on the cover, we showcase the bonsai tree - the art of ......on the cover, we showcase the bonsai...

On the cover, we showcase the Bonsai tree - the art of Bonsai has its origins back in Japan and China where it has been practiced for centuries. RealCAPITA practices profound dedication to perfection

and beauty, as it grants global projects their well deserved care.

The Wind Tower, 11th FloorP. O. Box 11627, Diplomatic Area,Manama - Kingdom of Bahraine-mail: [email protected]

Tel : + 973 17 54 11 44Fax : + 973 17 54 11 55

REALCA

PITA A

NN

UA

L REPORT 2007

سنوي 2007ريــــل كـــابــيــتا التقرير ال

an intricate master piece

ANNUAL REPORT

Contents03 Financial Highlights

04 Board of Directors

06 Chairman’s Message

08 President’s Message

10 Founders and Executive Management

12 Track Record of Success

14 Investments - Growth & Diversity

16 Commitment to Responsible Development

18 Strategic Alliances - Expanding the Horizon

20 Financial Strength for Solid Expansion

22 New Projects and Investments

26 Auditors Report and Financial Statements

Total Assets

Total Shareholders’ Equity

Total income

Net income

Earnings per share

Return on share capital

Return on total assets

Dividends per share

Number of staff

$104.8 millions $62.8 millions

$13.8 milions

$8.8 millions

15.9 cents

16.4%

8.4%

8 cents

27

11%

20%

80%

72%

71%

65%

54%

88%

48%

$116.4 millions $75.5 million

$24.8 million

$15.1 million

27.2 cents

27.0%

13.0%

15 cents

40

Financial Highlights

2006 Growth2007

AnnualReport 2007 3

Mr. Khalid Nasser Al-MisnadBoard Member

Mr. Mohammed Manea Aba AlalaBoard Member

Mr. Omar Ali BabtainBoard and Investment Committee Member

Mr. Ahmed Suleiman Al-RajhiBoard and Audit Committee Member

Board ofDirectors

Mr. Ahmed Ali Khalfan Al-DhahryChairman

Mr. Mohammed Al-TawashVice Chairman & President

Mr. Mohammed Ahmed Rashed Al-DossaryBoard and Investment Committee Member

4 AnnualReport 2007 AnnualReport 2007 5

Throughout this past year, RealCAPITA has endeavored to set the pillars on which it will embark on its new era of growth. Progress in its local projects has been rapidly advancing with the construction activities in Amwaj Gateway being initiated on the heel of the launch of unit sales, and construction being well underway in RealSUITS in Umm Al Hassam and RealGARDENS in Al Jasrah. This unfaltering tempo has likewise been mirrored in the progress of our projects in Morocco and France.

RealCAPITA has succeeded in upholding its ambitious promises and we find ourselves steering on the right course of building a global brand name that will stamp its mark prominently in real estate markets around the globe. In our quest for growth, diversity and expansion we have set our sights for this upcoming year on the Far East and the Indian Subcontinent and shall aspire to penetrate them with the kind of success that has come to be expected of RealCAPITA.

It is our core belief that there are no shortcuts to reaching the coveted summit, and we at RealCAPITA have pursued expansion and our trail to the top on more than one front. We have established our presence in the GCC, regional and global markets, along with securing strategic partnerships with select groups of real estate and investment institutions in the region, coupled with our unremitting efforts of exploring and assessing the global markets for pioneering investment opportunities that meet our stringent criteria for the delivery of extraordinary shareholder returns.

Allow me, and on behalf of the members of the Board of Directors, to express our thanks and gratitude to our Shareholders, Partners and Investors for their valued unwavering trust and confidence which we aspire to uphold throughout all our undertakings; and our appreciation to RealCAPITA’s team for their sincere and diligent efforts without which RealCAPITA would not have accumulated its track record of accomplishments and success and without which it would not be in the prominent position it is at today.

Honored Shareholders,

I have a personal passion for sailing, and after two years of sailing together on this ship, we are still at the beginning of our journey of success. Our experiences and accomplishments to-date will only serve to propel us further and move us from success to greater success as we continue to set and redefine higher standards and reinforce the position we achieved for ourselves amongst the other real estate investment companies, in our relentless efforts to reach the summit.

Ahmed Al DhahryChairman

Chairman’s Message

Dear Shareholders،

On behalf of my fellow members of the Board of Directors, it is with great honor and pride that I present to you RealCAPITA’s Annual Report for the financial year ended 31st December 2007, which carries within its folds the details of the financial and operational achievements that are a source of pride for us all.

These strides towards success are what we envisioned when we established RealCAPITA two years ago, and since then, we have pursued a well defined approach with a clear and concise goal of redefining and advancing urban real estate development. A solid investment process forms the foundation of this approach, with its scrupulous selection process and meticulous

studies that ensure the success of our endeavors and the generation of unsurpassed value and returns to our Shareholders.

The distinguished achievements realized by RealCAPITA to-date are indicators of its persistent ambition for success and excellence. By the end of its second year in operation, the company proved its ability to pursue its growth strategy as stipulated in the diligently drafted business plan.

Year 2007 witnessed a giant leap in our successful journey where we managed to achieve substantial increase in our financial results. Our income for the year jumped by 80% to reach $24.8 millions and our net income increased by 72% over the previous fiscal year’s results to reach $15.1 millions. These returns have come on the back of an increase in the value of the projects and investments currently managed by RealCAPITA, which presently exceeded the USD 1 billion mark. On this basis, the Board of Director has recommended a dividends distribution of 15% of the Company’s paid-up capital to the Shareholders.

The outstanding results achieved by RealCAPITA in its relatively short time in operation have come as a result of its sustained efforts and ambitions which coincided with its entry into the European and Saudi markets. The RealPALAIS project on the French-Swiss border and the Jubail Development company established in the industrial city of Jubail are providing us with exposure in two of the most vibrant and rapidly developing real estate markets.

This success has been

the embodiment of

RealCAPITA’s persistent

efforts during the past

year

AnnualReport 2007 76 AnnualReport 2007

of the environment and the protection of the planet from the multitude of urban factors influencing it.

In light of the surge in urban growth witnessed by the region, and in recognizing the significant impact that it bears on the environment, RealCAPITA has proudly manifested its interest in environmental preservation and by being at the forefront of this pressing issue through the announcement of its intention to establish the “Green Building Council-Bahrain” in collaboration with the Ministry of Municipalities and Agriculture.

