Majid Al Futtaim Properties LLC Consolidated Financial … · Consolidated Financial Statements for...

Majid Al Futtaim Properties LLC

Consolidated Financial Statements

For the year ended 31 December 2011

Consolidated Financial Statements for the year ended 31 December 2011

Majid Al Futtaim Properties LLC

Consolidated Financial Statements

Contents Pages

Directors‟ report 1-2

Independent auditors‟ report 3-4

Consolidated income statement 5

Consolidated statement of comprehensive income 6

Consolidated statement of financial position 7

Consolidated statement of cash flows 8

Consolidated statement of changes in equity 9 - 10

Notes to the consolidated financial statements 11 - 61


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Note 2011 2010

AED'000 AED'000

Cash flows from operating activities

Profit / (loss) for the year after tax 116,318 (566,096)

Adjustments:

Interest income 7.1 (4,589) (8,691)

Interest and similar charges 7.2 449,229 366,507

Provision for receivables from related parties 8 - 35,272

Impairment loss 9 45,403 860,001

Net loss on revaluation of land and buildings 11(i) 483,073 273,297

Depreciation 10 600,710 491,725

Provision for deferred tax 22 (76,401) (4,130)

Amortisation of intangible asset 13 20,070 19,867

Gain on sale of property, plant and equipment and

investment properties 8 (664) (26,938)

Gain on disposal of assets held for sale 8 (2,787) -

Fixed assets / project costs written off 8 3,762 17,365

Share of gain / (loss) in joint ventures and associate 12 93,591 (28,569)

Net movement in provision for staff terminal benefits 19.1 4,110 7,079

Cash generated from operations 1,615,507 2,002,785

Changes to working capital:

Inventories (1,327) 471

Receivables and prepayments (105,818) 233,379

Payables and accruals 237,015 (98,144)

Due (from) / to related parties (78,989) 5,153

50,881 140,859

Cash flow from operating activities 1,782,706 1,577,548

Investing activities

Acquisition of property, plant and equipment 10 (430,915) (891,074)

Acquisition of investment property (506,306) (744,013)

Proceeds from disposal of property, plant and equipment 4,248 55,313

Proceeds from disposal of investment property 6,000 -

Poceeds from disposal of assets held for sale 5,333 -

Investment in joint ventures and associate 12.1 (145,000) (41,672)

Payment of deferred liability for acquisition of intangible

asset 13 (20,995) (19,440)

Interest received 4,424 9,440

Cash flows used in investing activities (1,083,211) (1,631,446)

Financing activities

Long term loans received 20.1 & 20.2 1,685,969 3,024,502

Long term loans repaid 20.1 & 20.2 (1,787,604) (2,454,251)

Non-controlling interest equity injection - 7,552

Coupon paid 23.2.2 (110,000) -

Interest paid (461,182) (407,961)

Cashflows from financing activities (672,817) 169,842

Net increase in cash and cash equivalents 26,678 115,944

Cash and cash equivalents at beginning of the year 742,647 626,703

Cash and cash equivalents at end of the year 769,325 742,647

Cash and cash equivalents comprise:

Cash in hand and at bank 17 769,325 742,647

769,325 742,647

The notes on pages 11 to 61 form part of these consolidated financial statements.

The independent auditors' report is set out on pages 3 and 4.

Consolidated statement of cash flows



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Consolidated statement of changes in equity


Share- Currency Non-

Share holder Revaluation Retained Statutory Hedging translation controlling Total

capital contribution reserve earnings reserve reserve reserve Total interest equity

AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000

At 1 January 2010 1,820,000 4,180,000 10,426,029 2,863,116 515,822 (220,435) (8,097) 19,576,435 11,826 19,588,261

Total comprehensive income for the year

Loss for the year - - - (565,771) - - - (565,771) (325) (566,096)

Other comprehensive income

Net valuation gain on land and building - - 677,207 - - - - 677,207 - 677,207

Share of gain in joint ventures and associate - - 40,390 - - - - 40,390 - 40,390

Net change in fair value of cash flow hedges transferred to

profit or loss (refer note 7.3) - - - - - 142,621 - 142,621 - 142,621

Effective portion of changes in fair value of cash flow

hedges (refer note 7.3) - - - - - (142,263) - (142,263) - (142,263)

Foreign currency translation differences from foreign

operations - - - - - - (67,842) (67,842) 94 (67,748)

Total comprehensive income for the year - - 717,597 (565,771) - 358 (67,842) 84,342 (231) 84,111

Transactions with owners of the Company, recorded

directly in equity

Contributions by and distributions to owners of the

Company and other movements in equity

Transfer to statutory reserve - - - (1,573) 1,573 - - - - -

Issue of shares (refer note-23.4) 1,680,000 (1,680,000) - - - - - - - -

Shareholders' contribution (refer note-23.2) - 250,000 - - - - - 250,000 - 250,000

Coupon declared during the year (refer note-23.2.2) - - - (210,000) - - - (210,000) - (210,000)

Increase in non-controlling interest by way of land

contribution - - - - - - - - 52,789 52,789

Equity paid in by non-controlling interest - - - - - - - - 7,552 7,552

Total contributions by and distributions to the owners of

the Company 1,680,000 (1,430,000) - (211,573) 1,573 - - 40,000 60,341 100,341

At 31 December 2010 3,500,000 2,750,000 11,143,626 2,085,772 517,395 (220,077) (75,939) 19,700,777 71,936 19,772,713

The notes on pages 11 to 61 form part of these consolidated interim financial statements.

Attributable to the equity holders of the company

----------------------Other Reserves------------------------


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Consolidated statement of changes in equity


Share- Currency Non-

Share holder Revaluation Retained Statutory Hedging translation controlling Total

capital contribution reserve earnings reserve reserve reserve Total interest equity

AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000

At 1 January 2011 3,500,000 2,750,000 11,143,626 2,085,772 517,395 (220,077) (75,939) 19,700,777 71,936 19,772,713

Total comprehensive income for the year

Profit for the year - - - 118,387 - - - 118,387 (2,069) 116,318

Other comprehensive income

Net valuation gain on land and building - - 1,290,629 - - - - 1,290,629 - 1,290,629

Share of loss in joint ventures and associate - - (93,361) - - - - (93,361) - (93,361)

Net change in fair value of cash flow hedges transferred to profit or

loss (refer note 7.3) - - - - - 106,032 - 106,032 - 106,032

Effective portion of changes in fair value of cash flow hedges (refer

note 7.3) - - - - - (93,912) - (93,912) - (93,912)

Foreign currency translation differences from foreign operations - - - - - - (87,247) (87,247) (133) (87,380)

Total comprehensive income for the year - - 1,197,268 118,387 - 12,120 (87,247) 1,240,528 (2,202) 1,238,326

Transactions with owners of the Company, recorded directly in

equity

Contributions by and distributions to owners of the Company and

other movements in equity

Transfer to statutory reserve - - - (40,851) 40,851 - - - - -

Coupon declared (refer note 23.2.2) - - - (220,000) - - - (220,000) - (220,000)

Total contributions by and distributions to the owners of the

Company - - - (260,851) 40,851 - - (220,000) - (220,000)

At 31 December 2011 3,500,000 2,750,000 12,340,894 1,943,308 558,246 (207,957) (163,186) 20,721,305 69,734 20,791,039

The notes on pages 11 to 61 form part of these consolidated financial statements.

Attributable to the equity holders of the company

---------------------Other reserves-------------------------


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Notes to the consolidated financial statements

1. Legal status and principal activities

Majid Al Futtaim Properties LLC (“the Company”) was registered as a limited liability company in the

Emirate of Dubai, United Arab Emirates (“UAE”) on 5 February 1994.

The principal activities of the Company are investing in and operating and managing commercial projects

including shopping malls, hotels, leisure and entertainment, acting as a holding company to various

subsidiaries and investing in joint ventures and associates. The Company and its subsidiaries are collectively

referred to as “MAFP Group”. The registered address of the Company is P.O. Box 60811, Dubai, UAE. The

Company is a wholly owned subsidiary of Majid Al Futtaim Holding LLC (“MAFH”) - formerly Majid Al

Futtaim Group LLC, which in turn is a wholly owned subsidiary of Majid Al Futtaim Capital LLC (“MAFC”),

the ultimate holding entity. The registered address of MAFC is P.O. Box 91100, Dubai, UAE.

2. Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”) and the requirements of the U.A.E. Federal Law No.8 of 1984 (as amended).

(b) Basis of measurement

These consolidated financial statements have been prepared under the historical cost convention except for

investment properties, certain classes of property, plant and equipment and derivative financial instruments

which are measured at fair value. The methods used to measure fair values are discussed further in notes 24.5

and 29.

(c) Functional and presentation currency

These consolidated financial statements are presented in United Arab Emirates Dirhams (“AED”), which is the

Company‟s functional currency, and are rounded to the nearest thousands, except wherever stated otherwise.

(d) Use of estimates and judgements

The preparation of consolidated financial statements, in conformity with IFRS, requires management to make

judgements, estimates and assumptions that affect the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates

are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgments in applying

accounting policies that have the most significant effect on amounts recognised in the consolidated financial

statements are described in note 29.


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3. Significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set

out below. These policies have been consistently applied to all periods presented.

(a) Basis of consolidation

These consolidated financial statements present the results of operations and financial position of MAFP

Group for the year ended 31 December 2011.

(i) Subsidiaries

Subsidiaries are entities controlled by MAFP Group. Control exists when MAFP Group has the power,

directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits

from its activities. In assessing control, potential voting rights that presently are exercisable are taken into

account. The financial statements of subsidiaries are included in the consolidated financial statements on a

line by line basis from the date that control commences until the date that control ceases. The accounting

policies of the subsidiaries have been changed where necessary to align them with the policies adopted by

MAFP Group. Losses applicable to non-controlling interests in a subsidiary are allocated to non-

controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

The accounting year-end for all of MAFP Group‟s subsidiaries is 31 December.

(ii) Joint ventures

A joint venture is a contractual arrangement whereby MAFP Group and other parties undertake an

economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control

over an economic activity and exists when the strategic financial and operating decisions relating to the

activity require the unanimous consent of the parties sharing control.

MAFP Group has contractual arrangements with other parties representing joint ventures, which take the

form of a jointly controlled entity. A jointly controlled entity involves the establishment of a separate

entity in which each venturer has an interest, under contractual arrangement that establishes joint control

over the entity.

MAFP Group reports its interest in jointly controlled entities using the equity method whereby the interest

in the joint venture is initially recorded at cost and adjusted thereafter for the post acquisition change in

MAFP Group‟s share of net assets of the jointly controlled entity.

The consolidated income statement of MAFP Group includes its share of the profit and loss of the jointly

controlled entities.

The financial statements of MAFP Group‟s jointly controlled entities are prepared using consistent

accounting policies. Where necessary, adjustments are made to bring accounting policies in line with those

of MAFP Group.

(iii) Associates

Associates are those entities in which MAFP Group has significant influence, but not control, over the

financial and operating policies. The consolidated financial statements include MAFP Group‟s share of the

total recognized gains and losses of associates using the equity method of accounting, from the date that

significant influence commences until the date that significant influence ceases. When MAFP Group‟s

share of losses exceeds its interest in an associate, MAFP Group‟s carrying amount is reduced to nil and

recognition of further losses is discontinued except to the extent that MAFP Group has incurred legal or

constructive obligations or made payments on behalf of an associate.


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3. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iv) Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised gains and losses arising from intra-group

transactions are eliminated in full in preparing the consolidated financial statements. Unrealised gains

arising from transactions with jointly controlled entities and associates are eliminated to the extent of

MAFP Group‟s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains,

but only to the extent that there is no evidence of impairment.

(v) Business combinations involving entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the

shareholder that controls MAFP Group are accounted for as if the acquisition had occurred at the

beginning of the earliest comparative year presented or, if later, at the date that common control was

established.

MAFP Group has applied the book value measurement method to all common control transactions. The

assets and liabilities acquired are recognized at the carrying amounts recognized previously in the ultimate

holding entity‟s consolidated financial statements. The components of other comprehensive income of the

acquired entities are added to the same components within MAFP Group‟s other comprehensive income.

Any gain/loss arising is recognised directly in other comprehensive income.

(b) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of MAFP Group

entities at exchange rates at the date of the transactions. Monetary assets and liabilities denominated in foreign

currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date.

Foreign exchange differences arising on translation are recognised in the profit or loss.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are

translated into functional currency at the exchange rates ruling at the date when the fair value was determined.

Non-monetary assets and liabilities denominated in foreign currencies, which are measured in terms of

historical cost, are translated into functional currency at the exchange rates ruling at the date of the transaction.

Foreign exchange differences arising on the translation of non-monetary assets and liabilities carried at fair

value are recognised in profit or loss. Foreign exchange differences arising on the translation of non-monetary

items in respect of which gains and losses are recognised in other comprehensive income are recognised

directly in other comprehensive income.

Foreign operations

The assets and liabilities of foreign operations are translated into the functional currency at the foreign

exchange rates at the reporting date. Share capital is translated at historical rate. The income and expenses of

foreign operations are translated into functional currency at average rates of exchange. Foreign exchange

differences arising on retranslation are recognised directly in other comprehensive income, and are presented

in currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the

relevant proportionate share of the translation difference is allocated to the non-controlling interests.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the

cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as

part of the gain or loss on disposal. When MAFP Group disposes of only part of its interest in a subsidiary that


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(b) Foreign currency (continued)

Foreign operations (continued)

includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is

reattributed to non-controlling interests. When MAFP Group disposes of only part of its investment in an

associate or joint venture that includes a foreign operation while retaining significant influence or join control,

the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned

nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are

considered to form part of a net investment in a foreign operation and are recognised in other comprehensive

income, and presented in the currency translation reserve in equity.

(c) Lease payments

Lease payments incurred as lessee under operating leases are recognised as an expense in the profit or loss on a

straight line basis over the lease term. Lease incentives received are recognised in the profit or loss as an

integral part of the total lease expense, over the term of the lease.

