PHDC.L Regulatory News (PHDC)

PALM HILLS DEVELOPMENTS COMPANY

S.A.E AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2010

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF PALM HILLS DEVELOPMENTS COMPANY S.A.E.

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Palm Hills Developments Company S.A.E and its subsidiaries ('the Group'), which comprise the consolidated balance sheet as at 31 December 2010, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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 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 consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated 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 policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated 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 give a true and fair view of the financial position of the Group as at 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

 Ernst & Young

Date: March 2011

_____________________ __________________

Ehab Swellem Yasseen Mansour

(Chief Financial Officer) (Chairman)

Investing and financing activities that did not require the use of cash and cash equivalents are excluded from the cash flow statement. The group did not enter into such transactions during 2010 and 2009.

1 ACTIVITIES

Palm Hills for Development Company (S.A.E) was established according to the Investment Incentives and Guarantees Law No. (8) of 1997 and the Companies Law No.159 of 1981 and their executive regulations, taking into consideration the statutes of the Capital Market Law No. 95 of 1992 and its executive regulations. The company's headquarter is located in 6th of October City in 6th of October Governorate, where the main branch is located in Smart Village.

The company is registered in the Commercial Register under No. (6801) on 10 January 2005, and was listed in the unofficial schedule no. (2) Of the Cairo and Alexandria Stock Exchanges on 27 December 2006. The company got listed in the official schedule no. (1) Of the Cairo and Alexandria Stock Exchange on April 2008 and in London stock exchange on 8 May 2008.

The company was established to invest in real estate in the New Cities and New Urban Communities including building, constructing, possessing and managing residential compounds, resorts, villas and tourist villages, sale or lease as well as all the services, facilities, leasing and construction of integrated projects and managing the entertainment activities associated with the company's in activities. All such activities are subject to the approval of appropriate authorities.

These group consolidated financial statements were authorized for issue by the board of directors on 7 March 2011.

All the company operations are located in Egypt; it has only one identifiable operating reportable segment which is real estate development, club and hospitality do not meet the criteria of reportable segment neither separately nor in aggregate.

The company participated in the capital of fourteen subsidiary companies as follows:

1-New Cairo for Real Estate Developments S.A.E

New Cairo for Real Estate Development S.A.E. is registered in Egypt under commercial registration number 12613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in plot 36 South investors' area in new Cairo. The company is engaged in construction, management, and the sale of hotels, motels, buildings and residential compounds and the purchase, development, dividing and sale of land.

The company's fiscal year ended 31 December of each year.

2-Royal Gardens for Real Estate Investment Company S.A.E

Royal Gardens for Real Estate Investment Company S.A.E. is registered in Cairo under commercial registration number 21574 under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 11 El-Nakhil Street - Dokki-Giza. The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types of related services such as finance leasing and construction.

The company's fiscal year ended 31 December of each year.

3-Palm Hills Middle East Company for Real Estate Investment S.A.E and Its Subsidiary

Palm Hills Middle East Company for Real Estate Investment S.A.E and its subsidiary, Middle East Company for Real Estate and Touristic Investment S.A.E are engaged in real estate investment in new cities and urban communities, and also the construction, ownership and management of residential compounds, resorts, and villas. The company and its subsidiary are also involved in the sale and lease and other related services for managing integrated projects and entertainment activities.

1 ACTIVITIES - continued

The company is registered in Egypt under commercial registration number 21091. The company's subsidiary is registered in Egypt under commercial registration number 25016. Both companies are registered under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992.

The companies' fiscal year ended 31 December of each year.

4- Middle East for Development and Investment Touristic S.A.E

Middle East for Development and Investment Touristic S.A.E. is registered in Egypt under commercial registration number 25015 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza.

The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types or relevant services such as finance lease and construction of the company's projects or others'.

The company's fiscal year ended 31 December of each year.

5- Gamsha for Tourist Development S.A.E

Gamsha for Tourist Development S.A.E. is registered in Egypt under commercial registration number 33955 under the provisions of the Companies' Law No 159 of 1981. The company is located in 11 El Nakhil Street-Dokki-Giza. The company is engaged in real estate investments in new cities, urban communities, remote areas and regions outside the old valley.

The company's fiscal year ended 31 December of each year.

6- Nile Palm Al-Naeem for Real Estate Development S.A.E

Nile Palm Al-Naeem for Real estate Development S.A.E. is registered in Egypt under commercial registration number 27613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza. The company is engaged in real estate investment in new cities and urban communities, and also in the construction, ownership and management of residential compounds, resorts, and villas.

