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Page 1: STRATEGICALLY DECENTRALIZED · STRATEGICALLY DECENTRALIZED ANNUAL REPORT 2016 STRATEGICALLY DECENTRALIZED ANNUAL REPORT ... 1.1 Company Profile 6 1.2 Destinations' Map 8 1.3 Chairman's

WWW.ORASCOMDH.COM

STRATEGICALLY DECENTRALIZED

ANNUAL REPORT 2016

STRA

TEGI

CALL

Y DE

CEN

TRAL

IZED

ANNU

AL R

EPO

RT 2

016

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STRATEGICALLY DECENTRALIZED

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Contents

AT A GLANCE

1.1 CompanyProfile 6

1.2 Destinations'Map 8

1.3 Chairman'sNote 10

1.4 CEO'sLetter 11

01

BUSINESS SEGMENTS

2.1 Hotels 18

2.2 RealEstateandConstruction 20

2.3 DestinationManagement 22

2.4 LandSales 24

2.5 OtherOperations 25

02

COUNTRIES 3.1 Egypt 30

3.2 Oman 42

3.3 UAE 48

3.4 Montenegro 50

3.5 Switzerland 52

3.6 Morocco 54

3.7 UK 55

03

ORASCOM *FOCUS VISION

Breakthrough with Focus

CORPORATE GOVERNANCE 4.1 GroupStructureand SignificantShareholders 58

4.2 CapitalStructure 60

4.3 BoardofDirectors 62

4.4 ExecutiveManagement 68

4.5 CompensationShareholdingandLoans 70

4.6 Shareholders'Participation 71

4.7 ChangesofControlandDefenseMeasures 72

4.8 Employees 72

4.9 ExternalAuditors 73

4.10 InformationPolicy 74

04

05INVESTOR INFORMATION 78

CONSOLIDATED FINANCIAL STATEMENTS 2016 ORASCOM DEVELOPMENT HOLDING AG 6.1 Consolidatedstatementofcomprehensiveincome F-3

6.2 Consolidatedstatementoffinancialposition F-4

6.3 Consolidatedstatementofchangesinequity F-6

6.4 Consolidatedstatementofcashflows F-7

6.5 Notestotheconsolidatedfinancialstatements F-10

06

GLOSSARY OF TERMS

08

STATUTORY FINANCIAL STATEMENTS 2016 ORASCOM DEVELOPMENT HOLDING AG 7.1 Incomestatement F-86

7.2 Statutorybalancesheet F-87

7.3 Statementofchangesinequity F-88

7.4 Cashflowstatement F-89

7.5 Notestothefinancialstatements F-90

07

186

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1.1 CompanyProfile 1.2 Destinations’Map 1.3 Chairman'sNote 1.4 CEO'sLetter

ORASCOM DEVELOPMENT AT A GLANCE01

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OrascomDevelopmentisaleadingdeveloperoffullyintegrateddestinations,includinghotels,privatevillasandapartments,leisurefacilitiessuchasgolfcourses,marinasandsupportinginfrastructure.

TheGroup’sdiversifiedportfolioofdestinationsisspreadovermultiplejurisdictionssuchasEgypt,UAE,Oman,Switzerland,Morocco,MontenegroandUnitedKingdom.OrascomDevelopmenthasaduallisting:aprimarylistingontheSIXSwissExchange;andasecondarylistingontheEGXEgyptianExchange.

1.1 Company Profile

Focusing on “Life as it should be” across all destinations

AcquisitionPhase

Development Phase

Operational Phase

NEWDESTINATION

IDENTIFICATIONACQUISITION &

INITIAL CONCEPT

LAND BANK VALUE CREATION

REAL ESTATE

HOTEL DEVELOPMENT

DESTINATION DEVELOPMENT

PROJECT MANAGEMENT OPERATIONS MANAGEMENT

HOTEL OPERATIONS

PLANNING AND DESIGNPROPERTY AND

FACILITY MANAGEMENT

DESTINATION OPERATIONS

RE OWNER SERVICES

Initia

ldes

tinat

ion

conc

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Det

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des

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conc

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Mar

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Star

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Inte

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1 2 3 4 5 6 7 8 9 10

CONSTRUCTION

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TheGroup’sdiversifiedportfolioofdestinationsisspreadovermultiplejurisdictionssuchasEgypt,UAE,Oman,Switzerland,Morocco,MontenegroandUnitedKingdom.

1.2 Destinations Map

01ORASCOMDEVELOPMENTATAGLANCE

100.3millionm2

TOTAL LAND AREA

17.7millionm2

COMPLETED AREA

17.7%COMPLETED

01ORASCOMDEVELOPMENTATAGLANCE

SWITZERLAND

OPERATING DESTINATIONInvestment Held in Associates

AndermattSwissAlps

UAE

OPERATING DESTINATION

TheCove

MOROCCO

DEVELOPING DESTINATION

Chbika

OMAN

OPERATING DESTINATIONS

JebelSifahHawanaSalalah

DEVELOPING DESTINATION

AsSodahIsland

DESTINATION IN THE PIPELINE

CityWalk,Muscat

U.K.

