ezdan holding group company q.s.c (f ormerly) (ez dan real …

EZDAN HOLDING GROUPCOMPANY Q.S.C

(FORMERLY)(EZDAN REAL ESTATE COMPANY Q.S.C)

DOHA – QATARCONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDEDDECEMBER 31, 2012

TOGETHER WITHINDEPENDENT AUDITOR’S REPORT

TABLE OF CONTENT

Page

Independent Auditor’s Report 1-2

Consolidated Statement of Financial Position 3

Consolidated Statement of Income 4

Consolidated Statement of Comprehensive Income 5

Consolidated Statement of Changes in Equity 6

Consolidated Statement of Cash Flows 7

Notes to the Financial Statements 8-78

EZDAN HOLDING GROUP COMPANY Q.S.C(FORMERLY EZDAN REAL ESTATE COMPANY Q.S.C.)

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CONSOLIDATED STATEMENT OF INCOME STATEMENTFor the year ended 31 December 2012 In thousands of Qatari Riyals

Note 2012 2011

Rental revenues 519,910 611,838Other operating revenues 21 27,898 11,106

Operating expenses 22 (94,646) (122,948)

Gross profit on rental activities 453,162 499,996

Construction revenues 3,514 30,584Construction costs (3,354) (30,278)

Gross profit on construction activities 160 306

Gain on disposal of investment property 106,812 84,373

Operating profit 560,134 584,675

Add / (Less):Other income 23 18,546 5,647General and administrative expenses 24 (98,436) (84,139)Depreciation 14 (6,379) (15,808)Gain on revaluation of investment property 31,244 38,805Company share from the profit of associate companies 49,060 -Finance costs 25 (145,422) (183,747)

Net profit for the year and total comprehensiveincome for the year 408,747 345,433

Basic and diluted earnings per share 26 0.15 0.13

The attached notes from 1 to 30 form an integral part of these consolidated financial statements.


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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2012 In thousands of Qatari Riyals

2012 2011

PROFIT FOR THE YEAR 408,747 345,433

Other comprehensive incomeChange in value of available-for-sale financial assets (120,282) -Share of other comprehensive(losses) Income ofassociates

(357) -

Total other comprehensive income (120,639) -

Total comprehensive income for the year 288,108 345,433

The attached notes from 1 to 30 form an integral part of these consolidated financial statements


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2012 In thousands of Qatari Riyals

Share capitalLegal

reserveRevaluation

reserveRevaluation Retained

earnings Total equitysurplusAt 1 January 2011 26,524,967 771,721 - - 106,159 27,402,847Total comprehensive incomefor the year - - - - 345,433 345,433

Transfer to legal reserve - 34,543 - - (34,543) -

Transfer to Social and SportsActivities Fund (Note 20) - - - - (8,636) (8,636)At 31 December 2011 26,524,967 806,264 - - 408,413 27,739,644

Total comprehensive incomefor the year - - - - 408,747 408,747

Transfer to legal reserve - 40,875 - - (40,875) -Dividends distributed - - - - (397,873) (397,873)

Transfer to Social and SportsActivities Fund (Note 20) - - - - (10,219) (10,219)Revaluation surplus - - - 103,146 - 103,146Revaluation Reserve - - (96,592) - - (96,592)At 31 December 2012 26,524,967 847,139 (96,592) 103,146 368,193 27,746,853

The attached notes from 1 to 30 form an integral part of these consolidated financial statements


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CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 2012 In thousands of Qatari Riyals

Note 2012 2011

Operating ActivitiesNet profit for the year 408,747 345,433Adjustments for:Gain on revaluation of investment property 15 (31,244) (38,805)Loss on withdrawal of land by the Government 23 - 11,620Depreciation 14 6,379 23,478Gain on disposal of property, plant and equipment - (183)Provided impairment for doubtful receivables 7 36,491 13,480Reversed impairment for doubtful receivables 7 (11,051) (6,444)Reversed impairment on inventory 8 - (60)Share of Investee's profits (49,060) -Profit on Islamic bank accounts - (8,951)Finance costs charged to profit or loss 25 145,274 183,747Operating profit before working capital changes 505,536 523,315Changes in working capitalChanges in inventory 32,007 (12,289)Changes in receivables and prepayments (9,088) (52,880)Changes in payables and accruals 33,915 20,481Changes in related party balances (4,780,180) (50,461)Receivables written-off 7 - (5,355)Net cash from operating activities (4,217,810) 422,811Investing ActivitiesPayments for purchase and development of property (653,708) (1,209,855)Payments for purchase of property, plant and equipment (117,328) (3,306)Proceeds from disposal of property, plant and equipment - 551Profit on Islamic bank accounts 23 - 8,951Payments for establishment of equity accountedinvestees

13 - (130)

Proceeds from withdrawal of land by Government 23 - 10,429Net cash used in investing activities (771,036) (1,193,360)

Financing ActivitiesProceeds from Islamic financing borrowings 5,932,584 1,635,890Payments for Islamic financing borrowings 17 (984,945) (777,062)Dividends Paid (397,875) -Net cash from financing activities 4,549,764 858,828

Net change in cash and cash equivalents during the year (439,082) 88,279Cash and cash equivalents at the beginning of the year 6 762,769 674,490

Cash and cash equivalents at the end of the year 6 323,687 762,769The attached notes from 1 to 30 form an integral part of these consolidated financial statements.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2012

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1. REPORTING ENTITY

Ezdan Holding Group Company Q.S.C. (“the Company”) is a Qatari public shareholding company registeredin the State of Qatar under the commercial registration number 15466. The Company was established on 24May 1993 as a Limited Liability Company, and was publicly listed in Qatar Exchange on 18 February 2008.

The Company’s registered office is at P.O. Box 3222, Doha, State of Qatar.

The principal activities of the Company include acquiring and sale of property and land, general contractingfor all types of projects and buildings, trading in building materials and equipment, providing real estateconsulting services, managing property and collect rentals, and providing property maintenance works.

These consolidated financial statements of the Company and its subsidiaries (together referred to as “theGroup”) as at and for the year ended 31 December 2012, include the following subsidiaries:

Name of The CompanyShare capital

QR

Country ofincorporation

Effective percentageOf ownership

2012 2011

1 Ezdan Trading and Contracting Company S.O.C 200,000 Qatar -- 100%2 Ezdan Hotel and Suites Company S.O.C 200,000 Qatar 100% 100%3 Ezdan Mall Company S.O.C 200,000 Qatar 100% 100%4 Ezdan Facility Management Company S.O.C 200,000 Qatar 100% 100%5 Ezdan Partnership Company S.O.C 200,000 Qatar 100% --6 Itkan Trading Co. S.O.C 200,000 Qatar 100% --7 AlrobeAlkhale Trading Co. S.O.C 200,000 Qatar 100% --8 Al Iklim Real Estate Co. S.O.C 200,000 Qatar 100% --9 Almnara Medical Equipment Co. S.O.C 200,000 Qatar 100% --10 Al Taybeen Trading Co. S.O.C 200,000 Qatar 100% --11 Al Kara Trading Co. S.O.C 200,000 Qatar 100% --12 Ethmar Construction and Trading Co. S.O.C 200,000 Qatar 100% --13 Al Namaa Maintenance services Co. S.O.C 200,000 Qatar 100% --14 ShateeAlneel Co. S.O.C 200,000 Qatar 100% --15 Arkan Import and Export Co. S.O.C 200,000 Qatar 100% --16 Tarek Al Haq Trading Co. S.O.C 200,000 Qatar 100% --17 Manazel Trading Co. S.O.C 200,000 Qatar 100% --18 EenJaloot Trading Co. S.O.C 200,000 Qatar 100% --19 TareekAlkher Trading Co. S.O.C 200,000 Qatar 100% --20 AlkoraAlzahbya Co. S.O.C 200,000 Qatar 100% --

The Parent of the Group is Al-Tadawul Holding Group Q.S.C. (“Tadawul”) which aggregately owned directlyand indirectly through its subsidiaries, 54 % of the share capital of the Company as at 31 December 2012.



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2. BASIS OF PREPARATION

a) Statement of complianceThe consolidated financial statements have been prepared in accordance with International FinancialReporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)andapplicable requirements of Qatar Commercial Companies Law No. 5 of 2002.

The consolidated financial statement of the Group was authorized for issue in accordance with the resolutionof the Board of Directors on 05/02/2013

During the current year the Management of the Group has resolved to change the presentation of the statementof financial position, as the current presentation is more informative to the users of the financial statements.

b) Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis except for investmentproperty which is measured at fair value.

The methods used to measure fair values are discussed further in Note 5.

c) Functional and presentational currencyThese consolidated financial statements are presented in Qatari Riyals, which is the Group’s functionalcurrency. All financial information presented in Qatari Riyals has been rounded to the nearest thousand exceptotherwise indicated.

d) Use of estimates and judgmentsThe preparation of financial statements in conformity with IFRSs requires management to make judgments,estimates and assumptions that affect the application of accounting policies and the reported amounts ofassets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect onthe amounts recognized in the consolidated financial statements, assumptions and estimation uncertainties thathave a significant risk of resulting in a material adjustment within the next financial year is included in Notenumber 5.

e) Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year. As There are noIFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1January 2012 that would be expected to have a material impact on the group.



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2. BASIS OF PREPARATION (CONTINUED)

Improvements to IFRSs

In May 2010, the Board issued its third omnibus of amendments to its standards, primarily with a view toremoving inconsistencies and clarifying wording. There are separate transitional provisions for each standard.The adoption of the following amendments resulted in changes to accounting policies, but did not have anyimpact on the financial position or performance of the Group:

IFRS 7 Financial Instruments – Disclosures: The amendment was intended to simplify the disclosuresprovided, by reducing the volume of disclosures around collateral held and improving disclosures byrequiring qualitative information to put the quantitative information in context. The Group reflects therevised disclosure requirements in Note 28.

IAS 1 Presentation of Financial Statements: The amendment provides an option to present an analysisof each component of other comprehensive income maybe either in the statement of changes in equity(SOCIE) or in the notes to the financial statements. The Group provides this analysis in the SOCIE.

