Emaar Sukuk Ltd XS0586840588 - London Stock Exchange

c103695pu040 Proof 7: 17.1.11 B/L Revision:FINANCIAL REVIEWThe following discussion and analysis should be read in conjunction with the information set out in‘‘Selected Financial Information’’ and the Consolidated Financial Statements. References in this sectionto ‘‘2009’’ and ‘‘2008’’ are to the financial years ended 31 December in each of those years.Basis of PresentationThis section presents certain selected financial information of Emaar as at and for the years ended 31December 2008 and 2009, as at 30 September 2010 and for the nine month periods ended 30September 2009 and 2010. As a result of certain changes in accounting policies and classificationsduring these periods, this information has been extracted from Emaar’s previously publishedconsolidated financial statements as follows:* the selected financial data as at 30 September 2010 appearing in this section and as at and forthe nine month periods ended 30 September 2009 and 2010 has been extracted from theunaudited interim condensed consolidated financial statements as at and for the nine monthperiod ended 30 September 2010;* the selected financial data as at and for the year ended 31 December 2009 appearing in thissection has been extracted from Emaar’s 2009 audited consolidated financial statements;* the selected financial data as at and for the year ended 31 December 2008 appearing in thissection has been extracted from the comparative financial information as at and for the yearended 31 December 2008 included in the 2009 audited consolidated financial statements, whichhas been restated to take into account the application of IFRIC 15 (Agreements for theConstruction of Real Estate). The selected financial data as at and for the year ended31 December 2008 has not been extracted from the 2008 audited consolidated financialstatements as such data is not directly comparable to the financial data as at and for the yearended 31 December 2009 as it appears in the 2009 audited consolidated financial statements dueto the effect of the application of IFRIC 15 (Agreements for the Construction of Real Estate).See note 2.2 to the 2009 audited consolidated financial statements for further details.See also ‘‘Presentation of Financial Information’’ for a further discussion of the presentation offinancial statements contained in this Base Prospectus.Emphasis of MatterErnst & Young’s audit report in respect of the 2009 audited consolidated financial statements and itsreview report in respect of the 30 September 2010 interim condensed consolidated financial statementseach include an emphasis of matter relating to (i) an arbitration proceeding resulting from a claimmade against Emaar in respect of a conditional joint venture agreement in the Kingdom of SaudiArabia and (ii) Emaar’s investment in Amlak Finance PJSC. Emaar has settled the arbitrationproceeding referred to in (i) above in December 2010 with neither party having any claim against theother in respect of the dispute. See ‘‘Description of Emaar Properties PJSC – Financial Services –Amlak Finance’’ and the relevant reports contained in ‘‘Financial Information’’ for further details.Key Factors Affecting Results of OperationsThe following is a discussion of the most significant factors that have affected, or are expected toaffect, Emaar’s results of operations and financial condition.Evolving mix of income streamsHistorically, almost all of Emaar’s revenue was derived from the sale of properties (whether in theform of development land or completed residential properties) and Emaar recorded only a limitedamount of income generated from the operation of hotels and other hospitality businesses operatedby it and rental income from properties leased by it.However, in more recent years, many of Emaar’s revenue generating assets have been completed andhave started to generate revenue (e.g. The Dubai Mall, Marina Mall and The Address Hotels in theUAE). As a result, revenue from hospitality grew to approximately 8.1 per cent. and 7.9 per cent. oftotal revenue in the nine month period to 30 September 2010 and the year to 31 December 2009,respectively, and revenue from leased properties and related income grew to approximately16.1 per cent. and 17.9 per cent. of total revenue in the nine month period to 30 September 2010 andthe year to 31 December 2009, respectively. The proportion of revenues from these sectors has77