(d) Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred. However, borrowing

costs that are directly attributable to the acquisition, construction or production of a qualifying asset are

capitalised as part of the cost of that asset. Capitalisation of borrowing costs commences when the activities to

prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of

borrowing costs continues until the assets are substantially ready for the intended use. If the resulting carrying

amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is

arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to

that part of the development cost financed out of general funds.

(e) Finance income and finance costs

Finance income comprises interest income on funds deposited with banks and related party receivables.

Interest income is recognised as it accrues in profit or loss.

Finance costs comprise interest expense, arrangement fees, processing fees and similar charges on borrowings

and losses on hedging instruments that are recognised in profit or loss.

Finance income and costs also comprise the changes in fair value of cash flow hedges transferred from equity

including any ineffective portion of such changes.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying

asset are recognised in profit or loss using the effective interest rate method.

(f) Capital work in progress

Work in progress in respect of capital expenditure including land is classified as capital work in progress.

Interest and other overheads directly attributable to the projects are included in capital work in progress until

completion thereof.

Capital work in progress for properties that are being constructed with an intention of building an investment

property is carried at fair value. For other properties that are developed with an intention of constructing an owner occupied property, both the

capital expenditure and land are carried at cost, less impairment, if any, until the property is fully developed.


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(f) Capital work in progress (continued)

Development expenses are charged to profit or loss as incurred except for development expenditure which

complies with the following conditions:

- the concept for the new project has been defined;

- preliminary market, technical and financial feasibility studies demonstrate a viable project; and

- the management have agreed to proceed with developing the project, and believe that it is more

probable than not that the project will go ahead.

These development costs are shown as assets under capital work in progress.

Development expenses initially charged to profit or loss are not recognised as an asset in a subsequent period

even if it is found that the project to which they relate satisfies the criteria for capitalisation.

Development costs carried forward are reviewed in subsequent periods to ensure that circumstances have not

changed such that the criteria for capitalisation are no longer met. In these circumstances, the costs are written-

off or provided for to the extent they are believed to be irrecoverable. Such provisions are reversed if the

circumstances change again and there is persuasive evidence that the new circumstances and events will persist

for the foreseeable future.

(g) Intangible assets

Goodwill

All business combinations are accounted for by applying the purchase method except for acquisition of entities

under common control. The excess of cost of acquisition over MAFP Group‟s interest in the fair value of the

identifiable assets and liabilities at the date of acquisition is recorded as goodwill. Negative goodwill arising

on acquisition is immediately recognised in the profit or loss.

Goodwill is tested annually for impairment and is carried at cost less accumulated impairment losses, if any.

On disposal of a subsidiary / joint venture / associate, the attributable amount of goodwill is included in the

determination of the profit or loss on disposal.

Other intangible assets

Intangible assets that are acquired by MAFP Group and have finite useful lives are measured at cost less

accumulated amortisation and accumulated impairment losses, if any. Where the payment term is deferred, the

cost of the intangible asset is the cash price equivalent, which is the discounted amount of cash over the

payment term.

Amortisation

Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual

value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible

assets, other than goodwill, from the date that they are available for use, since this most closely reflects the

expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful

life for the current and comparative years is as follows

Life

Metro naming rights 10 years


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(h) Property, plant and equipment

Recognition and measurement

Following initial recognition at cost, developed properties (land and building), mainly comprising hotels,

shopping malls and offices, are stated at their revalued amounts, being the fair value at the date of revaluation,

less any accumulated depreciation and any impairment losses. Any accumulated depreciation at the date of

revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the

revalued amount.

Land on which development work has started with the intention of constructing property, plant and equipment

is fair valued at the date when significant development commences. During the construction period, land is

held at its carrying value and development expenditure is carried at cost. Upon completion of construction, the

entire property (that is land and building) is carried at revalued amount.

All other items of property, plant and equipment, mainly comprising administrative assets, are stated at cost

less accumulated depreciation and any impairment losses. Cost includes expenditures that are directly

attributable to the acquisition of the assets. The cost of self-constructed assets includes the cost of materials

and direct labour, any other costs directly attributable to bringing the asset to a working condition for its

intended use, the costs of dismantling and removing the items and restoring the site on which they are located

and capitalized borrowing costs. When parts of an item of property, plant and equipment have different useful

lives, they are accounted for as separate items (components) of property, plant and equipment.

Subsequent costs

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 MAFP Group and

the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or

loss during the period in which they are incurred.

Depreciation

Depreciation is charged to profit or loss so as to write off the cost / revalued amounts of property, plant and

equipment by equal instalments over their estimated useful lives. Land is not depreciated.

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

appropriate.

During the current year MAFP Group carried out an exercise to review and align the useful of certain assets

with their operational life. The estimated useful lives of depreciable assets were revised as a result of this

exercise.

Useful lives of assets for the current and comparative years are as follows:

Category of assets Revised useful life in years Comparative useful life in years

Buildings 4 - 50 years 4 - 35 years

Motor vehicles 4 years 4 years

Furniture, fixtures and equipment 3 - 4 years 3 - 15 years

Leisure rides and games 3 - 10 years 3 - 10 years

The financial impact due to the change in estimate is explained in note 10(ii).

Valuation surplus relating to buildings is allocated to the building structure and is depreciated over the

remaining useful lives of the respective building structures which range from 35 to 50 years.


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(h) Property, plant and equipment (continued)

Revaluation reserve

Any revaluation increase arising on the revaluation of developed properties is credited to the revaluation

reserve in equity, except to the extent that it reverses a revaluation decrease for the same property previously

recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease

previously charged.

A decrease in carrying amount arising on the revaluation of properties is charged to profit and loss except to

the extent that it reverses a previously recognised revaluation gain on the property in which case it is debited to

revaluation reserve in equity.

De-recognition

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits

are expected from its use. Any gain or loss arising on derecognition of the asset is included in profit and loss in

the period the asset is derecognised.

On subsequent disposal or retirement of a revalued property, the attributable revaluation surplus remaining in

the revaluation reserve is transferred directly to retained earnings.

(i) Investment property

Recognition and measurement

Investment properties are properties held either to earn rental income, for capital appreciation or for both, but

not for sale in the ordinary course of business, use in the production or supply of goods or services or for

administrative purposes. Following initial recognition at cost, investment property, principally comprising land

with undetermined use, certain shopping malls and property being constructed for future use as investment

property, is stated at fair value at the reporting date.

Where the fair value of an investment property under development is not reliably determinable, such property

is carried at its book value and any development cost incurred to date; until the earlier of the date that

construction is completed or the date at which fair value becomes reliably measurable.

Gains or losses arising from changes in fair value are included in profit or loss in the period in which they

arise. An investment property is derecognised when either it has been disposed of or when it is permanently

withdrawn from use and no future economic benefits are expected from its use or disposal. Any gain or loss on

the retirement or disposal of an investment property is included in profit or loss in the period the property is

derecognised.

Reclassification

When the use of a property changes from owner-occupied to investment property, the property is re-measured

to fair value and reclassified as an investment property. Any gain arising on re-measurement is recognised

directly in equity. Any loss is recognised immediately in profit or loss except to the extent that it reverses a

previously recognised revaluation gain on the property in which case it is debited to equity.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its

fair value at the date of reclassification becomes its deemed cost. Change in fair value up to the date of

reclassification is recognised directly in profit or loss.


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(j) Assets classified as held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered

primarily through sale rather than through continuing use are classified as held for sale. Immediately before

classification as held for sale, the assets or components of a disposal group are measured in accordance with

MAFP Group‟s accounting policies. Thereafter the assets are measured at the lower of their carrying amount

and fair value less costs to sell.

Impairment losses on initial classification as held for sale and subsequent gains and losses on re-measurement

are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss

previously recognised in profit or loss.

(k) Impairment

Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it

is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more

events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount, and the present value of the estimated future cash flows discounted at the

original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining

financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment

losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the

impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in

profit or loss.

Non-financial assets

The carrying amount of MAFP Group‟s non-financial assets, other than property, plant and equipment and

investment properties that are fair valued and inventories, are reviewed at each reporting date to determine

whether there is any indication of impairment. If any such indication exists, the asset‟s recoverable amount is

estimated. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit

exceeds its recoverable amount.

For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable

amount is estimated at each reporting date in order to assess impairment.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value

less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset.

(l) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on

weighted average cost principle and includes expenditure incurred in acquiring the inventories and bringing

them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary

course of business less estimated selling expenses.


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(m) Staff terminal and retirement benefits

Provision for staff terminal benefits is calculated in accordance with the labour laws of the respective country

in which they are employed. MAFP Group‟s net obligation in respect of staff terminal benefits is calculated by

estimating the amount of future benefit that employees have earned in return for their services in the current

and prior periods, and is discounted to determine the present value of the obligation. The discount rate used is

the yield at the reporting date on premium bonds that have maturity dates approximating the terms of MAFP

Group‟s obligation.

Under the UAE Federal Law No.7 of 1999 for pension and social security law, employers are required to

contribute 12.5% of the „contribution calculation salary‟ of those employees who are UAE nationals. These

employees are also required to contribute 5% of the „contribution calculation salary‟ to the scheme. MAFP

Group‟s contribution is recognised as an expense in profit or loss as incurred.

(n) Revenue recognition

Revenue comprises amounts derived from the provision of services falling within MAFP Group‟s ordinary

activities and encompasses hospitality services, rental income and leisure and entertainment activities.

Revenue from hospitality services and leisure and entertainment activities is recognised on rendering the

services. Revenue from services is recognised on a uniform basis as the right to use the facilities is allowed to

the customers.

Rental income received as lessor from properties under operating leases is recognised in profit or loss on a

straight line basis over the lease term. Lease incentives granted to lessees are recognised as an integral part of

the total rental income, over the term of the lease. Contingent rents are recorded as income in the period in

which they are earned.

(o) Alcohol

The purchase of alcohol for hotels and residence is the responsibility of the relevant Hotel Management

Company, and the revenue derived from sale is deemed to be that of the Hotel Management Company. The

profit resulting from the sales of alcoholic beverages forms part of the Hotel Management Company‟s

incentive fee.

(p) Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, trade

and other payables, accruals, retention payables, long-term loans, income tax payable, bank borrowings and

related party balances.

Non-derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition

non-derivative financial instruments are measured at amortised cost less impairment losses.

A financial instrument is recognised if MAFP Group becomes a party to the contractual provisions of the

instrument. Financial assets are derecognised if MAFP Group‟s contractual rights to the cash flows from the

financial assets expire or if MAFP Group transfers the financial asset to another party without retaining control

or substantially all risks and rewards of the asset. Financial liabilities are derecognised if MAFP Group‟s

obligations specified in the contract expire or are discharged or cancelled.


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(p) Financial instruments (continued)

Non-derivative financial instruments

Cash and cash equivalents comprise cash in hand, cash at bank and bank overdrafts. For the purpose of the

consolidated statement of cash flows, bank overdrafts that are repayable on demand and form an integral part

of MAFP Group‟s cash management are included as a component of cash and cash equivalents.

Derivative financial instruments

Derivative financial instruments are contracts, the value of which is derived from one or more underlying

financial instruments and include interest rate swaps and collars.

MAFP Group uses derivative instruments for risk management purposes to hedge its exposure to interest rate

risks arising from operational, financing and investment activities.

On initial designation of the derivative as the hedging instrument, MAFP Group formally documents the

relationship between the hedging instrument and hedged item, including the risk management objectives and

strategy in undertaking the hedge transaction and hedged risk, together with the methods that will be used to

assess the effectiveness of the hedging relationship. MAFP Group makes an assessment, both at the inception

of the hedge relationship as well as on an on-going basis, of whether the hedging instruments are expected to

be highly effective in offsetting the changes in fair value or cash flows of the respective hedged items

attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 to 125

percent.

Derivative financial instruments are initially recognised at fair value on the date on which the derivative

contract is entered into; attributable transaction costs are recognised in profit or loss when incurred. Derivative

financial instruments with positive fair values are included in assets and derivative financial instruments with

negative fair values are included in liabilities.

Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for

as described below.

In respect of changes in the fair values of derivative financial instruments that are designated as a hedge of

variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a

highly effective forecast transaction that could affect profit or loss, the effective portion of changes in the fair

value of the derivative is recognised directly in other comprehensive income and presented within hedging

reserve in equity. The amount recognised in other comprehensive income is removed and included in profit or

loss in the same period that the hedged item affects profit or loss. Any ineffective portion of changes in the fair

value of the derivative is recognised immediately in profit or loss.

If the derivative expires or is sold, terminated, or exercised, or no longer meets the criteria for cash flow hedge

accounting, or the designation is revoked, then hedge accounting is discontinued and the amount recognised in

equity remains in equity until the forecast transaction occurs. If the forecast transaction is no longer expected

to occur, then hedge accounting is discontinued and the balance in equity is recognised immediately in profit

or loss.

Any gains or losses arising from changes in the fair value of derivative instruments that do not qualify for

hedge accounting are taken directly to profit or loss.

(q) Provisions

A provision is recognised in the statement of financial position when MAFP Group has a present obligation

(legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be

required to settle the obligation and a reliable estimate can be made of the amount of the obligation.


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(r) Income tax

Income tax expense comprises current and deferred tax calculated in accordance with the income tax laws

applicable to certain overseas subsidiaries. Income tax expense is recognised in profit or loss except to the

extent it relates to items recognised directly in other comprehensive income, in which case it is recognised in

other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the

reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the corresponding tax bases used for taxation purposes. Deferred

tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,

based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities

and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on

different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax

assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for future tax loses, tax credits and deductible temporary differences, to the

extent it is probable that future tax profits will be available against which the temporary difference can be

utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no

longer probable that the related tax benefit will be realised.

(s) New standards and interpretations not adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the annual

period beginning on 01 January 2011, and have therefore not been applied in preparing these consolidated

financial statements.

None of these are expected to have any significant effect on the consolidated financial statements of MAFP

Group, except for IFRS 9 – Financial Instruments, which becomes mandatory for MAFP Group‟s 2013

consolidated financial statements and could change the classification and measurement of financial assets.

MAFP Group does not plan to adopt IFRS 9 early and the extent of the impact has not been determined.