We had obtained the environmentally-friendly Green Buildings LEED certification in one of our most

prominent project in the Kingdom of Bahrain, Amwaj Gateway, for which we have recently inaugurated the sales operations of its Eastern Block, and this is just further indication and evidence of our commitment at RealCAPITA towards environmental protection and the deliverance of a ubiquitous message to all institutions and real estate companies on the importance of environmental conservation.

Two of our firm beliefs at RealCAPITA are that the human element is the paramount ingredient of success within any enterprise, and that our citizens have a vast pool of abilities and talents to be tapped into, and since our inception, our team has successfully taken on an active role in propelling us forward and taking us to where we are today. What distinguishes our Team at RealCAPITA is its

cooperative spirit, meticulousness, devotion to work, and constant pursue to providing the best, most innovative investment opportunities.

Honored Shareholders,

Our ambitions and aspirations will have no bounds, and we will continue to strive with full force, effort and energies to enter new regional and global markets. The journey is still at its beginning, and what we have delivered is nothing but the onset of a road of success whose fruits we will bear through implementing a flawless investment strategy and the diligent efforts of our team.

In conclusion, it is my pleasure to express my sincere appreciation to our Shareholders, Investors, and every member of our Company for their loyalty, unfaltering efforts, and dedication extended for us to attain these praiseworthy results, wishing everyone continued success and development.

Mohammed Al TawashVice Chairman & President

President’s Message

A set goaland unlimited aspirations

Dear Shareholders،

It is with great pride and pleasure that we present to you the outstanding results of our operations in the financial year ending 31st December 2007, owing this accomplishment in large part to your valued and continued trust in the Board of Directors and the Management team without which such achievements would not have been attainable.

RealCAPITA has been able to pursue the strategy it has set for itself, focusing all efforts and energies to advance towards a more prominent position, which has yielded solid financial results and a significant expansion in the size and diversity of operations. This has come at a time when the Board of Directors and the Management Team took upon themselves the task of building RealCAPITA’s brand both within the Kingdom of Bahrain and worldwide.

Seeking to leave its mark on the international real estate map, RealCAPITA has been pursuing a strategy, both within the Kingdom of Bahrain and globally, whose steps have been thoroughly examined and carefully studied, as it strives to engage in assessing projects that span a number of the promising global markets.

In its continued efforts to reinforce the services it provides to its valued clients, RealCAPITA has signed a strategic partnership agreement for the implementation of comprehensive enterprise-wide financial reporting and customer relationship management systems for the entirety of its operations.

With regards to the projects announced in the past year, RealCAPITA is proud to have been able to initiate the construction process on a number of these projects, with the total areas under construction to date exceeding 18 million square feet which demonstrates our commitment to deliver actual results on the ground. RealCAPITA’s attributes a significant and decisive role of this advancement to its strategic partnerships with a number of the most prominent financial institutions and real estate investment companies and local operating partners. An approach which it commits itself to continuously pursue.

I am also pleased to highlight another of RealCAPITA’s success in the field of environmental conservation, as it joined ranks with environmental conversationalists worldwide in its commitment to adhere, and take into account all international norms and regulations relating to the preservation


Executive ManagementHasan Al Mansoor - Vice President, Finance & Administration

Abbas Al Fassi, Director - Post Aquisition

Mohamed Al Tawash - Vice Chairman & President

Mohammed Dhaif, Director - Development

Nader Sarhan, Director - Investor Relations

Qais Al Maskati - Executive Vice President

Founders &Executive Management

Founders

What distinguishes our team is our cooperative spirit, meticulousness and devotion to work


Track Recordof Success

We have always committed to delivering results on the ground and this year was a true demonstration for this strategy


Today our investment portfolio extends over three continents in vibrant mature and emerging markets

In millions of US Dollars

Projects market values

0

200

400

600

800

1000

1200

Residential Office Mixed Funds Total

Investments - Growth and Diversityservices to our investors, while generating long-term benefits for our shareholders.

Today our investment portfolio extends over three continents; in vibrant emerging and mature markets to ensure achieving the growth we always persued while maintaining optimum geographical and sectarian distribution to provide a natural hedge against unfortunate market trends. Time and experience are the two most telling factors in real estate success. Since inception, RealCAPITA has delivered above-market returns by understanding market cycles and playing to their peaks and valleys through the strategic application of management, development and financial expertise.

To embark on a journey of success one needs the tools of preparedness, foresight and strategy. These lead to the path of growth and high quality deliverables. It is imperative to combine these three forces in an industry, where every development we undertake stands as a witness for our innovation and capabilities.

We continued to embrace a robust investment philosophy. We believe that the quality of assets far outweighs the number of transactions, helping us to achieve our two most important objectives -- preserving capital and producing steady income for the long term. Our mission is to be the most trusted provider of development, advisory and real estate


energy, water, and materials- while reducing building impacts on health and the environment, through better sitting, design, construction, operation, maintenance, and removal. Green Building brings together a vast array of practices and techniques to reduce and ultimately eliminate the impacts of buildings on the environment and people. But effective Green Buildings are more than just a random collection of environmental friendly technologies. They require careful, systemic attention

to the full life cycle impacts of the resources embodied in the building and to the resource consumption and pollution emissions over the building’s complete life cycle.

Our considerable investment in “GREEN” will ensure a premium living environment for our residents and this initiative represents only one step towards ensuring all of our properties are recognized for being first class developments.

2.4

0.2

18.4

15.8

In millions of square feet

Built up areas under development

RealCAPITA pioneered the concept of Green Buildings in Bahrain to continue our leading role

To demonstrate continues commitment towards our main mission, real estate development, our professional Development and Post-Acquisition team is currently managing six active developments in three continents, bringing quality and best practices to ensure set timelines are met and optimum results are achieved.

To continue our leading role in introducing new development practices to the region, RealCAPITA pioneered the concept of Green Buildings in Bahrain

Commitment toResponsible Development

through establishing and exclusively sponsoring the “Green Buildings Council” and making our signature development in Bahrain, Amwaj Gateway, the first project in Bahrain to obtain Green Building certification through adopting the “LEED” (Leadership in Energy and Environment Design) criteria for New Construction.