The company's fiscal year ended 31 December of each year.

7- Saudi Urban Development Company S.A.E

Saudi Urban Development (Company) S.A.E. is registered in Egypt under commercial registration number 1971 under the provisions of the Companies' Law No 159 of 1981. The company is located in 72 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in the construction of advanced residential projects.

The company's fiscal year ended 31 December of each year.

8- Rakeen Egypt for Real Estate Investment S.A.E

Rakeem Egypt for Real Estate Investment S.A.E. is registered in Egypt under commercial registration number 34611 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in leasing, construction and operation of hotels, motels, resorts and residential compounds, construction, generation of electricity, desalination of water, land acquisition, dividing and constructing villas, residential units and offices malls and the marketing thereof..

The company's fiscal year ended 31 December of each year.

1 ACTIVITIES - continued

9- Al Naeem for Hotels and Touristic Villages S.A.E

Al Naeem for Hotels and Touristic Villages S.A.E. is registered in Egypt under commercial registration number 32915 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in construction and operation of hotels in Hamata.

The company's fiscal year ended 31 December of each year.

10- Gawda for Trade Services S.A.E

Gawda for Trade Services S.A.E. is registered in Egypt under commercial registration number 10242 under the provisions of the Companies' Law No 159 of 1981. The company is located in 66 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in real estate investments in new cities, urban communities, remote areas and regions.

The company's fiscal year ended 31 December of each year.

11- East New Cairo for Real Estate Development S.A.E

East New Cairo for Real Estate Development was established under the name of Kappci Company for Real Estate and touristic Development -S.A.E according to Law No. 159 of 1981 and its executive regulation and the company was registered under commercial registration No. 1429 of Ismailia at 20 March 2007.

The company's name was modified at 25 June 2008 to East New Cairo for Real Estate Development and the company's location was changed to 35 Abo Bakr El Sedik St., - Heliopolis and it registered under the commercial registration No. 35539 on 13/11/2008.

The company is established to operate in all the fields of Real Estate investments, construction, and development of residential areas.

The company's fiscal year ended 31 December of each year.

12- City for Real Estate Development S.A.E

City for Real Estate Development -S.A.E. - was established at 2007 according to the laws applicable in Egypt under the provisions of the Companies' Law No 159 of 1981. At 23 October 2007 the company was registered in commercial registration no. 27962.

The company is engaged at the lands' construction development (at all governorates except North and South Sinai and North El Kantara need the permission of the association) and provide these lands with all facilities and services.

The company's fiscal year ended 31 December of each year.

13- Palm October for Hotels S.A.E.

Palm October for Hotels S.A.E. is registered in Egypt under commercial registration number 38357 under the provisions of the Companies' Law No 159 of 1981. The company is located in 11 El Nakhil Street-Dokki-Giza. The company is engaged in establishing and operating the hotels, motels, resorts and residential compounds.

The company's fiscal year ended 31 December of each year.

14- Macor for Securities Investment Company S.A.E and its subsidiaries

Macor for Securities Investment Company S.A.E. was established in Egypt on 8 March 2000 under the provisions of Capital Market law No. 95 of 1992. The objective of the Company is to contribute in establishment or investment in the companies' securities especially the companies engaged in owning, renting and managing the hotels, motels and resorts.

The company's fiscal year ended 31 December of each year.

The company has the following subsidiaries:

1 ACTIVITIES - continued

Six of October for Hotels and Touristic Services Company S.A.E

Six of October Company for Hotels and Touristic Services Company S.A.E was established in Egypt on 15 December 1998 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 for the purpose of establishing and operating a four stars Hotel in Six of October City operated by Accor for Hotels.

The company's fiscal year ended 31 December of each year.

Hotels & Touristic Floating Restaurants Company S.A.E

Hotels and Touristic Floating Restaurants Company SAE was established in Egypt on 10 August 1988 under the provisions of the Companies' law No. 159 of 1981 for the purpose of establishing and operating the hotels and touristic units and provide all its facilities.

The company's fiscal year ended 31 December of each year.

Ismailia for Tourism Company S.A.E

Ismailia for Tourism Company S.A.E was established in Egypt on 1979 under the provisions of the Companies' law No. 159 of 1981 for the purpose of establishing and operating the hotels, motels and touristic units.

The company's fiscal year ended 31 December of each year.