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4. Segment information and reporting

MAFP Group‟s goal is the creation of long-term sustainable shareholder value. It does this through the

entrepreneurial development and management of fully owned or partially owned shopping malls and

synergistic hotel and mixed-use projects where these add value to its shopping malls. It is organized to achieve

these goals through three business units; Shopping Mall Business Unit “SMBU”, Hotels Business Unit

“HOBU” and Mixed Use Business Unit “MUBU” and sustained by corporate support functions such as

business development, finance, human resources, project management, legal, valuation and risk management.

Geographic segments are divided into UAE, Oman, Bahrain combined as “GCC”, Egypt, Lebanon and Syria.

MAFP Group‟s three business units are responsible for managing owned assets as well as strategic equity

investments or joint ventures defined as those that MAFP Group has management agreements such as asset

management agreements or development management agreements. Equity investments or joint ventures

without such agreements are considered as non-strategic and governed by corporate support functions.

Management Reporting

In conjunction with IFRS financial and other financial indicators, MAFP Group relies on non-GAAP

profitability measures in conjunction with statistical and operating key performance indicators to achieve its

business unit and corporate goals. These non-GAAP financial measures are used to supplement IFRS reporting

so as to align business reporting with operating performance:

Management Revenue: Statutory reported revenues are adjusted to exclude the impacts of non-cash IAS17

lease accounting impacts, and include MAFP Group‟s proportionate share of strategic equity investments or

joint ventures revenues.

Business unit EBITDA: This key reporting measure includes (i) all revenues and expenses for assets managed

by the business unit, including the proportionate share of strategic equity investments or joint ventures, and

management fees but excluding all finance costs, taxes, depreciation, amortization and impairment charges and

(ii) all business unit overhead expenses.

MAFP EBITDA: This is considered to be the key measure of MAFP Group‟s operating performance and cash

generation. It is defined as the aggregate of business unit EBITDA less corporate support overhead expenses,

and excludes all finance costs, taxes, depreciation, amortization and impairment charges.

Business unit Operating Profit: This business unit financial measure is defined as business unit EBITDA after

impacts of gross asset fair value changes (irrespective of IAS16 or IAS40 classification) or realized profits or

losses on disposal of business unit assets, and includes non-cash charges such as depreciation, amortization,

impairment and asset write-offs, as well as tax impacts on valuation gains or losses related to assets managed

by the business unit including the proportionate share of strategic equity investments or joint ventures.

Management Net Profit: This corporate measure is defined as aggregate of business unit‟s operating profit

adjusted for accounting impacts of non-strategic equity investments, gain or loss on disposal of non-strategic

assets, gain or loss on foreign exchange, net finance costs, income or deferred tax charges and accounting

impacts of minority (non-controlling) interest.

Shopping Mall Business Unit (SMBU)

This business unit leads and manages all aspects of the retail development and management of shopping malls,

from regional shopping malls to smaller community centers. As of December 31st 2011 MAFP Group held an

ownership interest and management of ten income producing properties in the United Arab Emirates, Oman,

Bahrain and Egypt and was in the process of constructing two shopping malls; in Fujairah (UAE) and Beirut

(Lebanon) expected to start operations in 2012 and 2013 respectively. The business unit conducts its activities

through functions such as development, design, leasing, marketing and property management, and also owns a

number of leisure and entertainment operations located within its shopping malls.


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4. Segment information and reporting (continued)

Shopping Mall Business Unit (SMBU) (continued)

Revenues from this business unit principally comprise of base minimum rents, percentage rents based on

tenant sales volume, mall promotions and media, recovery of common area charges, leisure and entertainment

assets, and management fees.

Hotels Business Unit (HOBU)

This business unit is responsible for leading the development of hotel assets and asset management of these

assets with third-party hotel operators. As of December 31st 2011 MAFP Group held an ownership interest in

ten hotels located in the United Arab Emirates and Bahrain.

Revenues from this business unit principally comprise of room revenues, food and beverage revenues and

management fees.

Mixed Use Business Unit (MUBU)

This business unit is responsible for master development of larger master planned lifestyle developments that

comprise multiple asset classes, and is responsible for infrastructure, residential and commercial assets within

these developments. The business unit is also responsible for managing MAFP‟s Group portfolio of three

office buildings in Dubai, UAE.

Revenues from this business unit principally comprise of sale proceeds upon recognition or leasing revenues

from commercial, residential, serviced land or other mixed use assets as well as management fees.


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4.1 EBITDA, Management Net Profit and Net Assets – Business Units Wise

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Revenue 2,281.8 1,938.5 429.3 318.6 21.2 16.5 2,732.3 2,273.6 - - 2,732.3 2,273.6

Operating expenses (467.2) (361.1) (292.2) (236.5) (18.4) (5.1) (777.8) (602.7) - - (777.8) (602.7)

Asset EBITDA 1,814.6 1,577.4 137.1 82.1 2.8 11.4 1,954.5 1,670.9 - - 1,954.5 1,670.9

Support Cost (89.3) (71.8) (9.7) (9.0) (4.4) (3.8) (103.4) (84.6) (139.3) (164.9) (242.7) (249.5)

EBITDA 1,725.3 1,505.6 127.4 73.1 (1.6) 7.6 1,851.1 1,586.3 (139.3) (164.9) 1,711.8 1,421.4

Adjustments for:

Depreciation and amortisation (53.7) (39.0) (16.4) (10.4) (0.5) - (70.6) (49.4) - - (70.6) (49.4)

Impairment on fixed assets (14.4) (276.5) - - - - (14.4) (276.5) - - (14.4) (276.5)

Net valuation (loss) / gain on land and building 889.1 977.5 (371.9) (487.0) (67.6) (131.4) 449.6 359.1 - - 449.6 359.1

Deferred tax impact on net valuation (loss) / gain 45.4 4.5 - - - - 45.4 4.5 - - 45.4 4.5

Provisions write back / (write off) - - - - (8.1) - (8.1) - - - (8.1) -

Operating profit 2,591.7 2,172.1 (260.9) (424.3) (77.8) (123.8) 2,253.0 1,624.0 (139.3) (164.9) 2,113.7 1,459.1

Impairment on Joint venture balances and receivables - - - - - - - - (22.0) (618.6) (22.0) (618.6)

Share of gain in joint ventures and assocaites-net - - - - - - - - (101.7) 28.5 (101.7) 28.5

Depreciation and amortisation - - - - - - - - (13.8) (13.0) (13.8) (13.0)

Net valuation (loss) / gain on land and building - - - - - - - - (232.9) (56.9) (232.9) (56.9)

Income / deferred tax impact on net valuation (loss) / gain - - - - - - - - 39.4 (2.2) 39.4 (2.2)

Provisions write back / (write off) - - - - - - - - (1.1) (17.4) (1.1) (17.4)

Profit / (loss) on sale of assets - - - - - - - - 2.9 27.0 2.9 27.0

Foreign exchange gain (loss) - - - - - - - - (18.4) (28.2) (18.4) (28.2)

Finance cost - - - - - - - - (663.3) (567.8) (663.3) (567.8)

Non-controlling interest - - - - - - - - 0.3 0.2 0.3 0.2

Management Net Profit 2,591.7 2,172.1 (260.9) (424.3) (77.8) (123.8) 2,253.0 1,624.0 (1,149.9) (1,413.3) 1,103.1 210.7

4.1(b) Segment assets and liabilities

Segment assets 23,310.2 21,994.4 2,631.8 2,741.7 996.3 936.1 26,938.3 25,672.2 3,876.6 4,207.0 30,814.9 29,879.2

Segment liabilities (3,055.8) (3,350.8) (1,192.5) (1,157.7) (402.0) (477.7) (4,650.3) (4,986.2) (5,373.6) (5,120.3) (10,023.9) (10,106.5)

Net Assets 20,254.4 18,643.6 1,439.3 1,584.0 594.3 458.4 22,288.0 20,686.0 (1,497.0) (913.3) 20,791.0 19,772.7

Business Unit's Performance

Total

AED in millions

Corporate Support

4.1(a) EBITDA and Management Net Profit

SMBU HOBU MUBU Total


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4.2 EBITDA, Management Net Profit and Net Assets – Geographical

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Revenue 2,226.0 1,760.5 134.0 128.4 249.0 244.5 2,609.0 2,133.4 123.3 140.2 - - - - 2,732.3 2,273.6 - - 2,732.3 2,273.6

Operating expenses (617.3) (471.9) (19.7) (20.8) (109.2) (87.4) (746.1) (580.1) (31.7) (22.7) - - - - (777.8) (602.7) - - (777.8) (602.7)

Asset EBITDA 1,608.7 1,288.6 114.3 107.6 139.8 157.1 1,862.9 1,553.3 91.6 117.5 - - - - 1,954.5 1,670.9 - - 1,954.5 1,670.9

Support Cost (94.8) (77.1) - - - - (94.8) (77.1) - - (4.6) (1.6) (4.0) (5.9) (103.4) (84.6) (139.3) (164.9) (242.7) (249.5)

EBITDA 1,513.9 1,211.5 114.3 107.6 139.8 157.1 1,768.1 1,476.2 91.6 117.5 (4.6) (1.6) (4.0) (5.9) 1,851.1 1,586.3 (139.3) (164.9) 1,711.8 1,421.4

Adjustments for:

Depreciation and amortisation (64.0) (43.2) (1.1) (1.1) (3.5) (2.9) (68.6) (47.2) (1.8) (2.0) (0.2) (0.2) - - (70.6) (49.4) - - (70.6) (49.4)

Impairment on fixed assets (14.4) (147.0) - - - (129.5) (14.4) (276.5) - - - - - - (14.4) (276.5) - - (14.4) (276.5)

Net valuation (loss) / gain on land and building 1,096.2 227.2 34.7 (11.4) (331.8) 123.6 799.1 339.4 (268.9) (20.8) (80.6) 40.5 - - 449.6 359.1 - - 449.6 359.1

Deferred tax impact on net valuation (loss) / gain - - - - - - - - 45.4 4.5 - - - - 45.4 4.5 - - 45.4 4.5

Provisions write back / (write off) - - - - - - - - - - - - (8.1) - (8.1) - - - (8.1) -

Operating profit 2,531.7 1,248.5 147.9 95.1 (195.5) 148.3 2,484.2 1,491.9 (133.7) 99.2 (85.4) 38.7 (12.1) (5.9) 2,253.0 1,624.0 (139.3) (164.9) 2,113.7 1,459.1

Impairment on Joint venture balances and receivables - - - - - - - - - - - - - - - - (22.0) (618.6) (22.0) (618.6)

Share of gain in joint ventures and assocaites-net - - - - - - - - - - - - - - - - (101.7) 28.5 (101.7) 28.5

Depreciation and amortisation - - - - - - - - - - - - - - - - (13.8) (13.0) (13.8) (13.0)

Net valuation (loss) / gain on land and building - - - - - - - - - - - - - - - - (232.9) (56.9) (232.9) (56.9)

Income / deferred tax impact on net valuation (loss) / gain - - - - - - - - - - - - - - - - 39.4 (2.2) 39.4 (2.2)

Provisions write back / (write off) - - - - - - - - - - - - - - - - (1.1) (17.4) (1.1) (17.4)

Profit / (loss) on sale of assets - - - - - - - - - - - - - - - - 2.9 27.0 2.9 27.0

Foreign exchange gain (loss) - - - - - - - - - - - - - - - - (18.4) (28.2) (18.4) (28.2)

Finance cost - - - - - - - - - - - - - - - - (663.3) (567.8) (663.3) (567.8)

Non-controlling interest - - - - - - - - - - - - - - - - 0.3 0.2 0.3 0.2

Management Net Profit 2,531.7 1,248.5 147.9 95.1 (195.5) 148.3 2,484.2 1,491.9 (133.7) 99.2 (85.4) 38.7 (12.1) (5.9) 2,253.0 1,624.0 (1,149.9) (1,413.3) 1,103.1 210.7

4.2(b) Segment assets and liabilities

Segment assets 19,810.2 18,681.4 1,328.2 1,165.6 2,954.0 2,824.2 24,092.4 22,671.2 1,032.4 1,393.6 1,395.5 1,252.7 418.0 354.7 26,938.3 25,672.2 3,876.6 4,207.0 30,814.9 29,879.2

Segment liabilities (2,177.4) (2,207.1) (350.0) (345.3) (1,059.0) (1,265.1) (3,586.4) (3,817.5) (252.4) (496.1) (811.5) (672.6) - - (4,650.3) (4,986.2) (5,373.6) (5,120.3) (10,023.9) (10,106.5)

Net Assets 17,632.8 16,474.3 978.2 820.3 1,895.0 1,559.1 20,506.0 18,853.7 780.0 897.5 584.0 580.1 418.0 354.7 22,288.0 20,686.0 (1,497.0) (913.3) 20,791.0 19,772.7

Total

AED in millions

4.2(a) EBITDA and Management Net Profit

UAE Oman Bahrain GCC Total Egypt Lebanon Syria Total Corporate Support

Business Unit's Performance


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2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Statutory reported revenue 2,307.4 1,975.4 429.3 318.6 21.2 16.5 - - 2,757.9 2,310.5

Reconciling items:

No-cash IAS-17 lease adjustments (25.6) (36.9) - - - - - - (25.6) (36.9)

Management revenue 2,281.8 1,938.5 429.3 318.6 21.2 16.5 - - 2,732.3 2,273.6

Net valuation changes recognised in income statement (95.4) 160.3 (155.3) (166.7) (4.3) (91.6) (228.1) (175.3) (483.1) (273.3)

Net valuation changes recognised in equity (IAS16) 1,289.6 944.0 (9.9) (188.7) 11.0 (76.1) - (1.9) 1,290.7 677.3

Net valuation changes reported in statutory financial statements 1,194.2 1,104.3 (165.2) (355.4) 6.7 (167.7) (228.1) (177.2) 807.6 404.0

Reconciling items: - -

Deduct: fair value accounting adjustments (N-1) (304.9) (126.9) (206.8) (131.7) 6.2 (10.9) (24.4) - (529.9) (269.5)

Add back: valuation loss on non-strategic assets (N-2) - - - - - - 19.6 127.3 19.6 127.3

Add: valuation changes on strategic equity investments or joint ventures (N-3) - - - - (80.6) 40.4 - - (80.6) 40.4

Total fair value adjustments (304.9) (126.9) (206.8) (131.7) (74.4) 29.5 (4.8) 127.3 (590.9) (101.8)

Net valuation changes reported in management report 889.3 977.4 (372.0) (487.1) (67.7) (138.2) (232.9) (49.9) 216.7 302.2

Notes:

(N-2) For the calculation of management net fair value changes, changes in fair value of non-strategic assets are not considered.

