FY 2010 Annual Report - Part II - Orascom Development

orascomdh.com

FY 2010 Annual Report - Part II - Orascom Development

Orascom Development Holding (Consolidated Financial Statement)

Contents

Orascom Development Holding (consolidated financial statements)

Consolidated statement of comprehensive income F-3

Consolidated statement of financial position F-4

Consolidated statement of changes in equity F-6

Consolidated cash flow statement F-7

Notes to the consolidated financial statements F-9

Orascom Development Holding AG

Income statement F-72

Statutory balance sheet F-72

Statement of changes in equity F-73

Cash flow statement F-73

Notes to the financial statements F-74

Filename/Version: ODH - 2010 annual report (financials)- fourth draft_v3.docx

Date/Time: 29/04/2011 12:04

F-1


ODH Annual Report 2010

Orascom Development

Holding

Consolidated financial statements

together with auditor's report for the

year ended 31 December 2010

F-2


Orascom Development Holding (Consolidated Financial Statement)

Consolidated statement of comprehensive income for the year ended 31 December 2010

CHF

Notes

2010 2009 (restated)

CONTINUING OPERATIONS

Revenue 6/7 516,091,893 586,089,302

Cost of sales 7.2 (340,702,242) (389,792,215)

Gross profit 175,389,651 196,297,087

Investment income 9 12,352,935 13,217,393

Other gains and losses 10 19,163,024 16,697,119

Administrative expenses 8 (57,524,090) (40,459,762)

Finance costs 11 (7,045,098) (18,949,656)

Share of (losses)/profits of associates 19 (1,552,599) 187,701

Profit before tax

140,783,823 166,989,882

Income tax expense 13 (18,531,906) (22,090,482)

Profit for the year from continuing operations 122,251,917 144,899,400

Other comprehensive income, net of income

tax

Exchange differences on translating foreign

operations (146,580,673) (34,750,611)

Net gain on hedging instruments entered into for

cash flow hedges 611,265 725,041

Net loss on revaluation of available-for-sale

financial assets (939,718) (85,800)

Other comprehensive income, net of income tax

(146,909,126) (34,111,370)

Total comprehensive income for the year

Profit attributable to:

(24,657,209) 110,788,030

Owners of the Parent Company 94,920,828 106,490,887

Non-controlling interests 27,331,089 38,408,513

Total comprehensive income attributable to:

122,251,917 144,899,400

Owners of the Parent Company (25,862,767) 75,681,383

Non-controlling interests 1,205,558 35,106,647

(24,657,209) 110,788,030

Earnings per share from continuing operations

Basic 14 3.88 4.59

Diluted 14 3.88 4.59

Samih Sawiris Amr Sheta Mahmoud Zuaiter

Chairman & CEO Vice Chairman & Co-CEO Group CFO

F-3


ODH Annual Report 2010

Consolidated statement of financial position at 31 December 2010

CHF

Notes

31 December 2010

31 December 2009

(restated)

1 January 2009 (restated)

ASSETS

NON-CURRENT ASSETS

Property, plant and

equipment

15 926,077,841 957,457,508 801,748,497

Investment property 16 78,355,235 71,786,344 65,834,078

Goodwill 17 8,208,807 30,432,009 33,368,405

Investments in associates 19 35,397,484 8,129,189 36,898,629

Non-current receivables 20 94,719,641 101,427,266 45,746,621

Deferred tax assets 13.4 17,319,445 3,020,589 1,795,751

Finance lease receivables 25 13,740,381 6,110,881 -

Other financial assets 21 70,597,147 95,927,598 45,482,274

Total non-current assets 1,244,415,981 1,274,291,384 1,030,874,255

CURRENT ASSETS

Inventories 23 260,175,662 202,618,963 174,904,697

Trade and other receivables 24 156,042,384 164,804,834 136,036,375

Finance lease receivables 25 2,478,257 2,101,401 -

Due from related parties 41 23,838,453 31,049,887 15,019,414

Other financial assets 21 10,808,861 701,500 1,338,713

Other current assets 22 119,225,619 132,121,875 137,316,347

Cash and bank balances 42 276,452,970 77,899,218 177,145,039

Total current assets 849,022,206 611,297,678 641,760,585

Total assets

2,093,438,187 1,885,589,062 1,672,634,840

F-4


Orascom Development Holding (Consolidated Financial Statement)

CHF Notes 31 December 2010

EQUITY AND LIABILITIES

31 December

2009 (restated)

1 January 2009 (restated)

CAPITAL AND RESERVES

Issued capital 26 672,882,864 568,881,621 580,491,450

Reserves 27 (74,209,306) (2,539,697) 27,856,378

Retained earnings 28 396,880,378 301,959,550 195,468,663

Equity attributable to owners of the Parent Company

Non-controlling interest 29

Total equity

995,553,936 868,301,474 803,816,491

197,589,888 197,143,304 152,614,877

1,193,143,824 1,065,444,778 956,431,368

NON-CURRENT LIABILITIES

Borrowings 30/36 270,832,587 161,378,525 152,987,442

Trade payables 33 35,921,963 71,476,141 30,059,744

Retirement benefit obligation 37 199,646 166,161 101,274

Notes payable 10,193,018 13,426,089 8,510,669

Deferred tax liabilities 13.4 27,993,241 14,446,690 12,697,998

Other financial liabilities 35 15,448,607 18,652,924 16,751,721

Total non-current liabilities

360,589,062 279,546,530 221,108,848

CURRENT LIABILITIES

Trade and other payables 33 57,120,751 102,219,680 64,059,838

Borrowings 30/36 240,936,367 226,791,976 222,072,302

Due to related parties 41 2,614,098 122,850 33,350,469

Current tax liabilities 13.3 15,975,901 10,873,384 8,368,915

Provisions 31 56,779,789 46,159,372 7,555,868

Other current liabilities 32 166,278,395 154,430,492 159,687,232

Total current liabilities

Total liabilities

539,705,301 540,597,754 495,094,624

900,294,363 820,144,284 716,203,472

Total equity and liabilities

2,093,438,187 1,885,589,062 1,672,634,840

Samih Sawiris Amr Sheta Mahmoud Zuaiter

Chairman & CEO Vice Chairman & Co-CEO Group CFO

F-5


ODH Annual Report 2010

Consolidated statement of changes in equity for the year ended 31 December 2010

CHF Issued capital Share premium Treasury shares Hedging reserve

Investments

revaluation reserve

Foreign currency

translation reserve

Reserve from

common control

transactions

Equity swap

settlement

Retained earnings

Attributable to owners

of the Company

Non-controlling

interests

Total

Balance at 1 January 2009 580,491,450 183,348,356 (28,426) (3,049,255) - (43,899,293) (108,515,004) - 194,315,195 802,663,023 144,341,700 947,004,723

Impact of changes in accounting policies - - - - - – – - 1,153,468 1,153,468 8,273,177 9,426,645

Restated balance at 1 January 2009 580,491,450 183,348,356 (28,426) (3,049,255) - (43,899,293) (108,515,004) - 195,468,663 803,816,491 152,614,877 956,431,368

Restated profit for the year - - – – - – – - 106,490,887 106,490,887 38,408,513 144,899,400

Other comprehensive income for the year, net of income tax - - - 725,041 (85,800) (31,448,745) - - - (30,809,504) (3,301,866) (34,111,370)

Total comprehensive income for the year - - - 725,041 (85,800) (31,448,745) - - 106,490,887 75,681,383 35,106,647 110,788,030

Reissuance of treasury shares - - 28,426 - - – – - - 28,426 - 28,426

Reserve from common control transactions - - - - - – 463,501 - - 463,501 - 463,501

Share capital reduction (repayment of nominal value) (11,609,829) - - - - – – - - (11,609,829) - (11,609,829)

Share capital reduction costs - (78,498) - - - – – - - (78,498) - (78,498)

Non-controlling interest share in equity of consolidated subsidiaries - - - - - – – - - - 9,421,780 9,421,780

Restated balance at 31 December 2009 568,881,621 183,269,858 - (2,324,214) (85,800) (75,348,038) (108,051,503) - 301,959,550 868,301,474 197,143,304 1,065,444,778

Balance at 1 January 2010 (note 27) 568,881,621 183,269,858 - (2,324,214) (85,800) (75,348,038) (108,051,503) - 301,959,550 868,301,474 197,143,304 1,065,444,778

Profit for the year - - - – - – - - 94,920,828 94,920,828 27,331,089 122,251,917

Other comprehensive income for the year, net of income tax - - - 611,265 (939,718) (120,455,143) - - - (120,783,595) (26,125,531) (146,909,126)

Total comprehensive income for the year - - - 611,265 (939,718) (120,455,143) - - 94,920,828 (25,862,767) 1,205,558 (24,657,209)

Reserve from common control transactions - - - - - - 1,795,586 - - 1,795,586 - 1,795,586

Share capital reduction (repayment of nominal value) (15,092,778) - - - - - - - - (15,092,778) - (15,092,778)

Share capital reduction costs - (49,205) - - - - - - - (49,205) - (49,205)

Share capital increase (issuance of ordinary shares) 119,094,021 66,065,708 - - - - - - - 185,159,729 - 185,159,729

Share capital increase costs - (7,013,540) - - - - - - (7,013,540) - (7,013,540)

Contract over own shares (10,220,295) - (10,220,295) - (10,220,295)

Consideration received in treasury shares - (1,464,267) - - - - - (1,464,267) - (1,464,267)

Non-controlling interest share in equity of consolidated subsidiaries - - - - - - - - - 1,719,314 1,719,314

Reduction non-controlling interests due to dividend payment (OHD) - - - - - - - - - (2,478,288) (2,478,288)

Balance at 31 December 2010 (note 27) 672,882,864 242,272,821 (1,464,267) (1,712,949) (1,025,518) (195,803,181) (106,255,917) (10,220,295) 396,880,378 995,553,936 197,589,888 1,193,143,824

F-6


Orascom Development Holding (Consolidated Financial Statement)

Consolidated cash flow statement for the year ended 31 December 2010

CHF Notes 2010 2009 (restated)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year 122,251,917 144,899,400

Adjustments for:

Income tax expense recognized in profit or loss 13.1 18,531,906 22,090,482

Share of profits/(losses) of associates 19 1,552,599 (187,701)

Finance cost recognized in profit or loss 11 7,045,098 18,949,656

Investment revenue recognized in profit or loss 9 (12,352,935) (13,217,393)

Impairment loss recognized on trade receivables and other current assets 22-24 19,655,459 6,643,241

Impairment loss revised on trade receivables 24 (3,389,300) (1,322,092)

Gain on sale or disposal of property, plant and equipment 10 (305,021) (223,996)

Gain on revaluation of investment properties 16 (14,120,934) (5,170,672)

Gain on disposal of subsidiaries 34 (7,824,706) -

Gain from disposal of AFS 10 - (5,233,080)

Bargain purchase gain on acquisition - (483,016)

Depreciation and amortization of non-current assets 15 41,608,430 47,212,660

Net foreign exchange (gains)/losses 10 6,575,798 (1,396,768)

Other non cash transaction - 28,426

MOVEMENTS IN WORKING CAPITAL - -

(Increase) in trade and other receivables (49,072,176) (83,057,779)

(Increase) in finance lease receivables (8,006,356) (8,212,282)

(Increase) in inventories (84,261,660) (31,953,404)

Decrease/(Increase) in other assets 31,948,246 (11,110,065)

Increase in trade and other payables 13,249,443 17,565,395

Increase in provision 18,077,465 32,512,125

Increase/(Decrease) in other liabilities 62,784,780 (20,431,510

Cash generated from operations 163,948,053 107,901,627

Interest paid (26,987,170) (16,694,883)

Income tax paid (10,873,384) (8,368,915)

Net cash generated by operating activities 126,087,499 82,837,829

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for property, plant and equipment (273,121,088) (187,729,260)

Proceeds from disposal of property, plant and equipment 1,460,285 3,401,398

Proceeds on sale of financial assets - 6,401,853

Payments to acquire financial assets (31,933,533) (25,282,182)

Dividends received 9 8,158 1,073,224

Interest received 12,345,149 9,140,275

Net cash outflow on acquisition of subsidiaries - 9,804

Net cash loss on deconsolidated subsidiaries 34 (2,868,053) -

Net cash used in investing activities (294,109,082) (192,984,888)

CASH FLOWS FROM FINANCING ACTIVITIES -

Proceeds from issues of equity shares 185,159,729 -

Transaction cost resulted from capital increase (7,013,540) -

Transaction cost resulted from capital reduction (49,205) (78,498)

Issued capital reduction paid to shareholders (15,092,778) (11,609,829)

Dividends paid (2,478,289) -

Non controlling interests shares in changes of equity for

consolidated subsidiaries

16,617,433 2,004,619

Repayment of borrowings (11,804,867) (11,783,055)

Proceeds from borrowings 211,688,812 33,984,076

Net cash generated by financing activities 377,027,295 12,517,313

Net (decrease)/increase in cash and cash equivalents 209,005,712 (97,629,746)

Cash and cash equivalents at the beginning of the year 77,899,218 177,145,039

Effects of exchange rate changes on the balance of cash held in

foreign currencies

(10,451,960) (1,616,075)

Cash and cash equivalents at the end of the year 42 276,452,970 77,899,218

F-7


ODH Annual Report 2010

Index to the notes to the consolidated financial statements

Page

1 General information 9

2 Application of new and revised International Financial Reporting Standards (“IFRSs”) 9

3 Significant accounting policies 11

4 Critical accounting judgments and key sources of estimation uncertainty 24

5 The group and major changes in group entities 27

6 Revenue 27

7 Segment information 28

8 Employee benefits expense 31

9 Investment revenue 32

10 Other gains and losses 32

11 Finance costs 33

12 Compensation of key management personnel 33

13 Income taxes relating to continuing operations 36

14 Earnings per share 39

15 Property, plant and equipment 40

16 Investment property 42

17 Goodwill 43

18 Subsidiaries 44

19 Investments in associates 46

20 Non-current receivables 47

21 Other financial assets 48

22 Other current assets 49

23 Inventories 49

24 Trade and other receivables 50

25 Finance lease receivables 50

26 Capital 51

27 Reserves (net of income tax) 52

28 Retained earnings 53

29 Non-controlling interests 54

30 Borrowings 54

31 Provisions 55

32 Other current liabilities 56

33 Trade and other payables 56

34 Disposal of subsidiaries 56

35 Miscellaneous financial liabilities 58

36 Obligations under finance leases 59

37 Retirement benefit plans 59

38 Risk assessment disclosure required by Swiss law 61

39 Financial instruments 61

40 Share-based payments 66

41 Related party transactions 67

42 Cash and cash equivalents 68

43 Non-cash transactions 68

44 Operating lease arrangements 68

45 Commitments for expenditure 69

46 Events after the reporting period 69

47 Litigation 69

48 Approval of financial statements 69

F-8


Orascom Development Holding (Consolidated Financial Statement)

Notes to the consolidated financial statements for

the year ended 31 December

2010 GENERAL INFORMATION

___________________________________________________________________________________

Orascom Development Holding AG (“ODH” or “the Parent

Company”), a limited company incorporated in Altdorf,

Switzerland, is a public company whose shares are traded on

the SIX Swiss Exchange. In addition, Egyptian Depository

Receipts (“EDRs”) of the Parent Company are traded at the

EGX Egyptian Exchange. One EDR represents 1/20 of an

ODH share.

The Company and its subsidiaries (the “Group”) is a leading

developer of fully integrated towns that include hotels, private

villas and apartments, leisure facilities such as golf courses,

marinas and supporting infrastructure. The Group’s diversified

portfolio of projects is spread over nine jurisdictions, with

primary focus on touristic towns and recently affordable

housing. The Group currently operates in Egypt, Jordan, UAE,

Oman, Switzerland, Morocco, United Kingdom, Montenegro

and Romania and is continuously seeking development

opportunities in untapped yet attractive locations all over the

world. The Group has four existing projects: El Gouna, the

flagship project, a fully-fledged town on the Red Sea coast

(Egypt); Taba Heights, on the Sinai Peninsula (Egypt), the

Group’s second tourism destination following El Gouna’s

business model; the Cove (Ras Al Khaimah, UAE), the

Group’s first development experience outside Egypt; and

Haram City, an integrated town dedicated to affordable

housing in Egypt, catering for the mass population.

The addresses of its registered office and principal place of

business are disclosed in the introduction to the annual report.

2 APPLICATION OF NEW AND REVISED

INTERNATIONAL FINANCIAL REPORTING

STANDARDS (“IFRSs”)

_______________________________________________________________________________________

2.1 New and revised IFRSs affecting amounts

reported in the current year and prior years

The following new and revised Standards and Interpretations

have been applied in the current period and have affected the

amounts reported in these financial statements.

Details of other new and revised IFRS applied in these

financial statements that have had no material effect on the

financial statements are set out in section 2.2.

New and revised IFRSs affecting presentation and disclosure

only

(i)

Revised and amended Standards

IFRS 1 was amended in 2010 to provide a limited

exemption for first-time adopters of IFRSs. The limited

exemption states that an entity need not provide the

comparative prior-period information required by the March

2009 amendments to IFRS 7 Improving Disclosures about

Financial Instruments for first-time adopters adopting before 1

January 2010. The amendment effective date is on or after 1

July 2010. The Group has used this exemption in the

presentation of its 2010 consolidated financial statements.

IAS 1 Amendments to IAS 1 Presentation of Financial

Statements (as part of Improvements to IFRSs issued in 2009)

clarify that the potential settlement of a liability by the issue of

equity is not relevant to its classification as current or noncurrent.

This amendment has had no effect on the amounts

reported in prior years because the Group has not previously

issued liabilities instruments of this nature.

IAS1 As part of Improvements to IFRSs issued in 2010,

IAS 1 Presentation of Financial Statements was amended to

clarify that an entity may choose to present the required

analysis of items of other comprehensive income either in the

statement of changes in equity or in the notes to the financial

statements. The Group has applied the amendments in

advance of their effective date (annual periods beginning on

or after 1 January 2011). The amendments have been

applied retrospectively.

IAS 7 Amendments to IAS 7 Statement of Cash Flows (as

part of Improvements to IFRSs issued in 2009) specify that

only expenditures that result in a recognised asset in the

statement of financial position can be classified as investing

activities in the statement of cash flows. The application of the

amendments to IAS 7 has not had any impact on the

presentation of cash outflows since the Group has never

classified expenditures that do not result in a recognized asset

as investing activities.

New and revised IFRSs affecting the reported financial

performance and / or financial position

(ii)

Revised and amended standards

IFRS 2 Share-based Payment – Amendments to IFRS 2

relate to group cash-settled share-based payment transactions

and clarify the scope of IFRS 2, as well as the accounting for

group cash-settled share-based payment transactions where

the entity receiving the goods or services and another group

entity or shareholder has the obligation to settle the award.

The amendments have a consequential impact on the

consolidated financial statement of the Group.

IFRS 3 Business Combinations – IFRS 3 (revised in 2008)

represents a comprehensive revision on applying the

acquisition method in accounting for business combinations.

There was no business combination in the current year.

IAS 27 Consolidated and Separate Financial Statements –

The consequential amendments to IAS 27 (as amended in

2008) arising from amendments to IFRS 3 have resulted in

changes in the Group's accounting policies for changes in

ownership interests in subsidiaries that do not result in loss of

control.

F-9


ODH Annual Report 2010

IAS 28 Investments in Associates – The consequential

amendments to IAS 28 (as amended in 2008) arising from

amendments to IFRS 3 have resulted in changes in the

Group’s accounting policies so that a loss of control is

recognized as a disposal and re-acquisition of any retained

interest at fair value. This change was applicable to the sale of

the six percent stake in the former Garranah subsidiaries.

IAS 31 Interests in Joint Ventures – Consequential

amendments arising from amendments to IFRS 3 have

resulted in that when an investor ceases to have joint control

over an entity, it shall account for any remaining investment in

accordance with IAS 39 from that date, provided that the

former jointly controlled entity does not become a subsidiary

or associate. From the date when a jointly controlled entity

becomes a subsidiary of an investor, the investor shall account

for its interest in accordance with IAS 27 (as amended in

2008) and IFRS 3 (as revised in 2008). From the date when a

jointly controlled entity becomes an associate of an investor, the

investor shall account for its interest in accordance with IAS 28 (as

amended in 2008).

IAS 39 Financial Instruments: Recognition and Measurement –

The amendments for eligible hedged items provide

clarification on two aspects of hedge accounting: identifying

inflation as a hedged risk or portion, and hedging with

options.

IAS 39 Financial Instruments: Recognition and Measurement –

Amendments for reassessment of embedded derivatives when

reclassifying financial instruments. These amendments to IFRIC

9 and IAS 39 issued in March 2009 set up two exceptions to

the general rule that prohibits an entity from reassessing

whether an embedded derivative is required to be separated

from the host contract and accounted for as a derivative

subsequent to the date on which the entity first becomes a

party to the contract.

Now such subsequent reassessment is required when an entity

reclassifies financial asset out of the fair value through profit

or loss category on the basis of circumstances that existed on

the later date of: (i) when an entity first becomes a party to the

contract; and (ii) a change in the terms of the contract that

significantly modified the cash flows that otherwise would have

been required.

Various - The application of Improvements to IFRSs issued in

2009.

(iii) New Interpretations

IFRIC 17 Distributions of Non-cash Assets to Owners – The

Interpretation provides guidance on the appropriate

accounting treatment when an entity distributes assets other

than cash as dividends to its shareholders and its effective

date is 1 July 2009.

IFRIC 18 Transfers of Assets from Customers – The

Interpretation addresses the accounting by recipients for

transfers of property, plant and equipment from ‘customers’

and concludes that when the item of property, plant and

equipment transferred meets the definition of an asset from

the perspective of the recipient, the recipient should recognise

the asset at its fair value on the date of the transfer, with the

credit being recognised as revenue in accordance with IAS 18

Revenue. The Interpretation effective date is 1 Jul 2009.

The adoption of these Standards and Interpretations has led

to changes in the Group’s accounting policies for business

combinations, basis of consolidation and investments in

associates as outlined in paragraph 3.5 Compulsory changes

in accounting policies. The other amendments have not had

any material impact on the presentation, disclosure or

amounts reported for the current and prior years but may

affect the accounting for future transactions or arrangements.

2.2 Standards and Interpretations in issue but not

yet effective

At the date of authorisation of these financial statements, the

Group has not adopted the following Standards and

Interpretations that have been issued but are not yet effective.

They will be effective on or after the dates described below.

(i) New, amended and revised Standards

IFRS 7 Amendments to IFRS 7 Financial

Instruments: Disclosures; require

disclosures about credit risk and

collateral held and provide relief from

disclosures previously required

regarding renegotiated loans (as part

of Improvements to IFRSs issued in

2010).

IFRS 3 As part of Improvements to IFRSs

issued in 2010, IFRS 3 (revised in

2008) was amended to clarify that the

measurement choice regarding noncontrolling

interests at the date of

acquisition is only available in respect

of non-controlling interests that are

present ownership interests and that

entitle their holders to a proportionate

share of the entity’s net assets in the

event of liquidation. All other types of

non-controlling interests are measured

at their acquisition-date fair value,

unless another measurement basis is

required by other Standards.

In addition, as part of Improvements to

IFRSs issued in 2010, IFRS 3 (revised

in 2008) was amended to give more

guidance regarding the accounting for

share-based payment awards held by

the acquiree’s employees. Specifically,

the amendments specify that sharebased

payment transactions of the

acquiree that are not replaced should

be measured in accordance with IFRS

2 Share-based Payment at the

acquisition date (‘market-based

measure’).

IFRS 1 Severe Hyperinflation and Removal of

Fixed Dates for First Time Adopters

IFRS 7

IAS 12

Financial Instruments: Disclosures was

amended in regard of the disclosure

requirements for transfers of financial

assets.

Income tax: Amendment in deferred

tax recovery for underlying assets

effective from

Annual

periods

beginning on

or after 1

January 2011

Annual

periods

beginning on

or after 1 July

2010

Annual

periods

beginning on

or after 1 July

2011

Annual

periods

beginning on

or after 1 July

2011

Annual

periods

beginning on

or after 1

January 2012

F-10


Orascom Development Holding (Consolidated Financial Statement)

IFRS 9

IAS 24

Financial Instruments: Recognition and

Measurement was issued in 2009 and

amended in 2010 to cover

classification and measurement of

financial assets and financial liabilities,

as the first part of its project to replace

IAS 39.

Related Party Disclosures – Revised

definition of related parties.

Annual

periods

beginning on

or after 1

January 2013

Annual

periods

beginning on

or after 1

January 2011

3.2 Basis of preparation

The consolidated financial statements have been prepared on

the historical cost basis except for financial instruments that

are measured at fair value or amortized cost, as appropriate

and investment properties that are measured at fair value as

explained in the accounting policies below. Historical cost is

generally based on the fair value of the consideration given in

exchange for assets.

3.3 New accounting policies

IAS 32 Financial Instruments: Presentation –

Amendments relating to classification

of rights issues.

Various Improvements to IFRSs issued in 2010

(except for the amendments to IFRS

3(2008), IFRS 7, IAS 1 and IAS 28

described earlier.

(ii) New Interpretations

IFRIC Prepayments of a Minimum Funding

14 Requirement: Amendment with respect

to voluntary prepaid contributions.

IFRIC

19

Extinguishing Financial Liabilities with

Equity Instruments. The Interpretation

addresses the accounting by an entity

where the terms of a financial liability

are renegotiated and result in the

entity issuing equity instruments to

extinguish all or part of the financial

liability, the transactions that are

referred to sometimes as ‘debt for

equity swaps’. It does not address the

accounting by the creditor.

Annual

periods

beginning on

or after 1

February

2010

Annual

periods

beginning on

or after 1 July

2010 and 1

January 2011,

as appropriate

effective from

Annual

periods

beginning on

or after 1

January 2011

Annual

periods

beginning on

or after 1 July

2010

Currently the Group is assessing whether these changes will

impact the consolidated financial statements in the period of

initial application.

3 SIGNIFICANT ACCOUNTING POLICIES

_______________________________________________________________________________________

3.1 Statement of compliance

The consolidated financial statements have been prepared in

accordance with International Financial Reporting Standards

(IFRS) issued by the International Accounting Standards Board

(IASB).

Investment property

The Group has historically classified all its property as

property, plant and equipment and measured them at cost

less accumulated depreciation and / or accumulated

impairment losses in accordance with IAS 16 Property, Plant

and Equipment. During the first half of 2010, the Group reperformed

a detailed review of its contracts and concluded

that its resort on Mauritius as well as selected premises in El

Gouna (Egypt) should have been retrospectively accounted for

as investment property in accordance with IAS 40 Investment

Property rather than as property, plant and equipment in

accordance with IAS 16 because these properties are earning

rental income and held for that purpose.

During the third quarter of 2010, the Group has voluntarily

changed its accounting policy for measuring their investment

property by replacing the cost model that had been applied

until the first half of 2010 by the fair value model. The Group

believes that this change provides reliable and more relevant

information about their financial position, financial

performance and cash flow in accordance with IAS 1

Presentation of Financial Statements and IAS 8 Accounting

Policies, Changes in Accounting Estimates and Errors.

The application of this new accounting policy for investment

property including the change from the cost to the fair value

model resulted in a restatement for its resort on Mauritius and

an adjustment to prior-year figures with the corresponding

differences as of 1 January 2009 being charged to retained

earnings. The impact of this accounting policy change on the

consolidated statement of comprehensive income,

consolidated statement of financial position, consolidated

cash flow statement for the 2009 financial year is as follows:

Consolidated statement of financial position

CHF

31 December 1 January

2009

2009

Property, plant and

+1,426,234 -54,743,908

equipment

Investment properties +5,952,266 +65,834,078

Deferred tax liability +1,106,775 +1,663,525

Retained earnings +808,828 +1,153,468

Non-controlling interests +5,462,896 +8,273,177

F-11


ODH Annual Report 2010

Consolidated statement of comprehensive income

CHF 2009

Cost of sales +2,207,828

Gross profit +2,207,828

Other gains and losses (net change in fair

+5,170,672

value of investment properties)

Profit before tax +7,378,500

Deferred tax expense -1,106,775

Profit for the year +6,271,725

Consolidated statement of cash flows - cash flow from operating activities

CHF 2009

Profit for the year after tax +6,271,725

Income tax expense recognised in profit

+1,106,775

or loss

Gain on revaluation of investment

+5,170,672

properties

Depreciation and amortisation of noncurrent

+2,207,828

assets

Cash generated from operations -

The fair values of investment property at 1 January 2009 and

31 December 2009 have been arrived at on the basis of

valuations carried out at these dates by Messrs Alan Tinkler,

Ramlackhan & Co and Fincorp & CPM, independent

valuation specialists not related to the Group. A

comprehensive description on the applied valuation

techniques as well as the valuation results are disclosed in

note 16.

The current year effect from this voluntary change in

accounting policy is presented in note 16 and the impact on

earnings per share for the current and prior year in note 14.

3.4 Revised presentation

The presentation regarding the recognition of provisions in the

consolidated statement of comprehensive income has been

revised in 2010 to better reflect the requirements of IAS 37

Provisions, Contingent Liabilities and Contingent Assets and IAS 1

Presentation of Financial Statements.

The change related to the presentation of expenses charged for

provisions within the respective function costs rather than

resenting the charges in a separate line item. This affected the

consolidated statement of comprehensive income for the year

2009 and resulted in a reduction of the cost of sales by CHF 7

Mio and an increase of the income tax expense by the same

amount.

3.5 Compulsory changes in accounting policies

IFRS 3 (revised in 2008) Business combinations

IFRS 3(2008) has been applied in the current year prospectively

to business combinations for which the acquisition date is on or

after 1 January 2010 in accordance with the relevant transitional

provisions. The adoption of the Standard has led to an

amendment of the Group’s respective accounting policy for

business combinations in the current year and has affected for

accounting for changes in the Group ownership over its

subsidiaries as well (see note 3.7 below). The impact of the

application of IFRS 3(2008) is as follows:

– To allow a choice on a transaction-by-transaction basis for

the measurement of non-controlling interests (previously

referred to as “minority” interests) either at fair value or at

the non-controlling interests’ share of the fair value of the

identifiable net assets of the acquire;

– To change the recognition and subsequent accounting

requirements for contingent consideration. Under the

previous version of the Standard, contingent consideration

was recognised at the acquisition date only if payment of the

contingent consideration was probable and it could be

measured reliably, any subsequent adjustments to the

contingent consideration were recognised against goodwill.

Under the revised Standard, contingent consideration is

measured at fair value at the acquisition date, subsequent

adjustments to the consideration are recognised against

goodwill only to the extent that they arise from better

information about the fair value at the acquisition date and

they occur within the “measurement” period (a maximum of

12 months from the acquisition date). All other subsequent

adjustments are recognised in profit or loss;

– Where the business combination in effect settles a preexisting

relationship between the Group and the acquiree to

require the recognition of a settlement gain or loss; and

– To require that acquisition-related costs be accounted for

separately from the business combination, generally leading

to those costs being recognised as an expense in profit or

loss as incurred, whereas previously they were accounted for

as part of the cost of the acquisition.

IAS 27 (as amended in 2008) Basis of consolidation

The application of IAS 27(2008) has resulted in changes in the

Group's accounting policies for changes in ownership interests in

subsidiaries (see note 3.7).

Specifically, the revised Standard has affected the Group's

accounting policies regarding changes in ownership interests in its

subsidiaries that do not result in loss of control. In prior years, in

the absence of specific requirements in IFRSs, increases in

interests in existing subsidiaries were treated in the same manner

as the acquisition of subsidiaries, with goodwill or a bargain

purchase gain being recognised, as appropriate. For decreases in

interests in existing subsidiaries that did not involve a loss of

control, the difference between the consideration received and the

adjustment to the non-controlling interests was recognised in

profit or loss. Under IAS 27(2008), all such increases or

decreases are dealt with in equity, with no impact on goodwill or

profit or loss.

When control of a subsidiary is lost as a result of a transaction,

event or other circumstance, the amended Standard requires the

Group to derecognise all assets, liabilities and non-controlling

interests at their carrying amount and to recognise the fair value

of the consideration received. Any retained interest in the former

subsidiary is recognised at its fair value at the date control is lost.