Green Building is the practice of increasing the efficiency with which buildings use resources


Strategic Alliances -Expanding the Horizon

58% Commercial Institutions

25% Financial Institutions

17% HNWI

Our investors base

We formed strategic alliances and partnerships to take our business to the next level

Maintaining investor confidence and trust has become increasingly important in today’s global business environment. Despite its young age, RealCAPITA was successfully able to form strategic partnerships with the region’s elite financial institutions and leading commercial business groups, who continue to trust our ability to structure and manage robust investment products and unique development opportunities.

Managing growth is a dynamic process that requires transparency, focus, commitment and discipline throughout an organization. We are constantly evolving to provide the finest

client service and to meet the full breadth of our clients’ needs. We are committed to attracting, encouraging and rewarding talent. We are taking RealCAPITA brand to the next level, deepening relationships, evolving with discipline, executing, innovating and building strong infrastructural growth.


We exploited our capital base through partnerships and strong banking relationships

Equity Invested

Market Value

Projects equity and market values

In millions of US Dollars

Financial Strengthfor Solid Expansion

We are committed to the pursuit of excellence, and we will continue evaluating ways to strengthen our policies and practices to promote the interests of our shareholders, partners, employees and the countries and communities in which we operate.We are an organization that combines technical, financial, managerial and operational skills and resources to rejuvenate your life. Gearing up for the future, we have the key success factors necessary to withstand the winds of change.

We can continue to execute our strategy because RealCAPITA remains a financially strong company, fully capable of making the investments necessary to drive future growth for our shareholders, exploiting its capital

base and wide-spread growing investors base and expanding our banking relationships. We continue to make significant progress on initiatives aimed at permanently reducing our cost structure by enhancing productivity, efficiency and effectiveness.

We are strongly committed to implementing policies and procedures that reflect a high level of ethical business practices. During the year, we introduced our comprehensive state-of-art Corporate Information System integrating various functions within the organization to achieve the highest levels of efficiency and transparency of operations.


A residential development project consisting of 11 buildings, RealPALAIS holds more than 180 housing units, in a mixture of the old-fashioned and modern scenery based on the old Château conversion style close to the French town of St Julien de Genevois.

RealPALAIS is distinguished by its proximity to Geneva. Only 7 kilometers away from Geneva city center, it provides an exceptional address to many cross-border commuters into Geneva, and its international visitors since Geneva International Airport is within 20 minutes drive. It is also within convenient drive from many major European cities.

The location is a unique blend between the quietness and serenity of the countryside and the hassle and bustle of the city.

RealCAPITA is aiming to diversify its investment portfolio through geographical diversification and entering new markets that demonstrates positive economic indicators and growth dynamics.

RealPALAIS is being developed on an area of 40,000 sqm to start construction in 2008 and estimated to be completed within three years.

Real PALAIS

NewProjects

RealCAPITA remains in quest for the best Real Estate Investment Opportunities


RealCAPITA directed its focus on the fastest growing cities in Saudi Arabia to establish Al Jubail Development Company with capital of SR 800 millions to engage mainly in developing residential and commercial facilities in the city of Jubail and Eastern Province.

Jubail is the industrial capital of the Kingdom of Saudi Arabia and it produces more than 7% of world’s total petrochemical products, which makes it an ideal location for various related in subordinated industries that is witnessing an increasing global demand. This phenomenal growth has attracted large number of professionals to live and work in this city which in turn resulted into a huge surge in demand

for fully integrated residential facilities.The idea to establish Al Jubail Development was conceived following studies that revealed an expected boom in the Saudi housing market, not only in Jubail that attracts 50% of total foreign direct investments (FDI) in the Kingdom, but also in other cities in the Eastern Province which will be the next natural expansion for the activities of Jubail Development.

The residential real estate market in the Kingdom of Saudi Arabia presents many attractive investment opportunities and strong growth potential, and Al Jubail Development Company will provide the ideal investment platform to penetrate this sector.

Tapping on New Opportunities

Al JubailDevelopment


Real Capita BSC (c)

INDEPENDENT AUDITORS’ REPORT

To the shareholders of

We have audited the accompanying consolidated financial statements of Real Capita BSC (c) (“the Company”) and its subsidiary undertaking (“the Group”), which comprise the consolidated balance sheet as at 31 December 2007, the consolidated statement of income, the consolidated statement of changes in shareholders’ equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Responsibility of the Directors for the financial statements

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

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2007, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirements

Further, as required by the Bahrain Commercial Companies Law, in the case of the Company, we report that:

(1) we have obtained all the information we considered necessary for the purpose of our audit;

(2) the Company has maintained proper books of account and the financial statements are in agreement therewith; and

(3) the financial information included in the Directors’ report is consistent with the books of account of the Company.

In addition, we report that nothing has come to our attention which causes us to believe that the Company has breached any of the applicable provisions of the Bahrain Commercial Companies Law, or of its Memorandum and Articles of Association, which would materially affect its activities, or its financial position as at 31 December 2007.

Manama, Kingdom of BahrainJanuary 2008

FinancialStatements

AnnualReport 2007 27AnnualReport 2007 26

AnnualReport 2007 29

Mohammed Al-TawashVice Chairman and President

Ahmed Ali Khalfan Al-DhahryChairman

The accounting policies and notes form an integral part of these consolidated financial statements.

Real Capita BSC (c)

CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States Dollars)

The consolidated financial statements were approved by the Board of Directors on 30 January 2008 and signed on its behalf by:

Notes 2007 2006

IncomeRealised gains on sale of investment properties - 9,009,111Unrealised fair value gains on investment properties 2,652,520 -Advisory and management fees 18,872,714 3,008,259Income from short-term deposits 15 774,802 1,441,942Rental income 1,335,157 351,755Other income 21,845 37,125

23,657,038 13,848,192

ExpensesStaff costs 16 (3,983,243) (1,972,812)Fees and commission (2,568,817) (1,032,004)General and administrative expenses 17 (2,106,262) (1,021,852)Pre-operating expenses written-off 18 - (450,309)Finance costs 11 (793,046) (403,896)Depreciation 2 (251,647) (120,851)

(9,703,015) (5,001,724)

Operating profit for the year/periodbefore share of profit from investmentin associated undertakings 13,954,023 8,846,468