DESTINATION IN THE PIPELINE

Eco-Bos

MONTENEGRO

OPERATING DESTINATION

LušticaBay

EGYPT

OPERATING DESTINATIONS

ElGounaTabaHeightsHaramCityMakadiFayoum

DEVELOPING DESTINATION

QenaGardens

OTHER HOTELS

RoyalAzurandClubAzurZahraOberoi

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SamihO.Sawiris,ChairmanoftheBoardofDirectors

Iamverypleasedwiththemanagementachievementsduring2016andtheenhancedoperationalperformancethatwaswitnessedacrossourbusinesssegments,despitethedifficultbusinessenvironmentthatweoperatedin.Theturbulenceinthetourismmarketandthefluctuatingforeignexchangerates,haverequiredthecompany'smanagementanditsBoardtobeexceptionallyactive.Ourcommitmenttoourclientsandtoconstantly evolveourorganizationtomeettheirneedsisalsocentraltoourframeworkforcreatinglong-termvalueforourshareholders.

During2016,thenewmanagementteamheadedbyKhaledwasmandatedbytheBoardtofocusmoreonidentifyingourchallengesanddevelopmentareasrelatedtostrategyandinternalstructure.WeaskedthemanagementtocomebacktotheBoardattheendoftheyearwithathoroughassessmentofthecurrentbusinessmodelindicatingareasofinefficienciesandenhancementsandthenprovidingtheirvisionofhowthiscompanyshouldlooklike5yearsdowntheroad.

TheBoardandIwerepleasedwiththenewstrategythatwaspresentedbythemanagementinDecember2016.Ipersonallywasgladtohavemoreclarityonthe5years’directionthatwasputdownforeachdestinationindependentlyandfortheGroup’sbusinessmodelingeneral.MoreimportantlywasthattheteamkeptthesameessenceandtruevalueofthisGroupintactandcontinuedtocapitalizeonitscoreassetwhichremainstobeitslandbank.Theydidsobypresentingthedifferentapproachesofhowtogenerateandmonetizethemaximumvaluepossiblefromthisassetoverthecourseofitsdevelopment.InowbelievethatbythethoroughimplementationofthisstrategythemarketandtheshareholderswillsoongettoacknowledgethetruevalueofthisGroupthathasbeenseverelydiscounted.

Iwouldliketoextendmythanksandappreciationtoouremployeesandtheircontinuouscommitmentandenduranceduringthosechallengingtimesandalsothankthemforputtingthecompanyontherighttracktonoticeablesuccess.

OnbehalfoftheentireBoardofDirectors,thankyouallverymuchforyourvaluedsupportandongoingtrust.

Samih O. SawirisChairmanoftheBoardofDirectors

1.3 1.4Chairman’s Note

CEO’s Letter

KhaledBichara,CEOofODH

January1st,2016,wasmyfirstofficialdayastheCEOfortheGroup,IwasfortunateenoughtohavesucceededEng.Samihinthisrole,afounderthatIgreatlyadmireandrespectandwasalsoluckytohavefoundatalentedanddedicatedteamthattogetherwiththeChairmanhavebuiltaglobaltouristiclandmark,knowninmanypartsoftheworld.

Throughoutthefirsthalfoftheyear,importantpositionswithintheorganizationhavebeenchangedandfilled,intheexecutiveandtopmanagementlevel.ThisteamthenworkedtogetheronconductingathoroughassessmentofthecurrentbusinessmodeloftheGroupandhowithasbeenmanaged.

Theassessmentinvolvedconductingbusinessreviewsessionswithseveraldepartmentheadsandemployeesandmeetingwithexternaladvisors,investors,analystsandshareholdersofthecompany.Severalchallengesandareasofinefficiencieswereidentifiedasanoutcomeofthosemeetings.Challengesincludedthefollowing:1)Theinefficientholisticstructureoftheorganizationandhowcomplexitistomanage,thusnotreflectiveofthepotentialvaluecreation,2)Noclearvisibilityregardingtheusageoftheremaininglandbank;and3)Timingonwhenthecompanywillbeabletooperationallybreak-even.

ThemanagementteamworkedonrevisitingtheGroup’sstrategyanddraftedaguidelineonhowthisbusinessshouldbemanagedmovingforward.TheproposalthatwasthenpresentedandapprovedbytheBoardwastorevisetheCompany’smediumtolongtermstrategyalongthreeguidelines(or“Pillars”):

1.Establishmentofenhancedbusinesspractices

2.StrengtheningODHbalancesheet

3.RepositioningandenhancementofODH’sbrand

1.Establishmentofenhancedbusinesspractices:

A.Destinationbasedstructure

Ourinitialfocuswasonidentifyingourorganizationalchallengesanddevelopmentareasrelatedtostrategy,visibilityandaccountability.Accordingly,westartedworkingonre-organizingthecurrentsegmentstructuretoadestinationbasedstructure,pushingmoreauthorityandresponsibilityonthegroundforeach

destination,tobetterincreaseoperationalefficiency,shortenthedecisionmakingprocessandimprovemarkettransparency.

Dependingonitslevelofmaturityandscaleofoperations,eachdestinationshouldbecomeaseparatelymanagedentityheadedbyitsownCEOorGeneralManagerwhowillbeultimatelyinchargeofallbusinesssegments(Hotels,RealEstateandDestinationManagement).

WehavealreadyadaptedthisnewstructureinTabaandFayoum.NowwehavetwoGeneralManagersoverlookingthethreebusinesssegmentsinbothdestinations.ThemodelhasalreadyprovedsuccessfulinTaba,wherebywewereabletocuttheannualGOPlossesfromCHF4.5millioninFY2015toCHF1.7millioninFY2016.