The resulting difference is recognised as a gain or loss in profit or

loss.

These changes in accounting policies have been applied

prospectively from 1 January 2010 in accordance with the

relevant transitional provisions.

The adoption of the amended Standard has affected the

accounting for the partial disposal of the Group's interest in the

Garranah companies in the current year. The change in policy

has resulted in the difference of CHF 8,530,587between (i) the

aggregate amounts of the fair value of consideration receivable

and the fair value of the retained interest in the former

subsidiaries at the date when control is lost of CHF 35,968,841

and (ii) the net carrying amount of assets (including goodwill),

and liabilities of the subsidiaries and any non-controlling interests

in these subsidiaries derecognized when control was lost of CHF

27,438,255 being recognised in profit or loss in the current year.

F-12


Orascom Development Holding (Consolidated Financial Statement)

The change in accounting policy has resulted in a decrease in the

profit for the year of CHF 240,733. The related impact on

earnings per share for 2010 is disclosed in note 14.

Also, the adoption of the amended Standard has further affected

the initial measurement of the residual interest in the Garranah

companies over which the Group still retains significant influence

for the purpose of applying the equity method as discussed in

more details in the ‘Investments in Associates’ policy.

IAS 28 (as amended in 2008) Investments in Associates

The principle adopted under IAS 27(2008) that a loss of control is

recognised as a disposal and re-acquisition of any retained

interest at fair value is extended by consequential amendments to

IAS 28. Therefore, when significant influence over an associate is

lost, the investor measures any investment retained in the former

associate at fair value, with any consequential gain or loss

recognised in profit or loss.

As part of Improvements to IFRSs issued in 2010, IAS 28(2008)

has been amended to clarify that the amendments to IAS 28

regarding the above transactions, where the investor loses

significant influence over an associate, should be applied

prospectively. The Group has not opted to apply the amendments

to IAS 28(2008) as part of Improvements to IFRSs issued in 2010

in advance of their effective dates (annual periods beginning on

or after 1 July 2010).

Furthermore and as discussed in the ‘Basis of Consolidation’

policy above, the change in the Group’s policy in accounting for

the partial disposal of the Group's interest in the Garranah

companies (former subsidiaries) has affected the initial

measurement of the residual interest held by the Group in these

entities over which it still retains significant influence.

Consequently, the Group has re-measured the residual

investment retained in the former subsidiaries at the date when

control was lost at the fair value of CHF 25,518,319 and,

therefore, recognized in profit or loss for the year a gain of CHF

1,482,507 from such re-measurement. This gain is part of the

total gain of CHF 8,530,587recognized in profit or loss on that

partial disposal. The fair value of the retained interest in these

entities became the cost on initial recognition of that investment

under IAS 28(2008). Had the Group's previous accounting policy

been followed, the carrying amount (rather than the fair value) of

the investment retained would have been regarded as cost for the

purpose of applying the equity method in accounting for such

investment under IAS 28 Investments in Associates and the

movement in fair value (and related deferred tax) would not have

been recognised. The carrying amount of the Group’s investments

in associates at 31 December 2010 and the net profit of the

Group reported for 2010 have, therefore, been increased by CHF

1,482,507 as a result of the change in accounting policy. The

related impact on earnings per share for 2010 is disclosed in

note 14.

This increase in net profits of the year would have been

recognized in profit or loss under the old policy when the

investment is disposed of at its fair value determined as of 31

December 2010 in future accounting periods.

3.6 Related parties

IAS 24 Related party disclosures (as revised in 2009) was issued

in November 2009 and it supersedes IAS 24 (as revised in 2003).

The effective date of the revised Standard is 1 January 2011 with

earlier application permitted.

The Group has not opted to apply the revised Standard in

advance of its effective date.

A party (a company or individual) is related to an entity if:

a) directly, or indirectly through one or more intermediaries, the

party:

i. controls, is controlled by, or is under common control

with, the entity (this includes parents, subsidiaries and

fellow subsidiaries);

ii. has an interest in the entity that gives it significant

influence over the entity; or

iii. has joint control over the entity;

b) the party is an associate (as defined in IAS 28 Investments in

Associates) of the entity;

c) the party is a joint venture in which the entity is a venture (as

defined in IAS 31 Interests in joint ventures);

d) the party is a member of the key management personnel of

the entity or its parent;

e) the party is a close member family of any individual referred

to in (a) or (d);

f) the party is an entity that is controlled, jointly controlled or

significantly influenced by, or which significant voting power

in such entity resides with, directly or indirectly, any

individual referred to in (d) or (e); or

g) the party is a post-employment benefit plan for the benefit of

employees of the entity, or of any entity that is related party

of the entity.

3.7 Basis of consolidation

The Group applied the requirements of the new version of IAS 27

(as amended in 2008) in the preparation and presentation of the

consolidated financial statements of the Group starting from 1

January 2010 since it applied as well IFRS 3 (as revised in 2008)

from that date. The new policy is set out below.

The consolidated financial statements of the Group incorporate

the financial statements of the Parent Company and entities

(including special purpose entities) controlled by the Parent

Company (its subsidiaries). Control is achieved where the Parent

Company has the power to govern the financial and operating

policies of an entity so as to obtain benefits from its activities.

The Parent Company considers the existence and effect of

potential voting rights that are currently exercisable or convertible,

including potential voting rights held by another entity such as a

call and put option, when assessing whether it has the power to

govern the financial and operating policies of its subsidiary.

Potential voting rights are not currently exercisable or convertible

if they cannot be exercised or converted until a future date or until

the occurrence of a future event.

Income and expenses of subsidiaries acquired or disposed of

during the year are included in the consolidated statement of

comprehensive income from the effective date of acquisition or

up to the effective date of disposal, as appropriate. Total

comprehensive income of subsidiaries is attributed to the owners

of the Parent Company and to the non-controlling interests even if

this results in the non-controlling interests having a deficit

balance, except where such total comprehensive income relates

to subsidiaries for which the deficit balance was incurred prior to

1 January 2010 (in which case the old policy applies in the

attribution of total comprehensive income to owners of the Parent

Company and to the non-controlling interests as set out below in

the same note).

Where necessary, adjustments are made to the financial

statements of subsidiaries to bring their accounting policies in line

with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are

eliminated in full on consolidation.

Non-controlling interests in subsidiaries are identified separately

from the Group’s equity therein.

F-13


ODH Annual Report 2010

Where the non-controlling interests have arisen from business

combinations for which the acquisition date is prior to 1 January

2010, the non-controlling shareholders are initially measured at

the non-controlling interests’ proportionate share of the fair value

of the acquiree’s identifiable net assets, at the date of the original

business combination. Subsequent to acquisition, the carrying

amount of non-controlling interests is the amount of those

interests at initial recognition plus the non-controlling interests’

share of subsequent changes in equity. Total comprehensive

income is attributed to non-controlling interests to the extent of

the carrying amount of those non-controlling interests. Losses

applicable to the non-controlling shareholders in excess of their

interests in a subsidiary’s equity are allocated against the interests

of the Group except to the extent that the non-controlling

shareholders have a binding obligation and are able to make an

additional investment to cover the losses.

As to other business combinations for which the acquisition date

is on or after 1 January 2010, the Group applies the

requirements of IFRS 3 (as revised in 2008) for initial and

subsequent measurement of the non-controlling interests (see 3.8

below).

Changes in the Group's ownership interests in existing subsidiaries

Changes in the Group's ownership interests in subsidiaries that do

not result in the Group losing control over the subsidiaries are

accounted for as equity transactions. The carrying amounts of the

Group's interests and the non-controlling interests are adjusted to

reflect the changes in their relative interests in the subsidiaries.

Any difference between the amount by which the non-controlling

interests are adjusted and the fair value of the consideration paid

or received is recognised directly in equity and attributed to

owners of the Parent Company.

When the Group loses control of a subsidiary, the profit or loss

on disposal is calculated as the difference between (i) the

aggregate of the fair value of the consideration received and the

fair value of any retained interest and (ii) the previous carrying

amount of the assets (including goodwill), and liabilities of the

subsidiary and any non-controlling interests. When assets of the

subsidiary are carried at re-valued amounts or fair values and the

related cumulative gain or loss has been recognised in other

comprehensive income and accumulated in equity, the amounts

previously recognised in other comprehensive income and

accumulated in equity are accounted for as if the Parent

Company had directly disposed of the relevant assets (i.e.

reclassified to profit or loss or transferred directly to retained

earnings as specified by applicable IFRSs). The fair value of any

investment retained in the former subsidiary at the date when

control is lost is regarded as the fair value on initial recognition

for subsequent accounting under IAS 39 Financial Instruments:

Recognition and Measurement or, when applicable, the cost on

initial recognition of an investment in an associate or a jointly

controlled entity.

3.8 Business combinations

In compliance with the requirements of IFRS 3 (as amended in

2008), the Group adopted a new accounting policy for business

combinations for which the acquisition date is on or after 1

January 2010 as set out below. The acquisition date is the date

on which the acquirer obtains control of the acquiree.

Acquisitions of businesses are accounted for using the acquisition

method. The consideration transferred in a business combination

is measured at fair value, which is calculated as the sum of the

acquisition-date fair values of the assets transferred by the Group,

liabilities incurred by the Group to the former owners of the

acquiree and the equity interests issued by the Group in exchange

for control of the acquiree. Acquisition-related costs are generally

recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the

liabilities assumed are recognised at their fair value at the

acquisition date, except that:

– deferred tax assets or liabilities and liabilities or assets

related to employee benefit arrangements are recognised

and measured in accordance with IAS 12 Income Taxes and

IAS 19 Employee Benefits respectively;

– liabilities or equity instruments related to share-based

payment arrangements of the acquiree or share-based

payment arrangements of the Group entered into to replace

share-based payment arrangements of the acquiree are

measured in accordance with IFRS 2 Share-based Payment

at the acquisition date; and

– assets (or disposal groups) that are classified as held for sale

in accordance with IFRS 5 Non-current Assets Held for Sale

and Discontinued Operations are measured in accordance

with that Standard.

Goodwill is measured as the excess of the sum of the

consideration transferred, the amount of any non-controlling

interests in the acquiree, and the fair value of the acquirer's

previously held equity interest in the acquiree (if any) over the net

of the acquisition-date amounts of the identifiable assets acquired

and the liabilities assumed. If, after reassessment, the net of the

acquisition-date amounts of the identifiable assets acquired and

liabilities assumed exceeds the sum of the consideration

transferred, the amount of any non-controlling interests in the

acquiree and the fair value of the acquirer's previously held

interest in the acquiree (if any), the excess is recognised

immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and

entitle their holders to a proportionate share of the entity's net

assets in the event of liquidation may be initially measured either

at fair value or at the non-controlling interests' proportionate

share of the recognised amounts of the acquiree's identifiable net

assets. The choice of measurement basis is made on a

transaction-by-transaction basis. Other types of non-controlling

interests are measured at fair value or, when applicable, on the

basis specified in another IFRS.

When the consideration transferred by the Group in a business

combination includes assets or liabilities resulting from a

contingent consideration arrangement, the contingent

consideration is measured at its acquisition-date fair value and

included as part of the consideration transferred in a business

combination. Changes in the fair value of the contingent

consideration that qualify as measurement period adjustments are

adjusted retrospectively, with corresponding adjustments against

goodwill. Measurement period adjustments are adjustments that

arise from additional information obtained during the

‘measurement period’ (which cannot exceed one year from the

acquisition date) about facts and circumstances that existed at the

acquisition date.

The subsequent accounting for changes in the fair value of the

contingent consideration that do not qualify as measurement

period adjustments depends on how the contingent consideration

is classified. Contingent consideration that is classified as equity is

not re-measured at subsequent reporting dates and its subsequent

settlement is accounted for within equity. Contingent

consideration that is classified as an asset or a liability is remeasured

at subsequent reporting dates in accordance with IAS

39, or IAS 37 Provisions, Contingent Liabilities and Contingent

Assets, as appropriate, with the corresponding gain or loss being

recognised in profit or loss.

When a business combination is achieved in stages, the Group's

previously held equity interest in the acquiree is re-measured to

fair value at the acquisition date (i.e. the date when the Group

F-14


Orascom Development Holding (Consolidated Financial Statement)

obtains control) and the resulting gain or loss, if any, is

recognised in profit or loss. Amounts arising from interests in the

acquiree prior to the acquisition date that have previously been

recognised in other comprehensive income are reclassified to

profit or loss where such treatment would be appropriate if that

interest were disposed of.

If the initial accounting for a business combination is incomplete

by the end of the reporting period in which the combination

occurs, the Group reports provisional amounts for the items for

which the accounting is incomplete. Those provisional amounts

are adjusted during the measurement period (see above), or

additional assets or liabilities are recognised, to reflect new

information obtained about facts and circumstances that existed

at the acquisition date that, if known, would have affected the

amounts recognised at that date.

Business combinations that took place prior to 1 January 2010

were accounted for in accordance with the previous version of

IFRS 3.

For common control transactions in which all of the combining

entities or businesses ultimately are controlled by the same party

or parties both before and after the combination, and that control

is not transitory, the Group recognises the difference between

purchase consideration and net assets of acquired entities or

businesses as an adjustment to equity. This accounting treatment

is also applied to later acquisitions of some or all shares of the

non-controlling interests in a subsidiary.

3.9 Investment in associates

The Group applied the requirements of the new version of IAS 28

(as amended in 2008) in accounting for its investments in

associates starting from 1 January 2010 since it applied as well

IAS 27 (as amended in 2008) from that date. The new policy is

set out below.

An associate is an entity over which the Group has significant

influence and that is neither a subsidiary nor an interest in a joint

venture. Significant influence is the power to participate in the

financial and operating policy decisions of the investee but is not

control or joint control over those policies.

The results, assets and liabilities of associates are incorporated in

these consolidated financial statements using the equity method

of accounting, except when the investment is classified as held for

sale, in which case it is accounted for in accordance with IFRS 5

Non-current Assets Held for Sale and Discontinued Operations.

Under the equity method, an investment in an associate is initially

recognised in the consolidated statement of financial position at

cost and adjusted thereafter to recognise the Group's share of the

profit or loss and other comprehensive income of the associate.

When the Group's share of losses of an associate exceeds the

Group's interest in that associate (which includes any long-term

interests that, in substance, form part of the Group's net

investment in the associate), the Group discontinues recognising

its share of further losses. Additional losses are recognised only to

the extent that the Group has incurred legal or constructive

obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the

net fair value of the identifiable assets, liabilities and contingent

liabilities of an associate recognised at the date of acquisition is

recognised as goodwill, which is included within the carrying

amount of the investment. Any excess of the Group’s share of the

net fair value of the identifiable assets, liabilities and contingent

liabilities over the cost of acquisition, after reassessment, is

recognised immediately in profit or loss.

The requirements of IAS 39 are applied to determine whether it is

necessary to recognise any impairment loss with respect to the

Group’s investment in an associate. When necessary, the entire

carrying amount of the investment (including goodwill) is tested

for impairment in accordance with IAS 36 Impairment of Assets as

a single asset by comparing its recoverable amount (higher of

value in use and fair value less costs to sell) with its carrying

amount. Any impairment loss recognised forms part of the

carrying amount of the investment. Any reversal of that

impairment loss is recognised in accordance with IAS 36 to the

extent that the recoverable amount of the investment subsequently

increases.

When a Group entity transacts with associates of the Group,

profits and losses resulting from the transactions with the

associate are recognised in the Group’s consolidated financial

statements only to the extent of interests in the associate that are

not related to the Group.

3.10 Goodwill

Goodwill arising on an acquisition of a business is carried at cost

as established at the date of acquisition of the business (see note

3.8) less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill acquired in a

business combination is allocated, starting from the acquisition

date, to each of the Group’s cash-generating units (or groups of

cash-generating units) that is expected to benefit from the

synergies of the combination. When assessing each unit or group

of units to which the goodwill is so allocated, the Group’s

objective is to test goodwill for impairment at a level that reflects

the way the Group manages its operations and with which the

goodwill would naturally be associated under the reporting system

in place.

A cash-generating unit to which goodwill has been allocated is

tested for impairment annually, or more frequently when there is

indication that the unit may be impaired. If the recoverable

amount of the cash-generating unit is less than its carrying

amount, the impairment loss is allocated first to reduce the

carrying amount of any goodwill allocated to the unit and then to

the other assets of the unit pro-rata based on the carrying amount

of each asset in the unit. Any impairment loss for goodwill is

recognised directly in the profit or loss in the consolidated

statement of comprehensive income. An impairment loss

recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable

amount of goodwill is included in the determination of the profit

or loss on disposal.

The Group’s policy for goodwill arising on the acquisition of an

associate is described in note 3.9.

F-15


ODH Annual Report 2010

3.11 Revenue recognition

Revenue is measured at the fair value of the consideration

received or receivable. Revenue is reduced for estimated

customer returns, rebates and other similar allowances.

Different policies for revenue recognition apply across the Group's

business segments. The following table shows the link between the

accounting policies for revenue recognition and segment

Accounting policies

Segments classified by

type of activity

3.11.1 Revenue on sale of land Sale of land

3.11.2 Revenue from agreements for Real estate and

construction of real estate

construction

3.11.3 Construction revenue

Real estate and

construction

Hotels

3.11.4 Revenue from the rendering of Town management

services

Tours operations

Other operations

3.11.5 Dividend and interest income Other operations

3.11.6 Rental income Other operations

information.

3.11.1 Revenue on sale of land

Revenue from sale of land, sale of land right and associated cost

are recognised when land is delivered and the significant risks,

rewards of ownership and control have been transferred to the

buyer, the amount of revenue can be measured reliably, it is

probable that the economic benefits associated with the

transaction will flow to the Group and the costs incurred or to be

incurred in respect of the transaction can be measured reliably.

Management uses its judgment and considers the opinion

obtained from the legal advisors in assessing whether the Group’s

contractual and legal rights and obligations in the agreements

are satisfied and the above criteria are met.

3.11.2 Revenue from agreements for construction of real

estate

Management uses its judgment to analyze the Group's

agreements for the construction of real estate and any related

agreements to conclude whether or not the contractual terms of

such agreements indicate that they are, in substance, for the

provision of construction services or for the delivery of goods that

are not complete at the time of entering into the agreement. Such

conclusion depends on the terms of the agreement and all the

surrounding facts and circumstances and on whether such an

agreement meets the definition of a construction contract, as

described in 3.11.3 below.

In accordance with IFRIC 15, an agreement for the construction

of real estate will meet the definition of a construction contract

when the buyer is able to specify the major structural elements of

the design of the real estate before construction begins and / or

specify major structural changes once construction is in progress,

whether it exercises that ability or not. Where such conditions are

met, revenue and costs associated with such contracts are

accounted for in accordance with IAS 11 Construction Contracts

(see 3.11.3).

Where an agreement for the construction of real estate does not

meet the definition of a construction contract and is not for the

rendering of services, then it is accounted for as a sale of goods

under the scope of IAS 18 Revenue. Management concluded that

all contracts entered into for the construction of real estate meet

the revenue recognition criteria for the sale of goods.

Accordingly, revenue from the sale of real estate is recognised

when all the following conditions are satisfied: the Group has

transferred to the buyer the significant risks and rewards of

ownership of the real estate, the Group retains neither continuing

managerial involvement to the degree usually associated with

ownership nor effective control over the real estate sold, the

amount of revenue and the costs incurred or to be incurred in

respect of the transaction can be measured reliably and it is

probable that the economic benefits associated with the

transaction will flow to the entity.

3.11.3 Construction revenue

A construction contract is a contract specifically negotiated for the

construction of an asset or a combination of assets that are

closely interrelated or interdependent in term of their design,

technology and function or their ultimate purpose or use.

Where the outcome of a construction contract can be estimated

reliably, revenue and costs are recognised by reference to the

stage of completion of the contract activity at the end of the

reporting period measured based on the completion of a physical

proportion of the contract work. Variations in contract work,

claims and incentive payments are included to the extent that they

have been agreed with the customer.

Where the outcome of a construction contract cannot be

estimated reliably, contract revenue is recognised to the extent of

contract costs incurred that is probable to be recovered. Contract

costs are recognised as expenses in the period in which they are

incurred. When it is probable that total contract costs will exceed

total contract revenue, the expected loss is recognised as an

expense immediately.

Construction contract revenue comprises revenue arising from

finishing of sold units, extra works requested by customers and

any construction agreement with third parties.

3.11.4 Revenue from the rendering of services

Revenue from services is recognised in the accounting periods in

which the services are rendered.

3.11.5 Dividend and interest income

Dividend income from investments other than in associates is

recognised when the shareholder’s right to receive payment has

been established, provided that it is probable that the economic

benefits will flow to the Group and the amount of income can be

measured reliably.

Interest income from a financial asset is recognized when it is

probable that the economic benefits will flow to the Group and

the amount of income can be measured reliably. Interest income

is accrued on a time basis, by reference to the principal

outstanding and at the effective interest rate applicable, which is

the rate that exactly discounts estimated future cash receipts

through the expected life of the financial asset to that asset’s net

carrying amount on original recognition.

3.11.6 Rental income

The Group’s policy for recognition of revenue from operating

leases is described in 3.12.1.

3.11.7 Cost of sales

Cost of sales comprises costs related directly to the sale of goods

or rendering of services. These costs include also administration

expenses of revenue generating entities in the Group. Under

administration expenses are costs allocated for corporate and

head quarter functions as well as non revenue generating entities,

F-16


Orascom Development Holding (Consolidated Financial Statement)

such as corporate companies, holding companies and start up

companies. Companies providing these services are marked as

HQ in the subsidiaries' list in note 18.

3.12 Leasing

Leases are classified as finance leases whenever the terms of the

lease substantially transfer all the risks and rewards of ownership

to the lessee. All other leases are classified as operating leases.

3.12.1 The Group as lessor

Amounts due from lessees under finance leases are recognised as

receivables at the amount of the Group's net investment in the

leases. Finance lease income is allocated to accounting periods

so as to reflect a constant periodic rate of return on the Group's

net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straightline

basis over the term of the relevant lease. Initial direct costs

incurred in negotiating and arranging an operating lease are

added to the carrying amount of the leased asset and recognized

on a straight-line basis over the lease term.

3.12.2 The Group as lessee

Assets held under finance leases are initially recognised as assets

of the Group at their fair value at the inception of the lease or, if

lower, at the present value of the minimum lease payments. The

corresponding liability to the lessor is included in the statement of

financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and

reduction of the lease obligation so as to achieve a constant rate

of interest on the remaining balance of the liability. Finance

expenses are recognised immediately in profit or loss, unless they

are directly attributable to qualifying assets, in which case they are

capitalised in accordance with the Group’s general policy on

borrowing costs (see 3.14 below). Contingent rentals are

recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a

straight-line basis over the lease term, except when another

systematic basis is more representative of the time pattern in

which economic benefits from the leased asset are consumed.

Contingent rentals arising under operating leases are recognised

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

In the event that lease incentives are received to enter into

operating leases, such incentives are recognised as a liability. The

aggregate benefit of incentives is recognised as a reduction of

rental expense on a straight-line basis, except when another

systematic basis is more representative of the time pattern in

which economic benefits from the leased asset are consumed.

3.13 Foreign currencies

The individual financial statements of each subsidiary are

presented in the currency of the primary economic environment in

which the entity operates (its functional currency). For the

preparation of the Group’s consolidated financial statements, the

results and financial position of each subsidiary are translated into

Swiss Franc (CHF), which is the Group’s presentation currency.

In preparing the financial statements of each individual group

entity, transactions in currencies other than the entity’s functional

currency (foreign currencies) are recognised at the rates of

exchange prevailing at the dates of the transactions. At the end of

each reporting period, monetary items denominated in foreign

currencies are retranslated at the rates prevailing at that date.

Non-monetary items carried at fair value that are denominated in

foreign currencies are retranslated at the rates prevailing at the

date when the fair value was determined. Non-monetary items

that are measured in terms of historical cost in a foreign currency

are not retranslated.

Exchange differences on monetary items are recognised in profit

or loss in the period in which they arise except for:

– Exchange differences on foreign currency borrowings

relating to assets under construction for future

productive use, which are included in the cost of those

assets when they are regarded as an adjustment to

interest costs on those foreign currency borrowings;

– Exchange differences on transactions entered into to

hedge certain foreign currency risks (see 3.26 below for

hedging accounting policies); and

– Exchange differences on monetary items receivable

from or payable to a foreign operation for which

settlement is neither planned nor likely to occur

(therefore forming part of the net investment in the

foreign operation), which are recognised initially in

other comprehensive income and reclassified from

equity to profit or loss on repayment of the monetary

items.

For the purpose of presenting consolidated financial statements,

the assets and liabilities of the Group’s foreign operations are

translated into Swiss Francs (CHF) using exchange rates prevailing

at the end of each reporting period. Income and expense items

are translated at the average exchange rates for the period,

unless exchange rates fluctuate significantly during that period, in

which case the exchange rates at the dates of the transactions are

used. Exchange differences arising, if any, are recognised in other

comprehensive income and accumulated in the Group’s foreign

currency reserve, a separate component in equity (attributed to

non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. disposal of the

Group’s entire interest in a foreign operation or a disposal

involving loss of control over a subsidiary that includes a foreign

operation), all of the exchange differences accumulated in other

comprehensive income in respect of that operation attributable to

the owners of the Parent are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group

losing control over a subsidiary that includes a foreign operation,

the proportionate share of accumulated exchange differences are

re-attributed to non-controlling interests and are not recognized in

profit or loss. For all other partial disposals (i.e. reductions in the

Group's ownership interest in associates that do not result in the

Group losing significant influence), the proportionate share of the

accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and

liabilities acquired arising on the acquisition of a foreign

operation are treated as assets and liabilities of the foreign

operation and translated at the exchange rate prevailing at the

end of each reporting period. Exchange differences arising are

recognised in equity.

F-17


ODH Annual Report 2010

The exchange rates relevant to the annual financial statements

were:

All other borrowing costs are recognised in profit or loss in the

period in which they are incurred.

Currency table

Average

2010 2009

Year

end

Average

Year

end

1 EGP Egyptian Pound 0.1848 0.1606 0.1954 .1884

1 USD US Dollar 1.0424 0.9323 1.0850 1.0333

1 EUR Euro 1.3810 1.2490 1.5097 1.4828

1 OMR Oman Rial 2.7076 2.4209 2.8189 2.6844

1 AED United Arab

Emirates Dirham

1 MAD Moroccan

Dirham

0.2838 0.2538 0.2954 0.2813

0.1238 0.1116 0.1341 0.1311

1 JOD Jordanian Dinar 1.4711 1.3173 1.5323 1.4608

3.14 Borrowing costs

Borrowing costs directly attributable to the acquisition,

construction or production of qualifying assets, which are assets

that necessary take a substantial period of time to get ready for

their intended use or sale, are added to the cost of those assets

until such time, as the assets are substantially ready for their

intended use or sale.

The following principles apply when borrowing costs are partly or

fully capitalized by the Group as part of a qualifying asset:

– Where hedge accounting is not applied to minimize the

interest rate risk on borrowings used to fund that asset

and, therefore derivatives are classified as at fair value

through profit or loss, all gains / losses on non-hedging

derivatives are immediately recognized in profit or loss.

– Where variable rate borrowings are used to finance a

qualifying asset and a derivative is designated to cash

flow hedge the variability in interest rates on such

borrowings, any gain or loss on the hedging derivative

that is effective and, therefore previously recognized in

other comprehensive income, is reclassified from equity

to profit or loss when the hedged risk impacts profit or

loss. The hedged interest component of the qualifying

asset (hedged risk) impacts profit or loss when the

qualifying asset is amortized, impaired or sold.

– Where fixed rate borrowings are used to finance a

qualifying asset and a derivative is designated to hedge

the fair value exposure to changes in interest rates of

such borrowings, the synthetic floating interest rate that

is achieved as a result of a highly effective hedge is

capitalized, so that borrowing costs always reflect the

hedged interest rate. The amount of borrowing costs

capitalized in such a case comprises the actual fixed

rate on the borrowings plus the effect of swapping this

fixed rate into floating rates.

Investment income earned on the temporary investment of specific

borrowings pending their expenditure on qualifying assets is

deducted from the borrowing costs eligible for capitalisation.

3.15 Government grants

Government grants are not recognised until there is reasonable

assurance that the Group will comply with the conditions attached

to them and that the grants will be received.

Government grants are recognised in profit or loss on a

systematic basis over the periods in which the Group recognises

as expenses the related costs for which the grants are received.

Government grants whose primary condition is that the Group

should purchase, construct or otherwise acquire non-current

assets are recognised as deferred revenue in the consolidated

statement of financial position and transferred to profit or loss on

a systematic and rational basis over the useful lives of the related

assets.

Government grants that are receivable as compensation for

expenses or losses already incurred or for the purpose of giving

immediate financial support to the Group with no future related

costs are recognised in profit or loss in the period in which they

become receivable.

The benefit of a government loan granted at below-market

interest rates of interest is treated as a government grant and

measured as the difference between proceeds received and the

fair value of the loan based on prevailing market interest rates.

3.16 Retirement benefit costs

Employee pension and retirement benefits are based on the

regulations and prevailing circumstances of those countries in

which the Group is represented. In Switzerland, ordinary pension

and retirement benefit plans qualify as defined-benefit plans and

are accounted for in conformity with IAS 19 Employee Benefits.

For defined benefit retirement benefit plans, the cost of providing

benefits is determined using the Projected Unit Credit Method,

with actuarial valuations being carried out at the end of each

reporting period. Actuarial gains and losses that exceed 10

percent of the greater of (i) the present value of the Group’s

defined benefit obligation and (ii) the fair value of plan assets as

at the end of the prior year are amortised over the excepted

average remaining working lives of the participating employees.

Past service-costs are recognised immediately in profit or loss to

the extent that the benefits are already vested, and otherwise are

amortized on a straight-line basis over the average period until

the benefits become vested.

The retirement benefit obligation recognised in the consolidated

statement of financial position represents the present value of the

defined benefit obligation as adjusted for unrecognised actuarial

gains and losses and unrecognised past service cost, and as

reduced by the fair value of plan assets. Any asset resulting from

this calculation is limited to unrecognised actuarial losses and

past service cost, plus the present value of available refunds and

reductions in future contributions to the plan.

Payments to defined contribution retirement benefit plans are

recognised as an expense when employees have rendered service

entitling them to the contribution.

F-18


Orascom Development Holding (Consolidated Financial Statement)

3.17 Taxation

Income tax expense represents the sum of the tax currently

payable and deferred tax.

3.17.1 Current tax

The tax currently payable is based on taxable profit for the year.

Taxable profit differs from profit as reported in the consolidated

statement of comprehensive income because of items of income

or expense that are taxable or deductible in other years and items

that are never taxable or deductible. The Group’s liability for

current tax is calculated using tax rates that have been enacted or

substantively enacted by the end of the reporting period.

3.17.2 Deferred tax

Deferred tax is recognised on temporary differences between the

carrying amounts of assets and liabilities in the consolidated

financial statements and the corresponding tax bases used in the

computation of taxable profit, and are accounted for using the

Balance Sheet Liability Method.

Deferred tax liabilities are generally recognised for all taxable

temporary differences. Deferred tax assets are generally

recognised for all deductible temporary differences to the extent

that it is probable that taxable profits will be available against

which those deductible temporary differences can be utilized.

Such deferred tax liabilities are not recognised if the temporary

difference arises from goodwill and no deferred tax assets or

liabilities are recognised for temporary differences resulting from

the initial recognition (other than in a business combination) of

other assets and liabilities in a transaction that affects neither the

taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary

differences associated with investments in subsidiaries and

associates, and interests in joint ventures, except where the Group

is able to control the reversal of the temporary difference and it is

probable that the temporary difference will not reverse in the

foreseeable future.