Share of profit from investment in anassociated undertaking 4 1,193,537 -

Net profit for the year/period transferred 15,147,560 8,846,468to retained earnings

Earnings per share 14 27.15 cents 15.85 cents


Mohammed Al-TawashVice Chairman and President

Ahmed Ali Khalfan Al-DhahryChairman

Notes 2007 2006

ASSETS

Non-current assetsPlant and equipment 2 872,951 773,710

Investment properties 3 14,710,222 16,585,325

Investment in an associated undertaking 4 21,153,392 5,000,000

Available-for-sale investments 5 13,744,527 5,874,953

Properties under development 6 23,402,427 10,958,407

73,883,519 39,192,395

Current assetsMudaraba investments 7 - 3,125,449

Trade and other receivables 8 33,908,889 44,986,434

Cash and cash equivalents 9 8,637,133 17,513,398

42,546,022 65,625,281

Total assets 116,429,541 104,817,676

EQUITY AND LIABILITIES

Capital and reservesShare capital 12 56,160,000 54,000,000

Statutory reserve 13 2,399,403 884,647

Retained earnings 17,014,625 7,961,821

75,574,028 62,846,468

Non-current liabilitiesNon-current portion of term loans 11 19,483,047 12,321,243

Current liabilitiesTrade and other payables 10 14,130,650 29,649,965

Current portion of term loans 11 7,241,816 -

21,372,466 29,649,965

Total equity and liabilities 116,429,541 104,817,676

The consolidated financial statements were approved by the Board of Directors on 30 January 2008 and signed on its behalf by:


Real Capita BSC (c)

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007



Real Capita BSC (c)

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2007


Notes 2007 2006Operating activities

Net profit for the year/period 15,147,560 8,846,468

Adjustments for:

Depreciation 2 251,647 120,851

Finance costs 11 793,046 403,896

Realised gains on sale of investment properties - (9,009,111)

Realised gains on sale of available-for-sale

investments (18,561) -

Unrealised fair value gains on investment properties 3 (2,652,520) -

Share of profit from investment in an associated

undertaking 4 (1,193,537) -

Income from short-term deposits 15 (774,802) (1,441,942)

Changes in operating assets and liabilities:

Trade and other receivables - 11,077,545 (44,986,434)

Trade and other payables - (15,519,315) 29,649,965

Cash provided by/(used in) operating activities - 7,111,063 (16,416,307)

Finance costs paid 11 (793,046) (403,896)

Net cash provided by/(used in) operating activities 6,318,017 (16,820,203)

Investing activitiesPurchase of plant and equipment 2 (350,888) (894,561)Purchase of investment properties 3 & 6 (7,916,397) (76,205,411)Purchase of investment in an associated undertaking 4 (13,571,322) (5,000,000)

Purchase of available-for-sale investments 5 (9,513,108) (5,874,953)Investment in mudaraba 3,125,449 (3,125,449)Income received from short-term deposits 15 774,802 1,441,942Proceeds from sale of available-for-sale investments 273,562 -Proceeds from sale of investment properties - 57,670,790

Net cash used in investing activities (27,177,902) (31,987,642)

Financing activitiesShare capital introduced by the shareholders 12 - 54,000,000Dividends paid 12 (2,160,000) -Directors’ fees paid 12 (210,000) -Donations paid 12 (50,000) -Net proceeds from term loans 11 14,403,620 12,321,243

Net cash provided by financing activities 11,983,620 66,321,243

Net (decrease)/increase in cash and cash equivalents (8,876,265) 17,513,398

Cash and cash equivalents beginning of the year/period 17,513,398 -

Cash and cash equivalents end of the year/period 9 8,637,133 17,513,398

Share Statutory Retained

Notes capital reserve earnings Total

Share capital introduced

by the shareholders 12 54,000,000 - - 54,000,000

Net profit for the period - - 8,846,468 8,846,468

Transferred to statutory

reserve 13 - 884,647 (884,647) -

At 31 December 2006 54,000,000 884,647 7,961,821 62,846,468

At 1 January 2007 54,000,000 884,647 7,961,821 62,846,468

Net profit for the year - - 15,147,560 15,147,560

Transferred to statutory

reserve 13 - 1,514,756 (1,514,756) -

Bonus shares issued 12 2,160,000 - (2,160,000) -

Dividends paid for 2006 12 - - (2,160,000) (2,160,000)

Directors’ fees for 2006 12 - - (210,000) (210,000)

Donations 12 - - (50,000) (50,000)

At 31 December 2007 56,160,000 2,399,403 17,014,625 75,574,028

Real Capita BSC (c)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007


The accounting policies and notes form an integral part of these consolidated financial statements. AnnualReport 2007 31AnnualReport 2007 30


associated undertaking’s post-acquisition profits or losses is recognised in the

statement of income, and its share of post-acquisition movements in reserves

is recognised in reserves.

3 Plant and equipment and accumulated depreciation

Plant and equipment are stated at historical cost less accumulated depreciation.

Cost includes all costs directly attributable to bringing the asset to working

condition for its intended use.

Depreciation is calculated using the straight-line method to write-off the cost

of plant and equipment to their estimated residual values over their expected

useful lives as follows:

Office equipment, furniture and fixtures 4 to 5 years

Computer hardware and software 3 years

Motor vehicles 5 years

Gains and losses on disposal of plant and equipment are determined by

reference to their carrying amount and are taken into account in determining

net profit.

Repairs and renewals are charged to the statement of income when the

expenditure is incurred.

The carrying values of the plant and equipment are reviewed for impairment

when events or changes in circumstances indicate that the carrying values

may not be recoverable. If any such indication exists, and where the carrying

values exceed the estimated recoverable amounts, the plant and equipment

are written-down to their recoverable amounts.

4 Pre-operating expenses

Pre-operating expenses represent all expenses incurred prior to the commencement of commercial operations of the Group, which are charged immediately to the statement of income.

5 Investment properties

Investment properties, principally comprising of freehold land and buildings, are held for capital appreciation and long-term rental yields and are not occupied by the Company. Initially, investment properties are measured at cost including transaction costs. Subsequent to initial recognition, investment properties are stated at their fair values. Gains and losses arising from changes in the fair values of investment properties are included in the consolidated statement of income in the year in which they arise.

Investment properties are derecognised when they have either been disposed of, or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on derecognition of an investment property are recognised in the consolidated statement of income in the year of derecognition.