Other amendments resulting from Improvements to IFRSs to the following standards did not have anyimpact on the accounting policies, financial position or performance of the Group:o IFRS 3 Business Combinations (Contingent consideration arising from business combination

prior to adoption of IFRS 3 (as revised in 2008))o IFRS 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment

awards)o IAS 27 Consolidated and Separate Financial Statementso IAS 34 Interim Financial Statementso IFRIC 13 Customer Loyalty Programs (determining the fair value of award credits)o IFRIC 19 Extinguishing Financial Liabilities with Equity Instrumentso IAS 32 Financial Instruments: Presentation (Amendment)



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3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in theseconsolidated financial statements, and have been applied consistently by Group entities. Certain comparativeamounts have been reclassified to conform with the current year’s presentation (see Note 30).

1) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiariesas at 31 December each year. Subsidiaries are fully consolidated from the date of acquisition, being the dateon which the Group obtains control, and continue to be consolidated until the date when such control ceases.The financial statements of the subsidiaries are prepared for the same reporting period as the parent company,using consistent accounting policies.

All intra-group balances, transactions and unrealized gains and losses resulting from intra-group transactionsare eliminated in full.

Non-controlling interests, if any, represent the portion of profit or loss and net assets not held by the Groupand are presented separately in the statement of comprehensive income and within equity in the consolidatedstatement of financial position, separately from parent shareholders' equity.

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary.

Any surplus or deficit arising on the loss of control is recognized in profit or loss. If the Group retains anyinterest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost.Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial assetdepending on the level of influence retained.

Business combinations are accounted for using the acquisition method. The acquisition is recognized at theaggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquire. For each business combination, the acquirer measures the non-controllinginterest in the acquire either at fair value or at the proportionate share of the acquirer’s identifiable netassets. Acquisition costs incurred are expensed.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriateclassification and designation in accordance with the contractual terms, economic circumstances and pertinentconditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts bytheacquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previouslyheld equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.Any contingent consideration to be transferred by the acquirer will be recognized at fair value at theacquisitiondate. Subsequent changes to the fair value of any contingent consideration classified as a liabilitywill berecognized in profit or loss.



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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2) Investments in associates and jointly controlled entities (equity-accounted investees)Associates are those entities in which the Group has significant influence, but not control, over the financialand operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50percent of the voting power of another entity. Joint ventures are those entities over whose activities the Grouphas joint control, established by contractual agreement and requiring unanimous consent for strategic financialand operating decisions.

Investments in associates and jointly controlled entities are accounted for using the equity method (equity-accounted investees) and are recognized initially at cost. The cost of the investment includes transaction costs.The consolidated financial statements include the Group’s share of the profit or loss and other comprehensiveincome, after adjustments to align the accounting policies with those of the Group, from the date thatsignificant influence or joint control commences until the date that significant influence or joint controlceases.

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount ofthat interest, including any long-term investments, is reduced to zero, and the recognition of further losses isdiscontinued except to the extent that the Group has an obligation or has made payments on behalf of theinvestee.

Unrealised gains arising from transactions with equity-accounted investees are eliminated against theinvestment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the sameway as unrealised gains, but only to the extent that there is no evidence of impairment.

3) Jointly controlled operationsA jointly controlled operation is a joint venture carried on by each venture using its own assets in pursuit ofthe joint operations. The consolidated financial statements include the assets that the Group controls and theliabilities that it incurs in the course of pursuing the joint operation, and the expenses that the Group incursand its share of the income that it earns from the joint operation.

4) Foreign currencyTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assetsand liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the financialposition date. All differences are taken to the consolidated statement of comprehensive income.

5) Revenue recognition

Rental incomeRental income receivable from operating leases, less the Group’s initial direct costs of entering into the leases,Is recognized on a straight-line basis over the term of the lease, except for contingent rental income which isrecognized when it arises.

Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if thepayments are not made on such a basis. The lease term is the non-cancellable period of the lease together withany further term for which the tenant has the option to continue the lease, where, at the inception of the lease,the directors are reasonably certain that the tenant will exercise that option.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognized in theconsolidated statement of comprehensive income when they arise.



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Service charges and expenses recoverable from tenantsIncome arising from expenses recharged to tenants is recognized in the period in which the expense can becontractually recovered. Service charges and other such receipts are included gross of the related costs inrevenue, as the directors consider that the Group acts as principal in this respect.

5) Revenue recognition (continued)

Sale of propertyRevenue from the sale of property is measured at the fair value of the consideration received or receivable.

Revenue is recognized when the significant risks and rewards of ownership have been transferred to thebuyer, recovery of the consideration is probable, the associated costs can be estimated reliably, there is nocontinuing involvement with the transferred property, and the amount of revenue can be measured reliably.Transfers of risks and rewards vary depending on the individual terms of the sale contract of property,however and in the lack of other contractual determinants, it is presumed that risks and rewards are transferredto the buyer upon transfer of possession of the sold property.When the Group is contractually required to perform further work on real estate already delivered to thebuyer, the Group recognizes a provision and expense for the present value of the expenditures required tosettle its obligations under such further works.

Services revenuesRevenues from services rendered is recognized in the consolidated statement of comprehensive income inproportion to the stage of completion of the transaction at the reporting date. The stage of completion isassessed by reference to surveys of work performed.

Construction contractsContract revenues includes the initial amounts agreed in the contract plus any variations in contract work,claims and incentive payments, to the extent that it is probable they will result in revenue and can bemeasured reliably. As soon as the outcome of a construction contract can be estimated reliably, contractrevenue is recognized in the consolidated statement of comprehensive income in proportion to the stage ofcompletion of the contract. Contract expenses are recognized as incurred unless they create an asset related tofuture contract activity.

The stage of completion is assessed by reference to surveys of work performed. When the outcome of aconstruction contract cannot be estimated reliably, contract revenue is recognized only to the extent ofcontract costs incurred that are likely to be recoverable. An expected loss on a contract is recognizedimmediately in profit or loss.

Finance incomeFinance income is recognized on a time apportionment basis using the effective profit rate method.

6) Trading propertyTrading properties are real estate properties (including non-developed plots of land) developed andconstructed, or held, for sale in the ordinary course of business. Trading properties are held at the lower ofcost and net realizable value. Net realizable value is the estimated selling price in the ordinary course ofbusiness less the estimated costs of completion and the estimated costs necessary to make the sale. Cost oftrading properties is determined on the basis of specific identification of their individual costs.



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7) Investment propertyInvestment properties are properties which are held either to earn rental income, including those underdevelopment, or for capital appreciation or for both are initially measured at cost, including transaction costs.Subsequent to initial recognition, investment properties are stated at fair value. The fair values are based onmarket values, being the estimated amount for which a property could be exchanged on the date of valuationbetween a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein theparties had each acted knowledgeably, prudently and without compulsion. Valuations reflect, whereappropriate; the type of tenants actually in occupation or responsible for meeting lease commitments or likelyto be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between lessor and lessee; and theremaining economic life of the property. Any gain or loss arising from a change in fair value is recognized inthe consolidated statement of comprehensive income.

Property that is being constructed for future use as investment property is accounted for as investmentproperty under the fair value model. Property under construction is designated as investment property only ifthere are unambiguous plans by management to subsequently utilize the property for rental activities uponcompletion of development, or if there is undetermined future use of the property and hence the property isheld for long term capital appreciation.

Transfers between property categoriesTransfers to, or from, investment property shall be made when, and only when, there is a change in use,evidenced by:(a) commencement of owner-occupation, for a transfer from investment property to owner-occupied property;(b) commencement of development with a view to sale, for a transfer from investment property to inventories;(c) end of owner-occupation, for a transfer from owner-occupied property to investment property;(d) commencement of an operating lease to another party, for a transfer from inventories to investmentproperty.

When the Group decides to dispose of an investment property without development, it continues to treat theproperty as an investment property until it is derecognized (eliminated from the statement of financialposition) and does not treat it as trading property.

When the use of a property changes from owner-occupied to investment property, the property is remeasuredto fair value and reclassified as investment property. Any gain arising on remeasurement is recognizeddirectly in equity as a revaluation surplus. Any loss is recognized immediately in the consolidated statementof comprehensive income.

For a transfer from investment property carried at fair value to owner-occupied property or inventories, theproperty’s deemed cost for subsequent accounting in accordance with IAS 16 or IAS 2 shall be its fair value atthe date of change in use.

For a transfer from inventories to investment property that will be carried at fair value, any difference betweenthe fair value of the property at that date and its previous carrying amount shall be recognized in profit or loss.



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8) Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable tobringing the asset to a working condition for its intended use, and the costs of dismantling and removing theitems and restoring the site on which they are located. Purchased software that is integral to the functionalityof the related equipment is capitalized as part of that computers and office equipment.

Depreciation is recognized in the consolidated statement of comprehensive income on a straight-line basisover the estimated useful lives of each part of an item of property, plant and equipment. Land, if any, is notdepreciated.

The estimated useful lives of the depreciable assets are as follows:

Buildings 20 - yearsMotor vehicles 5 - yearsFurniture, fixtures and office equipment 3-5 -yearsHeavy equipment 5 - years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes incircumstances indicate the carrying value may not be recoverable. If any such indication exists and where thecarrying values exceed the estimated recoverable amount, the assets are written down to their recoverableamount.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted forseparately is capitalized and the carrying amount of the component that is replaced is written off. Othersubsequent expenditure is capitalized only when it increases future economic benefits of the related item ofproperty, plant and equipment. All other expenditure is recognized in the consolidated statement ofcomprehensive income as the expense is incurred. An item of property, plant and equipment is derecognizedupon disposal or when no future economic benefits are expected from its use or disposal. Any gain or lossarising on derecognition of the asset is included in the consolidated statement of comprehensive income profitor loss in the year the asset is derecognized.

9) Financial instruments

(i) Non-derivative financial assetsThe Group initially recognises loans and receivables and deposits on the date that they are originated. Allother financial assets (including assets designated at fair value through profit or loss) are recognized initiallyon the trade date, which is the date that the Group becomes a party to the contractual provisions of theinstrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in whichsubstantially all the risks and rewards of ownership of the financial asset are transferred. Any interest intransferred financial assets that is created or retained by the Group is recognized as a separate asset orliability.



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9) Financial instruments (continued)

Financial assets and liabilities are offset and the net amount presented in the statement of financial positionwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle on a netbasis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: financial assets at fair valuethrough profit or loss, loans and receivables and available-for-sale financial assets.

Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in an activemarket. Such assets are recognized initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effectiveinterest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, and trade and other receivables

Cash and cash equivalentsCash and cash equivalents comprise cash and bank balances and deposits with original maturities of threemonths or less.

(ii) Non-derivative financial liabilitiesFinancial liabilities are recognized initially on the trade date, which is the date that the Group becomes a partyto the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled orexpire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial positionwhen, and only when, the Group has a legal right to offset the amounts and intends either to settle on a netbasis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Suchfinancial liabilities are recognized initially at fair value plus any directly attributable transaction costs.Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effectiveinterest method. Other financial liabilities comprise obligations under Islamic finance contracts , bankoverdrafts, and trade and other payables.

Bank overdrafts, if any, that are repayable on demand and form an integral part of the Group’s cashmanagement are included as a component of cash and cash equivalents for the purpose of the statement ofcash flows.

(iii) Share capitalOrdinary sharesOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary sharesare recognized as a deduction from equity.



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10) Impairment

Financial assetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that itis impaired. A financial asset is considered to be impaired if objective evidence indicates that one or moreevents have had a negative effect on the estimated future cash flows of that asset. All impairment losses arerecognized in the consolidated statement of comprehensive income.

a) For assets carried at fair value, impairment is the difference between cost and fair value, less anyimpairment loss previously recognized in the consolidated statement of comprehensive income;

b) For assets carried at cost, impairment is the difference between carrying value and the present value offuture cash flows discounted at the current market rate of return for a similar financial asset;

c) For assets carried at amortised cost, impairment is the difference between carrying amount and the presentvalue of the estimated future cash flows discounted at the original effective finance cost rate.

d) Significant financial assets are tested for impairment on an individual basis.e) The remaining financial assets are assessed collectively in groups that share similar credit risk

characteristics.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after theimpairment loss was recognized. For financial assets measured at amortized cost, the reversal is recognized inthe consolidated statement of comprehensive income .

Non-financial assetsThe carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at eachreporting date to determine whether there is any indication of impairment. If any such indication exists, thenthe asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is thegreater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated futurecash flows are discounted to their present value using a discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets aregrouped together into the smallest group of assets that generates cash inflows from continuing use that arelargely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds itsestimated recoverable amount. Impairment losses are recognized in the consolidated statement ofcomprehensive income.



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11) Borrowing costsBorrowing costs are finance cost and other costs that the Group incurs in connection with the borrowing offunds. A qualifying asset for finance cost capitalization is an asset that necessarily takes a substantial periodof time to get ready for its intended use or sale. The Group capitalizes borrowing costs that are directlyattributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.The Group recognizes other borrowing costs as an expense in the period in which it incurs them.

The Group begins capitalizing borrowing costs as part of the cost of a qualifying asset on the commencementdate. The commencement date for capitalization is the date when the Group first meets all of the followingconditions:(a) incurs expenditures for the asset;(b) incurs borrowing costs; and(c) undertakes activities that are necessary to prepare the asset for its intended use or sale.

To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, theGroup determines the amount of borrowing costs eligible for capitalization as the actual borrowing costsincurred on that borrowing during the period less any investment income on the temporary investment ofthose borrowings, if any.

The borrowing costs applicable to the borrowings of the Group that are outstanding during the period, otherthan those specific borrowings mentioned above as made specifically for the purpose of obtaining a qualifiedasset, are capitalized by applying a capitalization rate to the expenditures on that asset.

The amount of borrowing costs that the Group capitalizes during the period is not to exceed the amount ofborrowing costs it incurred during that period. The Group suspends capitalization of borrowing costs duringextended periods in which it suspends active development of a qualifying asset, and ceases capitalizingborrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intendeduse or sale are complete.

12) Islamic financing borrowingsIslamic financing borrowings are recognized initially at fair value of the consideration received, less directlyattributable transaction costs. Subsequent to initial recognition, those obligations are measured at amortizedcost using the effective cost method.

Gains or losses are recognized in the consolidated statement of comprehensive income when the liabilities arederecognized as well as through the amortization process. Finance cost and other related charges arerecognized as an expense when incurred.

Installments due within one year are shown as a current liability. Installments due after 1 year are shown asnon-current liability.

13) ProvisionsA provision is recognized if, as a result of a past event, the Group has a present legal or constructiveobligation that can be estimated reliably, and it is probable that an outflow of economic benefits will berequired to settle the obligation. Provisions are determined by discounting the expected future cash flows at adiscount rate that reflects current market assessments of the time value of money and the risks specific to theliability.



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14) LeasesLease paymentsLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classifiedas finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of itsfair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset isaccounted for in accordance with the accounting policy applicable to that asset.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classifiedas operating leases, and are not recognized in the Group’s consolidated financial position.

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term ofthe lease. Lease incentives received are recognized as an integral part of the total lease expense, over the termof the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and thereduction of the outstanding liability. The finance expense is allocated to each period during the lease term soas to produce a constant periodic rate of finance cost on the remaining balance of the liability. Contingentlease payments are accounted for by revising the minimum lease payments over the remaining term of thelease when the lease adjustment is confirmed.

Determining whether an arrangement contains a leaseAt inception of an arrangement, the Group determines whether such an arrangement is or contains a lease.This will be the case if the following two criteria are met:

The fulfilment of the arrangement is dependent on the use of a specific asset or assets; and The arrangement contains a right to use the asset(s).

At inception or on reassessment of the arrangement, the group separates payments and other considerationrequired by such an arrangement into those for the lease and those for other elements on the basis of theirrelative fair values. If the Group concludes for a finance lease that is impracticable to separate the paymentsreliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlyingasset. Subsequently the liability is reduced as payments made and an imputed finance cost on the liability isrecognized using the Group’s incremental borrowing rate.

15) Employees’ end of service benefitsThe Group provides end of service benefits to its expatriate employees in accordance with Qatar Labor Law.The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to thecompletion of minimum service period. The expected costs of these benefits are accrued over the period ofemployment.

With respect to its national employees, the Group provides contributions to the General Pension FundAuthority calculated as a percentage of the employees’ salaries. The Group’s obligations are limited to thesecontributions, which are expensed when due.



20


16) InventoryInventories are stated at the lower of cost and net realizable value. Costs are those expenses incurred inbringing each product to its present location and condition. Cost is determined on a weighted average basis.

Net realizable value is based on estimated selling price less any further costs expected to be incurred oncompletion and disposal.

17) Receivables and prepaymentsRent and other receivables are recognised at their original invoiced value. Where the time value of money ismaterial, receivables are carried at amortised cost. Provision is made when there is objective evidence that theGroup will not be able to recover balances in full. Balances are written off when the probability of recovery isassessed as being remote.

18) Construction contracts receivable (in progress)Construction contracts receivable represents the gross unbilled amount expected to be collected fromcustomers for contract work performed to date. It is measured at cost plus any profits recognized to date lessprogress billings and recognized contract losses. Cost includes all expenditures related directly to specificprojects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based onnormal operating capacity.

Construction contracts in progress is presented as part from receivables and prepayments in the consolidatedstatement of financial position for all contracts with external parties, in which costs incurred plus recognizedprofits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then thedifference is presented as deferred income in (excess billings) in the consolidated statement of financialposition.

19) Tenant depositsTenant deposits liabilities are initially recognized at fair value and subsequently measured at amortized costwhere material. Any difference between the initial fair value and the nominal amount is included as acomponent of operating lease income and recognized on a straight-line basis over the lease term.

20) Earnings per shareThe Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS iscalculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weightedaverage number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting theprofit or loss attributable to ordinary shareholders and the weighted average number of ordinary sharesoutstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes andshare options granted to employees, if any.

21) Segment reportingSegment results that are reported to the Chief Executive Officer include items directly attributable to asegment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainlycorporate assets, liabilities and income and expenses.



21

4. STANDARDS ISSUED BUT NOT EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the Group’s financial statements arelisted below. This listing is of standards and interpretations issued, which the Group reasonably expects to beapplicable at a future date. The Group intends to adopt those standards when they become effective.

IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive IncomeThe amendments to IAS 1 change the grouping of items presented in ‘Other Comprehensive Income’. Itemsthat could be reclassified (or‘recycled’) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items which will never be reclassified.

IAS 19 Employee Benefits (Amendment)The IASB has issued numerous amendments to IAS 19. These range from fundamental changes like removingthe corridor mechanism and the concept of expected returns on plan assets to simple clarifications andrewording. The amendment becomes effective for annual periods beginning on or after 1 January 2013.

IAS 27 (as revised in 2011)As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting forsubsidiaries, jointly controlled entities, and associates in separate financial statements. The amendmentbecomes effective for annual periods beginning on or after 1 January 2013.

IAS 28 (as revised in 2011)As a consequence of the new IFRS 11 and IFRS 12. IAS 28 has been renamed IAS 28 Investments inAssociates and Joint Ventures, and describes the application of the equity method to investments in jointventures in addition to associates. The amendment becomes effective for annual periods beginning on or after1 January 2013.

IFRS 9 Financial Instruments: Classification and MeasurementIFRS 9 as issued reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies toclassification and measurement of financial assets and financial liabilities as defined in IAS 39. The standardis effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB willaddress hedge accounting and impairment of financial assets. The completion of this project is expected overthe course of 2011. The adoption of the first phase of IFRS 9 will have an effect on the classification andmeasurement of the Group’s financial assets, but will potentially have no impact on classification andmeasurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases,when issued, to present a comprehensive picture.

IFRS 10 Consolidated Financial StatementsIFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses theaccounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation —Special Purpose Entities.



22

4. STANDARDS ISSUED BUT NOT EFFECTIVE (CONTINUED)

IFRS 10 establishes a single control model that applies to all entities including ‘special purpose entities. Thechanges introduced by IFRS 10 will require management to exercise significant judgement to determinewhich entities are controlled, and therefore are required to be consolidated by a parent, compared with therequirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after1 January 2013.

IFRS 11 Joint ArrangementsIFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetaryContributions by Ventures. IFRS 11 removes the option to account for jointly controlled entities (JCEs) usingproportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted forusing the equity method. The application of this new standard will not imply a modification in thepresentation of the financial statements of the Group. This standard becomes effective for annual periodsbeginning on or after 1 January 2013.

IFRS 12 Disclosure of Involvement with Other EntitiesIFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financialstatements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28 Investment inAssociates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates andstructured entities. A number of new disclosures are also required. This standard becomes effective for annualperiods beginning on or after 1 January 2013.

IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does notchange when an entity is required to use fair value, but rather provides guidance of how to measure fair valueunder IFRS when fair value is required or permitted. This standard becomes effective for annual periodsbeginning on or after 1 January 2013.



23

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group's financial statements requires management to make judgements, estimates andassumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure ofcontingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates couldresult in outcomes that require a material adjustment to the carrying amount of the asset or liability affected infuture periods.

Judgements other than estimatesIn the process of applying the Group's accounting policies, management has made the following judgements,which have the most significant effect on the amounts recognised in the consolidated financial statements:

Revenue recognitionWhen a contract for the sale of a property upon completion of construction is judged to be a constructioncontract, revenue is recognised using the percentage of completion method as construction progresses. Thepercentage of completion is made by reference to the stage of completion of projects and contracts determinedbased on the proportion of contract costs incurred to date and the estimated costs to complete.

Classification of propertyThe Group determines whether a property is classified as investment property or trading property:

Investment property comprises land and buildings (principally residential, commercial and retailproperty) which are not occupied substantially for use by, or in the operations of, the Group, nor forsale in the ordinary course of business, but are held primarily to earn rental income and capitalappreciation.

Trading property comprises property that is held for sale in the ordinary course of business.Principally, this is residential property that the Group develops and intends to sell before or oncompletion of construction.

Operating lease contracts – the Group as lessorThe Group in its normal course of rental activities, enters into commercial property leases on its investmentproperty portfolio. The Group has determined, based on an evaluation of the terms and conditions of thearrangements, that it retains all the significant risks and rewards of ownership of these property and soaccounts for the leases as operating leases.

Impairment of receivables and prepaymentsAn estimate of the collectible amount of tenants and other receivables, and due from related parties is madewhen collection of the full amount is no longer probable. For individually significant amounts, this estimationis performed on an individual basis.

Amounts which are not individually significant, but which are past due, are assessed collectively based on theprovisioning policy applied by the Group, and a provision is applied according to the length of time past due,based on historical recovery rates.

At the reporting date, there were no allowances for impairment of due from related parties as the Group doesnot have collection concern with regards to its receivables from its related parties. The overdue and doubtfulamounts for collection as the end of the reporting period are disclosed in Note 7.



24

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)

Estimates

Estimation of net realizable value for inventoryInventory is stated at the lower of cost and net realizable value (NRV).

NRV for completed inventory property is assessed with reference to market conditions and prices existing atthe reporting date and is determined by the Group having taken suitable external advice and in the light ofrecent market transactions.

Valuation of propertyThe fair value of investment property is determined by independent real estate valuation experts usingrecognized valuation techniques. These techniques comprise both the Yield Method and the Discounted CashFlow Method. In some cases, the fair values are determined based on recent real estate transactions withsimilar characteristics and location to those of the Group assets.

Investment property under construction is also valued at fair value as determined by independent real estatevaluation experts, except if such values cannot be reliably determined. In the exceptional cases when a fairvalue cannot be reliably determined, such properties are carried at cost. The fair value of investmentproperties under construction is determined using the Discounted Cash Flow Method.

The determination of the fair value of investment property requires the use of estimates such as future cashflows from assets (such as lettings, tenants’ profiles, future revenue streams, capital values of fixtures andfittings, plant and machinery, any environmental matters and the overall repair and condition of the property)and discount rates applicable to those assets. In addition, development risks (such as construction and lettingrisks) are also taken into consideration when determining the fair value of investment properties underconstruction. Future revenue streams, inter alia, comprises contracted rent (passing rent) and estimated rentalincome (ERV) after the contract period. In estimating ERV, the potential impact of future lease incentives tobe granted to secure new contracts is taken into consideration. All these estimates are based on local marketconditions existing at the reporting date.

Techniques used for valuing investment propertyThe Yield Method converts anticipated future cash flow benefits in the form of rental income into presentvalue .This approach requires careful estimation of future benefits and the application of investor yield orreturn requirements. One approach to value the property on this basis is to capitalize net rental income on thebasis of an Initial Yield, generally referred to as the ‘All Risks Yield’ approach or ‘Net Initial Yield’approach, adjusting for any factors not included in net rental income, such as vacancy, lease incentives,refurbishment, etc.



25

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)

The Discounted Cash Flow Method involves the projection of a series of periodic cash flows either to anoperating property or a development property. To this projected cash flow series, the weighted average cost ofcapital (WACC) issued as a discount rate to establish an indication of the present value of the income streamassociated with the property. The calculated periodic cash flow is typically estimated as gross rental incomeless vacancy and collection losses, if any is estimated, and less operating expenses/outgoings. A series ofperiodic net operating incomes, along with an estimate of the terminal value (which is estimated using theGordon Growth Model) anticipated at the end of the projection period, are discounted to present value. Theaggregate of the net present values equals the market value of the property.

Useful lives of property, plant and equipmentThe Group's management determines the estimated useful lives of its property, plant and equipment forcalculating depreciation. This estimate is determined after considering the expected usage of the asset,physical wear and tear, technical or commercial obsolescence.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2012 In thousands of Qatari Riyals

38

6. CASH AND CASH EQUIVALENTS

2012 2011

Cash on hand 105 537Cash in banks :-Term deposits - 262,000Saving and call accounts 43,525 471, 989Current accounts 280,057 21,523Margin accounts - 6,720

Cash and cash equivalents 323,687 762,769

7. RECEIVABLES AND PREPAYMENTS

2012 2011

Tenants receivable 138,452 95,465Less: Allowance for impairment of tenants receivable (52,511) (24,569)

85,941 70,894

Advances to suppliers 17,829 4,739Advances to contractors 1,905 40,729Advances for purchase of property 72,513 10,645Construction contracts receivable - 35,939Payments against letters of credit 3,222 93,586



39

Bank profits receivable - 1,322Refundable deposits 5,974 3,935Prepaid expenses 8,597 222Staff receivables 276 647Other receivables and debit balances 57,940 10,393Less: Allowance for impairment of other receivables - (2,502)

254,197 270,549

The Group’s exposure to credit and impairment losses related to receivables and prepayments are disclosed in Note 28.

7. RECEIVABLES AND PREPAYMENTS (CONTINUED)

Receivables and prepayments are segregated between current and non-current portions as follows:

2012 Current Non-current Total

Net tenants receivables 85,941 - 85,941Advances to suppliers 17,829 - 17,829Advances to contractors - 1,905 1,905



40

Advances for purchase of property 72,513 - 72,513Construction contracts receivable - - -Payments against letters of credit - 3,222 3,222Bank profits receivable - - -Refundable deposits - 5,974 5,974Prepaid expenses 8,597 - 8,597Staff receivable 276 - 276Net other receivables and debit balances 57,940 - 57,940

243,096 11,101 254,197


Net tenants receivables 70,895 - 70,895Advances to suppliers 4,739 - 4,739Advances to contractors - 40,729 40,729Advances for purchase of property - 10,645 10,645Construction contracts receivable 35,939 - 35,939Payments against letters of credit - 93,586 93,586Bank profits receivable 1,322 - 1,322Refundable deposits - 3,935 3,935Prepaid expenses 222 - 222Staff receivable 646 - 646Net other receivables and debit balances 7,891 - 7,891

121,654 148,895 270,549

Movements on the allowance for impairment of receivables were as follows:



41

2012 At 1January

Providedprovisions

Reversedprovisions

Provisionswritten-off

At 31December

Tenants receivables 24,569 36,491 (8,549) - 52,511Other receivables 2,502 - (2,502) - -

27,071 36,491 (11,051) - 52,511

7. RECEIVABLES AND PREPAYMENTS (CONTINUED)

Movements on the allowance for impairment of receivables (continued):

2011 At 1January

Providedprovisions

Reversedprovisions

Provisionswritten-off

At 31December

Tenants receivables 18,249 13,019 (6,444) (255) 24,569Other receivables 7,141 461 - (5,100) 2,502

25,390 13,480 (6,444) (5,355) 27,071

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. The Group’s practice is not to obtain collaterals over receivables and thevast majority of receivables are unsecured accordingly.

8. INVENTORY



42

2012 2011

Buildings and maintenance materials 2,57232,579

Goods in transit - 9,600Linen and China & glass ware 5,904 -

8,476 42,179Less: Allowance for impairment of inventory - (1,696)

8,476 40,483

The movement during the year on the allowance for impairment of inventory represents reversal of the allowance amounting to QR 1,696 thousands .in 2012 QR 60thousands in 2011.



43

9. RELATED PARTY BALANCES AND TRANSACTIONS

Related parties represent the Parent of the Group, (Tadawul), the major shareholder, associated companies, directors and key management personnel of the Group, andentities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s Board ofDirectors.

a) Due from related parties

Name of related party and nature of relationship 2012 2011

Al-Tadawul Holding Group Q.S.C. - 451,954Sak Group for Investment Properties S.O.C. (Affiliated entity) 16,418 4,382White Square Real Estate (Associate company) 246 2,204Other related parties 355 338Al-Abdulwahab for Real Estate Development W.L.L. 4,096 -Asia Company 3,026 -

24,141 458,878

Due from related parties are segregated between non-current and current portions as follows:


Al-Tadawul Holding Group Q.S.C. -Sak Group for Investment PropertiesS.O.C. 16,418 - 16,418White Square Real Estate 246 - 246



44

Other related parties 355 - 355White Square Real Estate 4,096 - 4,096Other related parties 3,026 - 3,026

24,141 - 24,141


Al-Tadawul Holding Group Q.S.C. 451,954 - 451,954Sak Group for Investment PropertiesS.O.C. - 4,382 4,382White Square Real Estate 2,204 - 2,204Other related parties - 338 338

454,158 4,720 458,878

9. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)

b) Due to related parties

Name of related party and nature of relationship 2012 2011

Al-Tadawul Holding Group Q.S.C. (Parent of the Group) 693,610 -Sheikh Thani Bin Abdullah Al-Thani (Chairman of the Board ofDirectors) - 8,000



45

693,610 8,000

c) Related party transactions2012 2011

Sale of property(i) 610,584 920,416Settlement of non-profit bearing liabilities - 473,688Exchange of investment property -

Fair value of property received - -Fair value of property given - -

Terms and conditions of transactions with related parties

Outstanding balances at the year-end are unsecured, free of finance cost and the settlement occurs in cash. There have been no guarantees provided or received for anyrelated party receivables or payables. For the years ended 31 December 2012 and 2011, the Group has not recorded any impairment of receivables relating to amountsowed by the related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which therelated party operates.