El Nema for Touristic & Real Estate Company S.A.E

El Nema for Touristic & Real Estate Company S.A.E was established in Egypt on 2 May 1996 under the provisions of the Companies' law No. 159 of 1981 for the purpose of constructing, owning, renting, managing and establishing hotels and participating in all hotel activities.

The company's fiscal year ended 31 December of each year.

2.1 BASIS OF PREPARATION

Preparation of consolidated financial statements

The consolidated financial statements have been prepared on a historical cost basis, except for financial assets at fair value through profit or loss that have been measured at fair value. The consolidated financial statements are presented in Egyptian Pound (EGP).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4.

Statement of compliance

The consolidated financial statements of Palm Hills Developments S.A.E and its subsidiaries ('the group') have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Income and cash flow statements

The Group presents its statement of comprehensive income by nature of expense.

The Group reports cash flows from operating activities using the indirect method.

Cash flows from investing and financing activities are determined using the direct method.

2.1 BASIS OF PREPARATION - continued

Basis of consolidation

(a) Subsidiaries

Subsidiaries 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. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests

issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the

subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

(b) Transactions and non-controlling interests

The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

2.2 BASIS OF PREPARATION - continued

(c) Associates

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The group's investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The group's share of its associates' post-acquisition profits or losses is recognized in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the group and its associates are eliminated to the extent of the group's interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognized in the statement of comprehensive income.

The group has changed its accounting policy for transactions with non-controlling interests and its accounting for loss of control or significant influence from 1 January 2010 when revised IAS 27, "Consolidated and separate financial statements", became effective. The version to IAS 27 contained consequential amendments to IAS 28, "Investments in associates", and "Interest in joint ventures"

Previously transactions with non-controlling interests were treated as transactions with parties external to the group. Disposals therefore resulted in gains or losses in profit or loss and purchase resulted in the recognition of goodwill. On disposal or partial disposal, a proportionate interest in reserves attributable to the subsidiary was reclassified to profit or loss or directly to retained earnings.

Previously, when the group ceased to have control or significant influence over an entity, the carrying amount of the investment at the date of control or significant influence became its cost of the purposes of subsequently accounting for the retained interests as associates, jointly controlled entity or financial assets.

The group has applied the new policy prospectively to transactions occurring on or after 1 January 2010. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES 

The accounting policies adopted are consistent with those of the previous financial year except as follows:

(a) New and amended standards adopted by the group:

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010.

IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs are expensed.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES - continued

-

The revised standard was applied to the acquisition of the controlling interest in Macor for Securities Investment Company S.A.E and its subsidiaries on 1 March 2010. The group has chosen to recognise the non-controlling interest at fair value of EGP 210,600,832 for this acquisition rather than the proportionate share of net assets of EGP 150,813,433, which is also allowed. Previously there was no choice, and the non-controlling interest would have been recognised at the proportionate share of net assets. See note 14 for further details of the business combination that occurred in 2010 and 2009.

IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. IAS 27 (revised) has no impact on the financial statements.

(b) new and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2010 but not currently relevant to the group.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010 but not currently relevant to the group

IFRIC 17, 'Distribution of non-cash assets to owners' (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable.

IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1 July 2009. This interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water). In some cases, the entity receives cash from a customer that must be used only to acquire or construct the item of property, plant, and equipment in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services (or to do both)

IFRIC 9, 'Reassessment of embedded derivatives and IAS 39, Financial instruments: Recognition and measurement', effective 1 July 2009. This amendment to IFRIC 9 requires an entity to assess whether an embedded derivative should be separated from a host contract when the entity reclassifies a hybrid financial asset out of the 'fair value through profit or loss' category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. If the entity is unable to make this assessment, the hybrid instrument must remains classified as at fair value through profit or loss in its entirety.

IFRIC 16, 'Hedges of a net investment in a foreign operation' effective 1 July 2009. This amendment states that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of IAS 39 that relate to a net investment hedge are satisfied. In particular, the group should clearly document its hedging strategy because of the possibility of different designations at different levels of the group. IAS 38 (amendment), 'Intangible assets', effective 1 January 2010. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES - continued

IAS 1 (amendment), 'Presentation of financial statements'. The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time.

IAS 36 (amendment), 'Impairment of assets', effective 1 January 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, 'Operating segments' (that is, before the aggregation of segments with similar economic characteristics).