6 Available-for-sale investments

Available-for-sale investments are non-derivatives that are not classified as financial assets at fair value through profit or loss. These are included in non-current assets unless management has the express intention of holding the investment for less than twelve months from the consolidated balance sheet date.

Available-for-sale investments are initially recognised at cost and subsequently remeasured at their fair values and any changes in fair value of such investments subsequent to initial recognition are included in the fair value reserve as a part of shareholders’ equity.

All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. The cost of purchase includes transaction costs. Investments are derecognised when the rights to receive cash flows from the investments have expired or

Real Capita BSC (c)SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A summary of the significant accounting policies adopted in the preparation

of these consolidated financial statements is set out below:

1 Basis of preparation

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as promulgated by the International Accounting Standards Board and the requirements of the Bahrain Commercial Companies Law. The consolidated financial statements have been prepared under the historical cost convention, except for available-for-sale investments and investment properties which are stated at their fair values.

The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process

of applying the Group’s accounting policies.

Standards, amendments and interpretations effective in 2007

IFRS 7, ‘Financial instruments: Disclosures’, and the complementary amendment to IAS 1, ‘Presentation of Financial Statements – Capital Disclosures’, introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the Group’s financial instruments, or the disclosures relating to trade and other payables.

Standards, amendments and interpretations effective in 2007 but not relevant

The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after1 January 2007 but they are not relevant to the Group’s operations:

• IFRS 4, ‘Insurance Contracts’;• IFRIC 7, ‘Applying the Restatement Approach under IAS 29, Financial

Reporting in Hyperinflationary Economies’; and

• IFRIC 9, ‘Re-assessment of Embedded Derivatives’.

Functional currency

The United States Dollar is the Group’s functional currency and also the currency in which the Company’s share capital is denominated. Accordingly, the consolidated financial statements have been prepared in United States Dollars.

2 Basis of consolidation

The consolidated financial statements includes the accounts of the parent

company and its subsidiary undertakings, after elimination of all inter-

company transactions, balances and unrealised surpluses and deficits on

transactions between the Group companies.

Subsidiary undertakings are all entities (including special purpose entities)

over which the Group has the power to govern the financial and operating

policies generally accompanying a shareholding of more than one-half of the

voting rights. Subsidiary undertakings are fully consolidated from the date

on which control is transferred to the Group. They are de-consolidated from

the date that control ceases. Accounting policies of subsidiary undertakings

have been changed where necessary to ensure consistency with the policies

adopted by the Group.

The Group does not consolidate an investment in a subsidiary undertaking

when control, by a shareholding exceeding 50%, is intended to be only

temporary.

Associated undertakings are all entities over which the Group has significant

influence but which it does not control, generally accompanying a

shareholding of between 20% and 50% of the voting rights. Investments

in associated undertakings are accounted for using the equity method of

accounting and are initially recognised at cost. The Group’s share of its

Real Capita BSC (c)SIGNIFICANT ACCOUNTING POLICIES


transaction costs) and the redemption value is recognised in the statement of income over the period of the borrowings.

14 Revenue recognition

Income from property management, development and maintenance services is recognised when the services for the transactions in accordance with contractual terms between the parties are substantially completed. Transaction-related expenses are deferred until the revenue is recognised.

15 Other income

Other income is accounted for on the accruals basis, unless collectibility is in doubt.

16 Rental income

Property rental and service charge income, arising from the letting-out of investment properties to tenants, is recorded based on the agreements entered into with the tenants and is recognised on the accruals basis.

17 Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

18 Advisory and management fees

Advisory and management fees are recorded based on agreements entered into for placement of equity and are recognised on the accruals basis.

19 Capitalisation of borrowing costs

Borrowing costs that are directly attributable to qualifying assets are included

in the cost of the asset. Such borrowing costs are capitalised as part of the

cost of the asset when it is probable that they will result in future economic

benefits to the Group and the costs can be measured reliably. Other borrowing

costs are recognised as an expense in the period in which they are incurred.

20 Foreign currency transactions

Foreign currency transactions are accounted for at the rates of exchange

prevailing at the dates of the transactions. Gains and losses resulting from

the settlement of such transactions and from the translation, at the year-end

rates, of monetary assets and liabilities denominated in foreign currencies,

are recognised in the statement of income.

21 Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents

comprise cash on hand, bank balances, murabaha investments and short-

term fixed deposits with original maturities of three months or less.

Real Capita BSC (c)SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

have been transferred and the Group has substantially transferred all the risks and rewards of ownership.

The fair value of investments listed on active markets is determined by reference to quoted market prices. The fair value of unquoted securities, where available, is the Group’s proportionate share of the net assets of the investee company. In the absence of active markets or other appropriate methods from which to derive reliable fair values, the unquoted securities are stated at cost.

7 Properties under development

Properties under development represent properties held for sale in the ordinary

course of business or in the process of construction and development for it’s

future sale. Properties under development are valued at cost and include

expenditure incurred in the normal course of developing and constructing

the property.

Capital work-in-progress is stated at cost and comprises of materials, labour

and directly attributable overheads.

Properties under development are derecognised when they have either

been disposed of, or when the property is permanently withdrawn from

use and no future benefit is expected from its disposal. Any gains or losses

on derecognition of a property under development are recognised in the

consolidated statement of income in the year of derecognition.

8 Mudaraba investments and profit

Mudaraba investments are accounted for at cost plus margin or ‘sales price.’

The gains and losses, which result from mudaraba transactions, are recognised

in the statement of income over the period of the related contracts. Mudaraba

investments usually have maturities of less than 360 days.

9 Trade receivables

Trade receivables are carried at their anticipated realisable values. An

estimate is made for doubtful receivables based on a review of all outstanding

amounts at the year-end. Bad debts are provided for during the year in

which they are identified.

10 Trade payables

Trade payables are recognised for amounts to be paid in the future for goods

or services received, whether billed by the supplier or not.

11 Provisions

The Group recognises provisions when it has a present legal or constructive

obligation to transfer economic benefits as a result of past events and a

reasonable estimate of the obligation can be made.