Severalinitiativeswereadaptedinternallyintermsofrestructuring,reportingandcommunicationincoordinationwithourHumanResourcesdepartment,tobettersupportourdestinationbasedstructureandallowforbetterassessmentofeachbusinesssegmentatthelocallevelofeachdestination.

B.Continuouslandvaluecreation

ThisnotionisbuiltaroundcapitalizingthecoreassetoftheGroupofwhichitsbusinessmodelisbuiltupon–itslandbankandthehugevaluethatitpertains.TheGroupholdsoneofthelargestland

Photographer:MarcWelt

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banksglobally;amountingto100.3millionm2ofwhichonly17.7millionm2hasbeendevelopedasofthe31stofDecember2016andsotheessenceofitscurrentoperatingmodelevolvesaroundbuildingthevalueofthislandbank.

Theinitialphaseofthemodelentails“cashflowgeneration”bycompletingthedevelopmentsmandatedbytheMinimumBuildObligations(MBO’s)andbyseveralin-houserealestateandotherdevelopmentsthatgeneratecashandaddvaluetothedestination.Inparallel,withmorevalue-addingdevelopmentsinthedestinations,thevalueoftheremaininglandbankcontinuestoappreciateandbecomesmoreappealingtootherdevelopers,investorsandowners.

Duringourmeetingswithexternalanalystsandinvestors,itwasclearthatthemarketdiscountoftheGroup’slandbankresultedfromthelackofclarityprovidedregardingtheusageoftheremaininglandineachdestination.Thistriggeredmanagementtoidentifydifferentapproachesofhowtogenerateandmonetizethemaximumvaluepossiblefromthisassetovertheforeseenfuture,tyingthismonetizationplanwithdefinitemilestonesandtargeteddeliverables.

Whileontheotherhand,clearlycommunicatingthatthereisstillapartofthislandbankofwhichitsusageisyettobeidentified,sinceitisverydifficulttoclearlymasterplanandindicatethespecificusageofapproximately82.0millionm2ofundevelopedlandoverthecourseofthecoming5years.

Asaresult,managementstartedthisprocessbydevelopingamuchclearermasterplanforeachdestinationtoincludethefollowing:

1. Atargetedshort-termdevelopmentplanthatcoverstheMBO’sthatwerepre-agreeduponwiththeGovernments,inadditiontoin-houserealestateandotherdevelopmentsthatcomplementstheGroup’s3-5years’businessview.

2. Identifyingspecificlandplotsforsaleorsub-developmentofcertainprojectsthatmightincludebutnotlimitedtohotels,conferencecenters,businessparks,aquaparksetc.thatwebelieveareneededandwilladdvaluetothedestination.

3. Clearlycommunicatingtothemarketthattherewillstillberemainingundevelopedlandbankafterpoints1and2above–ofwhichfutureusehasnotyetbeendetermined-yetthislandbankstillpertainsvalueandwewillbeprovidingthemarketwithanupdatedfairvalueforthisremaininglandusinganexternalvaluatoronanannualbasis.

Webelievethatbydeliveringonthose3notions,theanalystcommunitywillbeabletobuildtheirownbusinessmodelofODHandwillhavetheneededinputtohaveamoreproperassessmentofitsvalue.

WestartedbyElGouna,beingthemostmaturedestinationtodateandhaveworkedwithourdevelopmentdepartmenttoidentifythefutureuseofthelandbyzoningouttheareasofwhichwewillcontinuedevelopingourselvesandhaveallocatedsomeplotsforsub-development.

Wehavealsocommunicatedthatwewillbeveryselectivewithourfuturelandsalesinalldestinationsingeneral,especiallywhenitcomestorealestatesub-development.Incountrieswheretheoffplansalesmodeldoesn’twork,thenrealestatesub-developmentmayhelpusonthefinancingside.

2.StrengtheningODHbalancesheet:

Partoftheultimategoalofhavingaself-sustaineddestinationistomakesurethatnotonlyisitprofitablebutalsothatitholdsasustainableandasolidbalancesheet,thatbuildsvaluetoitsequityandcarriesassetsthatcouldpotentiallygeneratecash.That’swhyaspartoftheassessmentofeachdestinationwedecidedtotakeoutthenecessaryimpairmentsontheinvestmentsthatwillnotbringinvalueandwillnotgeneratethecashneededunderournewstrategy.Wewillalsolookintorevaluingourassetsthatarecurrentlybookedatcostinourbookstobeabletogivethemarketamuchcloserindicationonthoseassetscurrenttruevalue.

Inlinewiththepreliminary5yearsplanthatweareputtingtogetherforeachdestination,managementhascometotheconclusionthatitisnecessarytofurtherreduceandrescheduletheoutstandingdebtthatismostlysittingattheEgyptianholdinglevel;OrascomHotels&Development(OHD).Eventhoughwehavesuccessfullyconcludedtherefinancingpackagethatwehadbeenworkingonsince2014,westillplantofurtherreduceourdebtbalancetolevelsthatweforeseeassustainableenoughtobecoveredbytheprojectedlevelsofoperations.Accordingly,managementhasputtogetheraninternalmonetizationlistthatincludesnon-coreassetsinadditiontoevaluatingtheopportunityofdisposingsomeminoritystakesincertainsubsidiariesandusingtheproceedsofwhichtoreducethedebt.

Underthisnotion,TamweelHoldingGroupwasidentifiedasanon-coreassettotheGroupandhasbeenputinthemonetizationlistandassignedasanassetheldforsale.