IFRS 2 (amendments), 'Group cash-settled share-based payment transactions', effective form 1 January 2010. In addition to incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 - Group and treasury share transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation.

IFRS 5 (amendment), 'Non-current assets held for sale and discontinued operations'. The amendment clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.

(c) New standards, amendments and its interpretations issued but not effective for the financial year beginning 1 January 2010 and not early adopted.

The group's parent entity's assessment of the impact of these new standards and interpretations is set out below:

IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption.

The group is yet to assess IFRS 9's full impact. However, initial indications are that it may not have an effect the group's accounting, as IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. In the current reporting period, the group does not have other than financial assets that are held for trading.

Revised IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted.

The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The group will apply the revised standard from 1 January 2011. When the revised standard is applied, the group and the parent will need to disclose any transactions between its subsidiaries and its associates. The group is currently putting systems in place to capture the necessary information. It is, therefore, not possible at this stage to disclose the impact, if any, of the revised standard on the related party disclosures.

'Classification of rights issues' (amendment to IAS 32), issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES - continued

Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 'Accounting policies, changes in accounting estimates and errors'. The group will apply the amended standard from 1 January 2011. It is not expected to have any impact on the group or the parent entity's financial statements.

IFRIC 19, 'Extinguishing financial liabilities with equity instruments', effective 1 July 2010. The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. The group will apply the interpretation from 1 January 2011. It is not expected to have any impact on the group or the parent entity's financial statements.

'Prepayments of a minimum funding requirement' (amendments to IFRIC 14). The amendments correct an unintended consequence of IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct this. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented. The group will apply these amendments for the financial reporting period commencing on 1 January 2011. It is not expected to have any impact on the group or the parent entity's financial statements.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Provided it is probable that the economic benefits will flow to the group and the revenue and costs can be measured reliably, revenue is recognised in the statement of comprehensive income as follows: -

Sale of plots of land attributable to villas and town houses

Revenue on sale of plots is recognised as and when all of the following conditions are met:

·; A sale is consummated and contracts are signed;

·; The Group's receivable is not subject to future subordination;

·; The Group has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property; and

·; If acquired on deferred terms, the buyer's investment, to the date of the financial statements, is adequate (at least 25%)

Construction of villas

Revenue on construction of villas is recognised based on percentage of completion as and when the buyer is able to specify the major structural elements of the design of the real estate before construction begins; and/or major structural changes once construction is in progress (whether it exercised that ability or not).

In contrast, if construction could take place independently of the agreement and buyers have only limited ability to influence the design of the real estate (e.g. to select a design from a range of options specified by the entity, or to specify only minor variations to the basic design), the agreement will be for the sale of goods. (see sale of apartments below).

Under percentage of completion method contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that they have been agreed with the customer and are capable of being reliably measured.

The group uses the 'percentage-of-completion method' to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract.

The group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within notes receivable. The group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).

Sale of apartments and chalets

Revenue on sale of apartments and chalets are recognized upon delivery.

Revenue from club and hospitality activities

Service and management charges are recognised in the accounting period in which the services are rendered.

Interest

Interest income is recognised as the interest accrues using the effective interest method, under which the rate used exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Cost of revenues

Cost of revenues includes the cost of land and development costs. Development costs include the cost of infrastructure and construction. The cost of revenues in respect of apartments and villas is based on the estimated proportion of the development cost incurred to date to the estimated total development costs for each project.

The cost of revenues in respect of land sales is based on the total estimated cost of the land site over the total usable land area in a particular development.

Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily take a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Development properties

Properties acquired, constructed or in the course of construction for sale are classified as development properties. Development properties are stated at cost plus attributable profit/loss less progress billings or, if lower, net realisable value. The cost of development properties includes the cost of land and other related expenditure, which are capitalised as and when activities that are necessary to get the properties ready for sale are in progress. Net realisable value represents the estimated selling price less costs to be incurred in selling the property. 

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Income tax

Taxation is provided in accordance with Egyptian fiscal regulations.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have been enacted at the balance sheet date.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and any impairment in value. Land and projects under construction are not depreciated.

Depreciation is calculated on a straight-line basis using the following depreciation rates:

Buildings 5%

Tools & Equipments 25%

Vehicles 20 - 25%

Furniture & Fixtures 25 - 33%

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is measured initially at its cost, including transaction costs. As from 1 January 2009, investment property also includes property that is being constructed or developed for future use as investment property (note 9). Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and any impairment in value. Land and projects under construction are not depreciated. If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Impairment of non- financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Whenever the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the statement of comprehensive income. The recoverable amount is the higher of an asset's net selling price and the value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of comprehensive income. Impairment is determined as follows:

·; For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the statement of comprehensive income;

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

·; For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective interest rate.