(i) During 2012, the Group has entered into a contract to sell investment properties to Al- Tadawul Holding Group Q.S.C.(Parent of the Group) for an amountof QR 610,584 thousand. The sale has resulted in a gain of QR 160,812 thousand.



46

10. ACQUIRED COMPANIES DURING THE YEAR

As of 17 September 2012 and based on the decision which has been taken in the extraordinary general assembly the company had acquired the following 15 companiesfrom Tadawul Holding Group Q.P.S.C., the purchase cost has been decided based on evaluation reports which has been done by (KPMG, CAPITAL COMMERCIAL)

Name of The Company Assets Liabilities Net assetsPurchase

Value

InThousands

InThousands

InThousands

InThousands

QR QR QR QR

Itkan Trading Co. S.O.C 354,242 4,226 350,016 367,336AlrobeAlkhale Trading Co. S.O.C 262,078 - 262,078 228,844Al Iklim Real Estate Co. S.O.C 259,998 4,226 255,772 266,634Almnara Medical Equipment Co. S.O.C 355,697 4,226 351,471 368,941Al Taybeen Trading Co. S.O.C 255,290 - 255,290 261,791Al Kara Trading Co. S.O.C 295,905 4,226 291,679 308,622Ethmar Construction and Trading Co. S.O.C 355,670 4,226 351,444 368,915Al Namaa Maintenance services Co. S.O.C 259,998 4,226 255,772 266,634ShateeAlneel Co. S.O.C 478,773 - 478,773 485,633



47

Arkan Import and Export Co. S.O.C 320,031 4,226 315,805 327,145Tarek Al Haq Trading Co. S.O.C 245,233 - 245,233 250,590Manazel Trading Co. S.O.C 605,610 4,276 601,334 618,648EenJaloot Trading Co. S.O.C 258,847 4,226 254,621 265,290TareekAlkher Trading Co. S.O.C 299,550 853 298,697 305,646AlkoraAlzahbya Co. S.O.C 304,152 - 304,152 310,795

4,911,074 38,937 4,872,137 5,001,464

11. SOLD COMPANY DURING THE YEAR



48

As 30 September 2012, and after the decision which has been taken in the extraordinary general assembly for the company which was on 17 September 2012 to sellEzdan Trading and Contracting Company S.O.C. which was totally owned by the company to Sak Real Estate (Related parity) by QR 151,764 in thousands and the netassets as of the selling date 30 September 2012 by QR 151,764 in thousands accordantly there is no gain or losses incurred from this transaction

The following table summarizes the book value for Ezdan Trading and Contracting Company S.O.C. which has been disposed during the year and the profit (losses) fromdisposal.

Ezdan Trading andContracting

Company S.O.CIn Thousands QR

Assets

Inventory 60,590Receivables and prepayments 133,476Cash and bank balances 30,293Property, plant and equipment 59,717

284,076

Liabilities

Islamic financing and borrowings (233)Payables and accruals (132,079)

(132,312)

Net assets value (151,764)Total sale value 151,764Net gain (losses) from sale of subsidiary company -



49

Cash Flow from sale :Paid amount -Net cash (30,293)Net cash flow (30,293)

12. AVAILABLE FOR SALE INVESTMENTS

2012 2011

Number of quoted shares in thousands 55,135 -

Movements in cumulative changes in fair values arising from available for sale investments owned only by the group are as follows:

2012 2011

Balance at 1 January - -



50

Net unrealized gains on revaluation (96,592) -

(96,592) -

Concentration of investment portfolio

Concentration of investment portfolio arises when a number of investments are made in entities engaged in similar business activities, or activities in the samegeographic region, or have similar economic features that would be affected by changes in economic, political or other conditions. The Group manages this risk throughdiversification of investments in terms of geographical distribution and industry concentration. The industry and geographic concentration of the investment portfolio isas follows:

2012 2011

Banks and financial institutions 2,169,752 -Insurance 125 -Industry 73,548 -Services 80,832 -

2,324,257 -



51

13. INVESTMENTS IN ASSOCIATES

The Company has the following investments in associate companies:

Country ofincorporation

Ownership interest Ownership interest

In % In Thousands

2012 2011 2012 2011

% % QR QR

Medicare Group Q.S.C. Qatar 24.52% - 387,196 -

Qatar International Islamic Bank Q.S.C.

Qatar22.65% -

1,927,944-

Qatar Islamic Insurance CompanyQ.S.C.

Qatar22.97% -

199,764-

Dar Al-Sharq for Printing, Publishing,and Distribution W.L.L.

Qatar30.00% -

189,488-

Dar Al-Arab W.L.L. Qatar 49.00% - 26,488 -

White Square Real Estate W.L.L. Qatar 32.50% - 65 65

Al-Abdulwahab for Real EstateDevelopment W.L.L.

Qatar32.50% -

6565

2,731,011 130



52

Medicare Group Q.S.C.

The Medicare Group (Q.S.C.) was incorporated in Qatar as a shareholding Company on 30 December 1996. TheGroup is engaged in providing medical services in the State of Qatar.

The following table summarizes the financial information of the Group’s investment in the associate company.

2012 2011Share of associates’ statement of financial position:

Total assets 205,968 -Total liabilities (20,655) -

-

Net assets 185,313 -Goodwill 201,883 -Carrying amount of the investment 387,196 -

2012 2011Share of associates’ revenues and results:

Revenues 21,162 -Results 2,759 -

13 INVESTMENTS IN ASSOCIATES – (CONTINUED)

Qatar International Islamic Bank (Q.S.C.)

Qatar International Islamic Bank (QIIB) was incorporated in the State of Qatar as a shareholding Company on1990. The Bank is engaged in banking, financing and investing activities in accordance to Islamic Shari’a principles and regulations of Qatar Central Bank.



53

The following table summarizes the financial information of the Group’s investment in the associate Bank.2012 2011

Share of associates’ statement of financial position:

Total assets 6,469,004 -Total liabilities (5,328,274) -

-

Net assets 1,140,730 -Goodwill 787,214 -Carrying amount of the investment 1,927,944 -

2012 2011Share of associates’ revenues and results:Revenues 67,010 -Results 38,452 -

Qatar Islamic Insurance Company (Q.S.C.)

Qatar Islamic Insurance Company (Q.S.C.) was incorporated in the State of Qatar as a closed shareholding Company on 30 October 1993. On 12 December 1999 the Company changedits status to a public listed Company. The Company is engaged in business of underwriting general, Takaful (life) and health non-interest insurance in accordance with the Islamic Shari’aprinciples.The following table summarizes the financial information of the Group’s investment in the associate Company.



-



54



13. INVESTMENTS IN ASSOCIATES – (CONTINUED)

Dar Al-Sharq for Printing, Publishing and Distribution W.L.L.

Dar Al-Sharq for Printing, Publishing and Distribution (W.L.L.) was incorporated in the State of Qatar as a limited liabilities Company on 24 October 1985.The Company main activities include the publication of two daily newspapers, Al Sharq newspaper(Arabic Language),and Peninsula Newspaper (English Language) and the operation of a printing press.

The following table summarizes the financial information of the Group investment in the associate Company.



-

Net assets 91,384 -Goodwill 98,104 -



55

Carrying amount of the investment 189,488 -


Dar Al-Arab (W.L.L.)

Dar Al-Aarab (W.L.L.) was incorporated in the State of Qatar as a limited liabilities Company on 9 September2004. The Company main activities include the publication of Al Arab newspaper.The following table summarizes the financial information of the Group’s investment in the associate Company



-


2012 2011Share of associates’ revenues and results:Revenues 5,154 -Results 616 -



56

13 . INVESTMENTS IN ASSOCIATES – (CONTINUED)

The outstanding balances of the investments in equity accounted investees are represented as follows:

Name of investee Ownership 2012 2011

White Square Real Estate Company W.L.L. 32.5% 65 65Al-Abdulwahab for Real Estate Development W.L.L. 32.5% 65 65

130 130

During 2011, the Group, in association with other partners, established White Square Real Estate Company W.L.L. and Al-Abdulwahab for Real Estate DevelopmentW.L.L. with a share capital amounting to QR 200,000 each. The Group is able to exert significant influence over the financial and operating policies of the newlyestablished entities. The principal activities of these associates are real estate development and sale and purchase of property and property rentals.



57

14. PROPERTY, PLANT AND EQUIPMENT

2012 Land Buildings Motorvehicles

Furniture,fixtures and

office equipment

Heavyequipment

Projects inprogress

Total

CostAt 1 January 2012 5,038 44,336 11,463 37,604 50,211 - 148,652

Additions - 4,331 53,297 59,700 - - 117,328Disposals (5,038) (35,815) (57,076) (58,542) (50,211) - (206,682)

At 31 December 2012 - 12,852 7,684 38,762 - - 59,298

Accumulated depreciation

At 1 January 2012 - 4,541 5,004 30,084 31,549 - 71,178

Charge for the year - 643 1,434 4,302 - - 6,379Disposals - (3,149) (3,321) (1,649) (31,549) - (39,668)

At 31 December 2012 - 2,035 3,117 32,737 - - 37,889Net carrying amount31 December 2012 - 10,817 4,567 6,025 - - 21,409



58

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

2011 Land Buildings Motorvehicles

Furniture,fixtures and

office equipment

Heavyequipment

Projects inprogress

Total

CostAt 1 January 2011 5,038 44,336 9,208 36,583 49,732 1,680 146,577Additions - - 1,459 1,094 753 - 3,306Transferred from projects inprogress

- - 1,680) - - (1,680) -

Disposals - - (884) (73) (274) - (1,231)

At 31 December 2011 5,038 44,336 11,463 37,604 50,211 - 148,652

Accumulated depreciationAt 1 January 2011 - 2,324 3,850 21,511 20,878 - 48,563

Charge for the year - 2,217 1,994 8,596 10,671 - 23,478Disposals - - (840) (23) - - (863)At 31 December 2011 - 4,541 5,004 30,084 31,549 - 71,178

Net carrying amount31 December 2011 5,038 39,795 6,459 7,520 18,662 - 77,474



59

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Depreciation charges for the year were allocated as follows:

2012 2011

Depreciation charged to profit or loss 6,379 15,808Depreciation capitalized as part of development costs oninvestment property under construction - 7,670

6,379 23,478

14. INVESTMENT PROPERTY2012 2011

At 1 January 31,276,62230,952,278

Development costs and acquired land during the year 653,708 1,016,155Capitalized finance costs on property under development(Note i)

173,553 201,591

Transferred to advances for acquisition of property - (10,561)

Reduction in liabilities for purchase of property (Note ii) - (20,554)

Carrying amount of land withdrawn by Government (Note 23 i) - (22,049)

Disposal of property (515,302) (879,043)

Acquired properties 1,583,320 -

Fair value adjustment on investment property 31,244 38,805

At 31 December 33,203,145 31,276,622

The Group has carried out a valuation of all investment properties owned by the Group as at 31 December2012 and 2011. The valuation was prepared by D.T.Z Qatar L.L.C., a certified valuer, specialized in thevaluation of real estate and similar activities. The valuation has been prepared in accordance with theappropriate sections of the Practice Statements (“PS”) contained with the RICS Valuation Standards, 6thEdition (the “Red Book”).