12 Employee benefits

Employee benefits and entitlements to annual leave, holiday, air passage and other short-term benefits are recognised as they accrue to the employees. The Group contributes to the pension scheme for Bahraini nationals administered by the General Organisation for Social Insurance in the Kingdom of Bahrain. This is a defined contribution pension plan and the Group’s contributions are charged to the statement of income in the year to which they relate. In respect of this plan, the Group has a legal obligation to pay the contributions as they fall due, and no obligation exists to pay future benefits.

The expatriate employees of the Group are paid a leaving indemnity in accordance with the provisions of the Bahrain Labour Law. The Group accrues for its liability in this respect on an annual basis.

13 Borrowings

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, these are stated at amortised cost using the effective yield method; any differences between proceeds (net of

Real Capita BSC (c)

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


2 Plant and equipmentOffice Computer

equipment, hardwarefurniture and Motor

and fixtures software vehicles TotalUS$ US$ US$ US$

Cost

At 1 January 2007 659,390 145,694 89,477 894,561Additions 204,907 125,026 20,955 350,888

At 31 December 2007 864,297 270,720 110,432 1,245,449

Accumulated depreciation

At 1 January 2007 79,288 28,141 13,422 120,851Charge for the year 158,355 72,952 20,340 251,647

At 31 December 2007 237,643 101,093 33,762 372,498

Net book amount

At 31 December 2007 626,654 169,627 76,670 872,951

At 31 December 2006 580,102 117,553 76,055 773,710

3 Investment properties

2007 2006US$ US$

Opening balance 16,585,325 -Purchases during the year/period - 75,428,186Disposals during the year/period - (48,661,679)Transferred to properties under development during the year/period (Note 6) (4,527,623) (10,181,182)Unrealised fair value gains transferred to statement of income 2,652,520 -

At 31 December 14,710,222 16,585,325

Investment properties are stated at their fair values which have been determined based on valuations performed by independent property valuers. The valuations undertaken were based on open market values, which represent the prices at which the properties could be exchanged between knowledgeable willing buyers and knowledgeable willing sellers in an arm’s length transaction.

Real Capita BSC (c)Notes to the consolidated financial statements for the year ended 31 December 2007

1 Organisation and activities

Real Capita BSC (c) (“the Company”) and its subsidiary undertakings comprise the “Group”. The Company is a closed shareholding company registered with the Ministry of Industry and Commerce in the Kingdom of Bahrain and operates under commercial registration number 59789 obtained on 22 February 2006. However, the Company commenced commercial operations on 1 April 2006. Under the terms of its Articles of Association, the initial duration of the Company is 50 years, renewable for further similar periods unless terminated earlier by the operation of law or as provided in the Articles of Association.

The principal activities of the Group include:

- Property management, development and maintenance;- Management of commercial and industrial centres and residential buildings;- Providing consultancy services in local and international property matters;- Investment in local industrial projects;- Promotion of foreign products and services in the Kingdom of Bahrain; and- General trade, export and import.

The registered office of the Company is in the Kingdom of Bahrain.

Details of the Company’s investment in its subsidiary undertakingsas at 31 December 2007 are as follows:

Name of the subsidiary Country of Percentage of

undertaking incorporation effective

ownership interest

Real Business Center WLL Kingdom of Bahrain 100%

Real Capita Holdings SPC Kingdom of Bahrain 100%




4 Investment in associated undertakings (continued)Summarised financial information of the Group’s investment in associated undertakings is as follows:

2007US$

Total assets 135,129,875

Total liabilities 105,260,285

Net assets 29,869,590

Group’s share in the net assets 21,153,392

Net profit for the year 4,869,590

Group’s share in the net profit 1,193,537

The above financial information of the Group’s investment in an associated undertaking has been extracted from audited financial statements prepared as at, and for the period ended, 31 December 2007.

5 Available-for-sale investments2007 2006

US$ US$

Opening balance 5,874,953 -

Transferred to investment inassociated undertakings (1,388,533) -

Additions during the year/period 9,513,108 5,874,953

Disposals during the year/period (255,001) -

At 31 December 13,744,527 5,874,953

Available-for-sale investments include investments in unlisted companies, whose shares are not traded on active markets. The investments are primarily in certain companies located in the Gulf Co-operation Council countries (GCC) and Asia. In the Group management’s opinion, the fair values of these investments are not significantly different from their carrying values at 31 December 2007.


3 Investment properties (continued)Certain properties stated at a valuation of US$14,710,222 at 31 December 2007, though owned by the Group, are registered in the name of the bank and held on behalf, and for the beneficial interest, of the Group. Further, investment properties stated at a valuation of US$14,710,222 at 31 December 2007 are held as security with the Group’s bankers against credit facilities provided.

4 Investment in associated undertakings2007 2006

US$ US$


Transferred from available-for-sale investments 1,388,533 -

Additions during the year/period 13,571,322 5,000,000

Share of profits from an investment in

an associated undertaking 1,193,537 -

At 31 December 21,153,392 5,000,000

Details of the Group’s investment in an associated undertaking are as follows:

Name of the associated Country of Description ofPercentage of

ownership interest

undertaking registration shares held 2007 2006

Real Lands BSC (c) Kingdom of Ordinary shares of

Bahrain US$10 each 24.51% 28.39%

Amwaj Gateway Cayman Islands Ordinary shares of 22.93% -Development Company BD10 each

Amwaj Gateway BSC (c) Kingdom of Ordinary shares of 10% -Bahrain BD1 each

The Group’s share in the associated undertaking’s profits has been extracted from audited financial statements prepared as at,and for the period ended, 31 December 2007.


6 Properties under development (continued)

The properties under development comprise three projects, one for the construction of a residential compound in Al-Jasrah, the other for constructing twin residential towers in Umm-Al-Hassam and the last for constructing eight towers in the Hidd Industrial Area. The total costs incurred on these projects upto 31 December 2007 amounted to US$15,280,988, US$4,217,405 and US$3,904,034, respectively.

The finance costs represent the proportionate costs of the Ijarah and Musharaka finance loans obtained from a local bank (Note 11) to finance the purchase and development of these properties.

7 Mudaraba investments

Mudaraba investments represent amounts placed with financial institutions, which have a maturity period of 360 days, and bear profit of 11% per annum (2006:11% per annum) receivable on a quarterly basis. The profits from mudaraba investments are recognised over the period of the related investments.