Financial assets at fair value through profit or loss - Held for trading

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the near term. Assets in this category are classified as current assets. Regular waypurchases and sales of financial assets are recognised on the trade-date - the date on which the group commits to purchase or sell the asset. Financial assets carried at fair value through profit or losses are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the statement of comprehensive income within 'other (losses)/income - net' in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the group's right to receive payments is established.

Accounts receivable

Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

Notes receivable

Notes receivable are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Prepayments

Prepayments are carried at cost less any accumulated impairment losses.

Intangible assets

Intangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Cash and cash equivalents

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Land purchase liability

Land purchase liability is recognized initially at the fair value. Land purchase liability is subsequently stated at amortized cost using the effective interest method.

When a liability is incurred for the purchase of land. Liability is to be recorded at the fair market value of the land received or at an amount that reasonably approximates the market value of the liability, whichever is more clearly determinable. If the fair value of the land or liability is not determinable, the present value of the liability is determined using a market interest rate to discount all future payments. The difference between present and face value of the liability is recorded as a discount and amortized to interest expense using the effective interest method.

Notes payable

Notes payable are recognized initially at fair value. Notes payable is subsequently stated at amortised cost using the effective interest method.

Borrowings

Borrowings are recognized initially at the fair value, net of transaction cost incurred. Borrowings are subsequently stated at amortized cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of comprehensive income over the period of the borrowings using the effective interest method.

Provisions

Provisions for legal claims are recognized when the group has a present legal or constructive obligations as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken to the statement of comprehensive income.

Dividends distribution

Dividend distribution to the Group's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are approved.

2.4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

Judgments

In the process of applying the group's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant impact on the amounts recognized in the financial statements.

Revenue recognition

The group has entered into a number of contracts with buyers for the sale of land and villas. Determining whether an agreement for the construction of real estate falls within the scope of IAS 11 or IAS 18 depends on the terms of the agreement and all the surrounding facts and circumstances, and judgment is made with respect to each agreement.

If the contract under consideration meets the definition of a 'construction contract' in IAS 11, then the accounting for the contract is determined in accordance with that Standard. An agreement for the construction of real estate meets the definition of a construction contract when the buyer is able to specify:

• the major structural elements of the design of the real estate before construction begins;

and/or

• major structural changes once construction is in progress (whether it exercises that ability

or not).

In contrast, if construction could take place independently of the agreement and buyers have only limited ability to influence the design of the real estate (e.g. to select a design from a range of options specified by the entity, or to specify only minor variations to the basic design), the agreement will be for the sale of goods and within the scope of IAS 18.

Estimation uncertainty

Cost of revenues

The cost of revenues in respect of land sales is based on the total estimated cost of the land site over the total usable land area in a particular development.

Costs to complete the projects

The group uses the percentage-of-completion method in accounting for its fixed-price contracts to construct villas and townhouses. Use of the percentage-of-completion method requires the group to estimate the construction executed to date as a proportion of the total construction to be executed. Were the proportion of construction executed to total construction to be executed to differ by 10% from management's estimates, the amount of revenue recognised in the period would be increased by EGP 57,304,084 if the proportion performed were increased, or would be decreased by EGP 57,304,084 if the proportion performed were decreased.

Income tax

Certain subsidiaries of the group are subject to income tax. Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The group recognizes liabilities for anticipated tax audit issues based on estimates whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Estimate of fair values of properties and development properties acquired in a business combination

When acquiring subsidiaries whose primary asset is property it is assumed that the difference between the price paid and net tangible assets acquired relates to the value of the property.

3 REVENUES AND COST OF REVENUES

5 INTEREST INCOME

6 FINANCE COSTS

7 OTHER INCOME

8 INCOME TAX

Income tax expense consists of:

* Adjustments in determining taxable profit represent the net result from the non-deductible expenses and the exempt revenue in accordance with Egyptian Tax law as follows:

8 INCOME TAX - Continued

Movements in provision during the year

The movement in the current and deferred tax provisions for the year were as follows:

Tax Status of the Group

The tax situation of the group is as follows:

(a) The following companies enjoy income tax holidays on revenues derived from their operating activities:

- Palm Hills Development Company S.A.E, from 14 March 2005 to 31 December 2015.