BysellingTamweelwewillbeabletodeconsolidateitsdebtfromourbooksandtheproceedsofitssaleareearmarkedtofurtherreducethedebtbalance.

Weareidentifyingdebtre-allocationandrestructuringoptionsacrossvariouslevelsofthecorporatestructureandhaveagreedthatmovingforward,debtshouldbetakenattheprojectlevelasopposedtotheholdinglevelwhenfeasible.Wearealsostudyingopportunitiestoemploynewdebtinstrumentswithtenorsthatmatchthematurityprofilesofourdestinations.

3.Repositioning&enhancementofODH’sbrand:

Wehavebeenhearingalotofcomplaintsfromtheinvestorcommunityregardingtheilliquidityofbothlistedcompanies,theholdingGroupODHandtheEgyptiansubsidiaryOHDandtheconfusionbehindhavingthembothlistedonthesamestockexchange.

Accordingly,managementhasproposedtotheBoardthedelistingofODH’sEgyptianDepositoryReceipts(EDRs).Thedecisiontodelistaimstoincreasethefreefloatandimprovetheliquidityofthecompany'ssharesontheSIXSwissExchangewhereODHmaintainsitsprimarylistingandremovetheinconsistenciesresultingfromthelistingofboththeEDRsandthesharesofODH'slargestsubsidiaryinEgypt,OrascomHotelsandDevelopment(OHD),ontheEgyptianExchange,whichshouldpotentiallyenhancetheliquidityandtradingvolumesofOHD’sshares.DecisionwasthenofficiallygrantedbytheBoardandwehavebeenproceedingaccordingly

withthenecessarystepsandprocedureswithbothstockexchangesandregulatorsinSwitzerlandandEgypttoconcludethedelisting.

Furtheractionsthatwearecurrentlystudyingtohelpinsolvingtheilliquidityissuesinclude;afurtherstake-saleinOHDatacceptablepricepointsandadaptingamarketmakingmechanismattheholdinglevel.Allthoseactionsarestudiedinparallelwithmaintaininganopenandactivemarketpresenceanddialoguewiththeinvestor,analystandshareholdercommunity.

ManagementhavealsoproposedexploringthefirstandsecondhomemarketsinCairoandNorthCoastinEgypt,insteadofonlyfocusingonthethirdhomemarkets.ManagementbelievesthatwiththesolidtrackrecordthatwehaveestablishedinElGounawecouldcapitalizeonourdevelopmentknow-howandtapthosemarketswhererealdemandexists.

Finally,weareworkingonthebrandingofODHbyapplyingthe“Lifeasitshouldbe”statementacrossalldestinationsstartingfromthehighenddestinationssuchasElGounamovingtoMakadiandtheBudgetHousingsegmentofHarramCity.ThemessagebehindthismotoisthatODHiscapableofprovidingthebestleveloflivingforeachcategorywithinthedestinationsitbuilds.

OperationalandFinancial highlightsof2016

Duringthispastyear,wehaveexperiencedandIbelievesuccessfullynavigatedthroughseveralperiodsofvolatilityandturbulences.

Althoughwearenotimmunefromwhatishappeningaroundus,wewereabletodoamuchbetterjoboperationallythantheyearbeforeinmostofourdestinations.

ResultswereimpactedbythepoliticalandeconomicbackdropiinEgyptespeciallyaftertheCBE’sdecisiontofloattheEGPagainsttheforeigncurrencies.HoweverotherdestinationsinOmanandMontenegrohavewitnessedhigherlevelsofmaturityandaccordinglyhighercontributionstotheGroup’srevenues.

ThedecisiontakenbytheCentralBankofEgyptinNovember2016tofloattheEgyptianpoundinanattempttostabilizetheeconomyhashadasignificantimpactonalotofcompaniesthatoperateinEgyptincludingtheGroup.

The102.7%appreciationoftheU.S.DollaragainsttheEGPfrom8.88to18.0resultedinsubstantialrevaluationsofthedebtheldinUSDollarsatthesubsidiaryandsubsequentlynegativelyimpactedtheGroupsP&Lstatementwithanon-cashforeignexchangelossofCHF113.2million.Ontheotherhand,totaldebtoftheEgyptianSubsidiaryonODH’sbalancesheethasdecreasedby24%fromCHF414.7milliontoCHF315.2million.

Inaddition,resultswerealsoimpactedbyimpairmentsintheamountofCHF32.9million.GrossprofitreachedCHF11.3millionandthenetlossattributabletoshareholdersforthereportingperiodamountedtoCHF196.4millionvs.netlossofCHF19.1millioninFY2015.

Onthepositiveside,AdjustedEBITDAfortheperiodreachedCHF19.6million.Whenresultsarenormalizedforlandsaleinthe

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leaseagreementstarting1stofNovember2016,withFTIGroupfor3ofourhotelsthereforatotalofEUR3.3millionperannum.InFayoum,wesuccessfullyheldthesoftopeningofByoumLakesideHotelonSeptember2016with50rooms,whichreportedverypositiveoccupancyrateof43%forFY2016.

InOman,Salalahdestinationhasbeenrecentlybrandedto"HawanaSalalah".WewereabletolaunchourthirdhotelinSalalah,AlFanarhotelinFebruarywith218roomsandtherebycompletingthe700-roomphase1ofourhoteldevelopmentplaninOman,makingitthelargestcontributortothedevelopmentofhigh-endhotelsinOmanduringthelastfiveyears.WealsowitnessedalotofdemandonourhotelsinSalalahduringourvisittotheITBconferencewhichhaspushedustoaddanextra84roomsinAlFanarhotelthatwehavesuccessfullyopenedinDecember22,2016.Todaywehaveatotalof784roomsinSalalahandallourhotelsthereoutperformedthisyearrecordinganoccupancyof69%comparedto54%in2015.RevenuesofSalalah'sHotelsaloneincreasedby61.5%toreachCHF29.4millionvsCHF18.2millioninFY2015.