(N-3) For the calculation of management net fair value changes, proportionate equity share of strategic equity investments or joint ventures are considered as part of respective business unit.

4.3 Reconciliation of Management Revenue

SMBU HOBU MUBU Corporate Support Total

AED in millions

4.4 Reconciliation of Management Fair Value Changes

(N-1) For the calculation of Management net profit, gross changes in fair value from one reporting date to another are reported in the income statement compared to the net accouting valuation change computed as per the requirements of IAS 16 /40 for statutory

purposes.


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2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Statutory net profit / (loss) 1,265.4 946.1 (245.2) (231.0) (8.5) (95.1) (893.4) (1,185.8) 118.3 (565.8)

Reconciling items:

Fair value adjustments (refer table-4.3) (304.9) (126.9) (206.8) (131.7) (74.4) 29.5 (4.8) 127.3 (590.9) (101.8)

IAS-16 Fair value changes recognised in income statement (refer table-4.3) 1,289.5 944.0 (9.9) (188.7) 11.0 (76.2) - (1.9) 1,290.6 677.2

Depreciation on strategic assets (N-1) 318.7 301.2 192.5 126.2 2.2 10.9 12.3 9.7 525.7 448.0

Coupons declared to MAFH (N-2) - - - - - - (220.0) (210.0) (220.0) (210.0)

No-cash IAS-17 lease adjustments (refer table-4.2) (25.6) (36.9) (25.6) (36.9)

Other adjustments 5.0 - - - - - - - 5.0 -

Total reconciling items 1,282.7 1,081.4 (24.2) (194.2) (61.2) (35.8) (212.5) (74.9) 984.8 776.5

Management net profit / (loss) 2,548.1 2,027.5 (269.4) (425.2) (69.7) (130.9) (1,105.9) (1,260.7) 1,103.1 210.7

Notes:

(N-2) - For management net profit calculation coupon declared during the year are shown as a deduction from net profit. For financial reporting purposes coupons are shown as an appropiation of distributable profit and are adjusted in equity.

4.5 Reconciliation of Management Net Profit

SMBU HOBU MUBU Corporate Support Total

AED in millions

(N-1) - For management net profit calculation depreciation is not charged to strategic assets which are subject to fair valuation. Gross changes in fair value are reported in the income statement. For statutory purposes all assets which are classified under IAS-

16 are depreciated and any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount.


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5. Revenue

2011 2010

AED'000 AED'000

Rental income 2,140,555 1,974,891

Hospitality revenue 429,297 318,613

Leisure and entertainment revenue 188,001 17,024

2,757,853 2,310,528

6. Operating expenses

2011 2010

Note AED’000 AED’000

Staff costs (refer note (i) below) (407,748) (378,041)

Depreciation 10 (600,710) (491,725)

Legal, professional and consultancy fees (42,762) (20,006)

Selling and marketing expenses (105,680) (95,919)

Other operating expenses (505,010) (412,908)

(1,661,910) (1,398,599)

(i) Staff costs include the following: 2011 2010

AED’000 AED’000

Jan-00Gratuity cost (13,826) (17,402)

Pension cost (2,044) (1,830)

Staff costs are net of costs capitalised to various projects amounting to AED 54.6 million (2010: AED 58.3

million).


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7. Finance income / costs

2011 2010

AED’000 AED’000

7.1 Finance income

Interest income 4,383 5,285

Ineffective portion of changes in fair value of cash flow hedges 206 3,406

Finance income 4,589 8,691

7.2 Finance costs

Arrangement and participation fees (5,729) (12,666)

Interest expense (353,130) (270,704)

Less: capitalised interest 20,353 64,787

(338,506) (218,583)

Ineffective portion of changes in fair value of cash flow hedges (4,691) (5,303)

Net changes in fair value of cash flow hedges transferred from equity (106,032) (142,621)

Finance costs (449,229) (366,507)

Net finance cost recognised in profit or loss (444,640) (357,816)

2011 2010

AED’000 AED’000

Effective portion of changes in fair value of cash flow hedges (93,912) (142,263)

Net changes in fair value of cash flow hedges transferred to profit or loss 106,032 142,621

Finance income recognised in other comprehensive income 12,120 358

Recognised in profit or loss

Recognised directly in other comprehensive income

Capitalised interest arises on borrowings for development expenditure.

The capitalisation rate used to determine the amount of borrowing cost eligible for capitalization varies from

5.15% to 8.94% (2010: 3.49% to 8.04%) depending on the effective interest rate over the tenure of the

borrowing.

8. Other income / (expenses) - net

2011 2010


Foreign exchange loss (18,091) (27,885)

Gain on disposal of property, plant and equipment and

investment property 664 26,938

Gain on disposal of assets held for sale 2,787 -

Service charges levied on related parties 16 13,266 16,801

Provision against related party balance 16.1 - (35,272)

Fixed assets / project costs written off (3,762) (17,365)

Other income 15,859 18,961

10,723 (17,822)


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9. Impairment loss

2011 2010


Impairment of investments and receivables (refer note

(i))

(54,276) (608,957)

Reversal of impairment on investment in a joint venture

(refer note (ii)) 31,455 -

Impairment of property, plant and equipment 10(iv) (22,582) (251,044)

(45,403) (860,001)

(i) Impairment of investments and receivables:

MAFP Group has performed impairment tests and analysis of its carrying value of receivables,

advances and investments in various joint ventures and associate. Based on the results of this

analysis, the management is of the view that the carrying value of these assets has been eroded due to

adverse market and business conditions and has, therefore, recognized an impairment loss of AED

54.3 million in the current year (2010: AED 608.9 million).

(ii) Reversal of impairment on investment:

In 2008 MAFP Group had paid AED 31.5 million as an advance for a potential joint venture. In 2009

management had reassessed the future prospects of the joint venture and impairment was recognised

against this advance. During the current year MAFP Group has received AED 31.5 million and

accordingly the impairment has been reversed.


- 31 -

10. Property, plant and equipment

Furniture, Leisure Capital

Land and Motor fixtures and rides and work in

buildings vehicles equipment games progress Total

AED'000 AED'000 AED'000 AED'000 AED'000 AED'000

Cost / valuation

At 1 January 2010 13,344,510 4,631 339,457 - 1,623,365 15,311,963

Additions 52,732 223 25,545 - 812,574 891,074

Transferred on acquisition of businesses from a related party

(refer note-(iv), below) - - 3,269 357,484 - 360,753

Transferred to investment property (refer note-(v) below) (105,020) - - - (32,518) (137,538)

Assets placed in service (refer note-(iii), below) 1,239,697 52 29,334 - (1,269,083) -

Disposals / write offs / reversals (57,748) (359) (5,930) - (19,420) (83,457)

Reclassification of assets 36,587 - - - (36,587) -

Transferred to asset held for sale (refer note 14) (2,546) - - - - (2,546)

Accumulated depreciation & impairment eliminated on

valuation (432,989) - - - (37,098) (470,087)

Net valuation gain on land and buildings (refer note-(i),

below) 445,913 - - - - 445,913

Effect of foreign exchange movements - (12) (261) - - (273)

At 31 December 2010 14,521,136 4,535 391,414 357,484 1,041,233 16,315,802

At 1 January 2011 14,521,136 4,535 391,414 357,484 1,041,233 16,315,802

Additions 103,054 646 32,426 6,593 288,196 430,915

Assets placed in service (refer note-(iii), below) 885,173 - 50,455 - (935,628) -

Disposals / write offs / reversals / other adjustments (19,812) (552) (711) (13,309) (2,700) (37,084)


valuation (527,486) - - - - (527,486)

Net valuation gain on land and buildings (refer note-(i),

below) 1,127,941 - - - - 1,127,941

Effect of foreign exchange movements (103) - - - (47,286) (47,389)

At 31 December 2011 16,089,903 4,629 473,584 350,768 343,815 17,262,699

Depreciation and impairment

At 1 January 2010 - (2,829) (181,763) - (37,098) (221,690)

Depreciation charge for the year (432,989) (672) (45,323) (12,741) - (491,725)

Impairment loss (refer note-(iv), below) - - - (251,044) - (251,044)


valuation 432,989 - - - 37,098 470,087

Disposals / write offs - - 1,951 - - 1,951

At 31 December 2010 - (3,501) (225,135) (263,785) - (492,421)

At 1 January 2011 - (3,501) (225,135) (263,785) - (492,421)

Depreciation charge for the year (refer note-(ii), below) (527,486) (683) (59,423) (13,118) - (600,710)

Impairment loss (refer note-(iv), below) - - - (14,459) (8,123) (22,582)


valuation 527,486 - - - - 527,486

Disposals / write offs - 529 576 - - 1,105

At 31 December 2011 - (3,655) (283,982) (291,362) (8,123) (587,122)

Carrying amounts

At 1 January 2010 13,344,510 1,802 157,694 - 1,586,267 15,090,273

At 31 December 2010 14,521,136 1,034 166,279 93,699 1,041,233 15,823,381

At 31 December 2011 16,089,903 974 189,602 59,406 335,692 16,675,577


- 32 -

10. Property, plant and equipment (continued)

(i) During 2011, a revaluation gain of AED 1,127.9 million (2010: gain of AED 445.9 million) has been

recognised on property, plant and equipment of which a valuation gain of AED 1,290.6 million (2010: gain

of AED 677.2 million) has been credited to other comprehensive income and a loss of AED 162.7 million

(2010: loss of AED 231.3 million) has been charged to profit or loss because of a decrease in the carrying

value of certain properties over and above any valuation gain previously recorded in the revaluation reserve

for these properties (also refer note 11(i)).

(ii) During the year, estimated useful lives of certain assets were revised to align them with the expected

operational lives of respective assets. The effect of these changes on depreciation expense is recognised

prospectively and the impact on current and future years is as follows:

2011 2012 2013 2014

AED'000 AED'000 AED'000 AED'000

(Increase) / decrease in depreciation expense (29,848) 47,102 50,662 64,184

(iii) During the current year, MAFP Group completed the construction of two hotel towers in Bahrain

amounting to AED 935.6 million, which were reclassified from capital work in progress to the respective

classes of assets under property, plant and equipment.

In 2010, MAFP Group completed the construction of two hotels in UAE amounting to AED 858.1 million,

which were reclassified from capital work in progress to the respective classes of assets under property, plant

and equipment. During 2010, MAFP Group also transferred AED 410.9 million on completion of the

extension of a shopping mall in UAE from capital work in progress.

(iv) In 2010, the assets transferred on acquisition of businesses from a related party represent certain leisure

and entertainment units transferred to the Company at their book values (refer note- 16(iii)). At the time of

acquisition, the carrying amounts of these assets were tested for impairment and an impairment loss of AED

251.0 million was recognised in 2010. In the current year the recoverability of the carrying amounts of these

assets have been reassessed based on the estimated cash flows expected to be generated from the future

operations of these assets and an additional impairment loss of AED 14.5 million has been recognised in the

current year in profit or loss.

Furthermore, in the current year, certain costs on a project under development were tested for impairment and

an impairment loss of AED 8.1 million has been recognized.

(v) At 31 December 2010, an office tower in UAE with a carrying amount of AED 105.0 million was

reclassified from property, plant and equipment to investment property at its fair value due to a change in use,

as the owner-occupation based on the leasable value was considered insignificant.

(vi) Certain properties of MAFP Group are mortgaged against bank borrowings. Certain term loans are

secured by way of assignment of lease rentals. Also refer note-20.

(vii) Certain lands are held in the personal name of a majority shareholder of the ultimate holding entity for

the beneficial interest of MAFP Group.


- 33 -

10. Property, plant and equipment (continued)

viii) Accrued lease income at 31 December 2011, relating to the accounting for operating lease rentals on a

straight line basis as per IAS 17, has been eliminated from the valuation of developed properties, in order to

avoid double counting of assets, as mentioned below:

2011 2010

AED'000 AED'000

Fair value of land and buildings 16,191,326 14,623,290

Less: adjustment for accrued operating lease income (101,423) (102,154)

Net adjusted fair value 16,089,903 14,521,136

(ix) If the properties had been measured under the historical cost basis the carrying amounts would have been

as follows:

AED'000 AED'000 AED'000 AED'000

Land Buildings Land Buildings

Cost 689,855 7,003,736 644,926 6,083,310

Accumulated depreciation - (2,013,575) - (1,575,898)

Net carrying amount 689,855 4,990,161 644,926 4,507,412

20102011

11. Investment property Land- Land and

undeveloped buildings

AED'000 AED'000 AED'000 AED'000

At 1 January 2010 1,501,960 4,563,303 4,508,182 10,573,445

Additions 1,835 33,246 761,721 796,802

Transferred on acquisition (refer note- (iii), below) - 43,677 - 43,677

Assets placed in service (refer note-(iv), below) - 4,535,025 (4,535,025) -

Transferred from property, plant and equipment (refer

note-10(v)) - 134,680 2,858 137,538

Disposals / write offs - (7,792) - (7,792)

Reclassification of assets 71,217 - (71,217) -

Net valuation (loss) / gain on investment property (refer

note-(i), below) (110,707) 68,703 - (42,004)

Effect of foreign exchange movements (41,706) (61,926) (4,409) (108,041)

At 31 December 2010 1,422,599 9,308,916 662,110 11,393,625

At 1 January 2011 1,422,599 9,308,916 662,110 11,393,625

Additions - 34,358 471,948 506,306

Disposals / write offs / reversals - (34,285) - (34,285)

Net valuation (loss) / gain on investment property (refer

note-(i), below) (220,672) (100,887) 1,174 (320,385)

Effect of foreign exchange movements (18,000) (46,030) (14,794) (78,824)

At 31 December 2011 1,183,927 9,162,072 1,120,438 11,466,437

Carrying amounts

At 1 January 2010 1,501,960 4,563,303 4,508,182 10,573,445

At 31 December 2010 1,422,599 9,308,916 662,110 11,393,625

At 31 December 2011 1,183,927 9,162,072 1,120,438 11,466,437

Capital work in

progress

Total


- 34 -

11. Investment property (continued)

(i) For the year ended 31 December 2011, a net valuation loss of AED 320.4 million (2010: loss of AED 42.0

million) is included in profit or loss. Accordingly the following fair value losses were recognized during the

year in profit or loss:

2011 2010

Note AED'000 AED’000

Loss on valuation of property, plant and equipment 10(i) (162,688) (231,293)

Loss on valuation of investment property (320,385) (42,004)

Total valuation loss (483,073) (273,297)

(ii) Due to political disturbance in certain parts of the region, not all of the land portfolio could be valued by

external valuers. Management have internally assessed the fair value of these assets as at the reporting date.