Deferred tax assets arising from deductible temporary differences

associated with such investments and interests are only

recognised to the extent that it is probable that there will be

sufficient taxable profits against which to utilize the benefits of the

temporary differences and they are expected to reverse in the

foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end

of each reporting period and reduced to the extent that it is no

longer probable that sufficient taxable profits will be available to

allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates

that are expected to apply in the period in which the liability is

settled or the asset realised, based on tax rates (and tax laws) that

have been enacted or substantively enacted by the end of the

reporting period. The measurement of deferred tax liabilities and

assets reflects the tax consequences that would follow from the

manner in which the Group expects, at the end of the reporting

period, to recover or settle the carrying amount of its assets and

liabilities.

Deferred tax assets and liabilities are offset when there is a legally

enforceable right to set off current tax assets against current tax

liabilities and when they relate to income taxes levied by the same

taxation authority and the Group intends to settle its current tax

assets and liabilities on a net basis.

3.17.3 Current and deferred tax for the year

Current and deferred tax are recognised as an expense or income

in profit or loss, except when they relate to items that are

recognised in other comprehensive income or directly in equity, in

which case, the current and deferred tax are also recognised in

other comprehensive income or directly in equity respectively.

Where current tax or deferred tax arises from the initial

accounting for a business combination, the tax effect is included

in the accounting for the business combination.

3.18 Property, plant and equipment

Buildings, plant and equipment, furniture and fixtures held for use

in the production, supply of goods or services or for

administrative purposes are stated in the consolidated statement

of financial position at cost less any accumulated depreciation

and accumulated impairment losses.

Properties in the course of construction for production,

administrative purposes or for a currently undetermined future use

are carried at cost less any recognised impairment loss. Cost

includes professional fees and, for qualifying assets, borrowing

costs capitalized in accordance with the Group’s accounting

policy as described in 3.14. Such properties are classified to the

appropriate categories of property, plant and equipment when

completed and ready for intended use. Depreciation of these

assets, on the same basis as other property assets, commences

when the assets are ready for their intended use.

Depreciation of buildings, plant and equipment as well as

furniture and fixtures commences when the assets are ready for

their intended use.

Freehold land is not depreciated.

Depreciation is recognized so as to write off the cost of assets

(other than freehold land and properties under construction) less

their residual values over their estimated useful lives, using the

straight-line method. The estimated useful lives, residual values

and depreciation method are reviewed at the end of each

reporting period, with the effect of any changes in estimate

accounted for on a prospective basis.

Assets held under finance leases are depreciated over their

expected useful lives on the same basis as owned assets or, where

shorter, the term of the relevant lease.

An item of property, plant and equipment is derecognised upon

disposal or when no future economic benefits are expected to

arise from the continued use of the asset. Any gain or loss arising

on the disposal or retirement of an item of property, plant and

equipment is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognised

in profit or loss.

The following estimated useful lives are used in the calculation of

depreciation:

Buildings

Plant and equipment

Furniture and fixtures

20 – 50 years

4 – 25 years

3 – 20 years

F-19


ODH Annual Report 2010

3.19 Investment property

Investment properties are properties (land or a building – or part

of a building – or both) held by the Group entities to earn rentals

and / or for capital appreciation (including property under

construction for such purposes). Investment properties are

measured initially at cost, including transaction costs. Subsequent

to initial recognition, investment properties are measured at fair

value at the end of each reporting period. Gains and losses

arising from changes in the fair value of investment properties are

recognised in profit or loss including an adjustment to the related

deferred tax position in the period in which they arise.

Fair value is the amount for which an asset could be exchanged

between knowledgeable and willing parties in an arm’s length

transaction. The fair value of investment properties reflects market

conditions at the end of each reporting period and is determined

without any deduction for transaction costs which the Group may

incur on sale or other disposal. The fair value of investment

properties is determined based on evaluations performed by

independent valuators.

An investment property is derecognised upon disposal or when

the investment property is permanently withdrawn from use and

no future economic benefits are expected from the disposal. Any

gain or loss arising on de-recognition of the property (calculated

as the difference between the net disposal proceeds and the

carrying amount of the asset) is included in profit or loss in the

period in which the property is derecognised.

3.20 Impairment of tangible assets

At the end of each reporting period, the Group reviews the

carrying amounts of its tangible assets to determine whether there

is any indication that those assets have suffered an impairment

loss. If any such indication exists, the recoverable amount of the

asset is estimated in order to determine the extent of the

impairment loss (if any).

Where it is not possible to estimate the recoverable amount of an

individual asset, the Group estimates the recoverable amount of

the cash-generating unit to which the asset belongs. Where a

reasonable and consistent basis of allocation can be identified,

corporate assets are also allocated to individual cash-generating

units, or otherwise they are allocated to the smallest group of

cash-generating units for which a reasonable and consistent

allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell

and value in use. In assessing value in use, the estimated future

cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time

value of money and the risks specific to the asset for which the

estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is

estimated to be less than its carrying amount, the carrying amount

of the asset (or cash-generating unit) is reduced to its recoverable

amount. An impairment loss is recognised immediately in profit or

loss, unless the relevant asset is carried at a revaluated amount,

in which case the impairment loss is treated as a revaluation

decrease.

Where an impairment loss subsequently reverses, the carrying

amount of the asset (or cash-generating unit) is increased to the

revised estimate of its recoverable amount, but so that the

increased carrying amount does not exceed the carrying amount

that would have been determined had no impairment loss been

recognised for the asset (or cash-generating unit) in prior years.

3.21 Inventories

Inventories are stated at the lower of cost and net realizable

value.

Costs, including an appropriate portion of fixed and variable

production overheads as well as other costs incurred in bringing

the inventories to their present location and condition, are

assigned to inventories by the method most appropriate to the

particular class of inventory, with the majority being valued on a

weighted average basis. For items acquired on credit and where

payment terms of the transaction are extended beyond normal

credit terms, the cost of that item is its cash price equivalent at the

recognition date with any difference from that price being treated

as an interest expense on an effective-yield basis (see note 11).

Net realizable value represents the estimated selling price for

inventories less all estimated costs of completion and costs

necessary to make the sale.

Estimates of net realisable value are generally made on an itemby-item

basis, except in circumstances, where it is more

appropriate to group items of similar or related inventories.

The net realizable value of an item of inventory may fall below its

cost for many reasons including, damage, obsolescence, slow

moving items, a decline in selling prices, or an increase in the

estimate of costs to complete and costs necessary to make the

sale. In such cases, the cost of that item is written-down to its net

realizable value and the difference is recognized immediately in

profit or loss.

Properties intended for sale in the ordinary course of business or

in the process of construction or development for such a sale are

included in inventories. These are stated at the lower of cost and

net realizable value. The cost of development properties includes

the cost of land and other related expenditure attributable to the

construction or development during the period in which activities

are in progress that are necessary to get the properties ready for

its intended sale.

3.22 Provisions

Provisions are recognised when the Group has a present

obligation (legal or constructive) as a result of a past event, it is

probable that the Group will be required to settle the obligation,

and a reliable estimate can be made of the amount of the

obligation.

The amount recognised as a provision is the best estimate of the

consideration required to settle the present obligation at the end

of the reporting period, taking into account the risks and

uncertainties surrounding the obligation. When a provision is

measured using the cash flows estimated to settle the present

obligation, its carrying amount is the present value of those cash

flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a

provision are expected to be recovered from a third party, a

receivable is recognised as an asset, if it is virtually certain that

reimbursement will be received and the amount of the receivable

can be measured reliably.

3.23 Financial instruments

Financial assets and financial liabilities are recognised when a

Group entity becomes a party to the contractual provisions of the

instrument.

Financial assets and financial liabilities are initially measured at

fair value. Transaction costs that are directly attributable to the

acquisition or issue of financial assets and financial liabilities

F-20


Orascom Development Holding (Consolidated Financial Statement)

(other than financial assets and financial liabilities at fair value

through profit or loss) are added to or deducted from the fair

value of the financial assets or financial liabilities, as appropriate,

on initial recognition. Transaction costs directly attributable to the

acquisition of financial assets or financial liabilities at fair value

through profit or loss are recognised immediately in profit or loss.

3.24 Financial assets

All regular way purchases or sales of financial assets are

recognised and derecognised on a trade date basis. Regular way

purchases or sales are purchases or sales of financial assets that

require delivery of assets within the timeframe established by

regulation or convention in the market place.

Financial assets are classified into the following specified

categories: financial assets ‘at fair value through profit or loss’

(FVTPL), ‘available-for-sale’ (AFS) financial assets, held-to–

maturity and ‘loans and receivables’. The classification depends

on the nature and purpose of the financial assets and is

determined at the time of initial recognition.

3.24.1 Effective interest method

The effective interest method is a method of calculating the

amortised cost of a debt instrument and of allocating interest

income over the relevant period. The effective interest rate is the

rate that exactly discounts estimated future cash receipts

(including all fees or points paid or received that form an integral

part of the effective interest rate, transaction costs and other

premiums or discounts) through the expected life of the debt

instrument, or, where appropriate, a shorter period, to the net

carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt

instruments other than those financial assets designated as at

FVTPL.

3.24.2 Financial asset at fair value through profit or loss

(FVTPL)

Financial assets are classified as at FVTPL where the financial

asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading, if:

– it has been acquired principally for the purpose of

selling in the near term; or

– on initial recognition it is a part of a portfolio of

identified financial instruments that the Group manages

together and has a recent actual pattern of short-term

profit-taking; or

– it is a derivative that is not designated and effective as a

hedging instrument.

A financial asset other than a financial asset held for trading may

be designated as at FVTPL upon initial recognition, if:

– such designation eliminates or significantly reduces a

measurement or recognition inconsistency that would

otherwise arise; or

– the financial asset forms part of a group of financial

assets or financial liabilities or both, which is managed

and its performance is evaluated on a fair value basis

in accordance with the Group's documented risk

management or investment strategy and information

about the grouping is provided internally on that basis;

or

– it forms part of a contract containing one or more

embedded derivatives, and IAS 39 Financial

Instruments: Recognition and Measurement permits the

entire combined contract (asset or liability) to be

designated as at FVTPL.

All financial assets at FVTPL are stated at fair value with any gains

or losses arising on re-measurement recognised in profit or loss.

The net gain or loss recognised in profit or loss incorporates any

dividend or interest earned on the financial asset and is included

in the ‘other gains and losses’ line item in the consolidated

statement of comprehensive income. Fair value is determined in

the manner described in note 39.

3.24.3 Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets

with fixed or determinable payments and fixed maturity dates that

the Group has the positive intent and ability to hold to maturity.

Subsequent to initial recognition, held-to-maturity investments are

measured at amortised cost using the effective interest method

less any impairment.

3.24.4 Available for sales financial assets (AFS)

AFS financial assets are non-derivatives that are either designated

as AFS or are not classified as loans and receivable, held-to–

maturity investment or financial assets at fair value through profit

or loss.

Listed shares and listed redeemable notes held by the Group that

are traded in an active market are classified as AFS and are

stated at fair value at the end of each reporting period. Fair value

is determined in the manner described in note 39.

Changes in the carrying amount of AFS monetary financial assets

relating to changes in foreign currency rates (see below), interest

income calculated using the effective interest method and

dividends on AFS equity investments are recognised in profit or

loss. Other changes in the carrying amount of available-for-sale

financial assets are recognised in other comprehensive income

and accumulated under the heading of investments revaluation

reserve. Where the investment is disposed of or is determined to

be impaired, the cumulative gain or loss previously accumulated

in the investments revaluation reserve is reclassified to profit or

loss.

Dividends on AFS equity instruments are recognised in profit or

loss when the Group's right to receive the dividends is established.

The fair value of AFS monetary assets denominated in a foreign

currency is determined in that foreign currency and translated at

the spot rate prevailing at the end of the reporting period. The

foreign exchange gains and losses that are recognised in profit or

loss are determined based on the amortised cost of the monetary

asset. Other foreign exchange gains and losses are recognised in

other comprehensive income.

AFS equity Investments that do not have a quoted market price in

an active market and whose fair value cannot be reliably

measured, and derivatives that are linked to and must be settled

by delivery of such unquoted equity investments, are measured at

cost less any identified impairment losses at the end of each

reporting period.

3.24.5 Loans and receivables

Loans and receivables are non-derivative financial assets with

fixed or determinable payments that are not quoted in an active

market other than those the Group intends to sell immediately or

in the short-term, or those that the Group on initial recognition

designates as either at FVTPL or available-for-sale. Loans and

receivables (including trade and other receivables) are measured

F-21


ODH Annual Report 2010

at amortised cost using the effective interest method, less any

impairment. Impairment for loans and receivables is discussed in

4.2.6 below.

Interest income is recognised by applying the effective interest

rate, except for short-term receivables when the recognition of

interest would be immaterial.

3.24.6 Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for

indicators of impairment at the end of each reporting period.

Financial assets are considered to be impaired where there is

objective evidence that, as a result of one or more events that

occurred after the initial recognition of the financial asset, the

estimated future cash flows of the investment have been affected.

For listed and unlisted AFS equity investments, a significant or

prolonged decline in the fair value of the security below its cost is

considered to be objective evidence of impairment. Management

records an impairment charge if the fair value decline exceeds 20

percent or persists over a period of 180 days.

For all other financial assets, objective evidence of impairment

could include:

– significant financial difficulty of the issuer or

counterparty;

– breach of contract, such as a default or delinquency in

interest or principal payments;

– it becoming probable that the borrower will enter

bankruptcy or financial re-organisation; or

– the disappearance of an active market for that financial

asset because of financial difficulties.

For certain categories of financial assets, such as loans, trade and

notes receivable, assets that are assessed not to be impaired

individually are, in addition, assessed for impairment on a

collective basis. Objective evidence of impairment for a portfolio

of receivables could include the Group's past experience of

collecting payments, an increase in the number of delayed

payments in the portfolio past the average credit period for the

Group, as well as observable changes in national or local

economic conditions that correlate with default on loans and

receivables.

If collective assessment has indicated that a group of financial

assets (loans and receivables) has suffered an impairment loss, it

is recognized in profit or loss.

For financial assets carried at amortised cost, the amount of the

impairment loss recognized is the difference between the asset’s

carrying amount and the present value of estimated future cash

flows, discounted at the financial asset’s original effective interest

rate.

For financial assets carried at cost, the amount of the impairment

loss is measured as the difference between the asset's carrying

amount and the present value of the estimated future cash flows

discounted at the current market rate of return for a similar

financial asset. Such impairment loss will not be reversed in

subsequent periods.

The carrying amount of the financial asset is reduced by the

impairment loss directly for all financial assets with the exception

of trade receivables, where the carrying amount is reduced

through the use of an allowance account. When a trade

receivable is considered uncollectible, it is written off against the

allowance account. Subsequent recoveries of amounts previously

written off are credited against the allowance account. Changes

in the carrying amount of the allowance account are recognised

in profit or loss.

When an AFS financial asset is considered to be impaired,

cumulative gains or losses previously recognised in other

comprehensive income are reclassified to profit or loss in the

period.

For financial assets measured at amortised cost, if, in a

subsequent period, the amount of the impairment loss decreases

and the decrease can be related objectively to an event occurring

after the impairment was recognised, the previously recognised

impairment loss is reversed through profit or loss to the extent that

the carrying amount of the investment at the date the impairment

is reversed does not exceed what the amortised cost would have

been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously

recognised in profit or loss are not reversed through profit or loss.

Any increase in fair value subsequent to an impairment loss is

recognised directly in other comprehensive income and

accumulated under the heading of investments revaluation

reserve. In respect of AFS debt securities, impairment losses are

subsequently reversed through profit or loss, if an increase in the

fair value of the investment can be objectively related to an event

occurring after the recognition of the impairment loss.

3.24.7 De-recognition of financial assets

The Group derecognises a financial asset only when the

contractual rights to the cash flows from the asset expire, or if it

transfers the financial asset and substantially all the risks and

rewards of ownership of the asset to another entity.

If the Group neither transfers nor retains substantially all the risks

and rewards of ownership and continues to control the transferred

asset, the Group recognises its retained interest in the asset and

an associated liability for amounts it may have to pay. If the

Group retains substantially all the risks and rewards of ownership

of a transferred financial asset, the Group continues to recognise

the financial asset and also recognises a collateralised borrowing

for the proceeds received.

On de-recognition of a financial asset in its entirety, the difference

between the asset's carrying amount and the sum of the

consideration received and receivable and the cumulative gain or

loss that had been recognised in other comprehensive income

and accumulated in equity is recognised in profit or loss.

On de-recognition of a financial asset other than in its entirety

(e.g. when the Group retains an option to repurchase part of a

transferred asset or retains a residual interest that does not result

in the retention of substantially all the risks and rewards of

ownership and the Group retains control), the Group allocates

the previous carrying amount of the financial asset between the

part it continues to recognise under continuing involvement, and

the part it no longer recognises on the basis of the relative fair

values of those parts on the date of the transfer.

The difference between the carrying amount allocated to the part

that is no longer recognised and the sum of the consideration

received for the part no longer recognised and any cumulative

gain or loss allocated to it that had been recognised in other

comprehensive income is recognised in profit or loss. A

cumulative gain or loss that had been recognised in other

comprehensive income is allocated between the part that

continues to be recognised and the part that is no longer

recognised on the basis of the relative fair values of those parts.

3.25 Financial liabilities and equity instruments

3.25.1 Classification as debt or equity

Debt and equity instruments issued by a Group entity are

classified as either financial liabilities or as equity in accordance

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Orascom Development Holding (Consolidated Financial Statement)

with the substance of the contractual arrangements and the

definitions of a financial liability and an equity instrument.

3.25.2 Equity instruments

An equity instrument is any contract that evidences a residual

interest in the assets of an entity after deducting all of its liabilities.

The instrument is an equity instrument if, and only if, both

conditions (a) and (b) below are met:

a) The instrument includes no contractual obligation:

i. to deliver cash or another financial asset to another

entity; or

ii.

to exchange financial assets or financial liabilities with

another entity under conditions that are potentially

unfavourable to the issuer.

b) If the instrument will or may be settled in the issuer’s own

equity instruments, it is:

i. a non-derivative that includes no contractual obligation

for the issuer to deliver a variable number of its own

equity instruments; or

ii.

a derivative that will be settled only by the issuer

exchanging a fixed amount of cash or another financial

asset for a fixed number of its own equity instruments.

A contract that will be settled by the Group entity receiving or

delivering a fixed number of its own equity instruments in

exchange for a fixed amount of cash or another financial asset is

an equity instrument.

Equity instruments issued by the Group are recognised at the

proceeds received, net of direct issue costs.

Repurchases of the Parent Company’s own equity instruments is

recognised and deducted directly in equity. No gain or loss is

recognised in profit of loss on the purchase, sale, issue or

cancellation of the Parent Company’s own equity instruments.

3.25.3 Financial liabilities

Financial liabilities are classified as ‘other financial liabilities’.

Other financial liabilities including borrowings are subsequently

measured at amortised cost using the effective interest method,

with interest expense recognised on an effective yield basis.

Liabilities arising on written put option agreements are classified

as miscellaneous financial liabilities "obligation to buy". These are

initially measured at fair value, which is the present value of the

future amount to be paid to the other shareholders, if they were to

exercise the option on the last day of the option period. Put

option liabilities are subsequently measured at amortized cost

using the effective interest method with the difference between the

present value on initial recognition and the settlement value of the

liability recognized as interest expense on an effective yield basis

(see note 35).

Short-term trade and notes payable are non-interest bearing

liabilities, whose settlement dates do not extend beyond 12

months from the end of the reporting period. These are classified

as other financial liabilities and are stated at their nominal value,

where the effect of discounting is immaterial.

Other long-term payables arising on acquisition of an item of

property, plant and equipment or inventory are classified as other

financial liabilities. These are initially measured at the fair value,

which is the cash price equivalent for that item. They are

subsequently measured at amortized cost using the effective

interest method. As such, when payment for an item of property,

plant and equipment or inventory is deferred beyond normal

credit terms, the difference between the cash price equivalent and

the total payments is recognized in profit or loss as an interest

expense over the period of the credit using the effective interest

rate method, unless it is capitalized on qualifying assets in

accordance with the Group's policy. The interest expense

recognized as such is reported as part of the finance costs.

The effective interest method is a method of calculating the

amortised cost of a financial liability and of allocating interest

expense over the relevant period. The effective interest rate is the

rate that exactly discounts estimated future cash payments

(including all fees and points paid or received that form an

integral part of the effective interest rate, transaction costs and

other premiums or discounts) through the expected life of the

financial liability, or (where appropriate) a shorter period, to the

net carrying amount on initial recognition.

A financial guarantee contract is a contract that requires the

issuer to make specified payments to reimburse the holder for a

loss it incurs because a specified debtor fails to make payments

when due in accordance with the terms of a debt instrument. It is

not the Group's policy to guarantee third party debtors, but it

usually issues such contracts to guarantee debts of other entities

in the Group.

3.25.4 De-recognition of financial liabilities

The Group de-recognises financial liabilities when, and only

when, the Group’s obligations are discharged, cancelled or they

expire. The difference between the carrying amount of the

financial liability derecognised and the consideration paid and

payable is recognised in profit or loss.

3.26 Derivative financial instruments

The Group enters into a variety of derivative financial instruments

mainly to manage its exposure to interest rate and foreign

exchange rate risk, including foreign exchange forward contracts

and interest rate swaps. Further details of derivative financial

instruments are disclosed in notes 21 and 39.

Derivatives are initially recognised at fair value at the date the

derivative contracts are entered into and are subsequently remeasured

to their fair value at the end of each reporting period.

The resulting gain or loss is recognised in profit or loss

immediately unless the derivative is designated and effective as a

hedging instrument, in which event the timing of the recognition

in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial

asset; a derivative with a negative fair value is recognized as a

financial liability.

A derivative that has a remaining maturity of less than twelve

months from the end of the reporting period or has a remaining

maturity greater than twelve months but is expected to be settled

within twelve months is presented as current asset or liability.

A derivative that is designated and effective in a hedging

relationship with a non-current hedged item is presented as a

non-current asset or liability in accordance with the presentation

of the hedged item.

A derivative that has a maturity of more than twelve months from

the end of the reporting period and is not intended to be settled

within twelve months is presented as a non-current asset or

liability, even if that derivative is not part of a designated and

effective hedge accounting.

3.26.1 Hedge accounting

The Group generally designates certain derivatives as hedging

instruments in respect of foreign currency risk, interest rate risk or

hedges of net investments in foreign operations. Hedges of

foreign currency risk on firm commitments, hedges of net

F-23


ODH Annual Report 2010

investments in foreign operations as well as hedges of the

variability risk of interest rates are all accounted for by the Group

as cash flow hedges.

At the inception of the hedge relationship, the entity documents

the relationship between the hedging instrument and the hedged

item, along with its risk management objectives and its strategy

for undertaking various hedge transactions. Furthermore, at the

inception of the hedge and on an ongoing basis, the Group

documents whether the hedging instrument, in a hedging

relationship, is highly effective in offsetting changes in cash flows

of the hedged item attributable to the hedged risk.

3.26.2 Cash flow hedges

The effective portion of changes in the fair value of derivatives

that are designated and qualify as cash flow hedges is recognised

in other comprehensive income and accumulated under the

heading of cash flow hedging reserve. The gain or loss relating to

the ineffective portion is recognised immediately in profit or loss,

and is included in the ‘other gains and losses’ line item.

Amounts previously recognised in other comprehensive income

and accumulated in equity are reclassified to profit or loss in the

periods when the hedged item is recognised in profit or loss, in

the same line of the consolidated statement of comprehensive

income as the recognised hedged item. However, when the

hedged forecast transaction results in the recognition of a nonfinancial

asset or a non-financial liability, the gains and losses

previously recognized in other comprehensive income and

accumulated in equity are transferred from equity and included in

the initial measurement of the cost of the non-financial asset or

non-financial liability.

Hedge accounting is discontinued when the Group revokes the

hedging relationship, the hedging instrument expires or is sold,

terminated, or exercised, or when it no longer qualifies for hedge

accounting. Any gain or loss recognised in other comprehensive

income and accumulated in equity at that time remains in equity

and is recognised when the forecast transaction is ultimately

recognised in profit or loss. When a forecast transaction is no

longer expected to occur, the gain or loss accumulated in equity

is recognised immediately in profit or loss.

3.26.3 Hedges of net investments in foreign operations

Hedges of net investments in foreign operations are accounted for

similarly to cash flow hedges. Any gain or loss on the hedging

instrument relating to the effective portion of the hedge is

recognized in other comprehensive income and accumulated

under the heading of foreign currency translation reserve. The

gain or loss relating to the ineffective portion is recognized

immediately in profit or loss, and is included in the ’other gains

and losses’ line item.

Gains and losses on the hedging instrument relating to the

effective portion of the hedge accumulated in the foreign currency

translation reserve are reclassified to profit or loss on the disposal

of the foreign operation in the same way as exchange differences

relating to foreign operation as described at 3.13 above.

4 CRITICAL ACCOUNTING JUDGMENTS AND

KEY SOURCES OF ESTIMATION

UNCERTAINTY

___________________________________________________________________________________

In the application of the Group’s accounting policies, which are

described in note 3, the directors are required to make

judgments, estimates and assumptions about the carrying

amounts of assets and liabilities that are not readily apparent

from other sources. The estimates and associated assumptions

are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an

ongoing basis. Revisions to accounting estimates are recognised

in the period in which the estimate is revised if the revision affects

only that period or in the period of the revision and future periods

if the revision affects both current and future periods.

4.1 Critical judgments in applying accounting

policies

The following are the critical judgments, apart from those

involving estimations (see note 4.2 below), that management

have made in the process of applying the Group’s accounting

policies and that have the most significant effect on the amounts

recognised in the consolidated financial statements.

4.1.1 Revenue recognition – Real estate sales

The operating cycle of residential construction projects

predominantly starts when the Group enters into agreements to

sell the real estate units off-plan. The Group treats the sale of real

estate units as sale of goods in accordance with IAS 18 Revenue.

Management takes the view that the critical event of revenue

recognition hinges on the transfer of significant risks and rewards

of ownership and control to the buyer. When management makes

this assessment it ensures that the detailed criteria for revenue

recognition from the sale of goods as set out in IAS 18 - including

the transfer of significant risks and rewards of ownership and

control to the buyer - are satisfied and that recognition of revenue

from the sale of real estate is appropriate in the current year.

Given the structure of the real estate sale contracts and the

application of IAS 18 as described above, revenue recognition

from residential construction projects occurs in independent

stages and consists of the sale of land, constructed, but

unfinished units and finished units. The transfer of significant risks

and rewards of ownership and control of each stage is

documented in an official delivery protocol and signed by

representatives of the Group as well as the buyer.

4.1.2 Government grants

Acquisition by the Group entities of part of the land used in the

construction of their real estate projects from governments of the

local jurisdictions in which they carry out their activities has not

brought these transactions under the scope of IAS 20 Accounting

for Government Grants and Disclosure of Government Assistance

and, therefore, has not resulted in the recognition of government

grants in the current year or in prior periods.

In these cases the government is the only possible seller in the

market and the Group purchases the land at market prices

available to all interested parties and does not obtain finance

facilities from the government which would require accounting for

government grants.

F-24


Orascom Development Holding (Consolidated Financial Statement)

4.1.3 Employee benefits expense

Employee benefits expense which are directly related to the sale of

goods or rendering of services form part of the operation’s cost of

sales. Where employee benefit expense are incurred to perform

head quarter functions or relate to non-revenue generating

entities, such as corporate companies, holding companies and

start up companies, they are allocated to administration expenses.

4.1.4 Sale of six percent stake in former Garranah

subsidiaries

On 18 May 2010, the Group signed a share sale and purchase

agreement to sell to the Garranah family a six percent stake in six

subsidiaries whereof four are operating floating hotels

(International Stock Company for Floating Hotels & Touristic

Establishments, Mirotel for Floating Hotels Company, Tarot

Garranah & Merotil for Floating Hotels, El Tarek for Nile Cruises

& Floating Hotels), one is active as a tour operator (Tarot Tours

Company (Garranah) SAE) and one provides tour transportation

services (Tarot Garranah for Touristic Transportation).

Pursuant to this agreement, the Group’s interest in these entities

decreased from 51 to 45 percent and the Group ceased control

over these subsidiaries, but retained significant influence at 31

December 2010. As of the date of this change of ownership

interest, the Group did not consolidate these operations but

accounted for them as investments in associates.

The sale is not disclosed as a discontinued operation in

accordance with IFRS 5 in these consolidated financial

statements, as management is of the opinion that the disposed

subsidiaries did not represent a separate major line of business or

a geographical area of operations and were not acquired

exclusively with a view to resale.

Furthermore, management has the intention to acquire significant

shareholdings of companies providing services in the above

mentioned activities if they match the Group’s strategy.

4.2 Key sources of estimation uncertainty

The following are the key assumptions concerning the future and

other key sources of estimation uncertainty at the end of the

reporting period, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within

the next financial year.

4.2.1 Impairment of tangible assets and investments in

associates

At the end of each reporting period, the Group reviews the

carrying amounts of its tangible assets and investments in

associates to determine whether there is any indication that those

assets have suffered an impairment loss.

If any such indication exists, the recoverable amount of the asset

is estimated in order to determine the extent of the impairment

loss (if any). Where it is not possible to estimate the recoverable

amount of an individual asset, the Group estimates the

recoverable amount of the cash-generating unit to which the asset

belongs. Where a reasonable and consistent basis of allocation

can be identified, corporate assets are also allocated to individual

cash-generating units, or otherwise, they are allocated to the

smallest Group of cash-generating units for which a reasonable

and consistent allocation basis can be identified.

In light of the political development in Egypt, management

reconsidered the recoverability of the Group's significant items of

property, plant and equipment and its investments in associates,

which are included in the consolidated statement of financial

position at 31 December 2010 at CHF 926,077,841 and CHF

35,397,484 respectively (31 December 2009 (restated): CHF

957,457,508 and CHF 8,129,189).

The operations continue to progress in a satisfactory manner, and

customer reaction has reconfirmed management's previous

estimates of anticipated revenues from the projects. Management

periodically reconsider their assumptions in light of the

macroeconomic developments regarding future anticipated

margins on their products. Detailed sensitivity analysis has been

carried out and the directors are confident that the carrying

amount of these assets will be recovered in full, even if returns are

reduced. This situation will be closely monitored, and adjustments

made in future periods if future market activity indicates that such

adjustments are appropriate.

4.2.2 Impairment of available-for-sale financial assets

At the end of each reporting period, the Group reviews the

carrying amounts of its available for sale financial assets to

determine whether there is any objective evidence that an AFS

financial asset or group of AFS financial assets is impaired. An

AFS financial asset is impaired, and an impairment loss

recognized, if and only if, such evidence exists. Objective

evidence of impairment may result from one or more events that

occurred after the initial recognition of the asset (a ‘loss event’)

which the Group considers. These events are disclosed in note

3.24.

When considering what is a ‘significant or prolonged decline in

fair value’ of an available-for-sale listed equity investment below

cost, the Group entity which holds the instrument compares the

original cost at the date of acquisition and fair value of the equity

security on the re-measurement date. This assessment is made in

the functional currency of the entity holding the instrument.

Therefore, when the foreign currency, in which the listed equity

investment is denominated, depreciates significantly and causes

decline in fair value below cost, an impairment loss is recognized.

If there is objective evidence that an AFS unquoted equity

investment (measured at cost) is impaired, the Group measures

the amount of the impairment loss as the difference between

carrying amount and the present value of estimated future cash

flows discounted at the current rate of return for a similar financial

asset.

If there is objective evidence that an AFS debt instrument is

impaired, the Group measures the amount of the impairment loss

at the cumulative fair value loss that has been recognized in other

comprehensive income and reclassifies the whole amount from

equity to profit or loss. The impairment loss on an AFS debt

instrument includes a market participant’s view of recoverable

cash flows discounted at the rate that reflects current market

interest rates, adjusted for liquidity and other factors a market

participant would include in determining fair value.

The carrying value of the Group’s available-for-sale financial

assets at the end of the current reporting period is CHF

81,406,008 (31 December 2009: CHF 96,629,098).

Management has performed a detailed review of the carrying

amounts of its available for sale financial assets to determine

whether there is any objective evidence that an AFS financial asset

or group of AFS financial assets is impaired. The significant

assumptions are disclosed in note 3.24. Changes to the

assumptions may result in an impairment loss in subsequent

years.