- New Cairo for Real Estate Developments S.A.E, from 13 June 2007 to 31 December 2017.

- Gawda for trade services S.A.E, from 12 February 2008 to 11 February 2018.

- Saudi Urban Development Company S.A.E, from 1 April 2008 to 31 March 2018.

- Six of October for Hotels and Touristic Services Company S.A.E, from 15 February 2005 to 31 December 2015.

(b) The following companies submitted their income tax returns regularly and have not yet received any notice from the Tax Authority regarding their income tax inspection:

- Palm Hills Development Company S.A.E

- New Cairo for Real Estate Developments S.A.E

- Royal Gardens for Real Estate Investment Company S.A.E

- Palm Hills Middle East Company for Real Estate Investment S.A.E

- Middle East Company for Real Estate and Touristic Investment S.A.E

- Middle East for Development and Investment Touristic S.A.E

- Saudi Urban Development Company S.A.E

- Gamsha for Tourist Development S.A.E

- Nile Palm Al-Naeem for Real Estate Development S.A.E

- Rakeen Egypt for Real Estate Investment S.A.E

- Al Naeem for the hotels and touristic Villages S.A.E

- Gawda for trade services S.A.E

- East New Cairo for Real Estate Development S.A.E

- City for Real Estate Development S.A.E

- Palm October for Hotels S.A.E

(c)The following companies were inspected by the tax authority until 2005and the taxes due were settled and paid. The companies submitted their income tax returns regularly and have not yet received any notice from the Tax Authority regarding their income tax inspection for the years from 2005 till 2009:

- Macor for Securities Investment Company S.A.E

- Hotels & Touristic Floating Restaurants Company S.A.E

- El Nema for Touristic & Real Estate Company S.A.E

- Ismailia for Tourism Company S.A.E

9 INVESTMENT PROPERTY

As of 31 December 2010 all investments property were still under construction. No fair value disclosure is provided for property under construction as it cannot be reliably measured.

There were no interest capitalized on property and equipments in 2009 and 2010.

In 2009 Investment property under construction with a cost of EGP 452,029,267 was transferred from property and equipment to investment property following the adoption of the amendments to IAS 40 Investment Property resulting from Improvements to IFRSs issued in May 2008 (Note 10).

In 2010, Investment property under construction with a cost of EGP 157,842,866 was transferred from investment property to owner-occupied property based on the change in use of the Palm Hills Club project (Note 10).

10 PROPERTY AND EQUIPMENT

2010

10 PROPERTY AND EQUIPMENT - Continued

2009

- Property and equipment with a net carrying amount of EGP 219,231,323 (2009: EGP 5,278,750) is collateralized against term loans (note 22).

- There were no impairment charges in 2009 and 2010.

- There were no interest capitalized on property and equipments in 2009 and 2010.

- In 2009 Investment property under construction with a cost of EGP 452,029,267 in 2009 was transferred from property and equipment to investment property following the adoption of the amendments to IAS 40 Investment Property resulting from Improvements to IFRSs issued in May 2008 (note 9).

- In 2010, Investment property under construction with a cost of EGP 157,842,866 was transferred from investment property to owner-occupied property based on the change in use of the Palm Hills Club project (Note 9).

- The depreciation charge has been allocated in the consolidated statement of income as follows:

11 ADVANCE PAYMENTS FOR INVESTMENT ACQUISITION

The above mentioned advance payments for investments acquisition represents amounts paid by the company to acquire 65% of Villamora for Real Estate Development Company S.A.E, 51% of Baltan Group - Saudi Joint Stock Company and 49% of United Group For Real Estate Development S.A.E which were still under incorporation with the legal formalities not being complete as at 31 December 2010. Legal formalities were not completed as at 31 December 2010 for the increase in the Group's share in net assets from 59% to 60% of Gamsha for Touristic Development Company S.A.E.

12 INVESTMENT IN AN ASSOCIATE

Palm Hills Developments Company ('the company') has the following investment in associate:

 - The group's share of aggregated assets and liabilities is as follows:

- The associated company, which is unlisted, did not start its operation as of 31 December 2010.

13 INTANGIBLE ASSETS

The company holds the right of using the trademark of Coldwell Banker. The sub-license agreement has been made on 1 July 2007. The agreement is valid for 10 years starting 1 June 2008 to 1 May 2018.The Company started utilized the right starting 1 January 2008. The agreement for ten years with an amount of EGP 53,000,000 represents EGP 6,000,000 annual payment for the first three years and then EGP 5,000,000 annual payment till the end of the agreement. The annual amortization equal EGP 5,300,000.