(iii) In 2010, the amount of assets transferred on acquisition represents the carrying amounts of common area

and leasehold improvements related to leisure and entertainment units (refer note 16(iii)). During the current

year the carrying amount of these assets was reduced by AED 11.2 million on the finalisation of the account

with the contractor.

(iv) During 2010, MAFP Group completed the construction of a mall and office tower in UAE amounting to

AED 4,535.0 million, which were reclassified from capital work in progress to land and buildings.

(v) Certain properties of MAFP Group are mortgaged against bank borrowings. Certain term loans are

secured by way of assignment of lease rentals. Also refer note-20.

(vi) Certain land is held in the personal name of a majority shareholder of the ultimate holding entity of

MAFP Group.

(vii) Accrued lease income at 31 December 2011, relating to the accounting for operating lease rentals on a

straight line basis as per IAS 17 has been eliminated from the valuation of developed properties, in order to

avoid double counting of assets, as mentioned below:

2011 2010

AED'000 AED'000

Fair value of land and buildings 9,253,906 9,375,507

Less: adjustment for accrued operating lease income (91,834) (66,591)

Net adjusted fair value 9,162,072 9,308,916

(viii) Rental income derived from investment property during the current year was AED 963.6 million (2010:

AED 858.4 million). The direct operating expenses arising from investment property that generated rental

income during the current year amounted to AED 329.3 million (2010: AED 333.9 million).


- 35 -

12. Investment in joint ventures and associate

2011 2010

Note AED'000 AED'000

Investment in joint ventures 12.1 839,134 876,910

Investment in associate 12.2 208,919 244,093

At 31 December 1,048,053 1,121,003

Share of (loss) / gain:

From joint ventures 12.1 (85,853) 17,975

From associate 12.2 (7,738) 10,594

(93,591) 28,569

Note 2011 2010

AED'000 AED'000

At 1 January 876,910 1,388,387

Additions during the year 145,000 41,672

Reclassified to other receivables* - (272,300)

Provision for impairment 9(i) - (336,657)

Share of post acquisition (loss) / gain accounted through profit or

loss (85,853) 17,975

Share of post acquisition (loss) / gain accounted through the

statement of comprehensive income (refer note(i)) 12.1(i) (93,361) 40,390

Foreign currency translation differences from foreign operations (3,562) (2,557)

At 31 December 839,134 876,910

12.1 Investment in joint ventures

*This balance was reclassified to other receivables and was fully impaired in 2010 (also refer note-9(i)).

(i) This comprises MAFP Group‟s share of revaluation gains / (losses), net of the impact of deferred tax, on

land and building recorded directly in the statement of comprehensive income by the joint ventures.

Investments in various entities include capital contributions made by MAFP Group in its capacity as a

shareholder. These balances are unsecured and interest free in nature and will not be called for repayment,

except at the sole discretion of the respective joint venture entities.

Summarised financial information in respect of MAFP Group‟s interest in joint ventures is set out below:

2011 2010AED'000 AED'000

Total assets 4,138,425 4,425,985

Total liabilities (2,460,158) (2,445,450)

Net assets 1,678,267 1,980,535

Group‟s share of joint venture‟s net assets (net of impairment) 839,134 876,910

(Loss) / profit for the year earned by joint ventures (171,706) 35,950

MAFP Group‟s share of joint ventures' (loss) / gain for the year including

losses on investments exited (85,853) 17,975


- 36 -

12. Investment in joint ventures and associate (continued)

12.2 Investment in an associate 2011 2010

AED'000 AED'000

At 1 January 244,093 231,879

Share of post acquisition (loss) / gain accounted through profit or loss (7,738) 10,594

Provision for impairment (27,000) -

Foreign currency translation differences from foreign operations (436) 1,620

At 31 December 208,919 244,093

Summarised financial information in respect of MAFP Group‟s interest in the associate is set out below:

2011 2010AED'000 AED'000

Total assets 3,588,014 2,235,667

Total liabilities (2,758,480) (1,377,393)

Net assets 829,534 858,274

MAFP Group‟s share of associate‟s net assets 235,919 244,093

(Loss) / gain for the year incurred by the associate (11,665) 50,639

MAFP Group‟s share of associates (loss) / gain for the year (7,738) 10,594

13. Intangible asset and deferred liability

During 2008, the Company entered into an agreement with a Government entity in Dubai to acquire naming

rights for two stations of Dubai Metro for a 10 year period. As per the agreement, a payment schedule is

agreed over the life of the contract. In 2009, upon the Metro becoming operational, management recorded the

present value of the total future payments to be made as an intangible asset. The asset is being amortised over

the contract period of 10 years.

The intangible asset is measured by discounting the estimated cash flows using the incremental borrowing

cost of MAFP Group at 4.5%.

Intangible asset - cost

At 1 January 198,743 198,743

At 31 December 198,743 198,743

Amortisation

At 1 January (26,492) (6,625)

Amortisation for the year (20,070) (19,867)

At 31 December (46,562) (26,492)

Carrying amounts 152,181 172,251

2011 2010

AED’000 AED’000


- 37 -

13. Intangible asset and deferred liability (continued)

The corresponding liability to the Government entity for the Metro naming rights has been booked as follows:

2011 2010

Note AED'000 AED'000

At 1 January 133,642 146,759

Interest accrued during the year 5,709 6,323

Less: payment made during the year (20,995) (19,440)

At 31 December 118,356 133,642

Current maturity 18 (22,675) (20,995)

Long term portion 95,681 112,647

14. Asset classified as held for sale

During the current year an asset with a carrying value of AED 2.5 million was disposed and a gain of AED

2.8 million has been recognised on disposal which is included in “other income / (expenses) - net” (refer

note 8) in profit or loss.

15. Receivables and prepayments

2011 2010

AED’000 AED’000

Trade receivables 168,297 150,337

Accrued income on operating leases 193,276 167,890

Advances 100,572 45,436

Prepayments 70,526 90,626

Other receivables 69,686 71,741

At 31 December 602,357 526,030

16. Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant

influence over the other party in making financial and operating decisions. Related parties include the

ultimate parent company, Majid Al Futtaim Capital LLC, its subsidiaries, associates, joint ventures, key

management personnel and / or their close family members. Transactions with related parties are carried at

agreed terms.

(i) During current year, MAFP Group earned interest income of AED nil (2010: AED 0.4 million) on related

party balances and loans receivables.

(ii) Finance charges on loans from related parties amounted to AED 48.3 million (2010: AED 56.0 million).

These loans carry interest rate of 3 months EIBOR plus a margin of 3% (refer note-20.2).

(iii) In 2010 management agreed to a plan to acquire the operations of certain leisure and entertainment

businesses from MAF Leisure & Entertainment LLC, a subsidiary of the parent company.


- 38 -

16. Related party transactions (continued)

The effective transfer dates of the leisure and entertainment units were 1 January 2010 and 31 December

2010.

Purchase consideration towards the acquisition was agreed at AED 197 million. This was equivalent to the

carrying value of the net assets acquired as at 31 December 2010. The purchase consideration was partially

settled by adjusting an amount of AED 150.0 million due from the parent company, MAFH. The remaining

amount was adjusted with the related party balance payable to MAFH.

During current year the final account of the contractor was settled and consequently the carrying amounts of

property, plant and equipment and investment property transferred on acquisition and the purchase

consideration were revised by AED 24.5 million.

The following summarises the consideration transferred and the recognised amounts of assets acquired and

liabilities assumed at the respective acquisition date:

Acquired on

1 January 2010

Acquired on

31 December 2010

AED’000 AED’000

Property, plant and equipment (refer note 10) 161,240 199,466

Investment property (refer note 11) 17,560 26,117

Inventories 1,384 11,500

Other current assets 6,390 12,935

Cash and cash equivalents 390 (2,810)

Due to related parties (203,861) (32,932)

Trade and other payables (8,323) (15,649)

Provision for staff termination and retirement benefits (264) (1,593)

Total identifiable net (liabilities) / assets (25,484) 197,034

Purchase consideration at 31 December 2010 - 197,034

Adjustment during 2011:

Property, plant and equipment (refer note 10) (13,309)

Investment property (refer note 11(iii)) (11,219)

Total adjustment in 2011 (24,528)

Revised Purchase consideration at 31 December 2011 172,506

The negative net assets value of AED 25.5 million acquired at 1 January 2010 were recorded as a related

party receivable from MAF Leisure & Entertainment LLC. MAFP Group recorded a full impairment loss

against this balance on 31 December 2010. Refer note 8.

(iv) During 2010, a receivable from Majid Al Futtaim Ventures LLC, a related party, amounting to AED

363.4 million was transferred to MAFH. This receivable was partially offset by settlement of a long term loan

payable to MAFH amounting to AED 308.3 million.

(v) In 2010, the Company novated certain bank loans to the parent company. However, the Company

continues to use these facilities (refer note 20.1(i)). Accordingly, these loans are disclosed as related party

loans.

(vi) The Company has provided a corporate guarantee of AED 3,673 million (2010: AED 3,673.0 million) to

a bank in respect of a loan obtained by MAFH (refer note 26). The outstanding amount of the loan as at 31

December 2011 in the books of that related party is AED 1,203.5 million (2010: AED 2,115.8 million).


- 39 -


(vii) During 2009 and 2010, MAFH subscribed to equity instruments issued by the Company amounting to

AED 2,750.0 million. (Also refer note 23.2.1).

2011 2010

AED’000 AED’000

Internal audit, IT, legal services and corporate communication (8,746) (9,181)

Facility management services (64,449) (55,247)

(73,195) (64,428)

Provision of retail and office space 184,270 231,326

Corporate and administrative services 13,266 16,801

197,536 248,127

Services provided to MAFP Group by related parties

Services provided by MAFP Group to related parties

16.1 Related party balances

Balances with related parties at 31 December are as follows:

Due from related parties 2011 2010

AED’000 AED’000

Majid Al Futtaim Leisure and Entertainment LLC 25,484 25,484

Majid Al Futtaim Fashions LLC - 81

The Egypt Emirates Malls Group JSC 37,039 52,405

Majid Al Futtaim Trust LLC 147 -

Majid Al Futtaim JCB Finance LLC 544 269

MAF Orix Finance PJSC 11 -

Yenkit Tourism Development LLC 28,900 28,900

Aya Real Estate Investment BSC 2,983 2,983

Arzanah Mall LLC 3,171 3,171

Al Mamzar Islands Development LLC 5,829 2,582

City Centre Essa Town Co. WLL 10,938 10,938

Waterfront City SARL 19,410 4,040

Other related parties 2,130 2,175

136,586 133,028

Less: Provision for doubtful receivables (61,154) (61,154)

75,432 71,874

Due to related parties 2011 2010

AED’000 AED’000

Majid Al Futtaim Dalkia Middle East LLC 3,169 2,719

Majid Al Futtaim Ventures LLC 1,470 27,536

Majid Al Futtaim Holding LLC 26,818 68,600

Majid Al Futtaim Retail LLC 596 8,665

Other related parties 623 587

32,676 108,107


- 40 -


16.2 Compensation to key management personnel

The aggregate compensation to key management personnel is disclosed as follows:

2011 2010

AED'000 AED'000

Short term employee benefits (salaries and allowances including

provision for bonus)27,003 30,265

Provision for staff terminal benefits 847 899

27,850 31,164

17. Cash and cash equivalents

2011 2010

AED’000 AED’000

Cash in hand 2,997 2,120

Fixed Deposits 239,470 138,450

Call deposits 526,858 602,077

Cash and cash equivalents 769,325 742,647

Cash in hand represents the pending sales deposit, the cash in operation at the central cashier office and petty

cash. Cash at bank represents amount held in current and call accounts and short term deposits with banks at

prevailing market interest rates.

18. Payables and accruals

2011 2010


Trade payables 60,061 139,370

Accruals 641,798 454,513

Current portion of deferred liability 13 22,675 20,995

Unearned rental income 482,229 415,065

Retention from contractor payments 139,634 170,038

Rent received in advance 335,368 365,478

Tax payable 4,035 2,717

Negative fair value of derivatives (refer note-(i), below) 211,566 218,746

Others 139,468 175,273

2,036,834 1,962,195

(i) This comprises negative fair value in respect of the derivatives designated as cash flow hedges. These

derivatives are classified as cash flow hedges as the arrangements are undertaken under interest rate collar and

interest rate swap arrangements to hedge the variability of future cash flows arising on variable interest rate

loans. The details of these arrangements are set-out in note-24.6.


- 41 -

19. Provisions

AED’000 AED’000 AED’000 AED’000

Provision for bonus 55,401 52,324 (48,436) 59,289

Long-term portion (10,076) (6,221) 2,371 (13,926)

Current portion of bonus provision 45,325 46,103 (46,065) 45,363

Other provisions 27,209 6,080 (757) 32,532

72,534 52,183 (46,822) 77,895

Charge /

transfers

Transfers /

payments /

write backs

At 1 January

2010

At 31 December

2011

Long-term portion of bonus provision represent the deferred bonus plan for senior management staff, shown

under non-current liabilities.