8 Trade and other receivables

2007 2006

US$ US$

Trade receivables 16,138 16,138

Amounts due from related parties (Note 21) 29,917,973 44,689,164

Rents receivable 216,134 98,614

Advances to contractors 1,627,469 -

Prepayments and other receivables 2,157,626 182,518

33,935,340 44,986,434

Provision for doubtful receivables (26,451) -

33,908,889 44,986,434



5 Available-for-sale investments (continued)Available for sale investments are denominated in the following currencies:

Currency 2007 2006

Bahrain Dinar 2,718,833 1,388,533

United Arab Emirates Dirham 4,298,194 4,298,194

United States Dollar 3,550,000 -

Euro 1,655,056 -

Saudi Arabian Riyal 1,334,218 -

Kuwait Dinar 188,226 188,226

13,744,527 5,874,953

None of the available for sale investments are either past due or impaired.

6 Properties under development2007 2006

US$ US$


Additions during the year/period 3,492,573 -

Cost of land transferred from investment

properties during the year/period (Note 3) 4,527,623 10,181,182

Finance costs capitalised 1,258,546 614,512

20,237,149 10,795,694

Capital work-in-progress 3,165,278 162,713

23,402,427 10,958,407



10 Trade and other payables2007 2006

US$ US$

Trade payables 400,803 18,375,493

Amounts due to related parties (Note 21) 9,739,846 8,774,344

Rent billed in advance 220,037 177,570

Retentions payable 234,621 -

Accruals and other payables 3,535,343 2,322,558

14,130,650 29,649,965

Amounts due to related parties are unsecured, bear no interest and arise in the ordinary course of business.

11 Term loans2007 2006

US$ US$

Ijarah finance loan (a) 12,321,243 12,321,243

Ijarah finance loan (b) 7,161,804 -

Commodity murabaha loan (c) 5,304,324 -

Musharaka finance loan (d) 1,937,492 -

26,724,863 12,321,243

Current portion of term loans (7,241,816) -

Non-current portion of term loans 19,483,047 12,321,243

a) This Ijarah finance loan represents a financing facility obtained from a local bank for the purchase of a plot of land. The amount is repayable in

one single installment due in January 2009. The facility is secured against the land for which the loan was obtained and bears profit at market rates.

b) This Ijarah finance loan represents a financing facility obtained from a local bank for re-financing the purchase of the building “Wind Tower” at the

Diplomatic Area, Kingdom of Bahrain. The amount is repayable in one single installment due in December 2009. The facility is secured against the building for which the loan was obtained and bears profit at market rates.


8 Trade and other receivables (continued)

At 31 December, the ageing of unimpaired trade receivables is as follows:

Neither past due nor Less than More than

Total impaired 30 days 30-60 days 60 days

US$ US$ US$ US$ US$

2007 16,138 16,138 - - 16,138

2006 16,138 16,138 - 16,138 -

Unimpaired trade receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Company to obtain collateral over these trade receivables and these are, therefore, unsecured. In the opinion of the management, the fair values of trade and other receivables are not expected to be significantly different from their carrying values.

Amounts due from related parties are unsecured, bear no interest and have no fixed repayment terms.

9 Cash and cash equivalents

2007 2006

US$ US$

Cash on hand 1,997 4,048

Current account balances with banks 926,279 489,894

Murabaha receivables 7,708,857 12,400,388

Short-term fixed deposits - 4,619,068

8,637,133 17,513,398

The current account balances with banks are non-interest bearing.

Murabaha receivables represent the amounts placed with financial institutions which have a maturity period of less than 30 days and bear an effective average profit rate of 5.1% per annum (2006: 5.28% per annum). Profits are recognised over the period of the related contract. Murabaha receivables amounting to US$6,382,598 (2006: US$3,282,598) are secured against Ijarah finance loans (Note 11) obtained from the Group’s bankers.



12 Share capital (continued)

Additional information on shareholding pattern

The names and nationalities of the major shareholders, and the number of shares held in which they have an interest of 5% or more outstanding shares at 31 December 2007, are as follows (2006: same distribution pattern)

Percentage of share

Nationality Number holdingof shares interest

Al Khuzama Investments SPC Bahraini 8,424,000 15.00%

Al Dammam Development Company Saudi 5,200,000 9.26%

International Trading & Development Company Qatari 5,200,000 9.26%

Injaz Mena PJSC Emirati 5,200,000 9.26%

Ali & Sons Co. LLC Emirati 5,200,000 9.26%

Mr Faisal Sulaiman Abdulaziz Al Rajhi Saudi 5,200,000 9.26%

Mr Ahmed Ali Khalfan Al-Dhahry Emirati 3,796,000 6.76%

Gulf Thimarat Management WLL Bahraini 3,224,000 5.74%

The Company has only one class of equity shares and the holders of the shares have equal voting rights. Further, all the shares issued are fully paid

Proposed dividends and appropriations

The Board of Directors have proposed to pay a total dividend of US$8,424,000 (2006 US$4.32 million): i.e 15% of the issued and paid-up share capital of the Company for the year ended 31 December 2007. The dividend will consist a stock dividend, i.e. the bonus issue of 8,424,000 shares at a par value of US$1. This is subject to the approval of the Shareholders in the Annual General Meeting.

Directors’ remuneration

The Directors’ fees of US$432,992 (2006: US$210,000) is subject to the approval of the shareholders in the Annual General Meeting.

Charity

The charity of US$80,000 (2006: US$50,000) is subject to the approval of the shareholders in the Annual General Meeting.


11 Term loans (continued) c) Commodity murabaha loan represent a financing facility obtained from a local bank for the purpose of meeting the working capital requirements of the Group. The amount is repayable in one single installment due in August 2008. The facility is secured against the building and bears profit at market rates.

d) Musharaka finance loan represents a financing facility obtained from a local bank for the purchase of plots of land. The amount is repayable in one single installment due in December 2008. The facility is secured against the land for which the loan was obtained and bears profit at market rates.

The finance cost of BD793,046 relates to the Ijara finance loan and commodity Murabaha loan.

That portion of the installments which is due within one year from the balance sheet date, is disclosed as current portion of term loans under current liabilities.