F-25


ODH Annual Report 2010

4.2.3 Useful lives of property, plant and equipment

The carrying value of the Group's property, plant and equipment

at the end of the current reporting period is CHF 926,077,841

(31 December 2009 (restated): CHF 957,457,508).

Management’s assessment of the useful life of property, plant and

equipment is based on the expected use of the assets, the

expected physical wear and tear on the assets, technological

developments as well as past experience with comparable assets.

A change in the useful life of any asset may have an effect on the

amount of depreciation that is to be recognized in profit or loss

for future years.

4.2.4 Impairment of goodwill

Determining whether goodwill is impaired requires an estimation

of the value in use of the cash-generating units to which goodwill

has been allocated. The value in use calculation requires

management to estimate the future cash flows expected to arise

from the cash-generating unit and a suitable discount rate in

order to calculate present value.

The carrying amount of goodwill at the end of the current

reporting period is CHF 8,208,807 (31 December 2009:

30,432,009). The recoverability of goodwill is tested for

impairment annually during the fourth quarter, or earlier, if an

indication of impairment exists. The value of goodwill is primarily

dependent upon projected cash flows, discount rates (WACC)

and long-term growth rates. The significant assumptions are

disclosed in note 17. Changes to the assumptions may result in

an impairment loss in subsequent years.

4.2.5 Provisions

The carrying amount of provisions at the end of the current

reporting period is CHF 56,779,789 (31 December 2009: CHF

46,159,372). This amount is based on estimates of future costs

for infrastructure completion, legal cases, government fees,

employee benefits and other charges including taxes in

connection with the Group’s operations (see note 31). As the

provisions cannot be determined exactly, the amount could

change based on future developments.

4.2.6 Impairment of trade and other receivables as well as

other current assets

An allowance for doubtful receivables is recognized in order to

record foreseeable losses arising from events such as a

customer’s insolvency. The carrying amount of the allowance for

trade and other receivables at the end of the current reporting

period is CHF 10,729,483 (31 December 2009: CHF

13,054,738) (see note 24). In determining the amount of the

allowance, several factors are considered. These include the

aging of accounts receivables balances, the current solvency of

the customer and the historical write-off experience.

A similar assessment is being done in relation to the recoverability

of other current assets amounted to CHF 119,225,619 (CHF

2009: CHF 132,121,875) which includes outstanding proceeds

from the sale of the six percent stake in the former Garranah

subsidiaries and the entire interests in the Joud Funds 1, 2, 3 and

4 (see note 22). To determine the need for the recognition of any

impairment charge, management considered several factors, such

as the contractual repayment date, current solvency of the

counterparty and historical write-off experience. At 31 December

2010, an impairment charge of CHF 15 Mio was recorded to

cover any shortfall that might occur.

The actual write-offs and / or impairment charges might be

higher than expected if the actual financial situation of the

customers and other counterparties is worse than originally

expected.

4.2.7 Deferred income taxes

The valuation of deferred income tax assets and liabilities is based

on the judgment of management. Deferred income tax assets are

only capitalized if it is probable that they can be used. Whether or

not they can be used depends on whether the deductable tax

temporary difference can be offset against future taxable gains. In

order to assess the probability of their future use, estimates must

be made of various factors including future taxable profits. During

the current reporting period, deferred income tax assets

recognized in profit or loss amounted to CHF 17,319,445 (31

December 2009: CHF 3,020,589) and are mainly the result from

the tax impact of intercompany land sales (see note 13.4). Such

deferred tax assets are only recorded when the development

phase of the project has been started and it becomes evident that

future taxable profits are probable. If the actual values differ from

the estimates, this can lead to a change in the assessment of

recoverability of the deferred tax assets.

4.2.8 Retirement benefit obligations

The retirement benefit obligation is calculated on the basis of

various financial and actuarial assumptions. The key assumptions

for assessing these obligations are the discount rate, future salary

and pension increases and the probability of the employee

reaching retirement. The obligation was calculated using a

discount rate of 2.60% (31 December 2009: 3.25%). Pension

costs were calculated on the basis of an expected return on

investment on plan assets of 3.50% (31 December 2009:

3.50%). The calculations were done by an external expert and the

principal assumptions used are summarised in note 37. At 31

December 2010, the underfunding amounted to CHF 1,673,574

(31 December 2009: CHF 901,681), whereby only CHF

199,646 (31 December 2009: CHF 166,161) were recorded as

an obligation in the consolidated statement of financial position

because the corridor approach is used. Using other basis for the

calculations could have led to different results.

4.2.9 Classification and valuation of investment property

Generally real estate units are constructed either for the own use

or for the sale to third parties and carried at cost. However, when

a unit may not be sold, as soon as a long term rent contract over

more than 1 year is agreed with a third party at market

conditions, the unit is classified as an investment property and

revalued applying fair values provided by independent, third party

valuation experts. During the period, units with a total cost value

of CHF 3,822,824 have been revalued to a total fair value of

CHF 10,851,354.

At 30 September 2010, management decided to retrospectively

apply the fair value model for its investment properties including a

resort in Mauritius and several premises located in El Gouna

(Egypt. The fair values of investment property at 31 December

2010, 31 December 2009 and 1 January 2009 amounted to

F-26


Orascom Development Holding (Consolidated Financial Statement)

CHF 78,355,235, CHF 71,786,344 and CHF 65,834,078

respectively.

These values have been arrived at on the basis of valuations

carried out, at the dates specified above, by Messrs Alan Tinkler,

Ramlackhan & Co and Fincorp & CPM, independent valuation

specialists not related to the Group. Note 16 provides detailed

information about the valuation techniques applied and the key

assumptions used in the determination of the fair value of

investment property.

The change in the accounting policy from the cost model to the

fair value model and the subsequent change in use of several

premises in El Gouna (Egypt) after the retrospective

implementation of the new accounting policy had a net impact on

profit or loss for the current year, prior year and the opening

balance of retained earnings at 1 January 2009 of CHF

13,937,024, CHF 6,271,725 and CHF 9,426,646, respectively.

Part of that net impact, gains arising from fair value measurement

of investment property (net of deferred tax) amounted to CHF

11,007,622, CHF 4,063,897 and CHF 5,277,311 in 2010,

2009 and years prior to 2009, respectively, as disclosed in note

16. If market conditions change, other basis for the calculations

can lead to valuation adjustments and different results in future

periods.

6 REVENUE

___________________________________________________________________________________

An analysis of the Group’s revenue for the year is as follows:

CHF 2010

Revenue from the rendering of

services and rental income

Revenue from agreements for

construction of Real Estate and

construction revenue

2009

(restated)

276,858,997 306,796,531

228,990,911 240,041,362

Revenue on sale of land 10,241,985 39,251,409

516,091,893 586,089,302

5 THE GROUP AND MAJOR CHANGES IN

GROUP ENTITIES

___________________________________________________________________________________

The Group is comprised of the Parent Company and its

subsidiaries operating in different countries.

There have been no major changes in the group structure during

the period except for the sale of the Group’s six percent stake in

the former Garranah subsidiaries and the full interest in Joud

Fund 4 as outlined in note 18 and 34.

Orascom Hotels & Development SAE (“OHD”) remains the

principal operating subsidiary and is located in Egypt.

On 22 December 2010 the Parent Company launched a tender

offer to the remaining minority shareholders to acquire the

outstanding OHD shares. The tender offer was completed on 18

January 2011 and the outcome is described in note 46 events

after the balance sheet date.

At 31 December 2010, the Parent Company owns 98.16% of

OHD. The registration process for approximately 2% of these

shares was not completed at the time of launching the tender

offer described above and therefore this portion was also

included in the tender sites. The Parent Company has control over

the voting rights and bears all the risks and rewards of these

shares including dividend rights.

The group controls its subsidiaries directly and indirectly.

F-27


ODH Annual Report 2010

7 SEGMENT INFORMATION

___________________________________________________________________________________

7.1 Products and services from which reportable

segments derive their revenues

The Group has five reportable segments, as described below,

which are the Group’s strategic divisions. The strategic divisions

offer different products and services and are managed separately

because they require different skills or have different customers.

For each of the strategic divisions, the Country CEOs and the

Head of Segments review the internal management reports at

least on a quarterly basis. The following summary describes the

operation in each of the Group’s reportable segments:

Hotels – Include provision of hospitality services in two to five star

hotels owned by the Group which are managed by international

or local hotel chains or by the Group itself.

– Real estate and construction – Include acquisition of

land in undeveloped areas and addition of substantial

value by building residential real estate and other

facilities in stages.

– Land sales – Include sale of land and land rights to

third parties on which the Group have developed or will

develop certain infrastructure facilities and where the

Group does not have further development

commitments.

– Town management – Include provision of facility and

infrastructure services at operational resorts and towns.

– Tours operations – Include provision of tour packages

for tourist groups as well as tour transportation services.

Town management does not meet the quantitative threshold to be

shown as a separate reportable segment. However, management

believes that information about this segment is useful to the users

of the financial statements and therefore it is presented as a

separate reportable segment.

Other operations include the provision of services from businesses

not allocated to any of the segments listed above comprising

rentals from investment properties, mortgages, sports, hospital

services, educational services, marina, limousine rentals, laundry

services and other services. None of these segments meets any of

the quantitative thresholds for determining a reportable segment

in 2010 or 2009.

The following is an analysis of the Group's revenue from

continuing operations by its major products and services.

Segment

Product

Revenue from external customers

2010 2009 (restated)

Hotels Hotels managed by international chains 133,680,020 113,640,745

Hotels managed by local chains 43,823,042 44,327,993

Hotels managed by the Group 14,888,379 18,443,368

Floating hotels 736,891 6,948,074

Segment total 193,128,332 183,360,180

Real estate and construction Tourism Real estate 192,353,128 183,932,137

Budget Housing 32,030,193 55,517,275

Construction work 4,607,590 591,950

Segment total 228,990,911 240,041,362

Land sales Sales of land and land rights 10,241,985 39,251,409

Town management Utilities (e.g. water, electricity) 17,497,444 25,404,434

Tours operations (see note 34) Tours operations 26,127,653 60,877,547

Tour transportation 2,336,277 4,573,341

Segment total 28,463,930 65,450,888

Other operations Mortgage (Real estate financing) 6,083,527 5,816,688

Sport (Golf) 6,630,288 5,555,496

Rentals (i) 9,933,269 10,101,324

Hospital services 4,396,913 4,521,301

Educational services 2,263,338 2,068,590

Marina 2,232,953 1,715,753

Limousine 910,445 783,114

Laundry services 361,938 463,506

Others 4,956,620 1,555,257

Segment total 37,769,291 32,581,029

Total 516,091,893 586,089,302

(i) Rentals include income from investment property of CHF 7,161,744 (2009 (restated): CHF 5,062,180) and from other short term

rent contracts in hotels, marinas and golf courses of CHF 2,772,125 (2009 restated): CHF 5,039,144).

F-28


Orascom Development Holding (Consolidated Financial Statement)

7.2 Segment revenue, depreciation and results

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segments.

CHF

Total segment revenue Inter-segment revenue Revenue from external customers Cost of revenue Depreciation Gross profit / (loss) Segment result

2010 2009 (restated) 2010 2009 (restated) 2010 2009 (restated) 2010 2009 (restated) 2010 2009 (restated) 2010 2009 (restated) 2010 2009 (restated)

Hotels 196,089,202 187,596,736 (2,960,870) (4,236,556) 193,128,332 183,360,180 (128,251,471) (124,845,844) (18,201,763) (18,012,131) 46,675,098 40,502,205 44,475,503 40,389,635

Real estate and construction 323,806,022 292,809,942 (94,815,111) (52,768,580) 228,990,911 240,041,362 (118,304,812) (128,905,890) (4,012,333) (606,373) 106,673,766 110,529,099 112,359,556 120,708,448

Land sales 29,644,233 450,820,821 (19,402,248) (411,569,412) 10,241,985 39,251,409 (7,220,600) (13,708,585) (843,740) (724,974) 2,177,645 24,817,850 2,177,645 23,738,436

Town management 42,566,558 46,596,356 (25,069,114) (21,191,922) 17,497,444 25,404,434 (8,737,082) (14,239,645) (4,008,867) (3,809,216) 4,751,495 7,355,572 2,548,377 2,010,990

Tours operations 29,739,975 68,293,164 (1,276,045) (2,842,276) 28,463,930 65,450,888 (25,385,935) (60,955,981) (219,588) (2,365,889) 2,858,407 2,129,018 3,006,326 (2,917,528)

Other operations 84,495,783 49,710,547 (46,726,492) (17,129,518) 37,769,291 32,581,029 (22,550,904) (18,433,773) (2,965,147) (3,183,914) 12,253,240 10,963,342 23,391,548 15,239,150

Total 706,341,773 1,095,827,566 (190,249,880) (509,738,264) 516,091,893 586,089,302 (310,450,804) (361,089,718) (30,251,438) (28,702,497) 175,389,651 196,297,087 187,958,955 199,169,131

Share of profits of associates (1,552,599) 187,701

Other gains and losses 13,602,669 10,832,434

Investment income 2,149,643 6,360,521

Central administration costs and directors' salaries (57,524,090) (40,459,762)

Finance costs (3,850,755) (9,100,143)

Profit before tax (continuing operations) 140,783,823 166,989,882

Income tax expense (18,531,906) (22,090,482)

Profit for the year (continuing operations) 122,251,917 144,899,400

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment profit represents the profit earned by each segment without allocation of central

administration costs and directors’ salaries, share of profits of associates, gain recognised on disposal of interest in former associates, investment income , other gains and losses, finance costs and income tax

expense, as included in the internal management reports that are regularly reviewed by the Board of Directors’. This measure is considered to be most relevant for the purpose of resources allocation and assessment

of segment performance.

No single customer contributed ten percent or more to the Group's revenue for both 2010 and 2009.

No impairment loss in respect of property, plant and equipment as well as goodwill was recognized in 2010 or in 2009.

The layout of the Group’s analysis on revenue and results from continuing operations by reportable segements has been changed compared to prior year for better readability. In addtion the profit reconsiliation is now

down on a line by line item.

F-29


ODH Annual Report 2010

7.3 Segment assets and liabilities

7.3.1 Segment assets and liabilities

CHF 31 December 2010

Segment assets

31 December 2009

(restated)

1 January 2009

(restated)

Hotels 759,191,720 564,832,440 727,702,361

Real estate and construction 1,003,085,931 1,130,704,173 408,711,721

Land sales 430,057,858 492,268,396 75,125,583

Town management 184,345,508 178,662,532 127,345,334

Tours operations (see note 34) 978,387 70,029,452 76,480,061

Other operations 525,971,736 612,718,265 188,603,579

Segment assets before elimination 2,903,631,140 3,049,215,258 1,603,968,639

Inter-segment elimination (1,287,399,817) (1,464,011,851) (193,539,130)

Segment assets after elimination 1,616,231,323 1,585,203,407 1,410,429,509

Unallocated assets 477,206,864 300,385,655 262,205,331

Consolidated total assets 2,093,438,187 1,885,589,062 1,672,634,840

CHF 31 December 2010

Segment liabilities

31 December 2009

(restated)

1 January 2009

(restated)

Hotels 418,982,360 309,506,753 456,373,374

Real estate and construction 704,341,485 774,832,475 218,786,599

Land sales 154,989,726 195,060,820 29,193,315

Town management 168,379,323 142,220,699 61,592,483

Tours operations (see note 34) 1,871,019 55,019,912 58,713,302

Other operations 436,096,362 497,791,418 130,100,857

Segment liabilities before elimination 1,884,660,275 1,974,432,077 954,759,930

Inter-segment elimination (1,186,598,065) (1,408,469,038) (729,530,967)

Segment liabilities after elimination 698,062,210 565,963,039 225,228,963

Unallocated liabilities 202,232,153 254,181,245 490,974,509

Consolidated total liabilities 900,294,363 820,144,284 716,203,472

For the purpose of monitoring segment performance and allocation of recourses between segments:

– all assets are allocated to reportable segments other than investments in associates, other financial assets as well as current

and deferred tax assets. Goodwill is allocated to reportable segments as described in note 17; and

– all liabilities are allocated to reportable segments other than borrowings, other financial liabilities as well as current and

deferred tax liabilities.

The layout of the Group’s analysis on segment assets and liabilities has been changed compared to prior year for better readability.

F-30


Orascom Development Holding (Consolidated Financial Statement)

7.3.2 Additions to non-current assets

CHF 2010

2009

(restated)

Hotels 124,468,596 72,259,809

Real estate and construction 59,446,848 147,816,021

Land sales - 22,961,490

Town management 15,887,126 16,134,355

Tours operations 6,485 239,702

Other operations 17,459,141 8,904,986

Unallocated 55,852,892 22,595,400

273,121,088 290,911,763

7.4 Geographical information

The Group currently operates in six principal geographical areas – Egypt, Oman, United Arab Emirates, Jordan, Switzerland and

Morocco. In addition, new investments have been made in the UK, Montenegro and Romania, but they are not yet operating. The

Group's revenue from continuing operations from external customers by location of operations and information about its non-current

assets* by location of assets are detailed below.

Revenue

Non-current assets

CHF 2010 2009 (restated) 2010 2009 (restated)

Egypt 382,965,917 411,727,296 628,914,232 693,049,494

Oman 84,483,771 127,211,811 119,061,675 47,805,098

United Arab Emirates 28,827,783 27,651,117 54,423,257 63,559,571

Jordan 5,701,367 5,202,891 17,845,843 118,208,504

Switzerland 5,954,417 2,884,209 103,571,760 43,294,272

Morocco - - 1,101,628 735,723

Others 8,158,638 11,411,978 87,723,488 93,023,199

Total

516,091,893 586,089,302 1,012,641,883 1,059,675,861

* Non-current assets exclude financial instruments, deferred tax assets, post-employment benefit assets and assets arising from insurance

contracts.

8 EMPLOYEE BENEFITS EXPENSE

_____________________________________________________________________________________________________________________________________________________________________________

CHF 2010 2009

Employee benefits expense 109,736,136 89,717,297

Thereof included in cost of sales 96,029,396 84,087,202

Thereof included in administration expenses 13,706,740 5,630,095

F-31


ODH Annual Report 2010

9 INVESTMENT INCOME

___________________________________________________________________________________

CHF 2010 2009

Interest income:

- -

- Bank deposits (i) 3,439,148 10,640,125

- Other loans and receivables

(ii)

Dividends received from equity

investments

(i)

(ii)

8,905,629 2,233,318

8,158 343,950

12,352,935 13,217,393

The decrease in 2010 is due to lower interest rates on short

term funds as well is lower cash and bank balances during

the current year due to an increased cash demand for

projects under development.

The increase in 2010 is partly due to increase in imputed

interest income on long term real estate accounts

receivables during the year (see note 20).

Investment income earned on financial assets by category of

assets is CHF 12,344,777 (CHF 2009: 12,873,443) for loans

and receivables including cash and bank balances and CHF

8,158 (CFH 2009: 343,950) for dividend income earned on AFS

financial assets.

Income relating to financial assets classified as at fair value

through profit or loss is included in Other gain and losses in note

10.

10 OTHER GAINS AND LOSSES

___________________________________________________________________________________

CHF 2010 2009 (restated)

Gain on disposal of

property, plant and

305,021 223,996

equipment

Gain on disposal of

subsidiaries and

7,824,706 -

associates (i)

Gain from disposal

of AFS financial

assets (ii) - 5,233,080

Net foreign

exchange

(losses)/gains

Gain from change

in fair value of

investment property

(iii)

(i)

(ii)

(iii)

Other income

(6,575,798) 1,396,768

14,120,934 5,170,672

3,488,161 4,672,603

19,163,024 16,697,119

This gain mainly relates to the sale of the six percent stake in

the former Garranah subsidiaries which resulted in a loss of

control (see note 34).

In 2009 the Group derecognized the shares owned in Albion

Development Holding (ADL), a real estate project in

Mauritius, according to the call option agreement with Club

Méditerranée. These shares were classified by the Group as

AFS assets and carried at cost since they represent

investments in unquoted equity instruments that do not have

a quoted market price in an active market, and whose fair

value cannot be measured reliably.

This gain represents the effect from the revaluation of the

investment properties and the subsequent change in use of

several premises in El Gouna (Egypt) after the retrospective

implementation of the new accounting policy as described in

note 3.3.

No other gains or losses have been recognized in respect of loans

and receivables or held-to-maturity investments, other than as

disclosed in note 11 and impairment losses recognized and / or

reversed in respect of trade and other receivables in note 24.

F-32


Orascom Development Holding (Consolidated Financial Statement)

11 FINANCE COST

_____________________________________________________________________________________________________________________________________________________________________________

CHF 2010 2009 (restated)

Interest on bank overdrafts and loans (27,969,905) (20,126,538)

Interest on obligation under finance lease (402,129) (700,240)

Interest on call and put option arrangements (1,019,238) (1,053,687)

Total interest expense for financial liabilities not classified as at fair value through profit or loss (29,391,272) (21,880,465)

Less: amounts included in the cost of qualifying assets (i) * 22,346,174 2,930,809

(7,045,098) (18,949,656)

(i)

The increase is mainly caused due to a significant increase compared to prior year in the number of projects under

construction which are eligible for the capitalization of interest expense. They include 9 hotels (2009: 3), 2 marinas (2009:

nil), 3 golf courses (2009: nil) and 3 infrastructure projects in Oman, Switzerland and Morocco (2009: 2).

* The weighted average capitalization rate on funds borrowed generally is 6.7% per annum (2009: 4.73% per annum). This is the rate

that the Group used to determine the amount of borrowing costs eligible for capitalization.

Finance costs relating to financial liabilities classified as at fair value through profit or loss are included in Other gains and losses in

note 10.

12 COMPENSATION OF KEY MANAGEMENT PERSONNEL

_____________________________________________________________________________________________________________________________________________________________________________

CHF 2010 2009

Salaries

4,330,880 3,857,372

Other short-term employee benefits

2,027,584 1,486,006

Post employment benefits

247,500 94,174

6,605,964 5,437,552

Total compensation of key management personnel

There is a compensation plan in place for the Board of Directors which consists of a fixed compensation which is annually reviewed. As

to the compensation of the members of Executive Management, the base salary is either (in case of members who have served in that

capacity since the Company was formed in 2008) carried over from their previous employment with Orascom Hotels & Development

SAE, or (in case of members appointed at a later time) determined in a discretionary decision of the CEO and Co-CEO approved by the

Nomination & Compensation Committee. In respect of the bonus part of the compensation, proposals by the CEO and the Co-CEO

are presented to the Nomination & Compensation Committee which discusses such proposals and approves them if deemed fit.

The annual proposals and decisions concerning the compensation of the members of Executive Management are based on an

evaluation of the individual performance of each member, as well as of the performance of the business area for which he is

responsible (in case of the executive members of the Board, the performance of the Orascom Development Group as a whole). The

CEO and Co-CEO form the respective proposals in their discretion, based on their judgment of the relevant individuals' and business

areas' achievements.

Total compensation of directors and Executive Management is part of the employees benefit expense allocated between cost of sales

and administrative expenses (see note 8).

F-33


ODH Annual Report 2010

12.1 Board and Executive Compensation Disclosures as Required by Swiss Law

Compensation in 2010

CHF

Board of Directors

Gross

value of

salaries

and fees

Gross value of

cash bonuses

Unrestricted

shares

Other

benefits (car,

insurances)

Pension

contributions

Adil Douiri Member 85,000 - 85,000 3 - - 170,000

Luciano Gabriel 1 Member 98,000 - 98,000 3 - - 196,000

Carolina Müller-Möhl Member 85,000 - 85,000 3 - - 170,000

Jean-Gabriel Pérès Member 85,000 - 85,000 3 - - 170,000

Total Board of Directors 608,000 - 608,000 - - 1,216,000

Executive Management

Samih Sawiris 2 985,068 547,260 - - - 1,532,328

Total other members of Executive

Management

2,737,812 740,379 - 131,945 247,500 3,857,636

Total Executive Management 3,722,880 1,287,639 - 131,945 247,500 5,389,964

Total compensation of key management 4,330,880 1,287,639 608,000 131,945 247,500 6,605,964

1 acting as Lead Director

2 highest-compensated member of the Executive Management

3 will be paid out in 2011 in shares at market prices

4 has been paid out in 2010

Compensation in 2009

CHF

Board of Directors

Gross value of

salaries and

fees

Gross value

of cash

bonuses

Total

remuneration

Samih Sawiris Chairman 85,000 - 85,000 3 - - 170,000

Amr Sheta

Vice-

Chairman

85,000 - 85,000 3 - - 170,000

Franz Egle Member 85,000 - 85,000 3 - - 170,000

Unrestricted

shares

Other benefits

(car,

insurances)

Pension contributions

Total remuneration

Samih Sawiris Chairman 80,000 4 - 79,969 4 - -

Amr Sheta

Vice-

Chairman

80,000 4 - 79,969 4 - -

Franz Egle Member 80,000 4 - 79,969 4 - -

Adil Douiri Member 80,000 4 - 79,969 4 - -

Luciano Gabriel Member 92,500 4 - 92,634 4 - -

Carolina Müller-Möhl Member 80,000 4 - 79,969 4 - -

Jean-Gabriel Pérès Member 80,000 4 - 79,969 4 - -

Total Board of

Directors

Executive Management

159,969

159,969

159,969

159,969

185,134

159,969

159,969

572,500 - 572,448 - - 1,144,948

Samih Sawiris

781,200 379,750

Total other members of Executive

Management 2,503,672 477,400

-

-

13,020

-

1,173,970

43,388 94,174 3,118,634

Total Executive Management 3,284,872 857,150 - 56,408 94,174 4,292,604

Total compensation of key

management

3,857,372 857,150

572,448

56,408 94,174 5,437,552

A consultancy firm, in which a member of the Board has a partnership, was paid a fee amounted to CHF 473,018 during the current

year (2009: CHF 522,500).

F-34


Orascom Development Holding (Consolidated Financial Statement)

A company which is among others owned by Mr. Samih Sawiris and a member of the Board bought a property during the period under

review that had been leasing office space to the Group. The rent expenses paid to this company since the acquisition of this property

amounted to CHF 174,135 (2009: CHF nil).

Holding of Shares

2010 2009

ODH shares OHD shares ODH shares OHD shares

Board of Directors

Samih Sawiris 1 Chairman 16,987,444 2 - 13,932,074 -

Amr Sheta Vice-Chairman 45,943 - 22,000 -

Franz Egle Member 7,006 - 5,361 -

Adil Douiri Member 1241 - 841 -

Luciano Gabriel Member 2753 - 973 -

Carolina Müller-Möhl Member 4,306 - 2,441 -

Jean-Gabriel Pérès Member 1946 - 841 -

17,050,639 - 13,964,531 -

Total Board of Directors

Executive Management

Samih Sawiris CEO See above See above See above See above

Amr Sheta Co-CEO See above See above See above See above

Mahmoud Zuaiter Group CFO 16,750 - 16,000 -

Julien Renaud-Perret VP International Destinations - 40,000 - 40,000

Raymond Cron VP European Destinations 400 - 400 -

Hamza Selim VP Destination Management 8,000 - 8,000 -

Total Executive Management 25,150 40,000 24,400 40,000

1

total includes direct and indirect holding ownership as per note 26.5.

2

total includes 1,286,353 ODH shares borrowed by the company from Mr. Samih Sawiris free of charge under a securities

lending agreement as per note 41.

An amount of CHF 5,598,516 (2009: CHF 6,567,624) is due from key executives relating to the allocation of OHD shares in 2007 as

detailed in note 22.

No loans or credits were granted to members of the Board, the Executive Management or parties closely linked to them during 2010

and 2009.

F-35


ODH Annual Report 2010

13 INCOME TAXES RELATING TO CONTINUING OPERATIONS

_____________________________________________________________________________________________________________________________________________________________________________

13.1 Income tax recognised in profit or loss

CHF 2010

2009

(restated)

Current tax

Current tax expense 19,221,498 18,581,661

Adjustments recognized in the current year in relation to the current tax of prior years - -

19,221,498 18,581,661

Deferred tax

Deferred tax (income)/expense recognized in the current year (689,592) 3,508,821

Deferred tax reclassified from equity to profit or loss - -

Adjustments to deferred tax attributable to changes in tax rates and laws - -

(689,592) 3,508,821

Total income tax expense recognized in the current year relating to continuing operations 18,531,906 22,090,482

The income tax expense for the year can be reconciled to the accounting profit as follows:

CHF 2010

2009

(restated)

Profit from operations 140,783,823 166,989,882

Income tax expense calculated at 20.12% (2009 restated:: 20.48%) 28,323,937 34,200,166

Previously unrecognized deferred tax assets (12,573,387) -

Effect of income that is exempt from taxation 1,658,462 (14,830,660)

Effect of expenses or (income) that are not (deductable) or added in determining taxable profit 1,122,894 2,720,976

Income tax expense recognized in profit or loss 18,531,906 22,090,482

The average effective tax rate of 20.12% (2009 (restated): 20.48%) is the effective tax rate from countries in which the company

generates taxable profit.

13.2 Income tax recognized in other comprehensive income

CHF 2010 2009

Deferred tax

Arising on income and expenses recognised in other comprehensive income:

Fair value measurement of hedging instruments entered into in a cash flow hedge (152,816) (181,260)

Total income tax recognised in other comprehensive income (152,816) (181,260)

13.3 Current tax assets and liabilities

CHF 2010 2009 (restated)

Current tax expense 19,221,498 18,581,661

Tax risks covered in other provisions (see note 31) - (7,000,000)

Foreign currency difference (3,245,597) (708,277)

Current tax liabilities 15,975,901 10,873,384

F-36


Orascom Development Holding (Consolidated Financial Statement)

13.4 Deferred tax balances

Deferred tax assets and liabilities arise from the following:

2010

CHF

Assets

Temporary differences

Opening balance

Charged to

income

Exchange

difference

Recognized in

other

comprehensive

income

Acquisition/

disposal of

Subsidiary

Closing

balance

Property, plant & equipment (i)

Cash flow hedges

Tax losses

Provision

Pension Plan

396,025 12,655,047 (1,704,655) - (38,415) 11,308,002

581,053 - - (152,816) - 428,237

2,043,511 (14,952) (38,067) - - 1,990,492

- 4,154,858 (567,376) - - 3,587,482

- 5,232 - - - 5,232

3,020,589 16,800,185 (2,310,098) (152,816) (38,415) 17,319,445

Liabilities

Temporary differences - - - - - -

Property, plant & equipment (i)

Investment property

Pension plan

11,651,072 12,985,379 (1,943,818) - (39,211) 22,653,422

2,770,299 3,113,312 (581,013) - - 5,302,598

25,319 11,902 - - - 37,221

14,446,690 16,110,593 (2,524,831) - (39,211) 27,993,241

Net deferred tax liability

11,426,101 (689,592) (214,734) 152,816 (796) 10,673,796

2009 (restated)

CHF

Opening balance

Charged to

income

Exchange

difference

Charged to

other

comprehensive

income

Acquisition

Closing balance

Assets

Temporary differences

Property, plant & equipment 370,182 17,310 8,533 - - 396,025

Cash flow hedge 762,313 - - -181,260 - 581,053

Tax losses 663,256 1,336,226 44,029 - - 2,043,511

1,795,751 1,353,536 52,562 (181,260) - 3,020,589

Liabilities

Temporary differences

Property, plant & equipment 11,009,154 3,755,582 (1,001,183) - (2,112,481) 11,651,072

Investment property 1,663,524 1,106,775 - - - 2,770,299

Pension plan 25,319 - - - - 25,319

12,697,997 4,862,357 (1,001,183) - (2,112,481) 14,446,690

Net deferred tax liability 10,902,246 3,508,821 (1,053,745) 181,260 (2,112,481) 11,426,101

(i) The additions in deferred tax assets and liabilities of property, plant and equipment relates to the recognition of gains and losses

respectively from intercompany land sales taking place in Oman and Egypt. The tax assets were recognised in the current year, as it

became evident with the development of the land that future taxable profits are probable.