2011 2010

AED’000 AED’000

At 1 January 36,813 29,734

Charge during the year 13,826 17,402

Transferred on acquisition - 1,857

Payments / transfers (9,716) (12,180)

At 31 December 40,923 36,813

19.1 Provision for staff terminal benefits

20. Long-term loans

2011 2010


Long-term portion of external loans 20.1 5,343,441 5,145,745

Long-term portion of related party loans 20.2 - 559,740

At 31 December 5,343,441 5,705,485

2011 2010


Current portion of external loans 20.1 1,229,775 1,519,571

Current portion of related party loans 20.2 1,043,263 384,735

At 31 December 2,273,038 1,904,306

20.1 Long term loans – external

2011 2010

AED'000 AED’000

At 1 January 6,665,316 6,706,645

Loans transferred to a related party (refer note-(i)) - (250,000)

Borrowed during the year 1,271,936 1,660,208

Repaid during the year (1,362,841) (1,447,273)

Currency translation adjustment (1,195) (4,264)

At 31 December 6,573,216 6,665,316

Current maturity of long term loans (1,229,775) (1,519,571)

Long-term portion at 31 December 5,343,441 5,145,745


- 42 -

20. Long-term loans (continued)

20.1 Long term loans – external (continued)

(i) In 2010, the Company novated bank loans amounting to AED 250.0 million to MAFH by converting

external facilities to related party funding. However, the Company continues to use these facilities under an

inter-company funding agreement signed with MAFH. Accordingly, these loans have been disclosed as

related party loans (refer note 16(v)).

The details of long term loans are set out below:

Loan facility

Loan amount at 31

December 2011

Repayment

Interval

Repayment

Commencement Maturity date

AED '000

USD 200,000

(AED 734,600)

OMR 30,000

(AED 286,200)

USD 600,000

(AED 2,203,200)

USD 300,000

(AED 1,101,900)

USD 50,000

(AED 183,914)

USD 50,000

(AED 183,914)

USD 33,000

(AED 121,240)

USD 75,000

AED 275,475

EGP 146,400

(AED 91,075)

LBP 180,000,000

(AED 441,000)

USD 55,000

(AED 201,960)

6,573,216

165,671

Half-yearly (refer

note (h))15-Jun-12 16-Dec-13

42,430

26-Jun-11 26-Jun-14

Annual (refer note

(f))30-Jul-15 30-Jan-22

01-Oct-12 31-Mar-20

Annual (refer note

(f))30-Jul-15 30-Jan-22

1,976,351

887,208

183,914

183,914

55,201

AED 225,000 120,000 Half-yearly (refer

note (g))

Half-yearly (refer

note (h)) 275,475

577,360

63,520

AED 577,360

Half-yearly

15-Jun-12 16-Dec-13

10-May-14

Half-yearly (refer

note (d))08-Mar-10 08-Sep-13

Bullet (refer note

(d))-

Half-yearly (refer

note (c))31-May-09 30-Nov-16

Bullet (refer note

(d))- 25-Jan-13

Half-yearly (refer

note (e))31-Mar-10 26-Apr-18

Half-yearly (refer

note (a))25-Oct-08 30-Apr-18

Half-yearly (refer

note (a))31-Jan-12 31-Jan-22

Quarterly (refer

note (b))27-Mar-11 29-Dec-13

Half-yearly (refer

note (h))30-Apr-13 31-Oct-15

AED 1,139,000

OMR 22,000

(AED 210,100)

875,000

734,473

286,118

146,581


- 43 -

20. Long term loans (continued)

20.1 Long term loans – external (continued)

These loans are obtained at margins ranging from 0.5% to 3.5% (2010: 0.5% to 3.5%) over the base lending

rate, whilst two loans are fixed at 6.5% (2010: 6.5% for three loans). For loans obtained in the UAE, the base

lending rate used is generally EIBOR / LIBOR.

The amount of AED 1,045.9 million (2010: AED 1,519.6 million) payable within the next 12 months is

shown under current maturity of long term loans.

a) The loans in Omani Riyal are secured against:

i) a registered first charge on all assets of a shopping mall in Muscat including land, buildings and

equipment but excluding fit-outs and equipment owned by tenants; and

ii) assignment of all insurance policies related to the fixed assets of a shopping mall in Muscat.

b) The loan facility of AED 1,139.0 million is secured by way of assignment of lease rentals of a shopping

mall in UAE.

c) The USD 300 million loan obtained by a subsidiary in Bahrain is secured against:

i) a first ranking mortgage over the property of a shopping mall in Bahrain, a first ranking fixed and

floating charge over the subsidiary‟s assets and accounts, pledge of the subsidiary‟s shares, assignment

of insurances, and assignment of the subsidiary‟s rights under the project documents;

ii) a corporate guarantee was provided by the Company against the outstanding loan for the construction

and stabilization of the project.

d) The loans of a subsidiary in Egypt aggregating to USD 133 million are secured by way of bank

guarantees.

e) The USD 600 million loan facility is secured by a mortgage on the land and assignment of insurance

policies of the property and lease rentals of a shopping mall in UAE (refer note 11).

f) The loan facilities of AED 441.0 million and AED 202.0 million were obtained by a subsidiary in

Lebanon during 2011 and are secured by way of a first ranking charge over the plot on which the

shopping mall is under construction, assignment of future lease rentals of the shopping mall and a

corporate guarantee provided by MAFH.

g) During 2011 a loan facility of AED 225.0 million was obtained by a subsidiary in UAE. The facility is

secured by way of a first degree mortgage over land and building of a shopping mall in UAE, assignment

of insurance policies of the property and future lease rentals of the shopping mall, and a corporate

guarantee provided by MAFH.

h) The loan facilities of USD 200.0 million (AED 734.6 million), USD 75.0 million (AED 275.5 million)

and AED 577.4 million are secured by way of a corporate guarantee provided by MAFH.

The carrying value of properties mortgaged against the above loans aggregates to AED 8,043.9 million at 31

December 2011 (2010: AED 7,529.0 million).


- 44 -

20. Long term loans (continued)

20.2 Long term loans - related parties

2011 2010


At 1 January 944,475 587,906

External loans novated to a related party 16(iv) &

20.1(i)

- 250,000

Borrowed during the year 414,033 1,364,294

Adjusted against related party transaction 23.2.2 110,000 -

Repaid during the year (424,763) (1,006,978)

Transferred to shareholder contribution 23.2.1 - (250,000)

Currency translation adjustment (482) (747)

At 31 December 1,043,263 944,475

Current maturity of long term loans (1,043,263) (384,735)

Long-term portion - 559,740 During the current year, multiple loan facilities provided by MAFH were combined into a single loan facility

amounting to AED 3,500 million under a loan agreement automatically renewable for three consecutive years.

The loan is obtained at a margin 3% over EIBOR with true up of actual interest expense quarterly, based on

underlying facilities obtained externally by MAFH.

Loan facility Loan amount Lender Repayment

’000 AED ’000

AED 3,500,000 1,043,263 Majid Al Futtaim Holding LLC -

1,043,263

21. Advance receipts

This represents contributions in respect of the cost of chillers within the shopping malls made by Majid Al

Futtaim Retail LLC, a tenant and a related party, under operating lease agreements. The contributions are

amortised over the useful life of the chillers estimated to be 15 years and the carrying value of the balance is

AED 8.4 million (2010: AED 9.3 million)

22. Taxation

The subsidiaries of MAFP Group are liable to income tax in Oman and Egypt at the enacted tax rate of 12%

and 20% respectively. Income tax expense of AED 42k (OMR 4k) was recognised against the profits of

MAFP Group‟s subsidiary in Oman of AED 592k (OMR 62k).

The following amounts have been recognised in respect of income tax and deferred tax charge in the

consolidated financial statements.


- 45 -

22. Taxation (continued)

Income tax 2011 2010

AED’000 AED’000

Current tax expense

-Current year (42) (43)

-Adjustment for prior years - (1,745)

Deferred tax credit - net 76,401 4,130

Income tax credit for the year 76,359 2,342

Reconciliation of effective tax rate

Profit / (loss) for the year 116,318 (566,096)

Income tax credit for the year (76,359) (2,342)

Profit / (loss) for the year before tax 39,959 (568,438)

Income tax using the Group's domestic tax rate 0.00% - 0.00% -

Effect of tax rates in foreign jurisdictions -0.11% (42) 0.01% (43)

Under provided in prior years 0.00% - 0.31% (1,745)

Deferred tax gain on revaluation of land and buildings 191.20% 76,401 -0.73% 4,130

191.09% 76,359 -0.41% 2,342

For the subsidiary in Oman, the tax assessments for previous years have not been finalised by the tax

authorities. The management considers that additional taxes, if any, that may become payable on finalisation

of assessments of the open tax years would not be significant to the MAFP Group‟s financial position as at 31

December 2011.

2011 2010

AED’000 AED’000

At 1 January 184,944 190,046

Credited to profit or loss (77,892) (2,266)

Foreign currency translation difference from foreign operations (5,967) (2,836)

At 31 December 101,085 184,944

Deferred tax liabilities

Deferred tax liability has been computed on the taxable temporary differences arising as a result of valuation

gains/losses on properties in Egypt, Syria and Lebanon. The tax rates in these countries are 20%, 22% and

15% respectively. The corresponding valuation gain or loss has been recognised in profit or loss.

Accordingly, the resulting net deferred tax income has been recognized in profit or loss.

For the year ended 31 December 2011, in respect of change in valuation of investment properties, a deferred

tax credit of AED 83.4 million (2010: AED 16.1 million) is included in profit and loss on account of the

deductible temporary differences of AED 447.8 million (2010: deductible temporary difference of AED 78.7

million) and a deferred tax expense of AED 5.5 million (2010: AED 13.8 million) is included in profit and

loss on account of the taxable temporary difference of AED 25.2 million (2010: taxable temporary difference

of AED 77.9 million).


- 46 -

22. Taxation (continued)

2011 2010

AED’000 AED’000

At 1 January 1,864 -

Deferred tax asset created - 1,864

Deferred tax charged to profit or loss (1,491) -

Foreign currency translation difference from foreign operations (70) -

At 31 December 303 1,864

Deferred tax asset

Deferred tax asset of AED nil (2010: AED 1.86 million) is recognised by a subsidiary of MAFP Group in

Egypt at the enacted tax rate of 20%. AED 1.61 million was recognised in respect of reduction in corporate

tax liability due to the deduction in 2009 and 2010 resulting from the new property tax law and AED 0.25

million was recognised in respect of carry forward of tax losses of AED 1.28 million.

23. Share capital and reserves

23.1 Share capital

2011 2010

AED’000 AED’000

Authorised, issued and fully paid:

3,500,000 shares of AED 1,000 each 3,500,000 3,500,000

At 31 December 3,500,000 3,500,000

23.2 Shareholder contribution 2011 2010

AED’000 AED’000

Subordinated capital loan instruments (refer note 23.2.1) 2,750,000 2,750,000

At 31 December 2,750,000 2,750,000

23.2.1 Subordinated capital loan instrument

In 2009, the Company issued subordinated capital loan instruments of AED 2,500 million in five loan

instruments of AED 500 million each. During 2010, an additional loan instrument of AED 250 million was

issued by the Company (refer note 20.2). These instruments are collectively referred to as “the hybrid

instruments” and are fully subscribed to by MAFH as per the terms of a Master Capital Loan Agreement and

a separate Capital Loan Agreement for each loan, dated 5 October 2009. The hybrid instruments carry a

coupon payment, payable semi-annually, at a fixed rate of 8% per annum up to 7 October 2019 and at a

floating rate of EIBOR + 5% thereafter.

The hybrid instrument has a first par call date on 7 October 2019, at the election of the Company, without any

obligation. The hybrid instrument does not have a final maturity date. The coupon is non-cumulative in nature

and can be deferred indefinitely at the Company‟s discretion without constituting a default. In case of the

parent company ceasing control of the Company, the prevailing coupon rate on the hybrid instruments will be

permanently increased by 5% and such coupons will become cumulative.

Based on the terms of the hybrid instruments, these were accounted for as equity instruments. The hybrid

instruments were subscribed to through a debt to equity swap transaction. Also refer notes-16(vii) and 20.2.


- 47 -

23. Share capital and reserves (continued)

23.2.2 Coupons

The subordinated capital loan instruments of AED 2,750.0 million subscribed by MAFH carry a coupon

payment, payable semi-annually, at a fixed rate of 8% per annum up to 7 October 2019 and at a floating rate

of EIBOR + 5% thereafter.

During the current year the Company declared a coupon of AED 220 million on these instruments. The

coupon was calculated at the rate of 8% per annum on the amount outstanding for a 12 months period from 6

October 2010 to 5 October 2011. AED 110.0 million of the coupon declared was partially adjusted with the

related party loan (refer note 20.2) and remaining AED 110.0 million was settled in cash during the year.

2011 2010

AED’000 AED’000

Full year coupon at the rate of 8% per annum on AED 2,750

million

220,000 -

Full year coupon at the rate of 8% per annum on AED 2,500

million issued in 2009

- 200,000

Six months coupon at the rate of 8% per annum on additional

AED 250 million issued in 2010

- 10,000

220,000 210,000

23.3 Revaluation reserve

The revaluation reserve relates to the revaluation of property, plant and equipment, including the accumulated

revaluation reserve in respect of any properties that were reclassified as investment property.

23.4 Conversion of retained earnings

In 2009, the shareholders of the Company passed a resolution to convert retained earnings amounting to AED

1,680.0 million to share capital. Since the legal formalities for increase in capital were pending as at 31

December 2009, the amount was classified as shareholder contribution. During the year 2010 this amount was

transferred from shareholder contribution to share capital upon completion of the necessary legal formalities.

23.5 Statutory reserve

In accordance with the Articles of Association of companies in MAFP Group and relevant local laws, 10% of

the net profit for the year of the individual companies, to which the law is applicable, is transferred to a

statutory reserve. Such transfers may be discontinued when the reserve equals the limit prescribed by the

relevant laws applicable to individual entities. This reserve can be utilised only in the manner specified under

the relevant laws and is not available for distribution. During the year, AED 40.9 million (2010: AED 1.6

million) has been transferred to this reserve.