12 Share capitalThe Company’s share capital as at 31 December 2007 and 2006 is as follows:

2007 2006US$ US$

Authorised200,000,000 shares of US$1 each (31 December 2006: 200,000,000 shares of US$1 each) 200,000,000 200,000,000

Issued and fully paid-upOpening balance54,000,000 shares of US$1 each (31 December 2006: 54,000,000 shares of US$1 each) 54,000,000 54,000,000

Bonus issue2,160,000 shares of US$1 each (31 December 2006: Nil shares of US$1 each) 2,160,000 -

At 31 December56,160,000 shares of US$1 each (31 December 2006: 54,000,000 shares of US$1 each) 56,160,000 54,000,000

In accordance with resolutions passed at the Annual General Meeting held on 6 March 2007, a dividend of 8% of the issued and fully paid-up share capital as at 31 December 2006 was approved by the shareholders. The dividend consisted of 4% cash dividend of US$2.16 million and a 4% stock dividend, i.e. a bonus shares issue of 2.16 million shares. The distribution of the 2.16 million bonus shares was completed during the year. Further, Directors’ fees of US$210,000 and donations of US$50,000 was also approved by the shareholders at the same Annual General Meeting.



17 General and administrative expenses

2007 2006

US$ US$

Travelling expenses 662,705 242,470

Advertisement and business promotion expenses 380,275 302,077

Other expenses 279,027 208,295

Office expenses 229,451 95,933

Professional and consultancy services 227,092 41,603

Printing and stationery 188,897 80,803

Communication expenses 138,815 50,671

2,106,262 1,021,852

18 Pre-operating expenses written-off

2007 2006

US$ US$

Professional fees - 128,554

Advertisement expenses - 79,612

Printing and stationery - 74,706

Travelling expenses - 68,841

Business promotion expenses - 34,878

Staff salaries - 27,435

Other expenses - 36,283

- 450,309


13 Statutory reserve

Under the provisions of the Bahrain Commercial Companies Law, an amount equivalent to 10% of the Group’s net profit for the year before appropriationsis required to be transferred to a non-distributable reserve account until such time as a minimum of 50% of the issued share capital is set aside.During the year, the Group has transferred an amount of US$1,514,756 to the statutory reserve (2006: US$ 884,647).

14 Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to the shareholders by the weighted average number of ordinary shares issued dur-ing the period.

2007 2006

Net profit attributable to shareholders US$15,147,560 US$8,846,468

Weighted average number of ordinary shares 55,800,000 55,800,000

Basic and diluted earnings per share 27.15 cents 15.85 cents

The distribution of 2.16 million bonus shares was completed during the year and, therefore, the weighted number of ordinary shares of 2006 have been re-stated to give effect to the bonus issue.

15 Income from short-term deposits2007 2006

US$ US$

Mudaraba and murabaha profits 681,612 959,581

Income from short-term fixed deposits 93,190 265,138

Wakalah profits - 217,223

774,802 1,441,942

16 Staff costs

Staff costs includes a provision for staff bonus for the year ended 31 December 2007 based on a percentage of the Group’s net profit in excess of a pre-determined hurdle rate as set out in Article 12 paragraph 7 of the Company’s Articles of Association.



21 Related party transactions

Related parties comprise the shareholders, directors, entities owned or controlled by them, and companies affiliated by virtue of shareholding in common with that of the Group. The Group’s transactions with related parties are authorised by the management.

A summary of the transactions with related parties included in the statement of income is are as follows:

2007 2006

Realised gains Income Realised Income from

Advisory on sale of fees from Advisory and gains on sale of short-term

and investment short-term management investment fixed

management properties fixed deposits fees properties deposits

US$ US$ US$ US$ US$ US$

Jointly controlled

Entities 18,872,714 - - 3,008,259 6,898,295 -

Others - - 93,190 - - 265,138

18,872,714 - 93,190 3,008,259 6,898,295 265,138

A summary of the balances with related parties included in the consolidated balance sheet is as follows:

2007 2006

Receivables Payables Receivables Payables

US$ US$ US$ US$

Jointly controlled entities 29,172,933 7,238,456 44,404,914 8,774,344

Associated undertakings - 1,250,190 284,250 -

Major shareholders 2,825 - - -

Others 742,215 1,251,200 - -

29,917,973 9,739,846 44,689,164 8,774,344


19 Maturity profile

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not considered significant by management

At 31 December 2007

Less than Between 1 Between 21 year and 2 years and 5 years

Term loans 7,241,816 19,483,047 -

Trade and other payables 14,130,650 - -

At 31 December 2006

Less than Between 1 Between 21 year and 2 years and 5 years

Terms loans - - 12,321,243

Trade and other payables 29,649,965 - -

20 Capital commitments and contingent liabilities2007 2006

US$ US$

Uncalled share capital relating to

available-for-sale investments 4,851,184 7,217,176

Capital commitments 27,296,443 -

Capital commitments primarily relate to amounts contracted for the property development projects and available-for-sale investments.


22 Financial assets and liabilities and risk management

Financial assets and liabilities carried on the balance sheet include cash and cash equivalents, murabaha receivables, short-term fixed deposits, mudaraba investments, available-for-sale investments, investment in an associated undertaking, trade and other receivables, term loans and trade and other payables. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

Risk management is carried out by a central treasury department (group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Cash is placed with national and international banks with good credit ratings.

Currency rate risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group’s foreign currency transactions are predominantly in United States Dollars. As the Bahrain Dinar is effectively pegged to the United States Dollar, the management does not consider the Group to have a significant currency rate risk.

Price risk is the risk that the Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as available-for-sale. The Group is not exposed to commodity price risk, except for investment property which is revalued on an annual basis. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Ijara finance loans bear market rates of profit, whereas short-term fixed deposits and murabaha receivables bear fixed rates of interest or profits respectively. Thus renegotiation only occurs when the short-term fixed deposits and murabaha investments are renewed on maturity. The Group’s other assets and liabilities are not considered by management to be sensitive to interest rate risk.

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.The Group’s management rigorously monitors liquidity requirements on a regular basis to help ensure that sufficient funds are available, including unutilised credit facilities with banks, to meet all liabilities as they fall due. Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable, willing parties in an arm’s length transaction.

The fair values of the Group’s financial assets and liabilities are not materially different from their carrying amounts.

23 Comparative figures

The statements of income, changes in equity, cash flows and related notes for the year ended 31 December 2007 are not comparable with the prior period figures since the prior period figures were for the period from 22 February 2006 to 31 December 2006.

Further, certain comparative balances have been reclassified, wherever necessary, to conform with the current years presentation.


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