TheCoveRotana,UAEhascontinueditspositivemomentumandreportedarevenueincreaseof7.9%toreachCHF27.1millioninFY2016comparedtoCHF25.1millioninFY2015withanincreaseinoccupancyratetoreach78%inFY2016vs.70%inFY2015.

Finally,Ibelievethatthenewformulatedstrategydetailedabove,willensureourfuturecompetitiveness.Wewillcontinuetoaddvaluewhereverwegotoourshareholders,clients,partnersandcommunities.

Iwouldliketothankallouremployeesfortheirtremendouseffortsandcommitmentduringthosetoughtimes.Ilookforwardtocontinueworkingwithyouonachievingmuchbetterresultsinthecomingyears.

comparativeperiodtheAdjustedEBITDAwouldhavereachedonlyCHF15.6millioninFY2015.

Totalrevenuesdecreasedby22.5%toreachCHF237.4millionvs.CHF306.1millioninFY2015,mainlyduetothestrategicdecisiontobecomemoreselectivewithlandsaleswhichamountedtoCHF65.2millioninthecomparativeperiodandthedrop-inEgypt’shotelrevenuesresultingfromtheongoingtravelbans.

WesuccessfullyreachedourrealestatesalestargetforFY2016.Valueofcontractedunitsincreasedby29.2%toreachCHF122.5millionvs.CHF94.8millioninFY2015andthenetvalueofcontractedunitsincreasedby101%toreachCHF115.2millionvs.CHF57.3millioninFY2015withmaincontributionscomingfromElGouna,JebalSifahandMontenegro.TheEnhancedsalesperformanceresultedfromthetargetedsalesandmarketingactivitiesthatwestartedimplementingwithournewlaunchesthroughoutourdestinations.Totaldeferredrevenuefromrealestatethatisyettoberecognizeduntil2019reachedCHF133.3millioninFY2016vs.CHF143.0millioninFY2015.InElGouna,Egyptwelaunched3differentprojectsthisyearwithatotalinventoryofUSD84.6million.NetvalueofcontactedunitsforElGounaincreasedby31.9%inFY2016toreachCHF80.6millionvs.CHF61.1millioninFY2015.Besidesthenewlyintroduceddesignsof2016,wefocusedoncontrollingtheconstructioncostsintermsof

valueengineeringtomaintainqualitywhileobtainingbestmarketpricesfromsuppliers.

InJebelSifah,Oman,welaunchedanewrealestateproject“GolfLakeResidence”inOctober2016,thedestination’snewrealestateproductlaunchinseveralyears.Theproductofferedatotalof118unitsforatotalvalueofCHF19.3millionandhasnailedgreatacceptanceandsuccesssellingout60%oftheprojectinonlytwomonthsfromlaunch.TotalnetsalesinOmanreachedCHF16.2millioninFY2016.

WealsofinalizedtheusufructagreementforOman’sfourthprojectCityWalk,Muscat,whichwassignedinNovember2016.Theprojectisplannedtoincludearetailareawithshopsandrestaurants,aswellasa5-starhotelwithanupscale123rooms.Additionally,theprojectwillfeatureacommercialareawithofficesandadedicatedcinemacomplex.

InterestinLušticaBay,Montenegrohascontinuedtoflourish,theyear2016startedasthebusiestyearyetonthedevelopmentandconstructionfronts.WewereabletorecordasignificantincreaseinnetsalestoreachCHF17.3millionvs.CHF9.1millioninFY2015,thatfurtheremphasizeddemandonourprojectandwealsospeededuptheconstructionofthenew(F)&(G)buildingscomprising88apartmentswithplanstobefinalizedduringthefirsthalfof2017.Inaddition,wefinalizedthemarinasuperstructure,planningtolaunchthemarinainthesummerof2018.

Onthehotelsside,despitetheseveredeclineintheEgypt’stourismsectoroverallwhichcontinuedtoaffectourperformance,totalhotelsegmentrevenuesdecreasedbyonly3.2%toreachCHF120.2millioninFY2016vs.CHF124.2millioninFY2015.Nevertheless,theAdjustedEBITDAofthesegmentincreasedby12.2%toreachCHF20.3millioninFY2016comparedtoCHF18.1millioninFY2015.ThisboostinprofitabilityresultedfromthedualeffectoftheenhancedoperationaleffortsandcostoptimizationcoupledwiththedevaluationoftheEGPagainstothercurrencies.

ElGounafostereditsleadingmarketpositioninthecountryrecordinganoccupancyof57%andwesuccessfullyopenedanew5-starhotel“AncientSands”with56roomsand120hotelapartments.TabaHeights,remainedourmostlychallengeddestinationtodategiventheextendedtravelbansonSinai,yetdemandhasstartedtopickupsincetheendofQ22016duetotheaggressivemarketingcampaignstargetedtowardsJordaniansandEgyptians.In2016wehad718operatingroomsinTabaandinJanuary2017weopenedanadditional100roomsbringingthetotalcountto818roomsoutof2,365roomsandweareplanningtoopenmoreroomsinthecomingperiod.