F-37


ODH Annual Report 2010

13.5 Unrecognized deferred tax assets

Deferred tax assets not recognized at the reporting date:

CHF 2010 2009

Tax losses in Parent Company (expiry in 2015) (i) 5,215,394 5,215,394

Tax losses in Parent Company (expiry in 2016) (i)

Temporary differences in subsidiaries (ii)

393,186,695 393,186,695

307,759,305 378,990,646

(i)

(ii)

At 31 December 2009 the Parent Company’s tax losses amounted to CHF 398,402,089 which mainly related to tax losses

caused by impairment charges recognized on investments as a consequence of the recent restructuring of the Group and the

stock market listing in Switzerland.

The Parent Company incorporated in Switzerland is a holding company and enjoys a privileged taxation for dividend income

from subsidiaries, as such income is tax exempted if certain criteria are met.

The Parent Company does not expect to have any substantial income streams other then tax exempted dividend income in the

foreseeable future and therefore it is not probable that the unused tax losses can be utilized. As a consequence and

unchanged to prior year, all of the tax losses accumulated in the Parent Company which amounted to CHF 398,402,089 at

31 December 2010 were treated as unrecognized deferred tax assets.

At 31 December 2010, the Group has unrecognised deferred tax assets from gains incurred by intercompany land sales in

Egypt in the amount of CHF 307,759,305 (31 December 2009: CHF 378,990,646). The Group does not recognise any of

deferred tax asset as the development of this land has not yet been started and therefore it is not evident that future taxable

profits are probable.

F-38


Orascom Development Holding (Consolidated Financial Statement)

14 EARNINGS PER SHARE

___________________________________________________________________________________

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of

ordinary shares outstanding during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is

adjusted to assume conversion of all dilutive potential ordinary shares. As the company does not have any dilutive potential, the basic

and diluted earnings per share are the same.

CHF 2010 2009 (restated)

Basic earnings per share 3.88 4.59

Diluted earnings per share 3.88 4.59

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as

follows:

CHF 2010 2009 (restated)

Profit for the year attributable to the equity holders of the

company

94,920,828 106,490,887

Weighted number of shares 2010 2009

Weighted average number of shares for the purposes of EPS

24,478,213 23,219,317

The following table summarizes the impact from changes in accounting policies as outlined in 3.3 and 3.5 on both basic and diluted

earnings per share:

Effect on profit for the period

from continuing operations

Effect on basic

earnings per share

Effect on diluted

earnings per share

2010 2009

2009

(restated)

2010 2009

2009

(restated)

2010 2009

2009

(restated)

CHF

CHF

CHF per

share

CHF per

share

CHF per

share

CHF per

share

CHF per

share

CHF per

share

Profit for the year

attributable to Owners of

the Company 93,273,698 105,682,059 105,682,059 3.81 4.55 4.55 3.81 4.55 4.55

Changes in accounting

policies relating to:

- investment property (IAS

40) 405,356 - 808,828 0.02 - 0.04 0.02 - 0.04

- basis of consolidation

(IAS 27 as amended in

2008) (240,733) - - (0.01) - - (0.01) - -

- investment in associates

(IAS 28 as amended in

2008) 1,482,507 - - 0.06 - - 0.06 - -

Profit for the year

attributable to Owners of

the Company 94,920,828 105,682,059 106,490,887 3.88 4.55 4.59 3.88 4.55 4.59

F-39


ODH Annual Report 2010

15 PROPERTY, PLANT AND EQUIPMENT

_____________________________________________________________________________________________________________________________________________________________________________

CHF Freehold land Buildings

Plant and

equipment

Furniture and

fixtures

Property

under

construction

Equipment

under finance

lease at cost

Total

Cost or valuation

Balance at 1 January

2009

Reclassification into

investment properties

Restated balance at 1

January 2009

Additions

Disposals / Transfers

Reclassification into

investment properties

Acquisition through

business combination

Derecognized on

disposal of a subsidiary

117,812,796 529,906,606 134,508,377 75,749,770 170,450,776 9,880,224 1,038,308,549

(6,605,252) (52,287,992) - - - - (58,893,243)

111,207,544 477,618,614 134,508,377 75,749,770 170,450,776 9,880,224 979,415,306

16,062,267 92,904,800 20,639,107 23,686,712 38,751,898 - 192,044,784

- (487,398) (3,091,758) (2,579,502) - - (6,158,658)

(487,920) (761,253) - - - - (1,249,173)

98,866,979 - - - - - 98,866,979

(12,085,550) (12,235,138) (4,655,172) (2,839,788) (37,946,536) - (69,762,184)

Foreign currency

exchange differences

(2,855,328) (12,842,894) (3,259,964) (1,835,882) (4,131,070) (239,459) (25,164,597)

Restated balance at 1

January 2010 210,707,992 544,196,732 144,140,590 92,181,310 167,125,068 9,640,765 1,167,992,457

Additions

Disposals / transfers

Transferred to

investment property

Derecognized on

disposal of a subsidiary

Foreign currency

exchange differences

75,319,117 56,338,976 17,220,078 39,560,082 84,682,836 - 273,121,088

(1,069,096) (1,246,119) (1,479,826) (3,082,263) - - (6,877,304)

- (3,822,824) - - - - (3,822,824)

(89,409,383) (2,524,207) (5,121,522) (30,983,265) (5,281,742) (9,640,765) (142,960,883)

(50,337,202) (71,725,275) (22,318,540) (17,174,329) (11,456,465) - (173,011,811)

Balance at 31

December 2010

145,211,428 521,217,283 132,440,779 80,501,535 235,069,698 - 1,114,440,723

F-40


Orascom Development Holding (Consolidated Financial Statement)

CHF Freehold land Buildings

Plant and

equipment

Furniture

and fixtures

Property under

construction

Equipment

under finance

lease at cost

Total

Accumulated depreciation and impairment

Balance at 1 January

2009

Reclassification into

investment properties

- 71,374,560 71,632,096 37,986,136 - 823,352 181,816,144

- (4,149,335) - - - - (4,149,335)

Restated balance at 1

- 67,225,225 71,632,096 37,986,136 - 823,352 177,666,809

January 2009

Eliminated on

disposals of assets - (3,084) (110,109) (2,868,063) - - (2,981,256)

Acquisition through

business combination - (4,243,082) (1,591,379) (1,122,280) - - (6,956,741)

Depreciation expense - 17,120,190 16,005,887 12,091,602 - 1,994,981 47,212,660

Foreign currency

exchange differences - (1,729,844) (1,736,086) (920,638) - (19,955) (4,406,523)

Restated balance at 1

January 2010

- 78,369,405 84,200,409 45,166,757 - 2,798,378 210,534,949

Eliminated on

disposals of assets - (122,920) (822,782) (4,776,338) - - (5,722,040)

Derecognized on

disposal of a

subsidiary - (417,081) (4,401,503) (11,383,571) - (2,798,378) (19,000,534)

Depreciation expense - 9,823,268 12,691,970 19,093,192 - - 41,608,430

Foreign currency

exchange differences - (17,519,510) (17,384,954) (4,153,460) - - (39,057,925)

Balance at 31

December 2010 - 70,133,162 74,283,139 43,946,580 - - 188,362,881

Carrying amount

At 31 December 2009

210,707,992 465,827,327 59,940,181 47,014,553 167,125,068 6,842,387 957,457,508

At 31 December 2010 145,211,428 451,084,121 58,157,640 36,554,955 235,069,698 - 926,077,841

At 31 December 2010, property, plant and equipment (PPE) of the Group with a carrying amount of CHF 98.4 million (31 December

2009: CHF 109.7 million) were pledged to secure borrowings of the Group as described in note 30. At this date, the fire insurance

value of PPE was CHF 1.2 billion (31 December 2009: CHF 700.5 million).

See note 11 for the capitalised finance cost during the year.

F-41


ODH Annual Report 2010

16 INVESTMENT PROPERTY

___________________________________________________________________________________

The Group has historically accounted for all its property as

property, plant and equipment and measured them at cost less

accumulated depreciation and / or accumulated impairment

losses under IAS 16 (“property, plant and equipment”). The

Group has restated its previously reported financial information

including these financial statements to reflect the retrospective

restatement of the Mauritius real-estate from property, plant and

equipment to investment property measured at fair value as of 1

January 2009 (see notes 3.3, 3.19 and 4.2.9).

The following table summarizes movements, which have

occurred, during the current reporting period, on the carrying

amount of investment property.

CHF 31-Dec-10 31-Dec-09 1-Jan-09

Balance at the

beginning of the

year before

restatement as of 71,786,344 65,834,078 -

Transfer from

property, plant

and equipment 3,822,824 1,249,173 58,893,243

Revaluation gain

resulting from

accounting

policy change - - 6,940,835

Revaluation gain

14,120,934 5,170,672 -

Foreign currency

translation

adjustment (11,374,867) (467,579) -

Restated

balance as of 78,355,235 71,786,344 65,834,078

The Group’s investment properties are located in Mauritius and in

Egypt. The transfer from property, plant and equipment to

investment property during 2009 and 2010 relates to several

premises located in El Gouna (Egypt) which have been leased to

third parties for the first time.

Their fair values at 31 December 2010, at 31 December 2009

and 1 January 2009 have been arrived at on the basis of

valuations carried out at these dates by Messrs Alan Tinkler,

Ramlackhan & Co and Fincorp & CPM, independent valuation

specialists not related to the Group. They are both accredited

valuators in Mauritius and Egypt and have appropriate

qualifications and recent experience in the valuation of properties

in the relevant locations.

The valuation for the investment property in Egypt was arrived at

by reference to market evidence of transaction prices for similar

properties. Due to the lack of recent, comparable property trades,

the valuation for the investment property in Mauritius was based

on the summation approach. This approach considers the value

of land using a comparative method and the value of buildings

and other improvements based of their depreciated replacement

cost defined as being the current cost of replacing an asset with

its modern equivalent asset less deductions for physical

deterioration and all relevant forms of obsolescence and

optimization. Both valuation methods are in conformity with the

International Valuation Standards.

All of the Group’s investment property is held under freehold

interests.

The following table summarizes income and direct operating

expenses from investment properties rented out to third parties.

CHF 2010 2009

Rental income from investment

properties (i) 7,161,744 5,062,180

Direct operating expenses (including

repairs and maintenance) arising

from investment properties that

generated rental income during the

period 68,228 117,421

(i)

See note 7.1 for further information on the

Group’s rental income.

F-42


Orascom Development Holding (Consolidated Financial Statement)

17 GOODWILL

___________________________________________________________________________________

CHF 2010 2009

Cost

Balance at beginning of year 30,432,009 33,368,405

Derecognized amount on

disposal of former Garranah

subsidiaries (see note 34) (17,731,566) -

Derecognized amount of

former Falcon subsidiary due

to change of scope of

consolidation (see note 47) - (2,025,920)

Effect of foreign currency

(4,491,636) (910,476)

exchange differences

8,208,807 30,432,009

17.1 Allocation of goodwill to cashgenerating

units

Annual test for impairment

An impairment test of goodwill was performed by the Group in

order to assess the recoverable amount of its goodwill. No

impairment was recorded as a result of this test. All cashgenerating

units were tested for impairment using the Discounted

Cash Flow (DCF) method in accordance with IFRS.

The Group’s business segments have been identified as cash–

generating units. The DCF model utilized to evaluate the

recoverable amounts of these units was based on a five year

projection period. The model estimated the effects of capital

expenditures and assumed a positive development of the cashgenerating

units in the future.

The carrying amount of goodwill that has been allocated for

impairment testing purposes is as follows:

CHF Segment 2010 2009

Garranah

Group of

companies *

Hotel

companies *

Tours

operations - 20,866,473

Hotels 8,208,807 9,565,536

8,208,807 30,432,009

*Each subsidiary considered separately

Hotels

The recoverable amount of this cash-generating unit has been

determined based on a value in use calculation which uses cash

flow projections based on the financial budgets approved by the

directors covering a five-year period and an average discount

rate of 14% to 16% per annum (2009: 11% to 14% per annum).

Cash flow projections during the budget period were based on a

steady, annual growth rate. The cash flows beyond that five year

period were extrapolated using no additional growth rate, as

individual hotels have reached their peak.

The directors believe that any reasonably possible change in the

key assumptions (sensitivity analysis) on which the recoverable

amount is based would not cause the aggregate carrying amount

to exceed the aggregate recoverable amount of the cashgenerating

unit.

F-43


ODH Annual Report 2010

18 SUBSIDIARIES

_____________________________________________________________________________________________________________________________________________________________________________

The Group has control over all the subsidiaries below either directly or through controlling the Parent Company of those subsidiaries.

Details of the Group’s significant subsidiaries at the end of the reporting period are as follows:

Country - Company name Domicile FC

Share/paid-in

capital

Proportion

of

ownership

interest

and

voting

power

held by

the Group

Segment

HO * R&C LS TM TO Other HQ

Egypt

Abu Tig for Hotels Company Red Sea EGP 637,500 97.32% 2

Accasia for Hotels Company Cairo EGP 25,000,000 97.79% 5

Arena for Hotels Company S.A.E Cairo EGP 20,000,000 99.85% 4

Azur for Floating Hotels Company S.A.E (ii) Cairo EGP 3,000,000 50.06% 5

Captain for Hotels Company Red Sea EGP 768,750 58.45% 3

El Dawar for Hotels Company Cairo EGP 9,560,000 97.80% 3

El Golf for Hotels Company & Touristic

Establishments

Cairo EGP 19,000,000 97.82% 5

El Gouna for Hotels Company S.A.E Cairo EGP 79,560,000 69.23% 5

El Gouna Hospital Company Red Sea EGP 19,000,000 71.12%

El Gouna Services Company Red Sea EGP 250,000 94.24%

El Mounira for Hotels Company S.A.E Red Sea EGP 13,000,000 63.45% 4

El Tebah for Hotels & Touristic Establishments

Company

Cairo EGP 52,000,000 69.21% 5

El Wekala for Hotels Company Cairo EGP 39,000,000 71.30% 4

International Company for Taba Touristic Projects

(Taba Resorts)

Cairo EGP 96,000,000 63.47% 5

International Hotel Holding (previously: Orascom

Hotels Holding S.A.E)

Cairo EGP 452,367,300 97.90%

Marina 2 for Hotels & Touristic Establishments

Company

Cairo EGP 16,812,500 58.66% 4

Marina 3 for Hotels & Touristic Establishments

Company

Cairo EGP 18,500,000 97.84% 4

Med Taba for Hotels Company S.A.E Cairo EGP 51,000,000 65.56% 4

Misr El Fayoum for Touristic Development

Company S.A.E

Cairo EGP 28,000,000 66.04%

Mokbela for Hotels Company S.A.E Cairo EGP 85,000,000 80.60% 5

Orascom Hotels & Development S.A.E Cairo EGP 1,109,811,630 98.16%

Orascom Housing Communities (OHC) Cairo EGP 155,000,000 68.26%

Orascom Housing Company Cairo EGP 22,000,000 93.63%

Paradisio for Hotels & Touristic Establishments

Company S.A.E

Red Sea EGP 18,500,000 97.84% 4

Rihana for Hotels Company S.A.E Red Sea EGP 13,000,000 58.51% 4

Roaya for Tourist & Real Estate Development SAE

(i)

Red Sea EGP 50,000,000 73.04%

Royal for Investment & Touristic Development

S.A.E (i)

Cairo EGP 50,000,000 50.06% 4

Taba First Hotel Company S.A.E Cairo EGP 105,000,000 58.67% 5

Taba Heights Company S.A.E South Sinai EGP 157,510,000 93.27%

Tamweel Leasing Finance Co. ILC Cairo EGP 100,000,000 88.27%

Tamweel Mortgage Finance Company S.A.E Cairo EGP 100,000,000 86.32%

Tawila for Hotel Company S.A.E Cairo EGP 68,000,000 97.79% 5

F-44


Orascom Development Holding (Consolidated Financial Statement)

Country - Company name Domicile FC

Share/paid-in

capital

Proportion

of

ownership

interest

and

voting

power

held by

the Group

Segment

HO * LS TM TO Other HQ

Jordan

Golden Beach for Hotels Company Aqaba JOD 8,200,000 100.00% 4

Mauritius

Club Méditerranée Albion Resorts Ltd (iii) Port-Louis EUR 20,000,000 12.24%

Montenegro

Lustica Development Ad Podgorica Podgorica EUR 25,000 90.00%

Morocco

Oued Chibika Development (SA) Casablanca MAD 154,038,450 64.97%

Oman

Madrakah Hotels Management Company LLC Muscat OMR 150,000 69.97%

Muriya Tourism Development Company

(S.A.O.C)

Salalah Beach Tourism Development Company

(S.A.O.C)

Muscat OMR 7,500,000 69.27%

Muscat OMR 11,000,000 69.97%

Sifah Tourism Development Company (S.A.O.C) Muscat OMR 11,000,000 69.97%

Wateera Property Management Company LLC Muscat OMR 270,000 69.97%

Switzerland

Andermatt Swiss Alps AG (previously AADC AG) Altdorf CHF 27,000,000 100.00%

Andermatt Hotels Holding AG Andermatt CHF 100,000 100.00%

Bellevue Hotels and Apartment Development AG. Altdorf CHF 4,360,000 73.48% UC

United Arab Emirates

RAK Tourism Investment FZC Ras al Kaimah AED 7,300,000 72.97% 5

United Kingdom

Eco-Bos Development Limited Cornwall GBP 10,000,000 75.00%

(i)

(ii)

The Group has control over these subsidiaries as it has the power to appoint and remove the majority of the Board of

Directors and hence has control over the financial and operating policies of these subsidiaries.

On 18 May 2010, the Group signed a share purchase agreement to sell to the Garranah family a six percent stake in six

subsidiaries (International Stock Company for Floating Hotels & Touristic Establishments, Mirotel for Floating Hotels

Company, Tarot Garranah & Merotil for Floating Hotels, El Tarek for Nile Cruises & Floating Hotels, Tarot Tours Company

(Garranah) SAE and Tarot Garranah for Touristic Transportation). Pursuant to this agreement, the Group’s interest in these

entities decreased from 51 to 45 percent (see note 34).

On 30 June 2010, the Group sold the entire stake in the Joud Fund 4 (including its subsidiary Al-Aqaba Oasis for Housing

Ltd.). This transaction is part of the Group’s sale of all its interests in the Joud Funds 1, 2, 3, and 4 (see note 34).

(iii) The Group has control over the Club Méditerranée Albion Resorts Ltd through a call and put option as described in note 35.

Abbreviations:

HO Hotels

R&C Real estate and construction

LS Land sales

TM Town management

HQ Headquarter or not yet operational

TO Tours operations

Other Other operations

* Number of stars the hotel holds

UC Hotel under construction

F-45


ODH Annual Report 2010

19 INVESTMENTS IN ASSOCIATES

_____________________________________________________________________________________________________________________________________________________________________________

Details of the Group’s associates at the end of the reporting period are as follows:

Name of associate

Jordan Company for Projects and Touristic

Development (i)

Place of

incorporation

Proportion of ownership interest and

voting power held by the Group

Carrying value

(CHF)

2010 2010 2009

Jordon 15.64% 6,804,656 8,129,189

Orascom for Housing and Establishments (ii) Cairo 39.90% 1,633,303 -

International Stock Company for Floating

Hotels & Touristic Establishments (iii)

Cairo 45.00% 370,333 -

Mirotel for Floating Hotels Company (iii) Cairo 45.00% 1,496,440 -

Tarot Garranah & Merotil for Floating Hotels

(iii)

Cairo 45.00% 1,084,682 -

Tarot Tours Company (Garanah) S.A.E (iii) Cairo 45.00% 17,581,334 -

El Tarek for Nile Cruises & Floating Hotels (iv) Aswan 45.00% - -

Tarot Garranah for Touristic Transportation (iii) Cairo 45.00% 6,426,736 -

Total 35,397,484 8,129,189

Summarised financial information in respect of the Group’s

associates is set out below.

CHF 2010 2009

Total assets

Total liabilities

Net assets

202,022,366 98,201,458

(131,149,512) (46,211,949)

70,872,854 51,989,509

Group’s share of net assets

of associates 18,859,503 8,129,189

Total revenue

Total (loss)/profit for the period

45,783,670 25,839,570

(4,614,435) 819,655

Group’s share of (loss)/profits of

associates (1,552,599) 187,701

(i) Jordan Company for Projects and Touristic Development

(JPTD)

JPTD is investing in property, town management and development

in Aqaba in Jordon. Since 2008 the Group exercised significant

influence with their two active board members out of eleven

leading to changes in the JPTD’s Executive Management and

provision of essential technical information. The proportion of

ownership interest held by the Group at 31 December 2010 is

unchanged to prior year.

(ii) Orascom for Housing and Establishment

OHD increased its investment in Orascom for Housing and

Establishment during the current year resulting in an ownership

interest of 39.90% at 31 December 2010. The company

develops real estate and housing projects located in Egypt for the

low cost sector.

(iii) Garranah Group subsidiaries

On 18 May 2010, the Group signed a share sale and purchase

agreement to sell to the Garranah family a six percent stake in six

subsidiaries (International Stock Company for Floating Hotels &

Touristic Establishments, Mirotel for Floating Hotels Company,

Tarot Garranah & Merotil for Floating Hotels, El Tarek for Nile

Cruises & Floating Hotels, Tarot Tours Company (Garranah) SAE

and Tarot Garranah for Touristic Transportation). Pursuant to this

agreement, the Group’s interest in these entities decreased from

51 to 45 percent and the Group ceased control over these

subsidiaries, but retained significant influence at 31 December

2010. As of the date of this change of ownership interest, the

Group did not consolidate these operations but accounted for

them as investments in associates.

The Group has accounted for the partial disposal of the six

percent it previously held in Garranah subsidiaries in accordance

with IAS 27 (as amended in 2008). The Group derecognized all

assets, liabilities and non-controlling interests of the entities at

their carrying amount. The retained interest in the former

subsidiaries was recognized at its fair value at the date when

control was lost and the resulting gain amounting to CHF 8,

F-46


Orascom Development Holding (Consolidated Financial Statement)

530,587 was recorded in the statement of comprehensive income

as other gains and losses (see notes 10 and 34).

The members of the Garranah family who were party to the

transaction as sellers in 2008 and buyers in 2010 of the six

percent stake in the former Garranah subsidiaries are related to

the ex minister who is also a member of the Garranah family and

currently being investigated in Egypt in his capacity as a public

officer. The assets of the Garranah family are frozen; however,

this should not impact the recovery of the remaining sales

proceeds as this measure is only precautionary and not

permanent.

On 28 December 2010 the Group signed the legal documents to

register the transfer of title regarding the six percent stake of the

Garranah entities according to the broker’s invoices by the par

value of the shares to the Garranah family except for the legal

title of Tarot Tours Company (Garanah) S.A.E which is still under

execution awaiting the final approval from the regulator. The

company has received a request for clarification from the

authorities regarding the execution of the transfer documents with

par value.

(iv) El Tarek for Nile Cruises & Floating Hotels El Tarek for Nile

Cruises & Floating Hotels

20 NON-CURRENT RECEIVABLES

___________________________________________________________________________________

CHF 2010 2009

Trade

receivables

56,264,407 65,474,772

Notes receivable 38,455,234 35,952,494

94,719,641 101,427,266

Non-current receivables include long term receivables for real

estate contracts, which will be collected over an average

collecting period of 5.5 years (2009: 4.5 years) and accounts

receivables from the mortgage company (Tamweel Mortgage

Finance Company S.A.E.), one of OHD subsidiaries, with an

average collecting period of 10 years (2009: 10 years).

Tamweel Mortgage Finance Company S.A.E. has pledged trade

receivable with carrying amount of CHF 19.3 million (2009: CHF

15.4 million) to secure borrowings (note 30).

The Group’s share of losses of this associate exceeds the Group’s

interest in this associate and therefore the Group discontinues

recognising its share of losses. Furthermore, the Group has no legal

or contingent liabilities towards this associate or made payments on

behalf of it.

F-47


ODH Annual Report 2010

21 OTHER FINANCIAL ASSETS

_____________________________________________________________________________________________________________________________________________________________________________

Details of the Group’s other financial assets are as follows:

CHF

Current

Non-current

2010 2009 2010 2009

Financial assets carried at fair value through profit or

loss (FVTPL)

Held for trading non-derivative financial assets -

certificates of mutual funds (i)

1,380,948 701,500 - -

AFS equity investments carried at fair value

Nasr City company for Housing & Development

(N.C.H.R.) (ii)

- - 36,126,607 37,554,375

Egyptian Resort Company (iii) 15,175,383 1,127

Green Power Uri AG 30,000 30,000

Sedrun Bergbahnen AG 286,000 257,400

Andermatt Gotthard Sportbahnen AG - - 105,138 -

AFS equity investments carried at cost

Joud Fund I (iv) - - - 5,280,163

Joud Fund II (iv) - - - 10,282,966

Joud Fund III (iv) - - - 13,949,549

Falcon for Hotels SAE (v) - - 18,645,202 20,665,999

Montemena d.o.o. - - - 4,602,920

Coral Blue Airlines - - - 2,282,866

Egyptian Mortgage Refinance Company - - 160,610 188,420

Orascom for housing and establishments - 751,796

Camps and Lodges Company - - 40,153 47,105

Palestine for Tourism Investment Company - - 27,508 32,271

El Koseir Company - - 546 641

Held-to-maturity investments carried at amortised cost

Bonds issued by the Hellenic Republic (2 3/8%,

2004 – 18 March 2011)

9,427,913 - - -

10,808,861 701,500 70,597,147 95,927,598

(i) Certificates – mutual fund

The Group holds certificates in Mutual Funds and these certificates are recorded at their redemption price at year end.

(ii) Nasr City Company for Housing & Development (N.C.H.R.)

The investment in N.C.H.R. remains unchanged to prior year at 7.07%. In 2009, a development management agreement was

signed between Orascom Development & Management (ODM) and N.C.H.R., an Egyptian listed real estate development

company with a total land bank of 10.13 million square meters. As the necessary licenses are outstanding, the development

has not been started at 31 December 2010.

(iii) Egyptian Resort Company

The investment in Egyptian Resort Company (“ERC”) was increased during the year. The company is acting as the developer

of the hotel and real estate project in Sahel Hashish (Egypt). Since March 2011, ERC is involved in a dispute with the General

Authority for Tourism and Development (“GATD”) which is further disclosed in note 46.

(iv) Joud Fund 1, 2 and 3

These investments were entirely sold together with Joud Fund 4 in 2010 (see note 34).

(v) Falcon for hotels

The financial statements of Falcon Company for Hotels (“Falcon”) were incorporated into ODH’s consolidated financial

statements at 31 December 2008 in accordance with the International Financial Reporting Standards, as a result of the

business combination previously effected through one of ODH’s subsidiaries whereby control had existed over Falcon at that

time. Subsequent to the first time consolidation, but prior to the completion of the transfer of the legal title on the Egyptian

Stock Exchange (EGX), a dispute over the Falcon securities purchase agreement had arisen. At the beginning of October

2009, the Group ceased consolidating Falcon due to changes in Falcon’s management resulting in a loss of control for the

Group which was one of the reasons of the dispute (see note 47).

F-48


Orascom Development Holding (Consolidated Financial Statement)

22 OTHER CURRENT ASSETS

___________________________________________________________________________________

CHF 2010 2009

Advance to suppliers (i)

Other debit balances (ii)

20,460,324 39,752,193

48,690,280 28,733,619

Amounts due from employees

and the management team (iii) 13,024,339 20,863,618

Down payments for investments

(iv) 7,283,114 17,841,073

Prepaid expenses

Deposit with others

7,894,771 8,562,311

3,118,512 4,850,438

Prepaid sales commissions

related to uncompleted units 3,300,768 3,907,943

Withholding tax

Urban development authority

7,591,835 2,412,933

1,108,650 2,059,431

Letters of guarantee – cash

margin 4,702,026 1,544,044

Cash imprest

Accrued revenue

(i)

356,465 1,097,104

1,694,535 497,168

119,225,619 132,121,875

The decrease in advance to suppliers mainly relates to the

completion and delivery of real estate in Oman the current

year.

(ii) Other debit balances include deferred proceeds of CHF

24,704,634 from the sale of all interests in Joud Fund 1, 2, 3

and 4. At 31 December 2010, net of an impairment charge

of CHF 15 Mio was recorded against other debit balances to

cover any shortfall that might occur as a result of the recent

political developments in the Middle East region.

23 Inventories

___________________________________________________________________________________

(i)

CHF 2010 2009

Construction work in progress

(i)

Land held for development

under purchase agreements

(ii)

145,035,953 127,164,670

58,361,107 41,992,860

Other inventories 56,778,602 33,461,433

260,175,662 202,618,963

This amount includes real estate construction work under

progress. The real estate units are sold off plan. The growth is

mainly due to the commencement of the construction and

preparation work in Morocco and Oman. In addition, there

has been an increase in development activities in Oman

(Sifah and Salalah).

(ii) In 2008, the finance leases between OHD and General

Authority for Touristic and Development (“GATD”) for

development of land were terminated and replaced with

purchase agreements with GATD. On May 2008, OHD

signed a new purchase agreement with GATD to purchase a

plot of land and paid a down payment of 27% and the

remaining balance is payable in equal annual instalment

commencing upon the expiry of the grace period of three

years.

In addition, OHD is required to pay an annual interest at the

rate of 5% after the grace period with each instalment.

The value of land shown above is for those plots of land

assigned for development and not yet sold by OHD.

Other debit balances also include CHF 3.9 million due from

real estate agents selling real estate units on behalf of

subsidiaries.

(iii) Include an amount of CHF 12,042,632 (2009: CHF

15,827,280) which is due from employees and management

team including executive board members as a result of

receiving two million OHD shares for full consideration being

the market price as of the day of allocation (being 17 January

2007). These shares were previously issued based on a

general assembly resolution in OHD dated 13 February 2006

authorizing the company to issue 2 million shares at par to be

used to allocate to employees and management team (see

note 41. Of this amount CHF 5,598,516 (2009: CHF

6,567,624) are due from the chairman and executive board

members. All of these shares were swapped 1:10 to ODH

shares in 2008. In 2010 the board of Orascom Hotels &

Development extended the repayment period for another

year.

(iv) Down payments for investments mainly represent partial

payments for the planned acquisition of Reclaym.

F-49


ODH Annual Report 2010

24 Trade and other receivables

___________________________________________________________________________________

CHF 2010 2009

Trade receivables (i)

Notes receivable

134,409,628 145,177,518

32,362,239 32,682,054

Allowance for doubtful debts

(see below) (10,729,483) (13,054,738)

156,042,384 164,804,834

(i) The average credit period on sales of real-estate is 4

years. No contractual interest is charged on trade

receivables arising from the sale of real estate units.

Interest is only charged in case of customers default.

The Group has recognised an allowance for doubtful

debts of 8% (2009: 9%) based on historical experience.

Allowances for doubtful debts are recognised against

trade receivables based on estimated irrecoverable

amounts determined by reference to past default

experience of the counterparty and an analysis of the

counterparty's current financial position.

Movement in the allowance for doubtful debt:

CHF 2010 2009

Balance at the beginning of the

year (13,054,738) (8,144,943)

Impairment losses recognised on

receivables (4,655,459) (6,643,241)

Allowance no longer used 3,389,300 1,322,092

Foreign exchange translation

gains and losses 3,591,414 411,354

Balance at the end of the year

(10,729,483) (13,054,738)

Included in the Group’s trade and other receivable balance are

debtors with a carrying amount of CHF 32,530,404 (2009: CHF

31,869,159) which are past due but not impaired at the

reporting date. The Group has not built provisions for the past

due reported below as there has not been a significant change in

credit quality and the amounts are still considered recoverable

(see note 39).

Aging of receivables that are past due but not impaired:

CHF 2010 2009

25 FINANCE LEASE RECEIVABLES

___________________________________________________________________________________

CHF 2010 2009

Current finance lease

receivables 2,478,257 2,101,401

Non-current finance lease

receivables 13,740,381 6,110,881

25.1 Leasing arrangements

16,218,638 8,212,282

Tamweel Leasing Finance Co., a subsidiary of the Group entered

into finance lease arrangements for buildings, cars, equipments,

computer hardware and software as a lessor. All leases are

denominated in EGP. The average term of finance leases entered

into is six years.

