Notes to Financial Statements

54Middle East Development Singapore Ltd.Annual Report 2008Notes to Financial Statements30 June 20085 RELATED COMPANY TRANSACTIONSThe Company is a subsidiary of M.E. Development L.L.C. (“MED”), incorporated in the United Arab Emirates, whichis also the Company’s holding company. Related companies in these fi nancial statements refer to members of theholding company’s group of companies.Some of the Company’s transactions and arrangements are between members of the Group and the effect of theseon the basis determined between the parties is refl ected in these fi nancial statements. The intercompany balancesare unsecured, interest–free and repayable on demand unless otherwise stated.Transactions between the Company and its subsidiaries, which are related companies of the Company, have beeneliminated on consolidation and are therefore not disclosed in this note. Details of transactions between the Groupand other related companies are disclosed below.Group2008 2007$ $Payments to the holding company for the expenses incurred on behalfof the Company on project management contracts 154,655 –On 20 April 2007, the Company entered into a Project and Construction Management Agreement (“Agreement”)with the holding company, to provide project management services in connection with the construction anddevelopment of certain projects in the Middle East. On 11 December 2007, the Company announced that MEDinformed the Group that due to a dispute between MED and the owner of the land with respect to 2 projects, itsproject management services would not be required for these 2 projects and the estimated management fee wouldbe reduced from $31.3 million to $17.4 million over a period of 24 months. By way of a letter (“cancellation letter”)dated 21 July 2008, which was received by the Company only on 29 July 2008, MED cancelled the Agreementwith immediate effect, on ground of non-performance. By way of a letter dated 30 July 2008, MED retracted thecancellation letter. On 7 August 2008, the Company submitted a proposed supplementary agreement for MED tosign and execute. The proposed supplementary agreement, which signifi cantly changes the scope and fee structurefor the project supplementary agreement, has not been signed, as at the date of the report. During the currentfi nancial year, the Group incurred cost of $927,935 directly attributable to the project management services. Due tothe uncertainty of the agreement with MED, management and the Board of Directors are of the view that it is notprobable that the cost incurred will be recovered. Accordingly, no revenue is recognised and a full provision wasmade for the cost incurred (Note 10).Subsequent to the Balance Sheet date, MED disposed 90 million shares in the Company, resulting in a drop in itspercentage of equity interest in the Company including the potential voting rights (options) from 50.2% to 32.1%.Accordingly, MED changes its status from the holding company to a related party of the Company (Note 6).