The methods used for valuation of investment property are disclosed in details under Note 5.Note i:Capitalized finance cost is calculated based on the actual qualifying expenditures related to the projects underdevelopment. Finance cost is capitalized using the Group’s weighted average finance cost rate of 6.6 % in2012 and 8.2% in 2011.Note ii:The mortgages on the investment properties are disclosed in Note 17.



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15. PAYABLES AND ACCRUALS

2012 2011

Contractors and suppliers payable 33,680 121,065Retention payable - 42,613Tenants deposits 15,249 49,800Accrued expenses 98,881 24,298Unearned rents 101,444 2,791Notes payable - 7,524Refundable deposits 72,528 4,225Provision for Social and Sports Activities Fund 10,218 21,188Provision for end of services benefits 6,177 22,890Other payables 3,232 882

341,409 297,276

Payables and accruals are segregated between non-current and current portions as follows:


Contractors and suppliers payable - 33,680 33,680Retention payable 15,249 - 15,249Accrued expenses 98,881 - 98,881Unearned rents 101,444 - 101,444Refundable deposits 72,528 - 72,528Provision for Social and SportsActivities Fund

10,218 - 10,218

Provision for end of services benefits 6,177 6,177 6,177Other payables 3,232 - 3,232

301,552 39,857 341,409



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16. PAYABLES AND ACCRUALS (CONTINUED)


Contractors and suppliers payable 121,065 - 121,065Retention payable 22,157 20,456 42,613Tenants deposits 49,800 - 49,800Accrued expenses 24,298 - 24,298Unearned rents 2,791 - 2,791Notes payable 7,524 - 7,524Refundable deposits 4,225 - 4,225Provision for Social and SportsActivities Fund 21,188 - 21,188Provision for end of services benefits - 22,890 22,890Other payables 882 - 882

253,930 43,346 297,276

The Group’s exposure to currency and liquidity risk related to payables and accruals is disclosed in Note 28.

16. ISLAMIC FINANCING BORROWINGS

a) The movements on the Islamic financing borrowings during the year were as follows:

2012 2011

At 1 January 4,841,985 3,622,975Additional facilities obtained during the year 6,251,411 1,996,072Repayments of outstanding facilities during the year (984,945) (777,062)

At 31 December 10,108,451 4,841,985

b) Obligations under Islamic financing borrowings are segregated between current and non-current maturityperiods as follows:

2012 2011

Current portion 690,071 940,997Non-current portion 9,418,380 3,900,988

10,108,451 4,841,985



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c) Terms and conditions of the outstanding facilities were as follows:b

Type of facilities Currency Profit ratescharged by banks

2012 2011

Secured Ijara QR REPO rate 8,654,256 2,937,095Secured Ijara USD 3 M LIBOR 394,525 429,973Secured Murabaha QR REPO rate 510,740 1,262,198Unsecured Muarabaha QR REPO rate - 10,879Unsecured Musawama QR REPO rate - 201,840Tawarruq Islamic Finance QR REPO rate 548,930 -

10,108,451 4,841,985

Note iThe secured facilities are against mortgages on different types of investment property owned by the Group witha carrying value of QR 14,888,572 thousands (2011: QR 13,883,397 thousands).And against equity shares owned by the group with market value at 31-12-2012 of (QR 3,817,931 thousands)

d) The maturity profiles of the facilities are as follows:

2012 1 year 2-5 years Over 5 years Total

Secured Ijara QR 317,015 1,950,883 6,386,358 8,654,256Secured Ijara USD 102,003 275,315 17,207 394,525Secured Murabaha QR 107,229 403,511 - 510,740Tawarruq Islamic Finance QR 163,824 385,106 548,930

690,071 3,014,815 6,403,565 10,108,451

2011 1 year 2-5 years Over 5 years Total

Secured Ijara QR 530,035 1,855,693 551,367 2,937,095Secured Ijara USD 68,623 275,314 86,036 429,973Secured Murabaha QR 262,870 880,579 118,750 1,262,199Unsecured Muarabaha QR 5,854 5,025 - 10,879Unsecured Musawama QR 73,614 128,225 - 201,839

940,996 3,144,836 756,153 4,841,985

This note provides information about the contractual terms of the Group’s profit-bearing obligations which aremeasured at amortised cost. For more information about the Group’s exposure to fluctuation in profit rate onthe facilities, foreign currency and liquidity risk, see Note 28.



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17. SHARE CAPITAL2012 2011

Authorised, issued and fully paid up:

2,652,496,691 shares of QR 10 each 26,524,967 26,524,967

18. LEGAL RESERVE

In accordance with the requirements of the Qatar Commercial Companies Law No. 5 of 2002 and theCompany’s Articles of Association, a minimum of 10% of the net profit should be transferred to a legal reserveeach year until this reserve is equal to 50% of the paid up share capital. The reserve is not available fordistribution except in the circumstances stipulated in the above law and the Company’s Articles of Association.

19. CONTRIBUTION TO SOCIAL AND SPORTS ACTIVITIES FUND

In accordance with Law No. 13 of 2008, the Group made an appropriation of profit of QR 10,219 thousands(2011: QR 8,636 thousands) equivalent to 2.5% of the consolidated net profit for the year for the support ofsports, cultural, social and charitable activities.

20. OTHER OPERATING REVENUES

2012 2011

Food and beverage revenues 12,057 8,027Others 15,841 3,079

27,898 11,106

21. OPERATING EXPENSES

2012 2011

Staff benefits 17,230 6,577Generators and equipment rental 6,076 23,997Maintenance expenses 10,666 24,116Sewage 2,140 13,820Diesel & fuel 12,388 12,251Air-conditioning - 7,899Cleaning 4,962 8,329Electricity and water 21,992 5,243Food and beverage 2,766 4,664Property development costs 6,675 9,310Rental commissions 1,548 2,147Security 3,725 2,058Laundry and dry cleaning 2,672 1,526Other expenses 1,806 1,011

94,646 122,94822. OTHER INCOME



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2012 2011

Profit on Islamic bank accounts (Note 25) 4,009 8,951Income from reversal of allowances for impaired receivables 11,051 6,444Gain on disposal of property, plant and equipment -- 183Miscellaneous income 3,486 1,689Loss on appropriation of land (Note i) - (11,620)

18,546 5,647

Note i:During 2011, the Ministry of Municipality and Urban Planning expropriated the ownership of 9,028 sqm offreehold land from the Group due to changes in development plans for the surrounding area. The Ministrycompensated the Group by total amount of QR 10,429 thousands, while the carrying amount of the withdrawnarea was amounting to QR 22,049 thousands at date of compensation, which resulted in incurring losses to theGroup amounting to QR 11,620 thousands, in 2012 there was no such transaction .

23. GENERAL AND ADMINISTRATIVE EXPENSES

2012 2011

Advertising and marketing 6,655 11,421Staff benefits 53,402 32,535Consulting, legal & professional expenses 3,226 8,250Qatar Exchange registration 8,260 8,552Impairment of receivables 9,787 13,480Property transactions charges 3010 2,402Insurance 1450 1,165Security 1201 966Communication 1,763 999Commissions 1503 941Bank charges 850 866Information systems expenses 803 598Contracts authentication 3,134 340Other expenses 3,392 1,624

98,436 84,139

24. FINANCE COST AND INCOME2012 2011



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Finance costsBanks profits on Islamic financing borrowings 318,889 385,338Less: capitalized finance costs (173,467) (201,591)Banks profits charged to the consolidated statements ofcomprehensive income 145,422 183,747

Finance incomeProfit on Islamic bank accounts (Note 23) 4,009 8,951

Net Finance costs for the year 141,413 174,796

25. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number ofshares outstanding during the year.

2012 2011Net profit attributable to the Shareholders of the Company forthe year (in QR 000) 408,747 345,433Weighted average number of shares outstanding during the year(in thousand shares) 2,652,497 2,652,497

Basic and diluted earnings per share (QR) 0.15 0.13

There were no potentially dilutive shares outstanding at any time during the year. Therefore, the diluted earningsper share are equal to the basic earnings per share.

26. CONTINGENT LIABILITIES

2012 2011

Bank guarantees - 1,300

Letters of credit - 225,900

The Group anticipates that no material liabilities will arise from the above guarantees and letter of credits, whichare issued in the ordinary course of business.



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27. FINANCIAL RISK OBJECTIVES, POLICIES AND MANAGEMENT

Risk management frameworkThe Group’s risk management policies are established to identify and analyse the risks faced by the Group, toset appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policiesand systems are reviewed regularly to reflect changes in market conditions, products and services offered. TheGroup, through its training and management standards and procedures, aims to develop a disciplined andconstructive control environment, in which all employees understand their roles and obligations.

The Group’s Audit Committee is responsible for monitoring compliance with the Group’s risk managementpolicies and procedures, and for reviewing the adequacy of the risk management framework in relation to therisks faced by the Group. The Group Audit Committee is assisted in these functions by Internal Audit. InternalAudit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results ofwhich are reported to the Group Audit Committee.

The Group subsidiaries follow the Group risk management policies, being that the activities of the subsidiariesof the Group are monitored by the Company’s Board of Directors and Committees.