25.2 Amounts receivable under finance lease

Minimum lease payments Present value of minimum

lease payments

CHF 2010 2009 2010 2009

Not later

than one

year 4,902,997 2,306,470 2,478,257 2,101,401

Later than

one year

and not

later than

five years 16,050,054 7,819,637 10,652,822 5,245,978

Later than

five years 3,418,354 2,025,529 3,087,559 864,903

24,371,405 12,151,636 16,218,638 8,212,282

Less:

unearned

finance

income (8,152,767) (3,939,354) - -

Present

value of

minimum

lease

payments 16,218,638 8,212,282 16,218,638 8,212,282

The interest rate inherent in the leases is fixed at the contract date

for the entire lease term. The average effective interest rate

contracted is approximately 16% (31 December 2009: 15%) per

annum.

The finance lease receivables at the end of the reporting period

are neither past due nor impaired.

Total

32,530,404 31,869,159

Less than 30 days 15,046,685 11,595,808

Between 30 to 60 days 2,209,917 1,769,304

Between 60 to 90 days 1,966,265 2,611,670

Between 90 to 120 days 2,311,888 2,625,894

More than 120 days 10,995,649 13,266,483

F-50


Orascom Development Holding (Consolidated Financial Statement)

26 CAPITAL

___________________________________________________________________________________

26.1 Issued capital

CHF 2010 2009

Par value per share 23.85 CHF 24.50 CHF

Number of ordinary shares

issued and fully paid

28,213,118 23,219,658

Issued capital 672,882,864 568,881,621

26.2 Fully paid ordinary shares

On 11 May 2010, the General Meeting decided to reduce the

share capital by CHF 15,092,778 from CHF 568,881,621 to

CHF 553,788,843 through a reduction of the nominal value of

the registered shares by CHF 0.65 from CHF 24.50 to CHF

23.85. On 21 July 2010, the capital reduction was approved by

a public deed and on 24 August 2010, the Parent Company

remitted the amount of reduction to the shareholders.

On 17 / 18 September 2010, the Board of Directors resolved to

increase the share capital by the amount of CHF 119,094,021

through the issuance of CHF 4,993,460 fully paid-up registered

shares with a par value of CHF 23.85 each. 4,965,220 shares

were issued for an amount of CHF 37.00 each, resulting in an

additional paid-in capital of CHF 65,292,643. The offer price of

CHF 37.00 was derived from the closing price of the trading

session on 17 September 2010, discounted at a discount rate

negotiated with the banks. In addition, 28,240 shares were issued

for an average amount of CHF 51.22 resulting in an additional

paid-in capital of CHF 772,929. The total additional paid-in

capital from this capital increase amounted to CHF 66,065,707.

Fully paid ordinary shares, which have a par value of CHF 23.85

each, carry one vote per share and carry a right to dividends.

26.3 Authorized capital

The Board of Directors is authorized to increase the share capital

of the Parent Company by a maximum CHF 155,979 by issuing

of up to 6,540 fully paid registered shares with a par value of

CHF 23.85 each until 11 May 2012. A partial increase is

permitted. The Board of Directors determines the date of

issuance, the issue price, the type of contribution, the date of

dividend entitlement as well as the allocation of non exercised

pre-emptive rights. The Board of Directors may withdraw or limit

the pre-emptive rights of the shareholders.

Company and Mr. Samih Sawiris to buy-out the remaining

minority shareholders of OHD as described in note 46.

26.4 Conditional capital

The share capital may be increased by a maximum amount of

CHF 134,145,661 through the issuance of up to 5,624,556 fully

paid registered shares with a nominal value of CHF 23.85 each

a) up to the amount of CHF 14,895,661 corresponding

to 624,556 fully paid registered shares through the

exercise of option rights granted to the members of the

Board and the management, further employees and /

or advisors of the Parent Company or its subsidiaries.

b) up to the amount of CHF 119,250,000 corresponding

to 5,000,000 fully paid registered shares through the

exercise of conversion rights and / or warrants granted

in connection with the issuance of newly or already

issued bonds or other financial instruments by the

Parent Company or one of its group companies.

The subscription rights of the shareholders shall be excluded. The

Board of Directors shall determine the conditions of the option

rights, the issue price, the dividend entitlements as well as the type

of contribution.

At 31 December 2010, no option rights, conversion rights or

warrants had been granted on that basis.

26.5 Significant shareholders

The following significant shareholders are known to us.

CHF

Number of

shares

2010 2009

%

Number of

shares

Samih Sawiris 16,987,444 60.21% 13,932,074 60.00%

whereof held

8,717,995 30.90% 7,414,166 31.93%

directly

whereof held

7,142,941 25.32% 5,873,741 25.30%

through TNT

Holding Ltd.

whereof held

1,126,508 3.99% 644,167 2.77%

through SOS

Holding Ltd.

Janus Capital

1,524,707 5.40% 1,156,323 4.98%

Management LLC

Blue Ridge Capital 1,059,174 3.75% 851,660 3.67%

Holdings LLC and

Others 8,641,793 30.63% 7,279,601 31.35%

28,213,118 100.00% 23,219,658 100.00%

Total

%

The existing authorized capital expires on 11 May 2012.

Therefore the Board of Directors proposes to renew and to

increase the authorized capital from 6,540 registered shares by

4,993,460 registered shares with a par value of CHF 23.85 to

5,000,000 registered shares at the upcoming shareholders

meeting of the Parent Company scheduled for 23 May 2011, in

order to enable the Board of Directors to increase the Parent

Company’s share capital within the parameter of the article of

incorporation until 23 May 2013.

This is also in accordance with the terms of the securities lending

agreement dated 3 December 2010 between the Parent

F-51


ODH Annual Report 2010

27 RESERVES (NET OF INCOME TAX)

___________________________________________________________________________________

CHF 2010 2009

Share premium (note 27.1)

242,272,821 183,269,858

Treasury shares (note 27.2)

(1,464,267) -

Cash flow hedging reserve (note

27.3) (1,712,949) (2,324,214)

Investments revaluation reserve

(note 27.4) (1,025,518) (85,800)

Reserve from common control

transactions (note 27.5) (106,255,917) (108,051,503)

Foreign currencies translation

reserve (note 27.6) (195,803,181) (75,348,038)

Equity swap settlement (note

27.7) (10,220,295) -

27.1 Share premium

(74,209,306) (2,539,697)

CHF 2010 2009

Balance at

beginning of year 183,269,858 183,348,356

Share capital

reduction costs

(repayment of

nominal value) (49,205) (78,498)

Share capital

increase (issuance

of ordinary

shares) 66,065,708 -

Share capital

increase costs (7,013,540) -

Balance at end

of year 242,272,821 183,269,858

27.2 Treasury shares

CHF 2010 2009

Balance at beginning of year - (28,426)

Reissuance of treasury shares - 28,426

Consideration received in treasury

shares (i) (1,464,267) -

Balance at end of year

(1,464,267) -

27.3 Cash flow hedging reserve

CHF 2010 2009

Balance at beginning of year

Interest rate swaps

Income tax related to

gains/losses recognised in

other comprehensive income

(2,324,214) (3,049,255)

764,081 906,301

(152,816) (181,260)

Balance at end of year (1,712,949) (2,324,214)

The cash flow hedging reserve represents the cumulative effective

portion of gains or losses arising on changes in fair value of

hedging instruments entered into for cash flow hedges. The

cumulative gain or loss arising on changes in fair value of the

hedging instruments that are recognised and accumulated under

the heading of cash flow hedging reserve will be reclassified to

profit or loss only when the hedged transaction affects the profit

or loss, or included as a basis adjustment to the non-financial

hedged item, consistent with the relevant accounting policy. As

the cash flow hedge is 100% effective at 31 December 2010 the

entire hedging gain is recognised in other comprehensive income

(note 39.7).

27.4 Investments revaluation reserve

CHF 2010 2009

Balance at beginning of year

(85,800) -

Net loss arising on revaluation

of available-for-sale financial

assets (939,718) (85,800)

Balance at end of year

(1,025,518) (85,800)

The investments revaluation reserve represents the cumulative

gains and losses arising on the revaluation of available-for-sale

financial assets that have been recognised in other

comprehensive income, net of amounts reclassified to profit or

loss when those assets have been disposed of or are determined

to be impaired.

27.5 Reserve from common control transactions

(i)

As of 31 December 2010, the Group owned 26,171 own

shares (31 December 2009: nil). These own shares were

received on 30 December 2010 as part of the consideration

for the sale of the six percent stake in the former Garranah

subsidiaries (see note 34).

On 3 December 2010, the Parent Company borrowed

1,286,353 ODH shares from Mr. Samih Sawiris free of

charge under a securities lending agreement. These shares

were intended to be used for the tender offer regarding the

buy-out of the remaining shareholders of Orascom Hotels &

Development SAE (OHD), a company listed at the EGX. For

information on the outcome of this tender offer which was

completed on 18 January 2011 refer to note 46.

CHF 2010 2009

Balance at beginning of year

(108,051,503) (108,515,004)

Reserve from common

control transactions

Balance at end of year

1,795,586 463,501

(106,255,917) (108,051,503)

The reserve from common control transactions relates to the

restructuring of the group and the set up of a new holding

company during May 2008. This new structure became effective

by way of a share exchange between the shareholders of the

initial holding company (OHD) and the new holding company

(ODH). Following this acquisition through exchange of equity

instruments, ODH became the parent of OHD with an ownership

F-52


Orascom Development Holding (Consolidated Financial Statement)

stake of 98.05%, later increased to 98.16% at 31 December

2008.

Whereas the new holding company (ODH) is ultimately owned

and controlled by the same major shareholders, management

decided that this Group reorganisation was for the purpose of

capital restructuring and it has been accounted for as a

continuation of the financial statements of the initial holding

Group (OHD) in the 2008 consolidated financial statements

Management concluded that the above Group restructure is

classified as a transaction under common control since the

combining entities are ultimately controlled by the same parties

both before and after the combination and that control is not

transitory.

However, since IFRS 3 Business Combinations excludes from its

scope business combinations involving entities or businesses

under common control (common control transactions), IAS 8

requires management to develop and apply an accounting policy

that results in information that is relevant and reliable.

Management used its judgment in developing and applying an

accounting policy for common control transactions arising from

the Group’s capital restructuring as follows:




Recognition of the assets acquired and liabilities

assumed of the initial holding Group (OHD) at their

previous carrying amounts;

Recognition of the difference between purchase

consideration and net assets acquired as an adjustment

to equity;

Transaction costs, which were incurred in relation to the

issuance of ODH shares, have been recognised as a

reduction to the reserve from common control

transaction. Amount included in the consolidated

statement of changes in equity.

27.6 Foreign currencies translation reserve

CHF 2010 2009

Balance at beginning of year

(75,348,038) (43,899,293)

Exchange differences arising

on translating the net assets

of foreign operations (120,455,143) (31,448,745)

27.7 Equity swap settlement

CHF 2010 2009

Balance at

beginning of

year - -

Contract over

(10,220,295)

own shares

-

Balance at

end of year (10,220,295) -

Part of the consideration from the sale of the six percent stake of

the former Garranah subsidiaries will be settled by the receipt of a

fixed number of the Parent Company’s own shares and therefore

it was recorded as an equity instrument within equity (see note

34).

28 RETAINED EARNINGS

___________________________________________________________________________________

CHF 2010 2009 (restated)

Balance at beginning of year

301,959,550 195,468,663

Profit attributable to owners

of the Parent Company 94,920,828 106,490,887

Balance at end of year

396,880,378 301,959,550

During 2009 and 2010 no dividends had been paid, but a

capital reduction with payment to the shareholders took place in

each year as explained in note 26. In respect of the current year,

the Board of Directors propose a capital reduction amounting to

CHF 0.65 per share to be paid to the shareholders on or around

31 August 2011. This capital reduction is subject to approval by

the shareholders at the Annual General Meeting and has

therefore not been recorded as a liability in these consolidated

financial statements. The proposed capital reduction is payable to

all shareholders based on the Register of Members on 23 May

2011. The total estimated capital reduction to be paid is CHF

18,338,527. The payment of this capital reduction will not have

any tax consequences for the Group.

Balance at end of year

(195,803,181) (75,348,038)

Exchange differences relating to the translation of the results and

net assets of the Group's foreign operations from their functional

currencies to the Group's presentation currency (CHF) are

recognized directly in other comprehensive income and

accumulated in the foreign currency translation reserve. Exchange

differences previously accumulated in the foreign currency

translation reserve in respect of translating the net assets of

foreign operations are reclassified to profit or loss on the disposal

of the foreign operation.

F-53


ODH Annual Report 2010

29 NON-CONTROLLING INTERESTS

_______________________________________________________________________________________________________________________________________________________________

CHF 2010 2009 (restated)

Balance at beginning of year 197,143,304 152,614,877

Share of profit for the year 27,331,089 38,408,513

Exchange differences arising on translation of foreign operations (26,125,531) (3,301,866)

Non-controlling interest share in equity of consolidated subsidiaries

(i)

1,719,314 9,421,780

Reduction non-controlling interests due to dividend payment (OHD) (2,478,288) -

Balance at end of year 197,589,888 197,143,304

(i)

This figure represents capital increases mainly contributed to Salalah and Taqah (Oman), Eco-Bos Development (UK)

and Qued Chibika Development (Morocco) as well as the effect from the sale of the six percent stake in the former

Garranah subsidiaries and the disposal of the full interest in Joud Fund 4 (see note 34).

30 BORROWINGS

_______________________________________________________________________________________________________________________________________________________________

Current

Non-current

CHF 2010 2009 2010 2009

Secured at amortized cost

Credit facilities (i) 188,657,790 181,111,567 - -

Bank loans (ii) 52,278,577 43,883,818 270,832,587 155,663,343

Finance lease - 1,796,591 - 5,715,182

240,936,367 226,791,976 270,832,587 161,378,525

30.1 Summary of borrowing arrangements

The weighted average contractual effective interest rate for all credit facilities and loans are 6.11% (2009: 4.73%). It is calculated by

dividing the forecasted contractual interest expense due next year by the total outstanding credit facilities and bank loan at the end of

the current reporting period. For a breakdown of debts bearing variable and fixed interest see note 39.1.

(i)

Credit facilities used by the group are revolving facilities used to finance working capital requirements and they are available in

multiple currencies. The average interest rate for the credit facilities for year 2010 is 6.97% (2009: 5.16%).

(ii) Bank loans are current and non-current loans and have in general variable interest rates including a mark up. Property, plant and

equipment with a carrying amount of CHF 98.4 million (2009: CHF 109.7 million) and non-current receivable with a carrying

amount of CHF 19.3 million (2009: CHF 15.4 million) have been pledged to secure borrowings (see notes 15 and 20).

30.2 Breach of loan agreement

During the current year, the Group did not fail in meeting its interest and repayment commitments.

F-54


Orascom Development Holding (Consolidated Financial Statement)

31 PROVISIONS

_____________________________________________________________________________________________________________________________________________________________________________

CHF 31 December 2010 31 December 2009 restated

Current 56,779,789 46,159,372

Non-Current

- -

Total provisions 56,779,789 46,159,372

CHF

Provision for

infrastructure

completion

(i)

Provision for

legal cases

(ii)

Provision for

governmental

fees

Provision for

employee

benefits

Other provisions

(iii) (iv) (v)

Balance at 1 January

2010 13,712,774 7,233,100 5,840,400 1,566,989 17,806,109 46,159,372

Additional provisions

recognized 10,205,754 - 922,224 544,886 11,515,601 23,188,465

Reductions arising

from payments

(1,872,058) - (2,310,807) (928,135) - (5,111,000)

Exchange differences

arising on translation

of foreign operations

(2,017,714) (707,280) (383,862) (112,713) (4,235,479) (7,457,048)

Balance at 31

December 2010 20,028,756 6,525,820 4,067,955 1,071,027 25,086,231 56,779,789

Total

(i)

Provision for infrastructure completion relates to committed cash outflows for the development of the necessary infrastructure to

make the project area that is usually located in remote regions, habitable and attractive. Such provisions are recorded for land and

real estate sales, in case that the cash outflows for related infrastructure costs have not yet been incurred and take place with the

upcoming twelve months.

(ii) Provision for legal cases consists of expected cash outflows for the settlement of pending litigations and amounted to CHF

6,525,820 at 31 December 2010 (31 December 2009: CHF 7,233,100) and relates amongst others to the Falcon case which is

described in note 47.

(iii) Provision for government fees relate to cash outflows for fees due on the sale of land and / or any profit thereon which were

recorded during the current year. Such provisions are calculated and recorded using the locally enacted fee structures. Management

expects the related cash outflow to take place within the upcoming twelve months.

(iv) Provision for employee benefits relates to compulsory termination payments to foreign employees in Oman. The provision is based

on their actual salaries. As the work permits for these employees are reconsidered by the Government on annual bases, the related

cash outflows are likely to take place within the upcoming twelve months.

(v) This provision mainly includes charges, services and consultancy fees for the Group's current year's operations which have not yet

been finally negotiated. The increase in the current year is mainly related to the accelerated project development in different

countries and to the set up for likely payments to buyers of budget housing units in Egypt. In addition it covers the Group’s exposures

to tax risks amounting to CHF 7.0 million at 31 December 2010 (31 December 2009: CHF 7.0 million). Management expects the

related cash outflows to take place within the upcoming twelve months.

Management annually reviews and adjusts these provisions based on the latest developments, discussions and agreements with the

involved parties.

F-55


ODH Annual Report 2010

32 OTHER CURRENT LIABILITIES

___________________________________________________________________________________

33 TRADE AND OTHER PAYABLES

___________________________________________________________________________________

CHF 2010 2009

Advances from customers (i) 74,670,548 97,915,958

Other credit balances 17,764,827 19,530,818

Accrued expenses (ii) 23,042,430 12,282,398

Deposits from others 11,847,541 11,633,322

Taxes payable (other than

income taxes)

8,564,823 8,014,097

Amounts due to shareholders (iii) 28,378,122 3,195,215

Due to management companies 2,010,104 1,858,684

166,278,395 154,430,492

CHF 2010 2009

Non-current trade payables 35,921,963 71,476,141

Current trade and other

payables

57,120,751 102,219,680

The trade and other payables were reduced by CHF 9,394,616

due to the sale of the former Garranah subsidiaries and by CHF

65,057,355 due to the disposal of the Joud Fund 4 and its

subsidiary Al-Aqaba Oasis for Housing Ltd (see note 34).

(i)

Advances from customers include amounts received (progress

payments) from buyers of real estate between the time of the

initial agreement and contractual completion. The decrease is

mainly related to the completion and delivery of some real

estate in Oman and Egypt.

(ii) Accrued expenses mainly include operating costs for the hotel

and town management activities.

(iii) Amounts due to shareholders include amounts owed to non

controlling shareholders for planed capital increases in

several subsidiaries in Oman and Egypt in the total of CHF

26 million (2009: CHF 1.88 million).

34 DISPOSAL OF SUBSIDIARIES

___________________________________________________________________________________

On 18 May 2010, the Group signed a share sale and purchase

agreement to sell to the Garranah family a six percent stake in six

former subsidiaries (see note 18). Pursuant to this agreement, the

Group’s interest in these entities decreased from 51 to 45 percent

and the Group ceased control over these subsidiaries, but

retained significant influence at 31 December 2010.

On 30 June 2010, the Group sold the entire stake in the Joud

Fund 4 (including its subsidiary Al-Aqaba Oasis for Housing Ltd.),

former subsidiaries of the Group, as part of the Group’s sale of

all its interests in the Joud Funds 1, 2, 3 and 4 (see note 18).

34.1 Consideration received

2010

CHF

Garranah Group companies Joud Fund 4 Total

Consideration received in cash and cash equivalents - - -

Consideration received in kind 1,464,267 - 1,464,267

Deferred sales proceeds 10,558,070 30,156,135 40,714,205

12,022,337 30,156,135 42,178,472

Foreign currency translation adjustment (1,571,815) (4,052,855) (5,624,670)

Total consideration received 10,450,522 26,103,280 36,553,802

The total consideration for the sale of a six percent stake in the

former Garranah subsidiaries was agreed to be EGP 65,067,695

(equals CHF 12,022,337) and to be settled as follows:

– EGP 11,219,986 (equals CHF 1,802,042) in cash or in kind

within six months from the share purchase agreement

signature; and

– EGP 53,847,709 (equals CHF 10,220,295) by transferring

the ownership of 124,441 Parent Company's shares for a

total value of EGP 42,708,462 (equals CHF 8,106,066) and

694,900 Parent Company's EDRs for a total value of EGP

11,139,247 (equals CHF 2,114,229).

As the second part of the consideration gives the Group the right

to receive a fixed number of its own shares, it was recorded as an

equity instrument within equity (see note 27.7).

At 31 December 2010, the Group received 26,171 Parent

Company’s shares for a total value of CHF 1,464,247. These

shares have been recorded. Deferred sales proceeds of CHF

337,775 were recorded as other debit balances in other current

assets and the equity swap settlement reserve amounted to CHF

10,220,295 at 31 December 2010 (see note 27.7).

The total consideration for the sale of the Joud Fund 4 (including

its subsidiary Al-Aqaba Oasis for Housing Ltd.) was agreed to be

USD 28 million (equals CHF 26.1 million).

F-56


Orascom Development Holding (Consolidated Financial Statement)

This transaction is part of the Group’s sale of all its interests in the

Joud Fund 1, 2, 3 and 4 for a total consideration of USD 57.4

million (equals CHF 55.3 million). The settlement of this

consideration was agreed to be in-kind through the acquisition of

several real estate assets located in Egypt, Jordan and

Montenegro. At 31 December 2010, the legal title of such assets

34.2 Analysis of assets and liabilities over which control was lost

amounting to USD 16.7 million (equals CHF 15.6 million) have

been transferred to the Group. At 31 December 2010, an

impairment charge of CHF 15 Mio was recorded to cover any

shortfall that might occur as a result of the recent political

developments in the Middle East region. (see note 22).

2010

CHF

Garranah Group

companies

Joud Fund 4

Total

Current assets

Cash and cash equivalents 2,859,208 8,845 2,868,053

Other current assets 338,588 6,812,316 7,150,904

Other financial assets - 4,152,830 4,152,830

Due from related parties 1,441,784 - 1,441,784

Trade and other receivables 21,068,158 - 21,068,158

Inventories 169,609 - 169,609

Non-current assets

Property, plant and equipment 31,507,792 72,339,842 103,847,634

Other financial assets - - -

Goodwill - - -

Current liabilities

Trade and other payables (9,394,616) - (9,394,616)

Due to related parties (9,798,183) (3,332,989) (13,131,172)

Other current liabilities (1,030,932) (4,661) (1,035,593)

Short-term land payables - (65,057,355) (65,057,355)

Non-current liabilities

Borrowings (20,385,232) - (20,385,232)

Long-term land payables (47,027) (2,131,181) (2,178,208)

Deferred tax liabilities (11,128) - (11,128)

Net assets disposed of 16,718,021 12,787,647 29,505,668

34.3 Gain on disposal of subsidiaries

CHF

Garranah group

companies

2010 2009

Joud Fund 4 Total Total

Consideration received 10,450,522 26,103,280 36,553,802 -

Net assets disposed of (16,718,021) (12,787,647) (29,505,668) -

Non-controlling interests 8,191,830 4,910,703 13,102,533 -

Goodwill deconsolidated (17,731,566) - (17,731,566) -

Revaluation surplus deconsolidated (1,180,497) (18,932,217) (20,112,714) -

FV of residual interest 25,518,319 - 25,518,319 -

Gain on disposal 8,530,587 (705,881) 7,824,706 -

The gain on disposal is included in other gains and losses as part of the profit for the year from continuing operations in the

consolidated statement of comprehensive income (see note 10).

34.4 Net cash outflow on disposal of subsidiaries

2010

CHF

Garranah Group

companies

Joud Fund 4

Total

Consideration received - - -

Less: cash and cash equivalent

balances disposed of

(2,859,208) (8,845) (2,868,053)

(2,859,208) (8,845) (2,868,053)

F-57


ODH Annual Report 2010

35 OTHER FINANCIAL LIABILITIES

___________________________________________________________________________________

CHF 2010 2009

Financial liabilities carried at

amortized cost

Put option and call option

agreement – CMAR (i) 11,109,182 12,803,346

Derivatives linked to unquoted

equity instruments

Call option agreement –ADL

2,198,238 2,944,310

Derivatives that are designated

and effective as hedging

instruments carried at fair value

Hedging liabilities

2,141,187 2,905,268

15,448,607 18,652,924

Current - -

Non-current 15,448,607 18,652,924

Put option and call option agreement - CMAR

(i)

15,448,607 18,652,924

Pursuant to the Put option and Call option Agreement dated

April 2006 between Orascom Holding for Hotels Company

(OHH), European Investment Bank (EIB), and Société de

Promotion ET De Participation pour la Cooperation

Economique (PROPARCO). OHH (a subsidiary)

unconditionally and irrevocably undertakes to purchase all or

part of EIB and PROPARCO shares in Club Méditerranée

Albion Resort Ltd. (CMAR) during the put period ending 31

March 2016 if EIB and PROPARCO exercise their rights.

In addition, OHH has a right to buy all or part of the shares of

EIB and PROPARCO during the call period ending 31 March

2016. The financial asset “right to buy” was initially recognised at

fair value amounting to CHF 13 million which is the present value

of the amount to be redeemed to the other shareholders if they

were to exercise the option on the last day of the option period

(future value at 2016: CHF 28 million).

Starting 1 January 2007, CMAR has been deemed to be

controlled due to the potential voting rights arising from the call

option the Group has over 42.5% of EIB’s and PROPARCO’s

interests in CMAR, in addition to the existing voting rights of

12.5%. Therefore, CMAR was regarded as a subsidiary and

consolidated for the first time in 2007 based on the Group’s

present ownership interest in CMAR of 12.5% with the financial

asset derecognised. As of 31 December 2010, CMAR’s assets

were CHF 52.4 million (2009: CHF 65 million), its total revenues

amounted to CHF 6.0 million (2009: CHF 5.4 million) and a

losses amounted to CHF 2.1 million (2009: CHF 2.8 million

losses) were incurred.

As described above and in accordance with the Put option and

Call option Agreement dated April 2006, the Company has an

obligation to buy 8,500 shares in Club Méditerranée Albion

Resorts Ltd (CMAR) if the other shareholders exercised their right

to sell their shares during the period from 2012 till 31 March

2016. The settlement will be in the form of a cash payment by the

Group. The obligation price is determined to be the value of the

initial share plus one of the following rates for different

exercisable periods:

– 6.75% per annum computed on the value of initial share

from subscription date to the exercise date if the right to sell

by the other shareholders is exercised during the period from

subscription date to 31 March 2012, or

– 7.25% per annum computed on the value of the initial share

from subscription date to the exercise date if the right to sell

by the other shareholders is exercised during the period from

1 April 2012 to 31 March 2013, or

– 8.25% per annum computed on the value of initial share

from subscription date to the exercise date if the right to sell

by the other shareholders is exercised during the period from

1 April 2013 to 31 March 2016.

In addition, the Group undertakes to pay EIB and PROPARCO a

lock-up indemnity which is payable in arrears on the dates falling

at six-monthly intervals after the execution date of the Put option

and Call option Agreement. The payment of lock-up indemnity is

not refundable if the right to buy is not exercised by the Group.

The lock-up indemnity is computed as follows:

– In respect of initial shares; 6.75% per annum calculated on

the initial value of share from subscription date to the

exercise date.

– In respect of additional shares allocated to EIB and

PROPARCO; 6.75% per annum calculated on the value of

additional share from the allocation date to the exercise

date.

The financial liability “obligation to buy” was initially recognised

at fair value at the balance sheet date amounting to CHF 13

million which was the present value of the amount to be paid to

the other shareholders if they were to exercise the option on the

last day of the option period (future value in 2016 CHF 28

million).

The difference between the present value and final redemption

amount is interest expense that is to be recognized in profit or loss

over the life of the financial liability using an effective interest rate

of 6.75%. This financial liability is subsequently measured at

amortised cost in each subsequent period (details of accounting

policy are disclosed in note 3.25 to the financial statements). The

interest expenses recognised in the year amounted to CHF

1,019,238 (2009: CHF 1,053,687) (note 11).

F-58


Orascom Development Holding (Consolidated Financial Statement)

36 OBLIGATIONS UNDER FINANCE LEASES

___________________________________________________________________________________

36.1 Leasing arrangements

Finance leases accounted for by the Group in the prior year

related to cars and buses with lease terms of 5 years and were

entered into by the former Garranah subsidiaries. Pursuant to the

sale of a six percent stake in these entities at 18 May 2010, the

Group lost control over these former subsidiaries and ceased

consolidation of the Garranah operations.

36.2 Finance lease liabilities

No later than 1

year

Later than 1 year

and not later

than 5 year

Later than 5

years

Total of future

minimum lease

payments

Less: future

finance charges

Present value of

minimum lease

payments

Included in the

consolidated

statement of

financial position

as:

Current

borrowings (note

30)

Non-current

borrowings (note

30)

36.3 Fair value

Minimum lease

payments

MLPs

Present value of

minimum lease

payment

2010 2009 2010 2009

- 2,543,332 - 1,796,591

- 6,570,275 - 5,715,182

- - - -

- 9,113,607 - 7,511,773

(1,601,834) - -

- 7,511,773 - 7,511,773

- 1,796,591

- 5,715,182

- 7,511,773

The fair value of the finance lease liabilities was approximately

equal to their carrying amount.

37 RETIREMENT BENEFIT PLANS

___________________________________________________________________________________

37.1 Defined contribution plans

Employees of specific subsidiaries in the Group (such as Eco-Bos

Development Ltd (UK), Oued Chbika Development SA (Morocco),

Orascom International Hotel and Development (France) and

Luštica Development a.d. (Montenegro)) are members of private

or state-managed retirement benefit plans operated by insurance

companies or the relevant Jurisdictions’ Social Insurance

Authorities. The subsidiaries are required to contribute a specified

percentage of payroll costs to the retirement benefit scheme to

fund the benefits. Qualifying employees of these subsidiaries are

also required to contribute to such schemes at a different

percentage deducted from their salaries.

Benefits are payable to qualifying employees, by the relevant

insurance companies and authorities, on attainment of a

retirement age specified in the plans. The only obligation of the

Group with respect to the retirement benefit plan is to make the

specified contributions.

The total expense recognised in the consolidated statement of

comprehensive income of CHF 265,824 (2009: CHF 155,530)

represents contributions payable to these plans by the Group at

rates specified in the rules of the plans. At 31 December 2010,

contributions of CHF 68,796 (2009: CHF 35,254) due in respect

of the 2010 (2009) reporting period had not been paid over to

the plans. The amounts were paid subsequent to the end of the

reporting period.

37.2 Defined benefit plans

The Group operates fund defined benefit plans for qualifying

employees in Switzerland. Under the plans, the employees are

entitled to retirement benefits and risk insurance for death and

disability. No other post-retirement benefits are provided to these

employees. The most recent actuarial valuations of plan assets

and the present value of the defined benefit obligation were

carried out on 31 December 2010.

The present value of the defined benefit obligation, and the

related current service cost and past service cost, were measured

using the Projected Unit Credit Method.