OurhotelsinMakadiwereaffectedbytheRussiantravelban.WecontinuedtooperateonlytwohotelsoutofthefoursinceDecember2015.Toreducethelossesofthedestination,wesuccessfullysigneda3-year

Khaled BicharaChiefExecutiveOfficer

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2.1 Hotels 2.2 RealEstateandConstruction 2.3 DestinationManagement 2.4 LandSales 2.5 OtherOperations

ORASCOM BUSINESS SEGMENTS02

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Hotels Segment in 2016

In2016travelbansfromRussia,amongotherEuropeancountries,thatwereannouncedinOctober2015continuedtoapply.AccordingtothelatestfiguresEgypttouristarrivalsfell42%inFY16comparedtoFY15.HotelsinMakadi,SahlHasheeshandTabaHeights–50%oftheGroup’stotalinventory–likemostotherEgyptiantouristicdestinationsweredrasticallyaffected.Nonetheless,thecrisismanagementprogramthatOrascomHotelManagementstartedimplementinglate2015,comprisingstrictcost-cuttingmeasures,centralizationofservicesandsuspensionofoperationsatsomehotels,limitedtheimpactoftheindustryparametersatthethreedestinationstoacollectiveGOPdeclineof18.8%goingfromCHF3.2millioninFY15toCHF2.6millioninFY16-whilestillmaintainingapositiveGOP.

Conversely,atElGouna–34%oftheGroup’stotalinventory-theoptimizationstrategiesintroducedin2014,coupledwiththeDestination’smarketpositioningandstrongtieswithleadingEuropeantouroperators,affordedagrowthintheHotels’bottomlineresultswiththeGOPPARgrowingfromCHF13inFY15toCHF15inFY16.OntheGOPlevel,ElGounahotelsreporteda15.4%growthgoingfromCHF12.3millioninFY15toCHF14.2millioninFY16.

InTabaHeights,ourmostlychallengeddestinationtodategiventheextendedtravelbansonSinaibyallmajorEuropeancountries,demandhasstartedtopickupsincetheendofQ22016duetotheaggressivemarketingcampaignsweimplementedinJordanandthelocalEgyptianmarkets.InFY2016wehadatotalof718operatingroomsinTabaHeightsoutof2,365roomswithplanstoopenmoreroomsinthecomingperiod.Totaloccupancyoftheavailableroomsincreasedto30%inFY16vs.20%inFY15.

InMakadi,2016wasatoughyearforourhotelsasaresultsoftheongoingtravelbansbytheRussiangovernment.Wecontinued

tooperatetwohotelsoutoffoursinceDecember2015.Nevertheless,wehavesigneda3-yearleaseagreementstarting1stofNovember2016,withFTIGroupfor3ofourhotelsinMakadiforatotalofEUR3.3millionperannumnettoowner,subjecttoanannualincreaseof5%toovercomethedropinbusiness.ItisworthnotingthatthesehotelshavereportedaGOPlossinFY16.

InFayoum,wesuccessfullyheldthesoftopeningofByoumLakesideHotelinSeptember2016with50roomsrecordinganoccupancyof43%duringFY16.

TheGulfHotels–14%oftheGroup’stotalinventory–maintainedthepositivetrendthatstartedin2015.

HawanaSalalah,theGroup’srisingdestination,dominatedtheperformancescenereportingaGOPPARgrowthof88.9%goingfromCHF18inFY15toCHF34inFY16.Moreover,theopeningofthefirstphaseofFanarHotel&ResidencethattookplaceonDecember172015,affordedanotableboostintheDestination’soverallGOPreportinga166.7%growthgoingfromCHF3.3millioninFY15toCHF8.8millioninFY16.It’simportanttohighlightthatSalalahhotelsmanagedtorecordanotablegrowthinoccupancyrateduringFY16toreach69%vs.54%inFY15.

Similarly,attheCove,RotanasustaineditsgrowthtrendwiththeGOPPARgoingfromCHF69inFY15toCHF85inFY16.TheCovereportedaGOPgrowthof22.5%goingfromCHF8.9millioninFY15toCHF10.9millioninFY16.Inaddition,occupancyrateincreasedtoreach78%inFY16vs.70%inFY15.

OntheGrouplevel,theHotelSegmentreportedayear-endGOPgrowthof31.3%risingfromCHF27.8millioninFY15toCHF36.5millioninFY16.

Overall,totalhotelsegmentrevenuesdecreasedby3.2%toreachCHF120.2millioninFY16vs.CHF124.2millioninFY15.ThesegmentreportedAdjustedEBITDAofCHF20.3millioninFY16comparedtoCHF18.1millioninFY15duetothedevaluationoftheEgyptiancurrencyagainstotherscurrencies.

Situation Analysis

Todateandconsideringanefficientcontinuationofthestrategiesimposedonthechallengeddestinationsin2015,variablesforaprofitablehoteloperationareallevident.

InEgypt,thefreefloatoftheEgyptianpoundandtheincreaseinnumberofflightsfromGermany;addtothat,the3-year-leaseagreementthattheGroupenteredfortheMakadiHotelspromiseahighyieldoperation.

InOman,theproductmixofourHotels,inHawanaSalalahinparticular,provedtobehighlyappealingtotheEuropeanend-usermakingitanattractiveinvestmentfortouroperators;accordingly,anewextensionof84roomswasannexedtoFanarHotel&Residence,makingthetotalnumberofroomsinHawanaSalalah784guestrooms.Inaddition,wearestudyingthepossibilityofconstructingnewhotelsinSalalahcapitalizingonthehugedemandforourhotels.