- The amortization charge has been allocated in the consolidated statement of income as follows:

14 BUSINESS COMBINATIONS

2010

On 1 March 2010, Palm Hills Developments Company S.A.E. ('the company') acquired 60% of Macor for Securities Investment Company S.A.E and its subsidiaries mentioned in (Note 1). The subsidiary contributed a profit of EGP 38,161,288 to the Group for the period from date of acquisition to 31 December 2010. If the acquisition had occurred on 1 January 2010 with all other variables held constant, Group revenue for 2010 would have been increase by EGP 10,366,482, and profit for 2010 would have been increased by EGP 6,289,078.

At the date of acquisition, management determined that the acquired entity should be accounted for as a business in accordance with IFRS 3, "Business Combinations".

The valuation of property and equipments at the acquisition date was performed by an independent professional appraiser with experience of the relevant market. The valuation of cash and cash equivalents was considered to equal the carrying value representing the entities bank deposits. Carrying values of borrowings and trade and other payable was considered to approximate their fair values.

The group recognised the non-controlling interest in Macor acquisition at fair value by applying a discounted cash flows approach. See note 2.2 changes in accounting policy and disclosures related to IFRS 3(revised)

On 1 January 2010 Palm Hills Developments Company S.A.E. ('the company') acquired 99.5% of Palm October for Hotels S.A.E.

At the date of acquisition, management determined that the acquired entity should be accounted for as a business in accordance with IFRS 3, "Business Combinations".

The group recognised the non-controlling interest in Palm October for Hotels S.A.E. at the non-controlling interest's proportionate share of the acquire's net assets.

14 BUSINESS COMBINATIONS - Continued

2009

On 1 January 2009 Palm Hills Developments Company S.A.E. ('the company') acquired 51% of City For Real Estate Development S.A.E. The subsidiary contributed revenue of EGP 850,435 and a loss of EGP 90,898 to the Group for the period from date of acquisition to 31 December 2009.

On 20 March 2009, Palm Hills Developments Company S.A.E. ('the company') acquired 59% of East New Cairo For Real Estate Development S.A.E. The subsidiary contributed a profit of EGP 1,177,522 to the Group for the period from date of acquisition to 31 December 2009. If the acquisition had occurred on 1 January 2009 with all other variables held constant, Group revenue for 2009 would have been increase by EGP 1,963,562, and profit for 2009 would have been increased by EGP 1,348,322.

At the date of acquisition City For Real Estate Development S.A.E and East New Cairo For Real Estate Development S.A.E were actively engaged in the construction and development process and marketing of the project. Management determined that the acquired entity should be accounted for as a business in accordance with IFRS 3, "Business Combinations".

The valuation of development properties at the acquisition date was performed by an independent professional appraiser with experience of the relevant market. The valuation of cash and cash equivalents was considered to equal the carrying value representing the entities bank deposits. Carrying values of borrowings and trade and other payable was considered to approximate their fair values.

The group recognised the non-controlling interest in all 2009 acquisitions at the non-controlling interest's proportionate share of the acquire's net assets.

[.]

14 BUSINESS COMBINATIONS - Continued

The assets and liabilities as of the date of acquisition arising from the acquisition are as follows:

14 BUSINESS COMBINATIONS - Continued

15 NOTES RECEIVABLE

- Although the notes are not rated and generally from individuals, they are secured on the underlying properties and accordingly are thought to be recoverable in full. 

16 ACCOUNTS RECEIVABLE AND PREPAYMENTS

- The group's accounts receivable did not include past dues or receivables impaired. The management consider receivables to be fully recoverable.

- The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The group does not hold any collateral as security.

17 CASH AND CASH EQUIVALENTS

18 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS - HELD FOR TRADING

Represents investments in mutual funds in Egyptian pounds. The fair value is based on their current redemption prices in an active market (level two in fair value hierarchy) (note 34).

Financial assets at fair value through profit or loss are presented within 'operating activities' as part of changes in working capital in the cash flow statement. Changes in fair values of financial assets at fair value through profit or loss are recorded in 'other income' (note 7) in the consolidated statement of comprehensive income.