The principal assumptions used for the purposes of the actuarial

valuations were as follows:

Valuation at

2010 2009

Discount rates 2.60% 3.25%

Expected return on plan assets 3.50% 3.50%

Expected rates of salary

increase

1.00% 1.00%

Expected pension increases 0.00% 0.00%

Expected average remaining

working lives in years

8.9 years 9.5 years

Amounts recognised in profit or loss in respect of these defined

benefit plans are as follows:

CHF 2010 2009

Current service

cost

383,781 334,833

Interest on

obligation

177,478 121,720

Expected return

on plan assets

(159,829) (107,380)

Actuarial loss

recognised in

30,475 25,205

current year

Past service cost - 8,419

Expense

recognised in

profit or loss

431,905 382,797

F-59


ODH Annual Report 2010

The amount included in the consolidated statement of financial

position arising from the Group’s obligation in respect of its

defined benefit plans is as follows:

CHF 2010 2009

Present value of

funded defined benefit 7,389,547 4,457,978

obligation

Fair value of plan

assets

(5,715,973) (3,556,297)

Funded status (deficit)

1,673,574 901,681

Net actuarial losses

not recognized

Restrictions on asset

recognized

Net liability arising

from defined benefit

obligation

(1,473,928) (735,520)

- -

199,646 166,161

Movements in the present value of the defined benefit obligation

in the current year were as follows:

CHF 2010 2009

Opening defined benefit

obligation

4,457,978 3,309,876

Current service cost 383,781 334,833

Interest cost 177,478 121,720

Contributions from plan

participants

398,420 317,908

Past service cost 1,223,606 8,419

Benefits deposited - 217,976

Actuarial losses 748,284 147,246

Closing defined benefit

obligation

7,389,547 4,457,978

Movements in the present value of the plan assets in the current

period were as follows:

CHF 2009 2009

Opening fair value of

plan assets 3,556,297 2,641,108

Expected return on plan

assets 159,829 107,380

Actuarial (losses) (20,599) (45,985)

Contributions from the

employer 398,420 317,910

Contributions from plan

participants

398,420 317,908

Benefits paid 1,223,606 217,976

Closing fair value of

plan assets

5,715,973 3,556,297

The major categories of plan assets, and the expected rate of

return at the end of the reporting period for each category, are as

follows:

Expected return Fair value of plan assets

CHF 2010 2009 2010 2009

Equity

instruments

(e.g. shares)

7.20% 7.50% 168,343 103,133

– Third party

Debt

instruments

(e.g. bonds)

3.20% 3.40% 4,614,675 2,869,931

– Third party

Property not

occupied by

and not 4.70% 4.00% 813,963 547,669

used by the

group

Others 2.20% 2.50% 118,992 35,564

Total plan

assets at fair

value

5,715,973 3,556,297

The overall expected rate of return is a weighted average of the

expected returns of the various categories of plan assets held. The

directors' assessment of the expected returns is based on historical

return trends and analysts' predictions of the market for the asset

over the life of the related obligation.

CHF 2010 2009 2008

Fair value of

defined benefit

obligation

(6,923,328) (4,489,050) (3,309,876)

Expected plan

assets 5,736,572 3,602,282 2,777,189

Deficit

Experience

adjustments on

Defined Benefit

Obligation

(gain)/loss

Experience

adjustments on

plan assets

gain/(loss)

(1,186,756) (886,768) (532,687)

(282,065) (178,318) (69,113)

(20,599) (45,985) (136,081)

The assets of the retirement benefit scheme have been invested

under a collective insurance contract in accordance with an

affiliation contract concluded with Allianz Suisse

Lebensversicherungs-Gesellschaft.

The Group expects to make a contribution of CHF 465,644

(2009: CHF 318,791) to the defined benefit plans during the next

financial year.

F-60


Orascom Development Holding (Consolidated Financial Statement)

38 RISK ASSESSMENT DISCLOSURE REQUIRED

BY SWISS LAW

___________________________________________________________________________________

Organizational and process measures have been designed to

identify and mitigate risks throughout the Group at an early stage.

The responsibility for risk assessment and management is

primarily allocated to the segments and entities. However, Group

Finance has implemented monitoring and consolidating

measures. The Group’s entities report to the Group Finance on

their current operations and financial situation regularly. Various

reports and analysis have been implemented to allow the Group

to monitor the operations closely and immediately identify risks

and initiate mitigating actions. In addition, the Group Finance

has established during 2008 a new function for risk assessment

and internal control. A risk matrix has been created that was

populated by the most significant entities of the Group. The

Group has centralized certain functions (e.g. treasury, asset

management, information technology and human resources) to

be able to identify and control risks more closely. The Group

initiated a plan to centralize the legal and internal audit functions

in order to mitigate the risks in an effective and efficient way.

Group Finance assesses and consolidates all information from

the entities and shares and discusses it with the Group

Management on a regular basis. A more formal reporting on risks

over financial reporting was made prior to year-end to the Board

of Directors. The Board of Directors in turn has performed a risk

assessment covering longer-term operational and strategic risks to

the Group. The conclusions of such risk assessments have also

been considered by Group Finance. As the Group CFO is

consistently and closely involved in the risk assessment process

and the preparation of the consolidated financial statements it is

ensured that all conclusions from the Group-wide risk assessment

are adequately considered in the consolidated financial

statements.

capital and the risks associated with each class of capital. The

Group has a target gearing ratio of 40% to 45% determined as

the proportion of net debt to equity.

The gearing ratio at 31 December 2010 of 19.72% (see below)

was below the target range. Based on the committee’s

recommendations, the Group expects to increase its gearing ratio

closer to 40% to 45% through the issue of new debt.

The gearing ratio at the end of the reporting period was as

follows:

CHF 2010 2009 (restated)

Debt (i) 511,768,954 388,170,501

Cash and

cash

equivalents

(276,452,970) (77,899,218)

Net debt 235,315,984 310,271,283

Equity (ii) 1,193,143,824 1,065,444,778

Net debt

to equity

ratio

19.72% 29.12%

(i) Debt is defined as long- and short-term borrowings (excluding

derivatives), as detailed in (note 30).

(ii) Equity includes all capital and reserves of the Group and noncontrolling

interests that are managed as capital.

39.2 Significant accounting policies

Details of the significant accounting policies and methods

adopted, including the criteria for recognition, the basis of

measurement and the basis on which income and expenses are

recognised, in respect of each class of financial asset, financial

liability and equity instrument are disclosed in 3.23 Financial

instruments.

39.3 Categories of financial instruments

39 FINANCIAL INSTRUMENTS

___________________________________________________________________________________

39.1 Capital risk management

The Group manages its capital to ensure that entities in the

Group will be able to continue as a going concern while

maximising the return to stakeholders through the optimisation of

the debt and equity balance. The Group’s overall strategy

remains unchanged since 2009.

The capital structure of the Group consists of net debt

(borrowings, as detailed in note, 30 offset by cash and bank

balances) and equity of the Group (comprising issued capital,

share premium, reserves, retained earnings and non-controlling

interests as detailed in notes 26 to 29).

The Group is not subject to any externally imposed capital

requirements.

CHF 2010 2009

Financial assets

Cash and bank balances 276,452,970 77,899,218

Fair value through profit

and loss ( FVTPL)

Designated as at FVTPL 1,380,948 701,500

Held-to-maturity

investments 9,427,914 -

Available for sale financial

assets:

At cost 18,874,019 58,084,696

At fair value 51,723,128 37,841,775

Loans and receivables 338,065,282 333,949,656

Financial liabilities

Derivative instrument in

designated hedge

2,141,187 2,905,268

accounting relationship

At amortised cost 735,093,932 664,714,890

According to the Group’s internal policies and procedures, the

Executive Management reviews the capital structure on a regular

basis. As part of this review, the committee considers the cost of

F-61


ODH Annual Report 2010

39.4 Financial risk management objectives

In the course of its business, the Group is exposed to a number of

financial risks. This note presents the Group’s objectives, policies

and processes for managing its financial risk and capital.

The Group’s Corporate Treasury function provides services to the

business, co-ordinates access to domestic and international

financial markets, monitors and manages the financial risks

relating to the operations of the Group through internal risk

reports which analyse exposures by degree and magnitude of

risks. These risks include market risk (including currency risk,

interest rate risk and other price risk), credit risk and liquidity risk.

Other price risk includes equity price risk, settlement risk and

commodity price risk.

It is, and has been throughout 2010 and 2009, the Group’s

policy not to use derivatives without an underlying operational

transaction or for trading (i.e. speculative) purposes.

The Group seeks to minimise the effects of these risks mainly

through operational and finance activities and, on occasional

basis, using derivative financial instruments to hedge these risk

exposures. The use of financial derivatives is governed by the

Group’s internal policies and procedures approved by the Board

of Directors, which provide written principles on foreign exchange

risk, interest rate risk, credit risk, the use of financial derivatives

and non-derivative financial instruments, and the investment of

excess liquidity. The Group does not enter into or trade financial

instruments, including derivative financial instruments, for

speculative purposes.

The Corporate Treasury function reports monthly to the Executive

Management. The Group Treasury Director carries out risk

management under the Group’s guidelines.

39.5 Market risk

The Group’s activities expose it primarily to the financial risks of

changes in foreign currency exchange rates (see 39.6 below) and

interest rates (see 39.7 below).

Driven by the need, the Group’s policy is to enter into a variety of

derivative financial instruments to manage its exposure to foreign

currency risk and interest rate risk, including:

– forward foreign exchange contracts to hedge the exchange

rate risk arising on sales in foreign currency to the tourism /

real estate industry;

– interest rate swaps to mitigate the risk of rising interest rates;

and

– forward foreign exchange contracts to hedge the exchange

rate risk arising on translation of the Group's significant

investment in foreign operations.

39.6 Foreign currency risk management

The Group undertakes certain transactions denominated in

foreign currencies. Hence, exposures to exchange rate

fluctuations arise. The currencies, in which these transactions

primarily are denominated, are US Dollar (USD), Euro (EUR) and

Egyptian Pound (EGP). Exchange rate exposures are managed

within approved policy parameters utilising forward foreign

exchange contracts.

The Group’s main foreign exchange risk arises from sales in

foreign currency to the tourism / real estate industry, which

generates a net foreign currency surplus for the Group. The

Group has strong inflows in foreign currency, mainly US Dollar,

Euro, Oman Rial and Egyptian Pound.

Out of the total receivables on hand at the end of the reporting

period, receivables in USD have accounted for 53% (2009:

56%), in EUR for 7% (2009: 10%),in EGP for 34% (2009: 35%)

and in CHF for 5% (2009: nil) respectively.

To mitigate the above risk exposures, where possible, the Group

borrows in matching currencies to create a natural hedge. The

following table shows the carrying amounts of borrowings, at the

end of the reporting period, in the major currencies in which they

are issued.

Borrowing

CHF 2010 2009

USD 237,018,341 46% 204,295,724 53%

EGP 164,867,415 32% 99,368,490 26%

EUR 83,502,902 16% 75,025,516 19%

AED 16,994,248 4% - 0%

CHF 9,386,048 2% 9,480,771 2%

Total 511,768,954 100% 388,170,501 100%

At the end of the reporting period, the carrying amounts of the

Group’s major foreign currency denominated monetary assets

(mainly receivables and finance lease receivables) and monetary

liabilities (mainly borrowings), at which the Group is exposed to

currency rate risk, are as follows.

CHF Liabilities Assets

2010 2009 2010 2009

Currency-

USD 237,018,341 204,295,724 133,814,499 152,330,492

Currency-

EUR 83,502,902 75,025,516 18,530,113 26,628,159

Currency-

EGP 164,867,415 99,368,490 85,811,304 95,485,482

Residual foreign exchange exposure is managed by hedging

through entering into foreign currency forward contracts.

Currency risk has also recently developed due to the Group’s

investments in different markets such as those in Egypt, UAE,

Oman, Jordan, Morocco, Switzerland, Romania and the UK.

Again, the Group borrows in the local currency of the investment

and uses the above mentioned strategies to mitigate residual

currency risk.

39.6.1 Foreign currency sensitivity analysis

As discussed above, the Group is mainly exposed to the US

Dollar (USD), Euro (EUR) and Egyptian Pound (EGP) arising from

sales in these currencies to the tourism / real estate industry.

F-62


Orascom Development Holding (Consolidated Financial Statement)

The following table details the Group’s sensitivity to a 5%

increase and decrease in CHF against the relevant foreign

currencies. The (5%) is the sensitivity rate used when reporting

foreign currency risk internally to key management and represents

management’s assessment of the reasonably possible change in

foreign exchange rates. The sensitivity analysis includes only

outstanding foreign currency denominated monetary items and

adjusts their translation at the period end for a 5% change in

foreign currency rates.

The sensitivity analysis includes outstanding borrowings, impact of

the changes in the fair value of derivative instruments designated

as cash flow hedges and receivables in foreign currencies and,

where appropriate, loans to foreign operations within the Group

where the denomination of the loan is in a currency other than

the functional currency of the lender or the borrower.

A positive number below indicates an increase in profit or equity where the CHF strengths 5% against the relevant currency. For a 5%

weakening of the CHF against the relevant currency, there would be a comparable impact on the profit or equity, and the balances

below would be negative.

CHF Currency USD Impact Currency EUR Impact Currency EGP Impact

2010 2009 2010 2009 2010 2009

Profit or loss 5,159,285 2,598,122 3,246,542 2,420,036 3,928,944 194,150

Equity 56,166 77,832 - - - -

The Group's sensitivity to foreign currency has increased during

the current year mainly due to higher EGP, USD and AED

borrowings.

Forward foreign exchange contracts

It is the policy of the Group to enter into forward foreign

exchange contracts to cover specific foreign currency receipts

within 25% to 30% of the exposure generated. At 31 December

2010, the Group has no outstanding forward foreign currency

exchange contracts. However, the Group entered during the

current year into several forward foreign currency exchange

contracts to hedge part of the Group’s receivables denominated

in EUR and USD resulting in a net gain of CHF 560,000.

At 31 December 2010, no ineffectiveness has been recognised in

profit or loss arising from the Group’s hedging activities.

39.7 Interest rate risk management

The Group is exposed to interest rate risk because entities in the

Group borrow funds at both fixed and floating interest rates. The

risk is managed by the Group by maintaining an appropriate mix

between fixed and floating rate borrowings, and by the use of

interest rate swap contracts. Hedging activities are evaluated

regularly to align with interest rate views and defined risk appetite,

ensuring the most cost-effective hedging strategies are applied.

The Group's exposures to interest rates on financial assets and

financial liabilities are detailed in the liquidity risk management

section of this note.

At 31 December 2010, the Group held one interest rate swap

contract (IRS) under which the Group agrees to exchange the

difference between fixed and floating rate interest amounts

calculated on the agreed notional principal amount. The notional

amount of the IRS contract is based on the outstanding amount of

one of the long-term borrowings. The group was engaged in this

contract on September 2008 and it will expire on June 2014.

As the interest rate swap exchanges floating rate interest amounts

for fixed rate interest amounts it is designated as a cash flow

hedge in order to reduce the Group’s cash flow exposure

resulting from variable interest rates on borrowings. The interest

rate swap and the interest payments on the borrowing occur

simultaneously and the amount accumulated in equity is

reclassified in profit or loss over the period that the floating rate

interest payments on debt affect profit or loss.

The Group receives the fair value of the swap from the

counterparty bank at the end of each reporting period and is

disclosed below. The average interest rate is based on the

outstanding balances at the end of the reporting period.

Management has assessed that the cash flow hedge is 100%

effective and therefore the entire change in fair value of the

interest rate swap is recognised in other comprehensive income

and accumulated in equity (note 27.3).

The following table details the notional principal amount and

remaining terms of the interest rate swap contract outstanding at

the end of the reporting period.

Last instalment date

Average contracted Notional principal amount Fair value assets (liabilities)

Fixed interest rate CHF CHF

2010 2009 2010 2009 2010 2009

30-Jun-14 3.50% 3.50% 35,595,410 50,726,330 2,141,187 2,905,229

The interest rate swap settles on a half-yearly basis. The floating rate on the interest rate swaps is based on LIBOR for 6 months. The

Group settles the difference between the fixed and floating interest rate on a net basis.

39.8 Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the

exposure to interest rates for both derivatives and non-derivative

instruments at the end of the reporting period. For floating rate

liabilities, the analysis is prepared assuming the amount of liability

outstanding at the end of reporting period was outstanding for the

whole year. A ‘100 basis point’ (1%) increase or decrease is used

when reporting interest rate risk internally to key management

personnel and represents management’s assessment of the

reasonably possible change in interest rates.

If interest rates had been 100 basis points higher / lower and all

other variables were held constant, the Group’s profit for the year

F-63


ODH Annual Report 2010

ended 31 December 2010 would decrease / increase by CHF

2.9 million (2009: decrease / increase by CHF 2.3 million). This

is mainly attributable to the Group’s exposure to interest rates on

its variable rate borrowings; and

The Group’s sensitivity of interest rates has increased during the

current year mainly due to the increase in variable rate debt

instruments.

39.9 Other price risks

The Group is exposed to equity price risks arising from equity

investments. Equity investments are held for strategic rather than

trading purposes. The Group does not actively trade these

investments.

39.10 Credit risk management

Credit risk refers to the risk that a counterparty will default on its

contractual obligations resulting in financial loss to the Group.

The Group credit risk arises from transactions with counterparties,

mainly individual customers and corporations. The Group has

adopted a policy of only dealing with creditworthy counterparties

and obtaining sufficient collateral, where appropriate, as a means

of mitigating the risk of financial loss from defaults.

The Group’s exposure to credit risk is, to a great extent,

influenced by the individual characteristics of each customer. Risk

control assesses the credit quality of the customer, taking into

account its financial position, past experience, other publicly

available financial information, its own trading records and other

factors, where appropriate, as a means of mitigating the risk of

financial loss from defaults. The Group’s exposure is continuously

monitored and the aggregate value of transactions concluded is

spread amongst approved counterparties.

Trade receivables consist of a large number of customers, spread

across various industries and geographical areas. The Group

does not have any significant credit risk exposure to any single

counterparty or any Group of counterparties having similar

characteristics. The Group defines counterparties as having

similar characteristics if they are related entities. The credit risk on

sales of real estate is limited because the Group controls this risk

through the property itself by registering the unit in the name of

the customer only after receiving the entire amount due from the

customer.

Counterparty risk is also minimized by ensuring that 80% of

derivative financial instruments, money market investments and

current account deposits are placed with financial institutions

whose credit standings are above Aa1 and 20% above BB+.

The carrying amount of financial assets recorded in the financial

statements, which is net of impairment losses, represents the

Group’s maximum exposure to credit risk without taking account

of the value of any collateral obtained.

39.11 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the

Board of Directors, which has established an appropriate liquidity

risk management framework for the management of the Group’s

short-, medium- and long-term funding and liquidity management

requirements. The Group manages liquidity risk by maintaining

adequate reserves, banking facilities and reserve borrowing

facilities, by continuously monitoring forecast and actual cash

flows and matching the maturity profiles of financial assets and

liabilities.

As of 31 December 2010, total un-drawn facilities, that the

Group has at its disposal to further reduce liquidity risk, are CHF

28 million (31 December 2009: CHF 44 million).

39.11.1 Liquidity and interest risk tables

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment

periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on

which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are

floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is

based on the earliest date on which the Group may be required to pay.

Maturities of non-derivative financial liabilities

Weighted

2010

average Less than 6 6 months to one

effective month

year

1 – 5 years 5 + years Total

CHF

Non-interest bearing

interest rate

- 155,471,057 - - 5,986,046 161,457,103

Variable interest rate

4.90%

instruments

27,443,907 173,018,390 195,987,161 50,110,531 446,559,989

Fixed interest rate

10.09%

instruments

11,884,929 59,067,650 52,605,636 25,369,398 148,927,613

194,799,893 232,086,040 248,592,797 81,465,975 756,944,705

2009

CHF

Weighted

average

effective

interest rate

Less than 6

month

6 months to

one year

1 – 5 years 5 + years Total

Non-interest bearing - 158,097,124 - - 5,986,046 164,083,170

Finance lease liability 11.50% 1,271,664 1,271,664 6,570,279 - 9,113,607

Variable interest rate instruments 4.08% 21,112,213 192,785,966 104,339,919 30,648,802 348,886,900

Fixed interest rate other financial

liabilities

8.38% 4,496,500 14,639,761 104,148,104 46,584,774 169,869,139

184,977,501 208,697,391 215,058,302 83,219,622 691,952,816

F-64


Orascom Development Holding (Consolidated Financial Statement)

The Group has access to financing facilities as explained above. The Group expects to meet its other obligations from operating cash

flows and proceeds of maturing financial assets. The Group target is not to exceed a debt to equity ratio of 40% to 45% and the group

is maintaining this level as at year end.

CHF 2010 2009

Counterparty Rating Credit limit Carrying

amount

Credit limit

Carrying amount

Bank 1

BB+

28,471,736 27,054,574

46,941,451 47,669,077 *

Bank 2

Aa1

16,061,000 11,170,905

40,510,300 35,347,205

Bank 3

A3

36,908,178 34,636,198

31,154,682 30,536,649

Bank 4

(P)Aa3

23,306,519 23,301,235

25,832,853 25,889,918 *

Bank 5

Baa2

13,337,857 12,859,693

15,043,641 8,205,980

* Outstanding amount includes interest charged

The average interest rate for credit facilities is 6.97% (2009: 5.16%).

The amounts included above for variable interest rate instruments for liabilities is subject to change if changes in variable interest rates

differ to those estimates of interest rates determined at the end of the reporting period.

39.12 Fair value of financial instruments

39.12.1 Fair value of financial instruments carried at amortised cost

Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities

recognised in the consolidated financial statements approximate their fair values.

CHF

Financial liabilities

- Borrowings/bank loans

31-Dec-10

31-Dec-09

Carrying amount Fair value Carrying amount Fair value

511,768,954 600,051,008 388,170,501 691,952,816

39.12.2 Valuation techniques and assumptions applied for

the purposes of measuring fair value

The fair values of financial assets and financial liabilities are

determined as follows:

– The fair values of financial assets with standard terms and

conditions and traded on active liquid markets are determined

with reference to quoted market prices (includes listed equity

investments classified as at FVTPL and AFS).

– The Group receives the fair values of foreign currency forward

contracts and interest rate swaps from the counterparty banks.

Foreign currency forward contracts are usually measured

using quoted forward exchange rates and yield curves derived

from quoted interest rates matching maturities of the

contracts. Interest rate swaps are usually measured at the

present value of future cash flows estimated and discounted

based on the applicable yield curves derived from quoted

interest rates.

– The fair values of other financial assets and financial liabilities

(excluding those described above) are determined in

accordance with generally accepted pricing models based on

discounted cash flow analysis. Specifically, significant

assumptions used in determining the fair value of the

following financial assets and liabilities are set out below.

Finance lease receivables

The fair value of finance lease receivables is estimated to be CHF

16.2 million (31 December 2009: CHF 8.2 million) using a 16%

discount rate (31 December 2009: 15%) based on an average six

year tenor and adding a credit margin that reflects the secured

nature of the receivables.

Unlisted shares

The consolidated financial statements include holdings in unlisted

available-for-sale shares which are carried at cost (note 21).

Equity investments are held for strategic rather than trading

purposes. The Group does not actively trade these investments.

These AFS equity unlisted instruments have a carrying amount of

CHF 20.3 million at the end of the reporting period. The fair

value has not been disclosed for these instruments because their

fair value cannot be reliably measured. Measurement of the fair

value of these instruments cannot be made without using

subjective management judgments and assumptions based on

specific-entity inputs and significant adjustments to observable

market prices or rates.

F-65


ODH Annual Report 2010

39.12.3 Fair value measurements recognised in the

consolidated statement of financial position

The following table provides an analysis of financial instruments

that are measured subsequent to initial recognition at fair value,

grouped into Levels 1 to 3 based on the degree to which the fair

value is observable.

– Level 1: fair value measurements are those derived from

quoted prices (unadjusted) in active markets for identical

assets or liabilities.

– Level 2: fair value measurements are those derived from

inputs, other than quoted prices included within Level 1,

that are observable for the asset or liability, either directly (i.e.

as prices) or indirectly (i.e. derived from prices).

– Level 3: fair value measurements are those derived from

valuation techniques that include inputs for the asset or

liability that are not based on observable market data

(unobservable inputs).

2010

CHF

Financial assets

at FVTPL

Non-derivative

financial assets

held for trading

Available-forsale

financial

assets

Listed and

unlisted shares

measured at FV

Derivative

financial

liabilities

designated in a

effective hedge

relationship

Level 1 Level 2 Level 3 Total

1,380,948 - - 1,380,948

1,380,948 - - 1,380,948

51,301,991 - 421,137 51,723,128

51,301,991 - 421,137 51,723,128

- 2,141,187 - 2,141,187

- 2,141,187 - 2,141,187

There were no transfers between Level 1 and 2 in the period. The

Available-for-sale financial assets were measured at fair value

based on a method that combined the earning and net equity

book values of the companies.

Reconciliation of Level 3 fair value measurements of financial

assets

2010 Unquoted equity

CHF

securities

Opening balance 287,400

Total gains or( losses) recognized in other

comprehensive income

28,600

Purchases 105,138

Closing balance 421,138

2009 Unquoted equity

CHF

securities

Opening balance -

Total gains or( losses) recognized in other

comprehensive income

(85,800)

Purchases 373,200

Closing balance 287,400

39.13 Derivatives

The financial statements include interest rate swaps which are

measured at fair value (note 27.3). Fair value is determined by

the counterparty (financial institution) at mark to market.

The directors consider that the carrying amounts of financial

liabilities recorded at amortised cost in the financial statements

approximate their fair values

2009

CHF

Financial assets

at FVTPL

Non-derivative

financial assets

held for trading

Available-forsale

financial

assets

Listed and

unlisted shares

measured at FV

Derivative

financial

liabilities

designated in a

effective hedge

relationship

Level 1 Level 2 Level 3 Total

701,500 - - 701,500

701,500 - - 701,500

37,554,375 - 287,400 37,841,775

37,554,375 - 287,400 37,841,775

- 2,905,268 - 2,905,268

- 2,905,268 - 2,905,268

40 SHARE-BASED PAYMENTS

___________________________________________________________________________________

At 31 December 2010 and unchanged to prior year, the Group

did not have any share option or participation schemes in place

and had not granted any ODH shares to the members of the

Board or the Executive Management.

The Group compensated the members of the Board with a fixed

fee whereof 50% was paid in cash and the other 50% in

unrestricted shares of the Parent Company. The shares received

by the board members had a fair value of CHF 608,000 based

on the quoted market prices at the grant date (2009: CHF

572,448), and have been recognized in the consolidated

statement of comprehensive income as part of administrative

expenses. They will be transferred to the members of the Board by

the end of June 2011.

F-66


Orascom Development Holding (Consolidated Financial Statement)

41 RELATED PARTY TRANSACTIONS

___________________________________________________________________________________

Balances and transactions between the Group and its

subsidiaries, which are related parties of the Group, have been

eliminated on consolidation and are not disclosed in this note.

Details of transactions between the Group and other related

parties are disclosed below.

During the year, the Group purchased services from companies in

which members of the Board have a partnership or significant

influence through ownership during the period under review.

These services related to the provision of consultancy services and

the leasing of office space (see note 12).

The following balances were outstanding at the end of the

reporting period:

Amounts

CHF

Due from related parties

Due to related parties

2010 2009 2010 2009

- Financial investments

Three Corners Company 6,855,284 6,876,611 - -

El Gouna Football Club (i) 8,130,494 6,655,596 - -

Falcon for Hotels - 5,186,826 - -

Kingdom Co. 1,361,064 1,474,451 - -

Camps and lodges 1,013,652 1,085,777 - -

Other (balances less than CHF 120 000 each) 346,257 79,351 109,808 122,850

- Non controlling shareholders

Garanah - 8,146,190 - -

Tarot Tours Garanah 3,995,589 - 2,504,290 -

Mirotel For Floating Hotels 459,928 - - -

Tarot Garannah for touristic transportation 170,480 - - -

Tarot & Merotil Garranah for hotels 202,897 - - -

- Close family members

Samih Sawiris – (ii) - - - -

- Close family companies -

Orascom for Touristic Establishments company

(OTEC) 1,302,808

1,545,085 - -

Total 23,838,453 31,049,887 2,614,098 122,850

(i) The amount due from El Gouna Football Club is secured by a guarantee issued by Mr. Samih Sawiris, Chairman, CEO and major

shareholder.

(ii) Transactions involving Mr. Samih Sawiris, Chairman, CEO and major shareholder:

Purchase of shares from OHD

On 17 January 2007 OHD allocated to employees and the

management team (including the chairman and the executive

board members) an amount of 2 million shares for full

consideration being the market price as of that day. Mr. Samih

Sawiris acquired under this transaction 330,000 shares at the

market price. Amounts due from Mr. Samih Sawiris under this

transaction are included in “Other assets” as amounts due from

employees and management team and amounted to CHF 2.22

million at 31 December 2010 (31 December 2009: CHF 2.82

million). Amounts due from executive board members under this

transaction are included in “Other assets” as amounts due from

employees and management team and amounted to CHF

3,378,516 in 2010 (CHF 3,747,624 in 2009) (see note 22(iii)).

Taba Heights Company transactions

One of the Group companies had been granted the right to

acquire freehold title to the project's land by the Tourism

Development Authority. Due to foreign ownership restrictions on

the Sinai Peninsula becoming applicable in connection with the

reorganization, the respective Group company had to be

transferred to Mr. Samih Sawiris, major shareholder and of

Egyptian nationality. Mr. Samih Sawiris entered into a binding

agreement to retransfer these shares subject to approval of the

competent authorities, and that until such retransfer, the Group

would be put into a position as the full economic beneficiary of

these shares. This entails, inter alia, an irrevocable assignment of

dividends and the authorization to collect dividends, exercise

voting rights related to these shares and cause the sale of shares

with no additional rights of Mr. Samih Sawiris in any value

received.

Iskan International Project W.L.L. Inc. transaction

Iskan International Project W.L.L. Inc. (Iskan) entered into a

purchase agreements with Sifah Tourism Development Company

(S.A.O.C) and Salalah Beach Tourism Development Company

(S.A.O.C) to acquire 165 real estate properties. Mr. Samih

Sawiris is a major shareholder in Iskan. The other shareholders in

Iskan are Oasis Investments and Management (‘OIM’) and

Oman Touristic Developments. The contracts have a value of

US$ 61,508,533 (equals CHF 57,341,945) and are based on

normal commercial terms and conditions.

Iskan transferred the amount of US$ 12 million (equals CHF

11,187,120) as a down-payment. Trade and other receivables

balances in the Group’s consolidated financial statements at 31

December 2010 include outstanding receivables in connection

with this transaction in the amount of US$ 24,900,239 (equals

CHF 25,478,348). The related revenue recognized during the

period amounts to US$ 35,337,146 (equals CHF 36,157,569).

F-67


ODH Annual Report 2010

Securities lending agreement

On 3 December 2010, the Parent Company borrowed

1,286,353 ODH shares from Mr. Samih Sawiris free of charge

under a securities lending agreement. These shares were intended

to be used for the tender offer regarding the buy-out of the

remaining shareholders of Orascom Hotels & Development SAE

(OHD), a company listed at the EGX. For information on the

outcome of this tender offer which was completed on 18 January

2011 refer to note 46.

The borrowed ODH shares were not accounted for as treasury

shares by the Group, as Mr. Samih Sawiris retained the significant

rights, such as dividend and voting rights, during the borrowing

period as per contractual provisions.

Under the above mentioned securities lending agreement the

Parent Company is obliged to return the borrowed ODH shares

to Mr. Samih Sawiris no later than ten business days after the

Parent Company’s annual shareholder meeting 2011 which is

scheduled for 23 May 2011.

Orascom Hotel and Development, a wholly owned subsidiary of

Orascom Development Holding A.G., has a five year rental

contract for 1,701 square meters office space in Nile City office

building- Cairo where its owned headquarters are currently

situated, the contract was transferred among other similar

contracts totaling 11,274 square meters to a Joint Stock company

which is majority owned by the Chairman and the Co-CEO

amongst others. The basic annual rental value under this contract

is US$ 903,420 payable in advance on quarterly basis which is in

line with the other contracts transferred (there are other standard

parking, deposit and maintenance clauses in the contract that are

the same for all other units in the same building).

42 CASH AND CASH EQUIVALENTS

___________________________________________________________________________________

For the purposes of the consolidated cash flow statement, cash

and cash equivalents include cash on hand, demand deposits

and balances at banks. Cash equivalents are short-term, highly

liquid investments of maturities of three months or less from the

acquisition date, that are readily convertible to known amounts of

cash and which are subject to an insignificant risk of changes in

value.

CHF 2010 2009

Cash and cash equivalents 276,452,970 77,899,218

in cash, in-kind and in equity instruments of the Group. At 31

December 2010, only a partial amount of CHF 1,464,267

had been settled by transferring 26,171 ODH share (see note

34);

– The Group has accounted for the partial disposal of the six

percent it previously held in Garranah subsidiaries in

accordance with IAS 27 (as amended in 2008). The Group

derecognized all assets, liabilities and non-controlling

interests of these entities at their carrying amount. The

retained interest in the former subsidiaries was recognized at

its fair value at the date control was lost and the resulting gain

amounting to CHF 8,530,587 was recorded in the statement

of comprehensive income as other gains and losses (see notes

10 and 34).