TheCoveinUAEhasearneditssuccessrecord.InFY16,whileTheCoveRotana’sinventoryrepresentedonly5%ofthatoftheGroup,itsGOPaccumulatedto30%ofthatoftheGroup.Buildingonthata145-guestroomextensioniscurrentlyunderdevelopmentandduetoopeninQ217makingthetotalnumberofroomsatthehoteladdupto491rooms.InMontenegro,wearealsoplanningtostarttheconstructionofthefirsthotelinLušticaBayduringthefirsthalfof2017,headedbytheluxuryhotelbrandTheChediGroup.

A Challenging Start and an Optimistic Finale for a Promising Year Ahead

TheHotelsSegmentKPIs,asofDecember31,2016

Total numberof hotel rooms

Number ofavailable hotel

rooms

Occupancyfor)%( total rooms

Occupancyfor total rooms )%(

TRevPAR*)CHF(

GOP PAR **)CHF(

Country Destination FY 16 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 FY 15

Egypt ElGouna1 2,650 2,627 2,650 2,627 57 68 57 68 46 53 15 13

TabaHeights2 2,365 2,365 718 1,756 7 10 30 20 22 18 (5) (11)

Makadi3 1,627 1,627 1,005 1,627 24 64 37 64 28 41 9 13

Fayoum4 50 - 50 - 43 - 43 - 34 - (22) -

FloatingHotels 27 27 27 27 7 13 7 13 54 88 (20) (12)

Oman TotalOman5 851 767 851 767 66 51 66 51 113 101 32 18

U.A.E UAE 346 346 346 346 78 70 78 70 213 196 85 69

ODH Group 7,916 7,759 5,647 7,150

Germany

Egypt

Russia

Netherlands

Belgium

UnitedKingdom

UAE

Switzerland

France

Jordan

Oman

Italy

Austria

Sweden

Israel

Ukraine

Poland

Denmark

Others

Egypt

Oman

UAE

REVENUES BY

COUNTRIES (% TOTAL)

50.726.7

22.5

1InQ216AncientSandsHotelwasopenedwith56rooms.AlsoInQ416BellevueHotel:33roomshavebeenconvertedtorealestateunitsresultinginreducingthetotalnumberofroomsto101.

2DuringtheFY2016,only2hotelswereoperating(Sofitelwith442rooms)andStrandBeachHotelwith276rooms(out

of503rooms)inTabaHeights.Whereby,duringFY2015only1hotelwasoperatingrepresenting442roomsbyendof2015.

3InFY2016,only2hotelswereoperating(RoyalAzurwith491rooms&CitadelAzurwith514rooms)inMakadi,thenweleasedout(RoyalAzur,ClubAzur&MakadiGardens)startingNovember2016.

4InSeptember1st,2016;softopeningofByoumLakesideHotelwith50rooms.

5InDecember22nd2016,FanarHotelextensionwasopenedwith84rooms,thusbriningtotalnumberofthehotelroomsto302rooms.

HOTELS REVENUE

2016

2015

CHF120.2mn(2015:CHF124.1mn)

SHARE OF GROUPS REVENUE

2016

2015

50.6%(2015:41.0%)

ADJUSTED EBITDA

2016

2015

CHF20.3mn(2015:CHF18.7mn)

36

26

4

4

3

3

3

22

22

2 1 1 1 1 1 1 1 7

2.1 Hotels

NATIONALITY OF HOTEL GUESTS

(% TOTAL)

*FinancialKPIsarecalculatedbasedonthenumberofavailableroomsduringthereportedperiodofFY16.

**Includeallexpensesofthehotelsinthedestinations.

02ORASCOM BUSINESS SEGMENTS

02ORASCOM BUSINESS SEGMENTS

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Segment operational review in 2016

TherealestatemarketinEgyptstartedoutpositivelyin2016.Mostoftherealestatedeveloperswereabletoachievey-o-ygrowthintheirsalesfigures,wherebyrealestateisstillregardedasasafehavenagainstthedevaluationofthelocalcurrency.

Wewereabletosuccessfullyreachoursalestargetfortheyear.ElGounaremainedtobetheGroup’smostimportantsalescontributorrecordinganetsalesvalueofCHF80.6millioncomparedtoCHF61.1millioninFY15onthebackofaggressivetargetedsalesandmarketingactivitiesthatweinitiatedwithournewlaunchesduringthesecondhalfoftheyear,diversifyingourofferingstocaterforthedifferenttastesofourtargetsegment.Ourfirstlaunchwas"FanadirBay"projectinApril2016,withatotalinventoryofUSD60.0million.Theprojectofferedaluxuriousyetcomfortableunitswithauniquelocationandviewofthebayandthesea.Itwitnessedsoliddemandandhassoldalmost90%ofitstotalinventory.

Wealsolaunchedalimitedprojectcalled“TheWestVillas”inJuly2016,consistingof11unitsforatotalvalueofUSD3.0million,whichhadalsosuccessfullysoldoutduringthefirst48hoursfromitslaunch.Buildingonthesuccessandthehypeindemandonthelaunchedprojects,weintroducedourlatestproject,“Tawila”inOctober2016withatotalinventoryofUSD21.6millionandwemanagedtosell68%ofitsinventory.