23.6 Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow

hedges related to hedged transactions that have not yet occurred.

23.7 Currency translation reserve

The currency translation reserve comprises all foreign currency differences arising from translation of the

financial statements of foreign operations.


- 48 -

24. Financial instruments

Financial assets of MAFP Group include cash at bank and in hand, receivables and amounts due from related

parties. Financial liabilities of MAFP Group include amounts due to related parties, short term loans, long

term loans, bank overdrafts, payables and provisions. Accounting policies for financial assets and liabilities

are set out in note 3.

24.1 Financial risk management objectives and policies

The Company‟s Board of Directors have the overall responsibility for the management of risk throughout its

Group companies. The Board establishes and regularly reviews the Company‟s risk management strategy and

policy and procedures to ensure that they are in line with MAFH strategies and objectives. It has constituted

an Audit Committee within the Board of the Company which is required to review and assess the risk

management process. It ensures that internal risk management framework is effective and that a sound system

of risk management is in place to safeguard shareholder‟s interests. All MAFP Group‟s entities are required to

report on risk management on a regular basis including self-certification indicating that they have reviewed

the risks identified within their area, and they are satisfied that the controls are operating effectively.

The main risks arising from MAFP Group‟s financial instruments are credit risk, liquidity risk and market

risk, including foreign currency risk and interest rate risk.

Liquidity risk and market risk (including foreign currency risk and interest rate risk) are managed by the

centralised treasury function of MAFH on behalf of the Company.

The exposure to credit risk is monitored by MAFP Group on an on-going basis (refer note 24.2).

24.2 Credit risk

Credit risk is the risk of financial loss to MAFP Group if the counter-party fails to meet its contractual

obligations and arises principally from MAFP Group‟s receivables.

The entities in MAFP Group have credit policies in place and the exposure to credit risk is monitored on an

on-going basis. A majority of MAFP Group‟s income is by way of cash and advance receipts and is supported

by a deposit equivalent to one month‟s advance rental. Credit evaluations are performed on all customers

requiring credit over a certain amount and there is no concentration of credit risk. Cash is placed with

reputable banks and the risk of default is considered remote. Under the current economic conditions,

management has assessed the recoverability of its trade receivables as at the reporting date and consider them

to be recoverable. Due from related parties (net of provisions) are considered recoverable by management.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to

credit risk at the reporting date was:

2011 2010

AED’000 AED’000

Trade receivables 186,662 150,337

Other receivables and deposits 244,597 239,630

Cash at bank 766,328 740,527

Due from related parties 75,432 71,874

At 31 December 1,273,019 1,202,368


- 49 -

24. Financial instruments (continued)

24.3 Liquidity risk

Liquidity risk is the risk that MAFP Group will not be able to meet its financial obligations as they fall due.

MAFP Group‟s approach to managing liquidity is to ensure, in so far as it is reasonably possible, that it will

always have sufficient liquidity to meet its liabilities when they become due without incurring unacceptable

losses or risking damage to MAFP Group‟s reputation. MAFP Group‟s objective is to maintain a balance

between continuity of funding and flexibility through the use of bank overdrafts, bank loans and credit

facilities.

At 31 December 2011

Carrying

amount

Contractual

cash flows 6 months or less 6-12 months 1-2 years 2-5 years

More than 5

years

AED'000 AED'000 AED'000 AED'000 AED'000 AED'000 AED'000

Secured bank loans 6,509,696 (7,724,687) (772,545) (621,126) (1,802,218) (2,846,192) (1,682,606)

Other loans and borrowings 63,520 (87,884) (16,763) (15,996) (55,125) - -

Related party loans 1,043,263 (1,071,683) (1,071,683) - - - -

Trade and other payables 1,066,960 (1,066,960) (1,053,034) - (13,926) - -

Due to related parties 32,676 (32,676) - (32,676) - - -

Derivative financial liabilities

for risk management

- Interest rate swap 85,611 (89,751) (13,750) (12,721) (22,820) (40,460) -

- Interest rate collars 125,955 (143,636) (28,517) (20,505) (28,150) (55,800) (10,664)

Total 8,927,681 (10,217,277) (2,956,292) (703,024) (1,922,239) (2,942,452) (1,693,270)

At 31 December 2010

Carrying

amount

Contractual

cash flows

6 months or

less 6-12 months 1-2 years 2-5 years

More than 5

years


Secured bank loans 5,860,656 (6,325,629) (543,977) (365,209) (781,319) (2,403,825) (2,231,299)

Other loans and borrowings 804,660 (1,677,899) (41,331) (810,143) (23,874) (802,551) -

Related party loans 944,475 (999,293) (86,247) (363,005) (550,041) - -

Trade and other payables 1,018,307 (1,018,307) (1,008,231) - (10,076) - -

Due to related parties 108,107 (108,107) - (108,107) - - -

Derivative financial liabilities

for risk management

- Interest rate swap 80,198 (86,459) (16,404) (15,254) (24,745) (28,396) (1,660)

- Interest rate collars 138,548 (166,206) (46,452) (38,063) (46,493) (34,706) (492)

Total 8,954,951 (10,381,900) (1,742,642) (1,699,781) (1,436,548) (3,269,478) (2,233,451)


- 50 -


24.3.1 Funding and liquidity

At 31 December 2011, MAFP Group has net current liabilities of AED 2,948 million (2010: AED 2,680

million) which includes loans maturing in the short-term of AED 2,273 million, including AED 1,043 million

payable to MAFH under a revolving facility maturing in 2015 (2010: AED 1,904 million). Furthermore, at 31

December 2011 debts maturing in the long term are AED 5,343 million (2010: AED 5,706 million). Also,

from 01 January 2012 to 31 December 2012, MAFP Group expects to incur interest costs of AED 604 million

and capital expenditure of AED 3,281 million.

To meet the above MAFP Group has existing undrawn facilities of AED 3,063 million obtained from banks

and MAFH, cash in hand at 31 December 2011 of AED 769 million and it expects to generate cash from

operations of about AED 1,678 million in the subsequent twelve months ending 31 December 2012. In

addition to the existing undrawn facilities, MAFP Group has issued Sukuk (Sharia compliant debt instrument)

amounting to AED 1,469 million. These Sukuk were issued subsequent to the year end and the proceeds were

received before the signing of these consolidated financial statements. At 31 December 2011, MAFP Group is in compliance with all covenants under its borrowing facilities.

In previous years, MAFH has provided financial support to MAFP Group through conversion of long term

loans and related party balance amounting to AED 2,750 million into equity and waived a payable balance to

MAFH of AED 432.6 million.

On the basis of the above, management has concluded that MAFP Group will be able to meet its

commitments in the foreseeable future.

24.4 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will

affect MAFP Group‟s income or the value of its holdings of financial instruments. MAFP Group seeks to

apply hedge accounting to manage volatility in its income statement in relation to its exposure to interest rate

risk.

24.4.1 Foreign currency risk

MAFP Group is exposed to foreign currency risk on its net investments in foreign subsidiaries and operations.

MAFP Group is also exposed to foreign currency risk on purchases denominated in foreign currencies.

Exposure to foreign currency risk

A significant portion of MAFP Group‟s foreign currency borrowings and balances are denominated in US

Dollar (US$) and other currencies linked to US$. As MAFP Group‟s functional currency (AED) is currently

pegged to US$, any fluctuation in exchange rate is not likely to have material impact on Group‟s equity and

profit or loss. However, the subsidiaries and joint venture in Egypt and Syria report the numbers in their

respective local currencies which are not pegged to US$. During the current year, political turmoil and

economic instability resulted in depreciation in Egyptian and Syrian currencies by 3.75% and 13.38%

respectively. Foreign exchange losses recognised in profit or loss and equity are mainly attributable to these

two currencies.


- 51 -


24.4 Market risk (continued)

24.4.1 Foreign currency risk (continued)

The following significant exchange rates were applied during the year:

AED

2011 2010 2011 2010

USD 1 3.6730 3.6730 3.6730 3.6730

BHD 1 9.7427 9.7434 9.7430 9.7430

OMR 1 9.5413 9.5427 9.5400 9.5427

EGP 1 0.6171 0.6500 0.6091 0.6328

SYP 1 0.0760 0.0791 0.0680 0.0785

LBP 1 0.0024 0.0025 0.0024 0.0025

Average rate Repoting date spot rate

Foreign currency sensitivity analysis

A strengthening / (weakening) of AED, as indicated below, against EGP and SYP at 31 December would

have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis is based on

foreign currency exchange rate variances that MAFP Group considered to be reasonably possible at the

reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant and

ignores any impact of forecasted transactions.

The analysis is performed on the same basis for 2010, albeit that the reasonably possible foreign exchange

rate variances were different, as indicated below:

AED in '000s

Equity Profit or loss Equity Profit or loss

31 December 2011

EGP (14% movement) 89,036 2,097 (89,036) (2,097)

SYP (17% movement) 67,244 (487) (67,244) 487

31 December 2010

EGP (4% movement) 36,788 883 (36,788) (883)

SYP (13% movement) 46,288 - (46,288) -

Strengthening Weakening

24.4.2 Interest rate risk

As mentioned in note 24.1, interest rate risk is managed by MAFH on behalf of the Company within the

framework of the interest rate risk management policy. MAF Holding adopts a policy of maintaining a target

duration on its liability portfolio of about four years with a deviation of plus / minus one year. This is

achieved through cash and / or by using IAS 39 compliant derivative financial instruments.


- 52 -


24.4 Market risk (continued)

24.4.2 Interest rate risk (continued)

At the reporting date the interest rate profile of MAFP Group‟s interest-bearing financial instruments was:

2011 2010

AED’000 AED’000

Variable rate instruments

Financial liabilities (loans) (7,183,780) (7,146,908)

At 31 December (7,183,780) (7,146,908)

Fixed rate instruments

Financial assets 239,470 138,450

Financial liabilities (loans) (432,699) (462,883)

At 31 December (193,229) (324,433)

The contractual maturities of the financial liabilities are disclosed in note 24.3.

Sensitivity analysis for variable rate instruments

The following table demonstrates the sensitivity of MAFP Group‟s profit before tax and MAFP Group‟s

equity to a reasonably possible change in interest rates, assuming all other variables in particular foreign

currency rates remain constant. The analysis is performed on the same basis for 2009.

AED'000 2011 2010 2011 2010

Variable rate instrument + 100 (64,654) (57,175) - -

Interest rate swap + 100 - - 21,748 24,933

Interest rate collar + 100 7,863 5,575 32,344 53,832

Cash flow sensitivity (net) (56,791) (51,600) 54,092 78,765

Variable rate instrument - 100 64,654 57,175 - -

Interest rate swap - 100 - - (21,760) (34,658)

Interest rate collar - 100 - - (45,029) (45,714)

Cash flow sensitivity (net) 64,654 57,175 (66,789) (80,372)

Effect on profit or loss

Effect on other comprehensive

income

Increase /

(decrease) in

basis points


- 53 -


24.5 Fair values (continued)

The fair value of MAFP Group‟s financial instruments approximates their carrying amounts.

Basis for determining fair values

The following significant methods and assumptions were used in estimating the fair values of MAFP Group‟s

financial instruments:

Derivatives:

The fair values are obtained from market prices available from the counterparty bank, discounted cash flow

models and valuation models as appropriate. MAFP Group uses widely recognised valuation models for

determining the fair value of common and simpler financial instruments like options and interest rate swaps.

For these financial instruments, inputs into models are market observable.

Non-derivative financial liabilities:

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at

the market rate of interest at the reporting date.

Interest rates used for determining fair value:

The interest rates used to discount estimated cash flows, where applicable, are based on the spot rates derived

from the interpolated yield curve at the reporting date and were in the following range:

2011 2010

Derivatives 0.25% to 5.00% 0.29% to 3.05%

Borrowings 0.25% to 7.00% 0.29% to 3.05%


- 54 -


24.6 Derivatives held for interest rate risk management

Cash flow hedges of interest rate risk

At the end of the reporting year, MAFP Group held the following derivative instruments, designated as cash

flow hedges in relation to floating rate interest-bearing loans and borrowings:

InstrumentMaturity

date

Commencement

date

2011 2010

AED'000 AED'000

Interest rate swap 30-Nov-16 30-Nov-06 (85,611) (80,198)

09-Jul-12 09-Jul-07 (13,135) (34,519)

25-Jul-11 * 25-Jul-07 - (8,467)

28-Aug-11 * 28-Aug-07 - (9,684)

31-Mar-18 30-Sep-09 (112,820) (85,878)

(125,955) (138,548)

(211,566) (218,746)

Fair value of liabilities

Interest rate collar

*These derivatives matured during the current year. MAFH was the counterparty to these derivative

instruments.

The following table indicates the periods in which the cash flows associated with derivatives that are

designated as cash flow hedges are expected to occur:

At 31 December 2011

Carrying Expected 6 mths 6 to 12 1 to 2 2 to 5 More than

amount cash flows or less mths years years 5 years


Interest rate swaps:

Liabilities 85,611 (89,751) (13,750) (12,721) (22,820) (40,460) -

Interest rate collars:

Liabilities 125,955 (143,636) (28,517) (20,505) (28,150) (55,800) (10,664)

211,566 (233,387) (42,267) (33,226) (50,970) (96,260) (10,664)

At 31 December 2010

Carrying Expected 6 mths 6 to 12 1 to 2 2 to 5 More than

amount cash flows or less mths years years 5 years


Interest rate swaps:

Liabilities 80,198 (86,459) (16,404) (15,254) (24,745) (28,396) (1,660)

Interest rate collars:

Liabilities 138,548 (166,206) (46,452) (38,063) (46,493) (34,706) (492)

218,746 (252,665) (62,856) (53,317) (71,238) (63,102) (2,152)

The periods in which the cash flows associated with derivatives that are designated as cash flow hedges are

expected to impact the income statement are not expected to be significantly different from the above.


- 55 -


24.7 Capital management

The primary objective of MAFP Group‟s capital management is to ensure that it maintains healthy capital and

liquidity ratios in order to support its operations and future developments.