– The Group sold the entire stake in the Joud Fund 4 (including

its subsidiary Al-Aqaba Oasis for Housing Ltd.). This

transaction is part of the Group’s sale of all its interests in the

Joud Funds 1, 2, 3, and 4 (see note 34).

– The Group entered into a securities lending agreement with

Mr. Samih Sawiris in course of the buy-out of the minority

shareholders of OHD as described in note 5, 27 and 46.

44 OPERATING LEASE ARRANGEMENTS

___________________________________________________________________________________

44.1 The Group as lessee

44.1.1 Leasing arrangements

Operating leases relates to car lease with lease terms of between

2 to 4 years and office facilities with lease terms of 25 years. The

Group (as a lessee) does not have an option to purchase these

leased assets at the expiry of the lease periods.

44.1.2 Payments recognised as an expense in the period

CHF 2010 2009

Minimum lease payments 1,361,120 182,107

1,361,120 182,107

44.1.3 Non-cancellable operating lease commitments

Total of future minimum lease

payments

CHF 2010 2009

Not longer than 1 year 238,976 229,847

Longer than 1 year and not

longer than 5 years

868,412 879,290

Longer than 5 years 3,790,800 4,001,400

4,898,188 5,110,537

In respect of non-cancellable operating leases, no liabilities have

been recognised.

43 NON-CASH TRANSACTIONS

___________________________________________________________________________________

During the current year, the Group entered into the following

non-cash investing and financing activities which are not reflected

in the consolidated statement of cash flow:

– The Group sold a six percent stake in the former Garranah

subsidiaries and its full interest in Joud Fund 4.

Considerations from these disposals are agreed to be made

44.2 The Group as lessor

44.2.1 Leasing arrangements

Operating leases relate to the investment property owned by the

Group with lease terms of between 1 and 4 years for premises in

El Gouna (Egypt) and 25 years for the resort in Mauritius. These

lease contracts do not include a lease extension option and are

subject to renegotiation at the end of the lease term. The lessee

F-68


Orascom Development Holding (Consolidated Financial Statement)

does not have an option to purchase the property at the expiry of

the lease period.

Rental income earned by the Group from its investment properties

and direct operating expenses arising on the investment

properties for the year are set out in note 16.

44.2.2 Non-cancellable operating lease receivables

CHF 2010 2009

Not later than 1 year 6,125,899 6,005,784

Later than 1 year and not

longer than 5 years

25,753,527 25,248,556

Later than 5 years 58,050,807 64,681,677

89,930,233 95,936,017

45 COMMITMENTS FOR EXPENDITURE

___________________________________________________________________________________

The following commitments for expenditure have

been made for the future development of the

2010

respective projects (CHF)

Salalah Beach Tourism Development Company

(S.A.O.C)

1,935,691

Sifah Tourism Development Company (S.A.O.C) 5,150,399

Andermatt Swiss Alps AG (i) 4,400,000

Luštica Development A.D. 2,498,000

Eco-Bos Development Limited (ii) 59,132,092

(i)

(ii)

The Swiss subsidiary Andermatt Swiss Alps AG

(ASA) has obligations towards the canton of Uri

and the municipality of Andermatt. ASA is

responsible for the construction of certain parts of

the tourism resort Andermatt. Within certain

periods of time or should the construction work be

stopped for whatever reason, ASA has the

obligation to rebuild the relevant plots of land to

the original state. At 31 December 2010, 4,400

ASA shares with a nominal value of CHF 1,000

each, amounting to a total book value of CHF

4,400,000, have been pledged as a security to

the canton and municipality.

During 2011, the amount of pledged shares with

a nominal value of CHF 1,000 will be increased

from 4,400 to 7,000. Additionally, land with a

value of CHF 1,000,000 will be pledged under

this transaction in 2011 and the security towards

the canton of Uri will amount to CHF 8,000,000.

The UK subsidiary Eco-Bos Development Ltd. is

committed to purchase three plots of land from

Imerys, a multinational industrial minerals

company, to develop an integrated Eco Town in

Cornwall, UK.

46 EVENTS AFTER THE REPORTING PERIOD

______________________________________________________ _____________________________

Some substantial political events took place in Egypt since

January 2011 that impacted generally its economic sectors, which

probably may lead to a decline in the economic activities in future

periods. These subsequent events in return may have an impact

on the Group’s operations in future financial periods. For the

purpose of disclosure, management estimate that the Group’s

hotel business will experience a drop of approximately 30% in FY

2011 based on the current circumstances. On a positive note, the

Group’s real estate contracted sales during Q1 2011 is in line

with the same period last year. This is mainly due to the strategic

direction that the Group has adopted, since its listing on the SIX,

in diversifying its revenues across different geographical areas.

The tender offer to buy-out the minority shareholders of OHD

ended on 18 January 2011. The Company acquired a total of

8,117,758 OHD shares and thereby increased its share of OHD

to 99.66%. 375,156 borrowed ODH shares were used to acquire

6,997,392 OHD shares. Furthermore 1,120,366 OHD shares

were acquired by cash-payments.

According to the terms of the securities lending agreement

disclosed in note 41, the Board of Directors will recommend a

capital increase in the amount of CHF 12,211,073 (made up of

330,029 shares valued at CHF 37.00) against 6,997,392 OHD

shares at the upcoming shareholders meeting of the Parent

Company scheduled for 23 May 2011 (see note 26).

Furthermore, the Parent Company plans to start the process of

completely delisting OHD from the EGX, as per article 35 of the

EGX listing rules, without having to call for an OHD Extraordinary

General Assembly Meeting.

Subsequent to the year end the share price of the Egyptian Resorts

Company (“ERC”) one of the Groups AFS equity investments, has

dropped by 55 percent following an announcement made by ERC

on EGX in March 2011, that the authorities in Egypt have

withdrawn a previously allocated plot of land. ERC had already

started to develop a project on this land.

47 LITIGATION

___________________________________________________________________________________

The financial statements of Falcon Company for Hotels (“Falcon”)

were incorporated into ODH’s consolidated financial statements

at 31 December 2008 in accordance with the International

Financial Reporting Standards, as a result of the business

combination previously effected through one of ODH’s

subsidiaries whereby control had existed over Falcon at that time.

Subsequent to the first time consolidation, but prior to the

completion of the transfer of the legal title on the Egyptian Stock

Exchange (EGX), a dispute over the Falcon securities purchase

agreement had arisen. At the beginning of October 2009, the

Group ceased consolidating Falcon due to changes in Falcon’s

management resulting in a loss of control for the Group which

was one of the reasons of the dispute (see note 21).

48 APPROVAL OF FINANCIAL STATEMENTS

___________________________________________________________________________________

The financial statements were approved by the directors and

authorized for issue on 27 April 2011.

F-69


ODH Annual Report 2010

Deloitte AG

General Guisan-Quai 38

Postfach 2232

CH-8022 Zürich

REPORT OF THE STATUTORY AUDITOR

To the General meeting of Orascom Development Holding AG,

Altdorf

Report on the consolidated financial statements

As statutory auditor, we have audited the accompanying

consolidated financial statements of Orascom Development

Holding AG, Altdorf, which comprise the statement of

comprehensive income, statement of financial position, cash flow

statement, statement of changes in equity and notes (pages F-3 to

F-69) for the year ended 31 December 2010.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation of the

consolidated financial statements in accordance with International

Financial Reporting Standards and the requirements of Swiss law.

This responsibility includes designing, implementing and

maintaining an internal control system relevant to the preparation

and fair presentation of consolidated financial statements that are

free from material misstatement, whether due to fraud or error.

The Board of Directors is further responsible for selecting and

applying appropriate accounting policies and making accounting

estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated

financial statements based on our audit. We conducted our audit

in accordance with Swiss law and Swiss Auditing Standards and

the International Standards on Auditing. Those standards require

that we plan and perform the audit to obtain reasonable

assurance whether the consolidated financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material

misstatement of the consolidated financial statements, whether

due to fraud or error. In making those risk assessments, the

auditor considers the internal control system relevant to the

entity’s preparation and fair presentation of the consolidated

financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal

control system. An audit also includes evaluating the

appropriateness of the accounting policies used and the

reasonableness of accounting estimates made, as well as

evaluating the overall presentation of the consolidated financial

statements. We believe that the audit evidence we have obtained

is sufficient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the consolidated financial statements for the year

ended 31 December 2010 give a true and fair view of the

financial position, the results of operations and the cash flows in

accordance with International Financial Reporting Standards and

comply with Swiss law.

Report on Other Legal Requirements

Tel: +41 (0)44 421 60 00

Fax: +41 (0)44 421 66 00

www.deloitte.ch

We confirm that we meet the legal requirements on licensing

according to the Auditor Oversight Act (AOA) and independence

(article 728 CO and article 11 AOA) and that there are no

circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and

Swiss Auditing Standard 890, we confirm that an internal control

system exists, which has been designed for the preparation of the

consolidated financial statements according to the instructions of

the Board of Directors.

We recommend that the consolidated financial statements

submitted to you be approved.

Deloitte AG

Hans-Peter Wyss

Licensed audit expert

Auditor in charge

Thomas Schmid

Licensed audit expert

Zurich, 27 April 2011

F-70


Orascom Development Holding AG

Orascom Development

Holding AG

Statutory financial statements

together with auditor's report for the

year ended 31 December 2010

F-71


ODH Annual Report 2010

Income statement

CHF

Revenue

Notes

Dividend income 141,454,343

2010 2009

Management fee 230,400 1,650,000

Interest income 2,914,146 4,735,530

Other revenues 1,600

Total revenues

Operating expenses

144,600,489

-

-

6,385,530

Personnel expenses (4,704,254) (2,005,584)

Marketing expenses

-

(820,246)

Depreciation of fixed

assets (221,418) (200,636)

Other operating

expenses (4,923,962) (6,109,039)

Impairment on

-

investments

(388,073,390)

Total operating

expenses (9,849,634) (397,208,895)

Other

income/expenses

Amortization of

incorporation 4 (5,118,917) (4,765,781)

and organization

costs

Finance expense 8 (5,000,000)

Interest expense (2,456,995)

-

Exchange rate

differences 587,115 2,402,451

Total other expenses

(11,988,797) (2,363,330)

Net profit/(loss) for

the period 122,762,058 (393,186,695)

-

Statutory balance sheet

CHF

Notes

31 December

2010

31 December

2009

Assets

Current assets

Cash at bank 155,790,727 1,773,214

Other receivables

- Affiliated

companies

175,886,773 58,902,549

- Related party 9,306,925 8,146,190

- Third parties 6,494,794 418,461

Own shares 10 1,464,267 -

Other financial

assets

11 9,427,914 -

Total current assets 358,371,400 69,240,414

Non-current assets

Fixed assets 5 150,859 346,308

Incorporation and

organization costs

4 18,226,912 16,283,085

Investments 8 3,090,259,432 3,090,206,647

Total non-current

assets

3,108,637,203 3,106,836,040

Total assets 3,467,008,603 3,176,076,454

Liabilities and

shareholders’

equity

Short-term liability

Other payables

- Shareholder 7 177,377 400,000

- Affiliated

companies

61,700,226 64,661,845

- Third parties 876,833 79,627

Accrued expenses 1,112,232 622,055

Total short-term

liabilities

63,866,668 65,763,527

Shareholders’

equity

Share capital 9 672,882,864 568,881,621

Additional paid-in

capital (agio)

9 2,505,326,807 2,439,261,100

Reserve for own

shares

10 1,464,267 -

Other reserve 9 499,108,028 500,572,295

Accumulated losses -398,402,089 -5,215,394

Net profit/(loss) of

the period

122,762,058 -393,186,695

Total shareholders'

equity

3,403,141,935 3,110,312,927

Total liability

and shareholders‘

equity

3,467,008,603 3,176,076,454

Samih Sawiris Amr Sheta Mahmoud Zuaiter

Chairman & CEO Vice Chairman & Co-CEO Group CFO

F-72


Orascom Development Holding AG

Statement of changes in equity

CHF

Share

capital

Additional paid-in

capital (agio)

Reserve for

own shares

Other reserves

Retained

earnings

Balance at 1 January

2009

580,491,450 2,939,261,100 79,963 492,332 (5,215,394) 3,515,109,451

Share capital decrease (11,609,829) - - - - (11,609,829)

Loss for the period - - - - (393,186,695) (393,186,695)

Transfer to reserves - (500,000,000) (79,963) 500,079,963 - -

Balance at 31

December 2009

568,881,621

2,439,261,100

Total

- 500,572,295 (398,402,089) 3,110,312,927

Balance at 1 January

2010

568,881,621 2,439,261,100 - 500,572,295 (398,402,089) 3,110,312,927

Share capital decrease (15,092,778) - - - - (15,092,778)

Share capital increase 119,094,021 66,065,707 - - - 185,159,728

Acquisition of own

shares

- - 1,464,267 (1,464,267) - -

Profit for the period - - - - 122,762,058 122,762,058

Balance at 31

December 2010

Cash flow statement

672,882,864 2,505,326,807 1,464,267 499,108,028 (275,640,031) 3,403,141,935

CHF 2010 2009

Cash flows from operating activities

Profit/(loss) for the period 122,762,058 (393,186,695)

Impairment loss recognised on investment - 388,073,390

Depreciation of fixed assets 221,418 200,636

Amortization of incorporation and organization cost 5,118,917 4,765,781

Movements in working capital

(Increase)/decrease in trade and other receivables (15,383,258) 292,063

Decrease in other assets - 28,426

(Increase) in other financial assets (9,427,914) -

(Increase)/decrease in due from affiliated parties (116,984,224) 9,451,284

Decrease/(increase)in due from related parties 8,146,190 (121,190)

Increase/(decrease) in trade and other payables 574,583 (602,454)

(Decrease)/increase in due to affiliated parties (3,014,404) 64,660,216

Increase in other liabilities 490,177 478,793

Cash generated/(used) from operations (7,496,457) 74,040,250

CHF 2010 2009

Cash flows from investing activities

Payments for fixed assets (25,969) (145,941)

Acquisition of subsidiaries - (170,977,873)

Net cash used in investing activities (25,969) (171,123,814)

Cash flows from financing activities

Incorporation and organization cost (7,062,744) -

Capital increase 185,159,728 -

Capital reduction (15,092,778) (11,609,829)

Acquisition of own shares (1,464,267) -

Net cash generated/(used) by financing activities 161,539,939 (11,609,829)

Net increase/(decrease) in cash and cash equivalents 154,017,513 (108,693,393)

Cash and cash equivalents as at beginning of the financial year 1,773,214 110,466,607

Cash and cash equivalents as at end of the financial year 155,790,727 1,773,214

F-73


ODH Annual Report 2010

Notes to the financial statements

1. General

The purpose of the Company is the direct or indirect acquisition, durable management and disposal of participations in domestic or

foreign enterprises, in particular in the field of real estate, tourism, hotels, construction, resort management, financing of real estate and

related industries as well as the provision of related services.

2. Pledged assets to secure own obligations

The Swiss subsidiary Andermatt Swiss Alps AG (ASA) has obligations towards the canton of Uri and the municipality of Andermatt. ASA is

responsible for the construction of certain parts of the tourism resort Andermatt. Within certain periods of time or should the construction

work be stopped for whatever reason, ASA has the obligation to rebuild the relevant plots of land to the original state. As at 31

December 2010, 4,400 ASA shares with a nominal value of CHF 1,000 each, amounting to a total book value of CHF 4,400,000,

have been pledged as a security to the canton and municipality. During 2011, the amount of pledged shares with a nominal value of

CHF 1,000 will be increased from 4,400 to 7,000. Additionally, land with a value of CHF 1,000,000 will be pledged under this

transaction in 2011 and the security towards the canton of Uri will increase to CHF 8,000,000.

3. Off-balance-sheet leasing commitments

CHF 31 December 2010 31 December 2009

Cars 54,388 56,137

Office rent 4,843,800 5,054,400

4. Incorporation costs

Incorporation costs relate to costs incurred in relation to the incorporation of the Company, the related capital increase and exchange

offer, as well as the listing of the shares at the SIX Swiss Exchange and the EGX Egyptian Exchange in 2008 and the public offering in

September 2010. Incorporation costs are capitalised and amortised over a period of five years.

5. Fire insurance value of fixed assets

The fire insurance value of fixed assets at 31 December 2010 amounts to CHF 731,000 (31 December 2009: CHF 2,000,000).

6. Liabilities towards staff pension schemes

Current liabilities at 31 December 2010 amount to CHF 4,378 (31 December 2009: CHF 2,595).

7. Other payables - Shareholder

The position of “other payables – shareholder” at 31 December 2010 includes CHF 177,377 due to Mr. Samih Sawiris (31 December

2009: CHF 400,000).

8. Investments

Investments are valued at acquisition cost less adjustments for impairment. The Company performs annually an impairment assessment

of its investments based on a DCF valuation model for operations, of shareholders’ equity for entities not yet operating and separate

valuations for land banks. Based thereon, no impairment is necessary as at 31 December 2010.

F-74


Orascom Development Holding AG

At 31 December 2010, the Company directly holds the following investments:

Company, domicile, purpose

Ownership %

31 December 2010 31 December 2009

Share capital

Orascom Hotels & Development S.A.E.

(previously: EL Gouna Development & Hotels

S.A.E.), Egypt

98.16% 98.16% EGP 1,109,811,630

Real estate development, hotel management

Arena for Hotels Company S.A.E., Egypt

Hotel operation

99.85% 99.85% EGP 20,000,000

Orascom Development Holding International Ltd,

British Virgin Islands (BVI) 100.00% 100.00% USD 1

International holding company

Orascom Development & Management Limited,

Cyprus 100.00% 100.00% EUR 1,000

Management company

ORH Investment Holding Ltd, BVI

International holding company

ONSA Holding Ltd, BVI

International holding company

Lustica Development AD, Montenegro

Real estate development, hotel management

Andermatt Swiss Alps AG, Switzerland

Real estate development

100.00% 99.96% USD 125,000,000

100.00% 100.00% USD 1

51.00% 51.00% EUR 25,000

100.00% 100.00% CHF 27,000,000

Orascom Development International AG,

Switzerland 100.00% 100.00% CHF 100,000

Real estate development

Orascom Hotels & Development S.A.E. (OHD) (previously: EL Gouna Development & Hotels S.A.E.)

On 3 April 2008, the Company launched an exchange and cash offer to the shareholders of OHD. By the end of the offer period on 5

May 2008, 208,145,270 OHD shares were tendered to the Company for exchange. The shareholders of OHD received shares of the

Company in return at a ratio of 10:1.

76,176 OHD shares were tendered for cash. The Company offered EGP 78.49 (CHF 15.44) per OHD share. The total price paid

amounted to CHF 1,175,929.

The tendered OHD shares have been valued at EGP 78.49 (CHF 15.44). Such value was equal to the price offered in cash and

represented the 6 months average stock price at the Cairo and Alexandria Stock Exchange prior to the offer.

On 13 May 2008, the Company extended its exchange and cash offer to shareholders of OHD. By the end of the extended offer period

on 19 May 2008, 4,843,110 OHD shares were tendered to the Company for exchange. The shareholders of OHD received shares of

the Company in return at a ratio of 10:1.

233 OHD shares were tendered for cash. The Company offered EGP 78.49 (CHF 15.45) per OHD share. The total price paid

amounted to CHF 3,601.

On 18 December 2008, additional 4,797,204 OHD shares were contributed in kind to the Company for exchange in shares of the

Company at a ratio of 10:1. The tendered OHD shares have been valued at CHF 2.73.

On 22 December 2010 the Company launched a tender offer to the remaining minority shareholders to acquire the outstanding OHD

shares. The tender offer was completed on 18 January 2011 and the outcome is described in note 15 b) subsequent events.

As at 31 December 2010, the Company owns 98.16% of OHD. The registration process for approximately 2% of these shares was not

completed at the time of launching the tender offer described above and therefore this portion was also included in the tender offer. The

Company has control over the voting rights and bears all the risks and rewards of these shares including dividend rights.

Arena for Hotels Company S.A.E.

The investment in Arena for Hotels Company S.A.E. has been transferred from OHD to the Company in 2008.

F-75


ODH Annual Report 2010

Orascom Development & Management Limited

Orascom Development & Management Limited has been incorporated in Cyprus under the companies law 113, as a limited liability

company on 30 June 2008.

Orascom Development Holding International Limited

Orascom Development Holding International Limited has been incorporated in the British Virgin Islands (BVI) as a BVI business company

on 2 July 2008.

ORH Investment Holding Limited (ORH)

ORH Investment Holding Limited has been incorporated in the British Virgin Islands (BVI) as a BVI business company on 19 April 2007.

On 1 April 2009, the Company participated in a capital increase with the amount of USD 124,950,000 (CHF 143,858,589),

establishing a 99.96% ownership in ORH. On 12 April 2010, ODH bought all outstanding shares from group companies and has

increased its ownership to 100.00%.

ONSA Holding Ltd

ONSA Holding Ltd has been incorporated in the British Virgin Islands (BVI) as a BVI business company on 30 September 2008 by a

shareholder. On 7 July 2009 it was transferred to the Company at its nominal value of USD 1.

Lustica Development AD

Lustica Development AD has been incorporated in Montenegro as a real estate development company on 7 May 2008. On 23

October 2009, Orascom Development Holding AG purchased 51% of Lustica Development AD shares from the government of the

Republic of Montenegro.

Andermatt Swiss Alps AG

Andermatt Swiss Alps AG (ASA) has been incorporated in Altdorf, canton of Uri, Switzerland as a real estate company on 11 May 2007.

On 1 November 2009, the entity was transferred to the Company at its nominal value of CHF 17,000,000. On 4 December 2009, the

capital was increased in the amount of CHF 10,000,000 by setting off a credit balance due to the Company. On 16 December 2010,

the Company issued a waiver for an intercompany loan amounting to CHF 5,000,000 granted to ASA and recorded the respective

costs as finance expenses in the income statement.

Orascom Development International AG

Orascom Development International AG has been incorporated in Altdorf, canton Uri, Switzerland as a real estate company on 18

September 2009.

9. Shareholders’ equity

As at 31 December 2010 the Company's share capital of CHF 672,882,864 was divided into 28,213,118 registered shares with a par

value of CHF 23.85 each. The share capital is fully paid-in. The registered shares of the Company are listed on the Swiss Exchange

(SIX). The Company has also issued Egyptian Depository Rights (EDRs) which are traded on the Egyptian Stock Exchange (EGX).

Par Value CHF Shares # CHF

Share capital 23.85 28,213,118 672,882,864

Authorized capital 23.85 6,540 155,979

Conditional capital 23.85 5,624,556 134,145,661

The table below shows the development of issued capital and additional paid-in capital (agio):

Par

Shares Issued capital Additional paid-in capital (agio)

Value

# CHF CHF

Date Transaction CHF Change Total Change Total Change Total

1/1/2009 Opening balance

25 23,219,658 580,491,450 2,939,261,100

a)

4/5/2009 Transfer of reserves - - 23,219,658 - 580,491,450 (500,000,000) 2,439,261,100

b) 20/07/2009 Capital reduction 24.5 - 23,219,658 (11,609,829) 568,881,621 - 2,439,261,100

c) 24/08/2010 Capital reduction 23.85 - 23,219,658 (15,092,778) 553,788,843 - 2,439,261,100

d) 30/09/2010 Capital increase 23.85 4,993,460 28,213,118 119,094,021 672,882,864 66,065,707 2,505,326,807

a) As per resolution of the general shareholder meeting held on

4 May 2009, the amount of CHF 500,000,000 was

transferred from additional paid-in capital (agio) to other

reserve.

b) As per resolution of the general shareholder meeting held on

4 May 2009, the share capital was reduced by CHF

11,609,829 by decreasing the nominal value per share from

CHF 25.00 to CHF 24.50. The amount of CHF 0.50 per

share was distributed to the shareholders on 20 July 2009.

c) As per resolution of the general shareholder meeting held on

11 May 2010, the share capital was reduced by CHF

15,092,778 by decreasing the nominal value per share from

CHF 24.50 to CHF 23.85. The amount of CHF 0.65 per

share was distributed to the shareholders on 24 August 2010.

F-76


Orascom Development Holding AG

d) As per resolution of the Board of Directors’ meeting held on

17 / 18 September 2010, the share capital was increased by

the amount of CHF 119,094,021 through the issuance of

CHF 4,993,460 fully paid-up registered shares with a par

value of CHF 23.85 each.

4,965,220 shares were issued for an amount of CHF 37.00

each, resulting in an additional paid-in capital of CHF

65,292,643. The offer price of CHF 37.00 was derived from the

closing price of the trading session on 17 September 2010,

discounted at a discount rate negotiated with the banks.

In addition, 28,240 shares were issued for an average amount of

CHF 51.22 resulting in an additional paid-in capital of CHF

773,064.

The total additional paid-in capital from this capital increase

amounted to CHF 66,065,707.

10. Own shares

At 31 December 2010, the Company owned 26,171 own shares

(31 December 2009: nil). These own shares were received on 30

December 2010 as part of the compensation for the sale of the

six percent stake in the former Garranah subsidiaries.

On 3 December 2010, the Company borrowed 1,286,353 ODH

shares from Mr. Samih Sawiris free of charge under a securities

lending agreement. These shares were intended to be used for the

tender offer regarding the buy-out of the remaining shareholders

of Orascom Hotels & Development SAE, a company listed at the

EGX. For information on the outcome of this tender offer which

was completed on 18 January 2011 refer to note 15 b)

subsequent events.

Under the above mentioned securities lending agreement the

Company is obliged to return the borrowed ODH shares to Mr.

Samih Sawiris no later than ten business days after the

Company’s annual shareholder meeting 2011 which is scheduled

for 23 May 2011.

At 31 December 2010, the borrowed ODH shares were not

accounted for as own shares by the Company, as Mr. Samih

Sawiris retained the significant rights such as dividend and voting

rights during the borrowing period as per contractual provisions.

11. Other financial assets

At 31 December 2010, the Company recorded other financial

assets in the amount of CHF 9,427,914 (31 December 2009:

nil). They consist of fixed rate government bonds with a repayment

date during the first quarter of 2011.

12. Risk assessment

Orascom Development Holding AG, as the Parent Company of

the Group, is fully integrated into the Group-wide internal risk

assessment process. Such assessment is performed bottom-up

and top-down with final conclusions consolidated in the Group

Finance Function.

The Group’s entities report periodically to the Group Finance on

their current operations and financial situation. Various reports

and analysis have been implemented to allow the Group to

monitor the operations closely and immediately identify risks. In

managing the Companies vital activities and controlling the risks

within those activities the Company pursuits a policy of

centralization at the corporate level in which the bank accounts,

the fixed assets, the collection of receivables and material

transactions are controlled at the corporate level with certain

approvals required to exercise or execute any of the above.

Management is efficiently and effectively assisted into taking

decisions based on the short term operating level and long term

strategic level through the various reports that are provided

through the system. In addition to that there is a monthly as well

as quarterly reporting package and a set of key performance

indicators on the entity and segment level that enable the

management to monitor the business, take decisions and undergo

corrective action whenever necessary.

In addition, the Group Finance has a function for risk assessment

and internal control. A risk matrix is regularly updated for the

most significant entities of the Group. All information from the

entities is reviewed and consolidated by Group Finance and is

shared and discussed with the Executive Management on a

regular base. A more formal reporting on risks over financial

reporting was made prior to year-end to the Board of Directors.

The Board of Directors in turn has performed a risk assessment

covering more long-term operational and strategic risks to the

Group. The conclusions of such risk assessment are also

considered by Group Finance.

The risk mitigating actions are performed on the segment and

entity level. The Group has centralized certain functions to be

able to identify and control risks more closely. This risk

assessment also covers the specific risks related to unconsolidated

financial statements of Orascom Development Holding AG.

F-77


ODH Annual Report 2010

13. Significant shareholders

31 December 2010 31 December 2009

Name of holder

Number of

shares

Percentage

ownership of

total equity

capital and

voting rights

Number of

shares

Percentage

ownership of

total equity

capital and

voting rights

Samih Sawiris 8,717,995 30.91% 7,414,166 31.93%

Thursday Holding Ltd. (controlled by Mr. Samih Sawiris’ family) 7,142,941 25.32% 5,873,741 25.30%

SOS Holding Ltd. (controlled by Mr. Samih Sawiris’ family) 1,126,508 3.99% 644,167 2.77%

Janus Capital Management LLC 1,524,707 5.40% 1,156,323 4.98%

Blue Ridge Capital Holdings LLC and Blue Ridge Capital

Offshore Holdings LLC

1,059,174 3.75% 851,660 3.67%

Others 8,641,793 30.63% 7,279,601 31.35%

Total 28,213,118 100.00% 23,219,658 100.00%

14. Remuneration of the Board of Directors and Executive Management

A detailed overview of the remuneration of the Board of Directors and Executive Management is provided in the consolidated financial

statements.

15. Subsequent events

a) Refer to note 2 “Pledged assets to secure own obligations” for further details.

b) The tender offer to buy-out the minority shareholders of OHD ended on 18 January 2011. The Company acquired a total of

8,117,758 OHD shares and thereby increased its share of OHD to 99.66%. 375,156 borrowed ODH shares were used to acquire

6,997,392 OHD shares. Furthermore 1,120,366 OHD shares were acquired by cash-payments.

The Company plans to start the process of completely delisting OHD from the EGX, as per article 35 of the EGX listing rules, without

having to call for an OHD extraordinary general assembly meeting.

According to the terms of the securities lending agreement mentioned in note 10, the Board of Directors will recommend a capital

increase in the amount of at least CHF 12,221,073 (made up of 330,029 shares valued at CHF 37.00) against 6,997,392 OHD

shares at the upcoming shareholders meeting.

Some substantial political events took place in Egypt since January 2011 that impacted generally its economic sectors, which probably

may lead to a decline in the economic activities in future periods. These subsequent events in return may have an impact on the

Group’s operations in future financial periods.

F-78


Deloitte AG

General Guisan-Quai 38

Postfach 2232

CH-8022 Zürich

REPORT OF THE STATUTORY AUDITOR

To the General meeting of Orascom Development Holding AG,

Altdorf

Report on the financial statements

As statutory auditor, we have audited the accompanying financial

statements of Orascom Development Holding AG, Altdorf, which

comprise the income statement, statutory balance sheet,

statement of changes in equity, cash flow statement and notes

(pages F-72 to F-78) for the year ended 31 December 2010.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation of the

financial statements in accordance with the requirements of Swiss

law and the company’s articles of incorporation. This

responsibility includes designing, implementing and maintaining

an internal control system relevant to the preparation of financial

statements that are free from material misstatement, whether due

to fraud or error. The Board of Directors is further responsible for

selecting and applying appropriate accounting policies and

making accounting estimates that are reasonable in the

circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with Swiss law and Swiss Auditing Standards. Those

standards require that we plan and perform the audit to obtain

reasonable assurance whether the financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of

the financial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers the internal control

system relevant to the entity’s preparation of the financial

statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal

control system. An audit also includes evaluating the

appropriateness of the accounting policies used and the

reasonableness of accounting estimates made, as well as

evaluating the overall presentation of the financial statements. We

believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the period ended 31

December 2010 comply with Swiss law and the company’s

articles of incorporation.

Report on Other Legal Requirements

Tel: +41 (0)44 421 60 00

Fax: +41 (0)44 421 66 00

We confirm that we meet the legal requirements on licensing

according to the Auditor Oversight Act (AOA) and independence

(article 728 CO and article 11 AOA) and that there are no

circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and

Swiss Auditing Standard 890, we confirm that an internal control

system exists, which has been designed for the preparation of

financial statements according to the instructions of the Board of

Directors.

We recommend that the financial statements submitted to you be

approved.

Deloitte AG

Hans-Peter Wyss

Licensed audit expert

Auditor in charge

Thomas Schmid

Licensed audit expert

Zurich, 27 April 2011


Notes


www.orascomdh.com

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