement and custody services in Egypt by applying central depository system, effect central registry of securities traded in the Egyptian capital market and facilitate securities trading on dematerialized shares. MENA: Middle East and North Africa MV: Megavolt NAV: Net Asset Value is a term used to describe the value of an entity s assets less the value of its liabilities OHM: Orascom Hotels Management RevPAR: Revenue Per Available Room equals average room rate (ARR) multiplied by average occupancy. SESTA: Swiss Federal Act on Stock Exchanges and Securities Trading of 24 March 1995 (Bundesgesetz vom 24. März 1995 über die Börsen und den Effektenhandel, BEHG) SIS: SIS SegaInterSettle AG provides securities settlement and custody services in the Switzerland. SIX Swiss Exchange: The SIX Swiss Exchange is Switzerland s principal stock exchange and part of the Cash Markets Division of SIX Group. It operates several trading platforms and is the marketplace for various types of securities. The SIX Swiss Exchange is supervised by the Swiss Financial Market Supervisory Authority (FINMA). TRevPAR: Total Revenue per Available Room is similar to RevPAR but also takes into account other room revenues e.g. food and beverage, entertainment, laundry and other services. UAE: United Arab Emirates UK: United Kingdom Zurich, April 5, 2018 F Annual Report 182