19 DEVELOPMENT PROPERTIES

- At 31 December 2010 development properties with a carrying amount of EGP 5,354,425,37 (2009 EGP 5,473,529,413) are subject to a register debenture to secure the land purchase liability (note 23). According to the land purchase agreement the ownership of the land will not be transferred to the company until the full settlement of the purchase liability.

- Borrowing cost capitalised on the development properties is EGP 84,923,019 (2009: EGP 51,996,501). The capitalization rate used to determine the amount of borrowing costs eligible for capitalisation is 10%.

20 SHARE CAPITAL 

* On 31 March 2009, the Share Capital was increased from EGP 931,840,000 to EGP 1,397,760,000 based on the Company's General Assembly Meeting approval dated 31 March 2009. The Company distributed 232,960,000 share dividends (one share for each two shares).The new shares were listed in Cairo Stock exchange on 18 June 2009.

** On 28 January 2010, the Share Capital was increased from EGP 1,397,760,000 to EGP 2,096,640,000 based on the Company's Extraordinary General Assembly Meeting approval dated 28 January 2010. The Company issued 349,440,000 shares. The new shares were listed in Cairo Stock exchange on 13 May 2010.

21 STATUTORY RESERVE

As required by the Egyptian company law and Group's Articles of Association 5% of the net profit for the year has to be transferred to statutory reserve. The Group may resolve to discontinue such annual transfers when the reserve totals 50% of the issued capital.

22  TERM LOANS

Analysed as follows:

22  TERM LOANS - Continued

 Loan 1:

The term loan is secured over three floors of Diar Plaza building with net carrying amount as at 31 December 2009 of EGP 5,278,750 (note 10). It carries interest at a fixed rate of 14.5% and is repayable on 28 quarterly instalments of EGP 276,000. The loan has been settled in 2010.

Loan 2:

The term loan is a syndicated loan secured over notes receivables and bears an interest of a floating rate of the average corporate deposit rate for 6 months announced from central bank of Egypt plus 2.5% annually. The loan is repayable on 2 instalments of EGP 67,859,328.35 and EGP 71,972,014.95.

Loan 3:

The term loan is secured by the assignment of projects' cash flow and bears an interest rate of 2.5% above deposit corridor rate and is repayable on 14 quarterly instalments of EGP 12,860,000.

.

Loan 4:

This is a short term loan denominated in US dollars to finance working capital and to fund property acquisition pending arrangement of medium term funding. The loan carries interest rate three months LIBOR plus 0.7%. The loan has been settled in 2010.

Loan 5:

This is a revolving medium term loan amounted to EGP 500 million to be settled with a minimum of 100 million EGP annually in case of full utilisation of the facility with an interest rate 1% plus Libor at the three month rate.

Loan 6:

The term loan is secured over notes receivables of EGP 75 million. The loan term is for four years, repayable on four instalments of EGP 18,750,000 for three years and EGP 14,788,825 in the fourth year. The loan carries interest of 1.5% above lending corridor rate.

Loan 7:

The term loan is a syndicated loan secured by the assignment of projects' cash flow and bears an interest rate of 2.5% above deposit corridor rate and is repayable on 6 semi-annually instalments of EGP 55 million.

Loan 8:

The term loan is secured by a first degree commercial mortgage over the property and equipment and a real estate mortgage over a land area of 20568.7 Square Meter of Six of October for Hotels and Touristic Services Company S.A.E - a subsidiary of Macor for Securities Investment Company S.A.E ('subsidiary'). The carrying value of the property and equipment as at 31 December 2010 amounted to EGP 45,821,954 (note 10). The loan dominated in EGP has been settled in 2010 while the loan dominated in USD will end on 30 September 2012. The USD loan bears an interest rate of 2.5% above the three months Libor rate and is repayable on quarterly instalments of EGP 120,714.

Loan 9:

The term loan is secured by a first degree mortgage over the property and equipment of El Nema for Touristic and Real Estate Company S.A.E - a subsidiary of Macor for Securities Investment Company S.A.E ('subsidiary'). The carrying value of the property and equipment as at 31 December 2010 amounted to EGP 173,409,369 (note 10). The loan dominated in EGP and USD with an amount of EGP 88,521,587 and USD 1,512,861 respectively and bears an interest rate of 1% above deposit med-corridor rate for the loan dominated in EGP and 3% above the six months Libor rate for the loan dominated in USD. The loan is repayable on 16 semi-annually instalments of EGP 6,082,900.

23 LAND PURCHASE LIABILITIES