The Board of Directors (“Board”) has overall responsibility for the establishment and oversight of the Group’srisk management framework, and implementing the same through the Board’s established committees, such asthe Executive Committee, the Financing Committee and the Investment Committee. All Board committeeshave both executive and non-executive members and report regularly to the Board on their activities, either onad-hoc basis or periodically.

The Group has exposure to the following risks from its use of financial instruments:

(i) credit risk(ii) liquidity risk(iii) market risk(iv) Operational risks(v) Real estate risk(iv) Other risks

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,policies and processes for measuring and managing risks, and the Group’s management of capital. Furtherquantitative disclosures are included throughout these consolidated financial statements.

(i) Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument failsto meet its contractual obligations, and arises principally from the Group’s receivables from rental activities,advances to contractors and suppliers and due from related parties.

For risk management reporting purposes, the Group considers and consolidates all elements of credit riskexposure (such as individual obligor default risk, country and sector risk).

Tenants receivableThe Group’s exposure to credit risk is mainly influenced by the individual characteristics of each tenantleasing its rental units. However, management also considers the demographics of the Group’s tenants base,including the default risk in the real estate industry and the country in which the Group operates (i.e. the Stateof Qatar), as these factors directly influence credit risk.



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28. FINANCIAL RISK OBJECTIVES, POLICIES AND MANAGEMENT (CONTINUED)

As a result of improving the economic circumstances in 2012, certain tenants groups have been redefined,particularly the tenants of commercial property, since the Group’s experience is that the economic recoveryhas had a greater impact in the commercial property sector than the other residential sectors by its classes, ascommercial sector is directly correlated with the increased aggregate demand in the market in which theproperty operates.

Allowances for impairmentThe Group establishes an allowance for impairment losses that represents its estimate of incurred losses in itsreceivables. The main component of this allowance is a provision policy loss component that relates toindividually significant exposures. The Group's policy is to classify tenants receivable past due on transactioncollection basis as delinquent, 31 days to 90 days as doubtful, and more than 91 days as loss assets. Theallowances for impairment of receivables and movement thereon during the year is disclosed in Note 7.

Write-offThe Group writes off receivables (and any related allowances for impairment) when the managementdetermines that the receivables and balances are uncollectible based on the approval of the Chief ExecutiveOfficer of the Group. This is determined after all possible efforts of collecting the amounts have beenexhausted. Receivables written off during the year is disclosed in Note 7.

Advances and related partiesThe Group’s exposure to credit risk is influenced mainly by the individual characteristics of eachcontractor/suppliers, and related party. The demographics of the Group’s project base, including the defaultrisk of the industry and country, in which the contractor/supplier operate, has less of an influence on creditrisk. Material amounts of the Group’s advances/collections are attributable to contractors originating from theState of Qatar. There is no concentration on credit risk attributable to a single contractor.

On the other hand, all material transactions with related parties are firstly approved by the Board of Directors,and / or the Shareholders in their General Assembly Meetings, if stipulated under the relevant laws.

The Group’s policy is that advances and related parties are stated at original paid advance / invoice amount less aprovision for any uncollectible amounts. An estimate for doubtful debts is made when collection of the fullamount is no longer probable. Bad debts are written off when there is no possibility of recovery, if any.

GuaranteesThe Group’s policy is to provide financial guarantees only to its subsidiaries, and is not allowed under thedirections of the Board of Directors to provide any guarantees to external parties to the Group. Outstandingguarantees to the Group are disclosed in Note 27.

(i) Credit risk (continued)

Balances with banksCredit risk on balances and placements with banks and other financial institutions is limited as they are placedwith local banks having good credit ratings assigned by international credit rating agencies.

CollateralThe Group holds collaterals against any advances paid for purchase of property in the form of mortgage overother property owned by the seller, in case the transfer of ownership of the property subject to purchase isexpected to take place in the future. In which case, the title deed of the other property is transferred to theGroup upon payment of those advances.



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Concentration riskConcentration risk is any single exposure or group of exposures with the potential to produce losses largeenough to threaten the Group's health or ability to maintain its core operations. Such concentrations include: Significant exposures to an individual counterparty or group of related counterparties; Credit exposures to counterparties in the same economic sector or geographical region; Credit exposures to counterparties whose financial performance is dependent on the same activity or

commodity; and

Exposure to credit risk

The carrying amounts of financial assets represent the maximum credit exposure. The maximum exposure tocredit risk at the reporting date was:

Carrying amounts2012 2011

Banks balances 323,582 762,232Financial receivables 149,855 119,981Due from related parties 24,141 458,878

497,578 1,341,091

(ii) Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. TheGroup’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficientliquidity to meet its liabilities when due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Group’s reputation.

The Group uses project-based costing to cost its projects and services, which assists it in monitoring cash flowrequirements and optimising its cash return on investments. Typically the Group ensures that it has sufficientcash on demand to meet expected operational expenses, including the servicing of financial obligations, thisexcludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as naturaldisasters.The Group monitors its bank accounts and cash requirements through monthly budgets and reviews actual versusbudgeted cash movements on a daily basis, as to ensure that cash and bank accounts are managed in the optimummanner to the Group.



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(ii) Liquidity risk (continued)

The following are the contractual maturities of financial assets and financial liabilities including finance costpayments and excluding the impact of netting agreements, if any:

2012 CarryingAmounts

Contractualcash in /

(out) flows

Less than1 year

1 – 2 years 2 – 5Years

Morethan 5years

Financial AssetsCash and bank balances 323,687 323,687 323,687 - - -Due from related parties 24,141 24,141 24,141 - - -Financial receivables

Tenants receivable 85,941 85,941 85,941 - - -Construction receivables - - - - - -Bank profits receivable - - - - - -Refundable deposits 5,974 5,974 - 5,974 - -Other receivables 57,940 57,940 57,940 - - -

497,683 497,683 491,709 5,974 - -

Financial LiabilitiesIslamic financingborrowings

10,108,451 10,108,451 690,071 1,418,025 1,596,790 6,403,565

Due to related parties 693,610 693,610 - 693,610 - -Financial payablesContractors and supplierspayable

33,680 33,680 - 33,680 - -

Retention payable - - - - - -Tenants deposits 15,249 15,249 15,249 - - -Accrued expenses 98,881 98,881 98,881 - - -Refundable deposits 72,528 72,528 66,351 6,177 - -Notes payable - - - - - -

11,022,399 11,022,399 870,552 2,151,492 1,596,790 6,403,565



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(ii) Liquidity risk (continued)

2011 CarryingAmounts

Contractualcash in /

(out) flows

Less than 1year

1 – 2 years 2 – 5Years

Morethan 5years

Financial AssetsCash and bank balances 762,769 762,769 762,769 - - -Due from related parties 458,878 458,878 454,157 4,721 - -Financial receivables

Tenants receivable 70,894 70,894 70,894 - - -Construction receivables 35,939 35,939 35,939 - - -Bank profits receivable 1,322 1,322 1,322 - - -Refundable deposits 3,935 3,935 - - 3,935 -Other receivables 7,891 7,891 7,891 - - -

1,341,628 1,341,628 1,332,972 4,721 3,935 -

Financial LiabilitiesIslamic financingborrowings 4,841,985 5,750,708 1,204,902 1,045,292 2,709,748 790,766Due to related parties 8,000 8,000 - 8,000 - -Financial payables

Contractors andsuppliers payable 121,065 121,065 121,065 - - -Retention payable 42,613 42,613 22,157 20,456 - -Tenants deposits 49,800 49,800 49,800 - - -Accrued expenses 24,298 24,298 24,298 - - -Refundable deposits 4,225 4,225 4,225 - - -Notes payable 7,524 7,524 7,524 - - -

5,099,510 6,008,233 1,433,971 1,073,748 2,709,748 790,766

(iii) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, profit rates and equityprices will affect the Group’s income or the value of its holdings of financial instruments. The objective ofmarket risk management is to manage and control market risk exposures within acceptable parameters, whileoptimizing the return. The Group is in the process of setting acceptable parameters, based on value at risk, thatmay be accepted and which is monitored on a daily basis.

a Currency riskThe Group is not exposed to currency risk as the Group has a facility balance denominated in USD disclosedin Note 14, and the USD is pegged to Qatari Riyal.In respect of other monetary assets and liabilities denominated in foreign currencies, the relevant transactions’values are immaterial to result in currency risks to the Group.



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28. FINANCIAL RISK OBJECTIVES, POLICIES AND MANAGEMENT CONTINUED

b Finance cost profit rate riskThe Group adopts a policy of ensuring that finance cost rates on Islamic financing borrowings and finance costrate exposures are reviewed monthly, and that finance cost rates are not subject to present fluctuations in profitrates. The Group’s policy ensures that most of the exposure on finance rates on borrowings are on a fixed basisor are based on Qatar Central Bank rate REPO rates , unless, the variable basis are in favourable terms to theGroup.

Further, the Group does not account for any fixed rate financial assets and liabilities at fair value through profitor loss, and the Group does not enter into derivative instrument agreements profit rate swaps or have theintention to designate the same as hedging instruments, therefore the changes to bank profit rates at thereporting date would not adversely affect the profit or loss.

At the reporting date the profit rate profile of the Group’s profit-bearing financial instruments was:


Fixed rate instruments

Islamic financing borrowings based on fixed profit rates 1,059,670 1,474,917

iii Market risk continued


Variable rate instruments

Islamic financing borrowings based on QCB REPO rate 8,654,256 2,937,095

Islamic financing borrowings based on USD LIBOR rates 394,525 429,9739,048,781 3,367,068

Cash flow sensitivity for variable rate instruments

A change of 50 basis points in profit rates at the reporting date would have increased / decreased equity andprofit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreigncurrency rates, remain constant.