The following ratios are used to monitor the business performance:

(i) Net debt to equity ratio

(ii) Interest coverage ratio

(iii) Debt service coverage ratio

These ratios are monitored in accordance with MAFH‟s capital management policy.

2011 2010

AED'000 AED'000

Loans and borrowings 7,616,479 7,609,791

Total debt 7,616,479 7,609,791

Share capital 3,500,000 3,500,000

Shareholder contribution 2,750,000 2,750,000

Retained earnings 1,943,308 2,085,772

Revaluation reserve 12,340,920 11,143,626

Other reserves 187,077 221,379

Total equity attributable to owners of the Company 20,721,305 19,700,777

Gearing ratio 37% 39%

MAFP Group has various borrowing arrangements which require maintaining certain net worth, interest

coverage and debt equity ratios. Apart from these requirements neither the Company nor any of its

subsidiaries are subject to any externally imposed capital requirements.

25. Capital commitments

Capital commitments of MAFP Group at 31 December 2011 on on-going projects, including MAFP Group‟s

share in capital commitments of joint ventures, amounted to AED 757.7 million (2010: AED 1,684.8 million).

Furthermore, MAFP Group has executed a development agreement with a government agency in Syria to

invest AED 3,673.0 million in 15 years effective from July 2009 of which AED 1,101.9 million should be

invested in the first five years. Up to 31 December 2011, MAFP Group has invested AED 324.7 million

(2010: AED 276.5 million) in the project.

26. Contingent liabilities

MAFP Group is contingently liable in respect of corporate guarantees of AED 3,673.0 million (2010: AED

3,998.0 million) to various banks. Furthermore, MAFP Group has provided other operational guarantees of

AED 5.5 million (2010: AED 6.5 million).


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27. Subsequent events

There have been no significant events subsequent to 31 December 2011 up to the date of authorisation of

financial statements on 05 March 2012, which would have a material effect on these consolidated financial

statements.

28. Operating leases

Leases as lessor

MAFP Group leases out its properties under operating leases. Minimum lease payments under non-

cancellable operating leases are as follows:

2011 2010

AED’000 AED’000

Less than one year 1,667,944 1,481,970

Between one and five years 5,567,429 5,167,871

More than five years 1,367,562 2,002,417

Total 8,602,935 8,652,258

Leases as lessee

Minimum lease payments under non-cancellable operating leases are as follows:

2011 2010

AED’000 AED’000

Less than one year 10,702 10,921

Between one and five years 42,810 42,809

More than five years 95,323 106,022

Total 148,835 159,752

Above lease rentals represent MAFP Group commitments for staff accommodation. In addition to this

MAFP Group also enters into operating leases, which typically run for a period of one year with an

option to renew the lease after that date. The lease rentals are usually renewed to reflect market rentals.

29. Critical judgments in applying MAFP Group’s accounting policies

In the process of applying MAFP Group‟s accounting policies, which are described in the notes, management

has made certain judgments as mentioned below.

Investment property – accounting for dual use properties

Investment property is property held to either earn rental income or capital appreciation or for both. Certain

properties of MAFP Group include a portion that is held to generate rental income or capital appreciation and

another portion that is held for own use by the Company in supply of services or for administrative purposes.

Such properties are split between property, plant and equipment and investment properties based on leasable

value, subject to the conditions described below.

Properties that can be sold or finance leased separately

In the UAE, Law No. 27 of 2007 Regulating the Ownership of Jointly Owned Properties in the Emirate of

Dubai (“the Strata Law”) came into effect from 1 April 2008. Based on the terms of the Strata Law and

clarification obtained by the Company from independent legal advisors, management is of the view that:

- it is possible to divide developed property, such as shopping mall, into separate units;

- that conceptually, strata title can validly be created within the shopping malls and individual units or parts

may be sold or subject to long leases; and

- the Dubai Land Department and the Strata Law both support the above concept.

In countries other than UAE, wherever similar laws exist, the Company splits dual use properties on a similar

basis.


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29. Critical judgments in applying MAFP Group’s accounting policies (continued)

Investment property – accounting for dual use properties (continued)

Properties that cannot be sold or finance leased separately (continued)

Due to legal restrictions in Oman, and in the UAE in respect of properties which are built on land gifted by

the Ruler, these properties cannot currently be sold or finance leased separately (in case of UAE, without the

prior consent of the Ruler). Consequently, the entire property is classified as investment property only if an

insignificant portion is held for own use.

Properties built on gifted land:

Certain properties have been developed on land gifted to the majority shareholder of the ultimate holding

entity, personally, rather than the company. These properties are held in the name of the majority shareholder

for the beneficial interest of the company.

Properties which are built on land gifted by the Ruler of Dubai, cannot currently be sold or finance leased

separately (without the prior consent of the ruler). On 15 March 2010, the Ruler of Dubai issued a decree

which allows each UAE national, who has been granted industrial or commercial land, to apply to the Land

and Properties Department (“the Department”) to request for free ownership of the land (and obtain a title

deed with free hold status for the plot), that is free from any restrictions over the use of the land by registering

it in the real estate register for a fee of 30% of the market value of the land, which will be determined by the

Department on the date of the transfer of ownership. Upon issuance of this decree, MAFP can transfer the

legal title and register the properties constructed on gifted land in its name. Management is of the view that

until the decision to register the properties is formally approved by the Board, the properties will continue to

be classified as property, plant and equipment if a significant portion is held for own use.

In management‟s judgment, the level of own use is assessed based on the level of ancillary income earned by

MAFP Group from the property as a whole. If the ancillary income exceeds 5% of the total income from the

property, then the entire property is classified as property, plant and equipment, at the date when the level of

ancillary income exceeds 5%.

Vacant lands in Egypt and Syria:

External valuers were unable to value the vacant lands in Egypt (including three plots owned by a JV) and

Syria in view of the current political and economic situation, civil unrest and the lack of comparable market

transactions. Due to these reasons and considering the decline in fair value of other operating properties in

Egypt, management has internally assessed the value of these lands and a reduction in value has been

recognised in the current year.

Fair value of properties

Fair value of undeveloped land and other developed properties at the reporting date is determined every year

at the reporting date by independent external RICS Chartered Surveyors and Valuers having sufficient current

local and national knowledge of the respective property markets. The valuation has been prepared in

accordance with the RICS Valuation Standards, Sixth Edition. Internal valuations are carried out quarterly,

based on the methods and assumptions used by the external valuer, to ensure that the fair value of a revalued

asset does not differ materially from its carrying amount.

Fair value is the market value of the properties. Market value is the highest possible price for which the

property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm‟s

length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and

without compulsion. If there is no market-based evidence of fair value of a property, fair value is determined

using the present value of the estimated future net cash flows for each property. A yield that reflects the

specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the

property valuation.


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The fair valuation of properties constructed on gifted land reflects management‟s interpretation of the relevant

decree and assumes that the titles are transferable to the company within a reasonable time scale.

The current volatility in the global financial system has created a significant degree of turbulence in

commercial real estate markets across the world. Furthermore, the lack of liquidity in the capital markets

means that it may be very difficult to achieve the sale of property assets in the short term.

Apportionment of fair values between land and buildings

Where the valuation of a property comprises the aggregate value of land and building, the valuation is

apportioned between land and building based on the reinstatement cost as computed by an external appraiser

of the building, unless another appropriate basis is available for allocation.

Change in fair value apportioned to buildings is then allocated to the building structure as it is impracticable

to obtain detailed fair value information at each component level of the building from the valuer or to use any

other reasonable method of approximation to internally estimate such component values. Consequently, any

increase in fair values is allocated to the structure of the buildings and depreciated over the remaining useful

lives of the respective buildings.

Impairment

Management assesses impairment loss on assets other than investment property and inventories whenever

there are indicators of impairment. In assessing impairment of assets based on value in use, the estimated

future cash flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and risk specific to the asset.

Staff terminal benefits

MAFP Group‟s liability for staff terminal benefits qualifies as a defined benefit plan under IAS 19. MAFP

Group‟s net obligation in respect of staff terminal benefits is calculated by estimating the amount of future

benefits that employees have earned in return for their services in the current and prior years, and is

discounted to determine the present value of the obligation. The discount rate used is the yield at the reporting

date on premium bonds that have maturity dates approximating the terms of MAFP Group‟s obligations.

The principal assumptions for calculation of the provision for staff terminal benefits at the reporting date are

as follows:

Discount rate 5.00%

Future salary increase 4.00%

Valuation of financial instruments

MAFP Group‟s accounting policy on fair value measurements is discussed in accounting policy 3(q).

MAFP Group measures fair values using the following fair value hierarchy that reflects the significance of the

inputs used in making the measurements:

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e.

derived from prices). This category includes instruments valued using: quoted market prices in active markets

for similar instruments; quoted prices for identical or similar instruments in the market that are considered

less than active; or other valuation techniques where all significant inputs are directly or indirectly observable

from market data.


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Valuation of financial instruments (continued)

Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments

where the valuation technique includes inputs not based on observable data and the unobservable inputs have

a significant effect on the instrument‟s valuations. This category includes instruments that are valued based

on quoted prices for similar instruments where significant unobservable adjustments or assumptions are

required to reflect differences between the instruments.

Valuation techniques include net present value and discounted cash flow models, comparison to similar

instruments for which market observable prices exist, and other valuation models. Assumptions and inputs

used in valuation techniques include risk-free and benchmark profit rates, credit spreads and other premia use

in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index

prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a

fair value determination that reflects the price of financial instruments at the reporting date that would have

been determined by market participants acting at arm‟s length.

MAFP Group uses widely recognized valuation models for determining the fair value of common and more

simple financial instruments, that use only observable market data and require little management judgment

and estimation. Observable prices and model inputs are usually available in the market for listed debt and

equity securities, exchange traded derivatives and simple over the counter derivatives like interest rate swaps

and collars. Availability of observable market prices and model inputs reduces the need for management

judgment and estimation and also reduces the uncertainty associated with determination of fair values.

Availability of observable market prices and inputs varies depending on products and markets and is prone to

changes based on specific events and general conditions in the financial markets.

The table below analyses financial instruments measured at fair value at the end of the reporting period, by

the level in the fair value hierarchy into which the fair value measurement is categorized:

Level 1 Level 2 Level 3 Total

Note AED’000 AED’000 AED’000 AED’000

31 December 2011

Financial liabilities

Derivatives held for interest rate risk

management 24.6 - 211,566 - 211,566

- 211,566 - 211,566

31 December 2010

Financial liabilities

Derivatives held for interest rate risk

management 24.6 - 218,746 - 218,746

- 218,746 - 218,746

During the period, there was no movement between the fair value hierarchies of the derivative financial

instruments held by MAFP Group. Furthermore, there has been no change in the valuation techniques in

relation to valuation of derivative financial instruments during the year.

30. Syria sanctions and representation

MAFP Group has adopted a policy of compliance with US and other relevant sanctions in relation to its

operations in Syria. Management has identified several areas to protect MAFP Group and its employees from

this sanctions regime, including recusing employed US persons, which includes Senior Executives and

Statutory Managers from representations in relation to MAFP Group‟s activities in Syria and these

consolidated financial statements.


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31. List of Subsidiaries

The consolidated financial statements include the results of the following subsidiaries:

Subsidiaries

Country of

incorporation /

origin

Ownership

%

Active subsidiaries

Majid Al Futtaim Investments Mirdiff LLC UAE 100%

Majid Al Futtaim Syria for Investment and Development LLC UAE 100%

MAM Investments LLC UAE 100%

Majid Al Futtaim Properties Lebanon LLC (formerly Beirut Marina LLC) UAE 100%

Fujairah City Centre Investment LLC UAE 62.5%

International Property Services LLC Oman 100%

MAF Misr for Commercial and Real Estate Investment Company S.A.E Egypt 100%

MAF Investments Bahrain BSC Bahrain 100%

MAF Lebanon for Commercial and Real Estate Investments SARL Lebanon 100%

MAF Lebanon Holding SAL Lebanon 100%

Suburban Development Company SAL Lebanon 96.3%

MAF Investments Syria LLC Syria 100%

Majid Al Futtaim Shopping Malls KSA Saudi Arabia 100%

Bab Al Madinah Company Property Investment Limited Yemen 51%

Majid Al Futtaim Properties Lebanon Holding SAL Lebanon 100%

Majid Al Futtaim Properties Management Services SARL Lebanon 100%

Dormant subsidiaries

MAF Technological Systems LLC UAE 100%

Majid Al Futtaim Malls International LLC UAE 100%

Majid Al Futtaim Hospitality LLC UAE 100%

Majid Al Futtaim Development LLC UAE 100%

Majid Al Futtaim Shopping Malls LLC UAE 100%

MAF for Real Estate Investment S.A.E. Egypt 100%

Majid Al Futtaim North Africa SARL Tunisia 100%

Societe Tunisia WIFEK Tunisia 100%

Shares of certain subsidiary companies are held by subsidiaries of MAFH for the beneficial interest of MAFP

Group.


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32. List of joint ventures

The consolidated financial statements include MAFP Group‟s share of the results of the following joint

venture companies:

Joint ventures

Country of

incorporation /

origin

Ownership %

Active joint ventures

Sharjah Holding Company JSC (formerly Sharjah Real Estate Development

Holding (Brajeel) JSC)

UAE 50%

Al Mamzar Islands Developments LLC UAE 50%

The Wave Muscat S.A.O.C Oman 50%

Waterfront City SARL Lebanon 50%

The Egypt Emirates Malls Group S.A.E Egypt 50%

Aya Real Estate Investment BSC Bahrain 50%

Dormant joint ventures

Arzanah Mall LLC UAE 50%

Yenkit Tourism Development LLC Oman 60%

Bab Al Madina for Development and Management of Business Centers

Company LLC Libya 50%

City Centre Essa Town Co WLL Bahrain 50%

33. Associate

The consolidated financial statements include MAFP Group‟s share of the results of the following associate

company:

Associate

Country of

incorporation /

origin

Ownership %

Active associate

Enshaa PSC UAE 28.44%

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