2012 Equity Profit or loss50 bp 50 bp 50 bp 50 bp

Increase Decrease increase Decrease

QCB REPO rate borrowings 2,322 2,322 2,322 2,322

USD LIBOR rates borrowings 198 198 198 198

2,520 2,520 2,520 2,520



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2011 Equity Profit or loss50 bp 50 bp 50 bp 50 bp

Increase decrease increase Decrease

QCB REPO rate borrowings 2,956 2,956 2,956 2,956

USD LIBOR rates borrowings 2,264 2,264 2,264 2,264

5,220 5,220 5,220 5,220

iv Operational riskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with theGroup’s processes, personnel, technology and infrastructure, and from external factors other than credit,market and liquidity risks such as those arising from generally accepted standards of corporate behavior.Operational risks arise from all of the Group’s operations.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses anddamage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrictinitiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk isassigned to senior management within each department. This responsibility is supported by the development ofoverall Group standards for the management of operational risk in the following areas: requirements for appropriate segregation of duties, including the independent authorisation of transactions. requirements for the reconciliation and monitoring of transactions. compliance with regulatory and other legal requirements documentation of controls and procedures. requirements for the periodic assessment of operational risks faced, and the adequacy of controls and

procedures to address the risks identified. requirements for the reporting of operational losses and proposed remedial action. development of contingency plans. training and professional development. ethical and business standards. risk mitigation, including insurance of property and against embezzlement, where this is effective.

v Real estate riskThe Group has identified the following risks associated with the real estate portfolio: The cost of the development schemes may increase if there are delays in the planning process. The Group

uses its subsidiary in developing all of its projects, which employs experts in the specific planningrequirements in the scheme’s location in order to reduce the risks that may arise in the planning process,and utilizes the accumulated experience in contracting for the purpose of reducing development costs ascompared to the relevant market.

A major tenant may become insolvent causing a significant loss of rental income and a reduction in thevalue of the associated property see also credit risk. To reduce this risk, the Group reviews thefinancial status of all prospective major tenants and decides on the appropriate level of security requiredvia rental deposits or guarantees.

The exposure of the fair values of the portfolio to market and occupier fundamentals.



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vi Other risksOther risks to which the Group is exposed are regulatory risk, legal risk, and reputational risk. Regulatory riskis controlled through a framework of compliance policies and procedures. Legal risk is managed through theeffective use of internal and external legal advisers. Reputational risk is controlled through the regularexamination of issues that are considered to have reputational repercussions for the Group, with guidelines andpolicies being issued as appropriate.

Capital managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and marketconfidence and to sustain future development of the business. Capital consists of ordinary shares, legal reserveand retained earnings of the Group. The Board of Directors monitors the return on capital, which the Groupdefines as net operating income divided by total shareholders’ equity. The Board of Directors also monitorsthe level of dividends to the shareholders.

The Group’s main objectives when managing capital are: to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns

for shareholders and benefits for other stakeholders; to provide an adequate return to shareholders by pricing products and services commensurately with the

level of risk; and To remain within the Group’s quantitative banking covenants and attain a strong credit rating.

Further, the Board seeks to maintain a balance between higher targeted returns that might be possible withhigher levels of borrowings, and the advantages and security afforded by the strong capital position of theGroup.

The Group’s net debt to equity ratio at the reporting date was as follows:

2012 2011

Total liabilities 11,143,470 5,147,261Less: cash and cash equivalents 323,687 762,769

Net debt10,819,783 4,384,492

Total equity 27,746,853 27,739,644

Net debt to equity ratio at 31 December 39% 16%

On the other hand, the Board reviews regularly the borrowing to value ratio, which is calculated as the amountof outstanding debt divided by the valuation of investment property portfolio. The Group’s policy is to keepaverage borrowing to value at a low risk ratio.



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The Group’s borrowing to value ratio at the reporting date was as follows:2012 2011

Islamic financing borrowings 10,108,451 4,841,985External valuation of investment property 33,203,145 31,276,622

Borrowing to value ratio at 31 December 30.4% 15.5%Accounting classifications and fair valuesThe fair values of the financial assets and liabilities, together with the carrying amounts shown in theconsolidated statement of financial position, are as follows:

2012Fair values Carrying amounts

Cash and bank balances 323,687 323,687Financial receivablesDue from related parties 24,141 24,141Tenants receivable net 138,452 138,452Construction contracts receivable - -Other financial receivables net 57,940 57,940

Islamic financing borrowings 10,108,451 10,108,451Financial payablesDue to related parties 693,610 693,610Contractors and suppliers payable 33,680 33,680Retention payable - -Tenants deposits 15,249 15,249Accrued expenses 98,881 98,881Notes payable - -

2011Fair values Carrying amounts

Cash and bank balances 762,769 762,769Financial receivablesDue from related parties 458,878 458,878Tenants receivable net 70,894 70,894Construction contracts receivable 35,939 35,939Other financial receivables net 7,891 7,891

Islamic financing borrowings 4,841,985 4,841,985Financial payablesDue to related parties 8,000 8,000Contractors and suppliers payable 121,065 121,065Retention payable 42,613 42,613Tenants deposits 49,800 49,800Accrued expenses 24,298 24,298Notes payable 7,524 7,524



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Fair value hierarchyThe Group measures financial assets and liabilities carried at fair value, if any, using the following fair valuehierarchy that reflects the significance of the inputs used in making the measurements:

Level 1: Quoted market price unadjusted in an active market for identical assets or liabilities.

Level 2: Valuation techniques based on observable inputs, either directly i.e., as prices or indirectly i.e.,derived from prices. This category includes instruments valued using: quoted market prices in activemarkets for similar instruments; quoted prices for identical or similar instruments in markets that areconsidered less than active; or other valuation techniques where all significant inputs are directly orindirectly observable from market data.

Level 3: Valuation techniques using significant unobservable inputs. This category includes allinstruments where the valuation technique includes inputs not based on observable data and theunobservable inputs have a significant effect on the instrument’s valuation. This category includesinstruments that are valued based on quoted prices for similar instruments where significant unobservableadjustments or assumptions are required to reflect differences between the instruments.

At the reporting date, there were no financial assets or liabilities measured at fair value.

29. SEGMENT INFORMATIOMFor investment property, discrete financial information is provided on a property-by-property basis to theBoard of Directors, which is the chief operating decision maker,. The information provided is net of rentalsincluding gross rent and property expenses, valuations gains/losses, and profit/loss on sale of property. Theindividual properties are aggregated into segments with similar economic characteristics. The Directorsconsider that this is best achieved by aggregating into retail, office and industrial segments.

Information on the residential development property segment provided to the Board is aggregated and isrepresented by revenue and profit from the sale of inventory.

Consequently, the Group is considered to have three reportable operating segments, as follows: Residential and commercial property segment — acquires, develops and leases residential buildings,

commercial buildings and shopping malls. Suites and hotels property segment — manages residential suites and hotel activities. Contracting segment — the main developer and contractor for the projects of the residential and

commercial property segment.

Total assets of the contracting segment do not exceed 10% of the total assets of the Group, and hence is notconsidered a reportable segment for quantitative thresholds. Being that the residential and commercial propertysector is the main client of the contracting segment, the assets and liabilities of the contracting segment whichare not eliminated in the consolidated financial statements are included under the residential and commercialproperty segment, being mainly resulting from the development activities of that segment’s assets.



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29. SEGMENT INFORMATIOM CONTINUED

Group administrative costs, profit/loss on sale of property, finance revenue, finance costs are not reported tothe Board on a segment basis. Revenues of the contracting segment are eliminated in consolidation againstrelated expenses as the development projects are transferred to the residential and commercial property sector.While intercompany rental revenues against corresponding rental expenses between the residential andcommercial property sector, and the suites and hotels property sector are eliminated in consolidation as well.

Investment property including those under construction are included under the residential and commercialproperty sector.

Segment liabilities represent Islamic financing borrowings, contractors payable, tenants deposits, as these arethe liabilities reported to the Board on a segmental basis.

All of the property of the Group are located in the State of Qatar, and hence there is no geographicalsegmentation for the Group.

For the year ended 31 December 2012

Residentialand

commercialproperty

InvestmentSuitesand

HotelsTotal

Rent and other operating revenues 362,733 - 160,691 523,424Gain on sale of property 106,812 - - 106,812Other income 12,029 50,107 26,989 89,125Operating expenses 58,210 - 39,790 98,000General and administrative expenses 85,816 - 12,620 98,436Segment profit 337,548 50,107 135,270 522,925Gain on revaluation of investmentproperty

31,244 - - 31,244

Finance cost 145,422 - - 145,422Net profit 223,370 50,107 135,270 408,747



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For the year ended 31 December2011

Residential andcommercial

property

Suites andHotels

Total

Rent and other operating revenues 474,649 148,295 622,944Gain on disposal of investmentproperty 84,373 - 84,373Other income 3,698 2,255 5,953Operating expenses 88,327 34,621 122,948General and administrative expenses 75,603 8,536 84,139Depreciation 8,836 6,972 15,808Segment profit 389,954 100,421 490,375Gain on revaluation of investmentproperty 38,805 - 38,805Finance cost 183,747 - 183,747Net profit 245,012 100,421 345,433

For the year ended 31 December2012

Residentialand

commercialproperty

InvestmentSuitesand

HotelsTotal

Segment assetsInvestment property 28,796,908 - 4,406,237 33,203,145Property, plant & equipment 17,030 - 4,379 21,409Due from related parties 22,793 - 1,348 24,141Investments 130 5,055,138 - 5,055,268Inventory 1,418 - 7,058 8,476Receivables and prepayments 216,764 - 37,433 254,197Cash and banks 318,404 1,489 3,794 323,687

Total assets 29,373,447 5,056,627 4,460,249 38,890323

Segment liabilitiesLoans and borrowings 10,108,451 - - 10,108,451

Due to related parties 693,610 - - 693,610

Payables and accruals 293,199 - 48,210 341,409

Total liabilities 11,095,260 - 48,210 11,143,470



78


As at 31 December 2011 Residential andcommercial

property

Suites andHotels

Total

Segment assetsInvestment property 26,870,374 4,406,248 31,276,622Property, plant & equipment 72,585 4,889 77,474Due from related parties 458,878 - 458,878Investments in equity accountedinvestees 130 - 130Inventory 37,285 3,198 40,483Receivables and prepayments 261,552 8,997 270,549Cash and bank balances 757,839 4,930 762,769Total assets 28,458,643 4,428,262 32,886,905

Segment liabilitiesIslamic financing borrowings 4,841,985 - 4,841,985Due to related parties 8,000 - 8,000Payables and accruals 277,322 19,954 297,276Total liabilities 5,127,307 19,954 5,147,261

30. COMPARATIVE FIGURES

The comparative figures presented for 2011 have been reclassified where necessary to preserve consistency withthe 2012 figures. However, such reclassifications did not have any effect on the consolidated net profit, orcomprehensive income or the total consolidated equity for the comparative year.

ezdan holding group company q.s.c (f ormerly) (ez dan real …

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