Tawilacomprisesdifferenttypesandsizesofvillas,inadditiontotownhouses,whichleavesprospectiveclientswithawiderangeofoptionstochoosefrom.Besidesthenewlyintroduceddesignsof2016,wefocusedoncontrollingtheconstructioncostsintermsofvalueengineeringtomaintainqualitywhileobtainingbestmarketpricesfromsuppliers.Wecontinuedspeedingupourconstructionprogresstodeliversomeofourprojectsaheadofschedule,allowingforfasterrevenue

recognitionandaccordinglywewereabletoincreasethesegment’srevenues.

InJebelSifah,Oman,welaunchedanewrealestateproject“GolfLakeResidence”inOctober2016,thedestination’snewrealestateproductlaunchinseveralyears.Theproductofferedatotalof118unitsforatotalvalueofCHF19.3millionandhasnailedgreatacceptanceandsuccesssellingout60%oftheprojectinonlytwomonthsfromlaunch.Theresidentialneighborhoodconsistsofstudio,oneandtwobedroomapartments,aswellaslofts.ThesuccessfullaunchwasastrongtestamenttohowJebelSifahwasbecomingoneofthemostattractivedestinationsintheMuscatsuburbwithitscontinuallyexpandingrangeofattractions.TotalnetsalesinOmanreachedCHF16.2millioninFY2016.

WefinalizedtheusufructagreementforOman’sfourthprojectCityWalkMuscat,whichwassignedinNovember2016.Theprojectwhichhasanincrediblesea-frontlocationinoneofthehighestdensityareasinMuscatandisplannedtoincludearetailareawithshopsandrestaurants,aswellasanupscale5-starhotel.Additionally,theprojectwillfeatureacommercialareawithofficesandadedicatedcinemacomplex.

InterestinLušticaBay,Montenegrohascontinuedtoflourish,theyear2016startedasthebusiestyearyetonthedevelopmentandconstructionfronts.Besidesthesignificantincreaseinsalesthatfurtheremphasizeddemandonourproject,wearestronglyprogressingwiththeconstructionofthenew(F)and(G)buildingscomprising88apartmentsandwefinalizedthemarinasuperstructure,planningtolaunchthemarinainthesummerof2018.

LušticaBay,continueditsstrongsalesmomentumsincethebeginningoftheyear.Wewereabletoconcludeabulksale’sdealforEUR3.9millionpushingthenetsalesvaluetoCHF17.3millioninFY16comparedtoCHF9.1millioninFY15.

Financial Review 2016

DuringFY16totalrealestateandconstructionrevenuesreachedCHF65.4millioncomparedtoCHF66.4millioninFY15.TheGroup’stotalvalueofcontractedunitsinFY16reachedCHF122.5millioncomparedtoCHF94.8millioninFY15andthenetvalueofcontractedunitsreachedCHF115.2millioncomparedtoCHF57.3millioninFY15.Theenhancedsalesperformanceduringthe2016reflectsthetargetedsalesandmarketingactivitiesthatwestartedimplementingwithournewlaunchesin2016throughoutallourdestination.Totaldeferredrevenuefromrealestatethatisyettoberecognizeduntil2019reachedCHF133.3millioninFY16comparedtoCHF143.0millioninFY15.

Outlook for 2017

Although2016startedoutonapositivenote,theeffectsoftheliberalizationoftheEgyptianpoundwhichtookplaceinearlyNovemberhadstartedtoimpacttheoverallbuyersentimentinEgypt.Nevertheless,wearebuildingonthestrongbasethatwasestablishedlastyearandarecapitalizingonthesuccessfullaunchesofElGouna.WeareplanningtolaunchnewphasesofTawilaandFanadirBaywithanexpectedinventoryofUSD40.0million.

TherewillalsobeastrongfocusonexistingprojectslikeSabinaandWaterSideCondos.WearealsoworkingonnewproductofferingsthatwillincludeservicedhotelapartmentsinFanadir,BellveueandMosaique.InMakadi,westartedtheconstructionoftheClubHousewithplanstobefinalizedduring2017.

A Year of Success Across the Destinations

InFayoum,weareplanningtolaunchnewproductswithatotalinventoryofCHF3.4millioninQ22017.Finally,forEgypt,wearecurrentlystudyingseveralopportunitiesforthefirstandsecondhomemarkets.

InOman,wearecapitalizingonthesuccessfulrealestatecomeback,withplanstolaunchnewrealestateproductsinbothdestinationsSifahandSalalah,cateringforlocal,regionalandinternationalbuyers.Wearealsoontrackonfinalizingtheconstructionofthe9-holesgolfcourseinSifah,scheduledtobeopenedinSeptember2017andareplanningtheconstructionoftheWaterParkinSalalah,thenewadditiontothetownwhichwillserverealestateownersandhotelguestsduringthefirsthalfoftheyear,withplanstobefinalizedbeforetheendof2017.

InMontenegro,wearespeedinguptheconstructionprogress,expectingtodeliverthe(F)and(G)buildingsinthefirsthalfof2017.WearealsoplanningtolaunchnewproductsinadditiontostartingtheconstructionofthefirsthotelinLušticaBayduringthefirsthalfof2017,headedbyluxuryhotelbrandTheChediGroup.

ADJUSTED EBITDA

2016

2015

CHF20.8mn(2015:CHF16.2mn)

REAL ESTATE AND CONSTRUCTION REVENUES

2016

2015

CHF65.4mn(2015:CHF66.4mn)

SHARE OF GROUPS REVENUE

2016

2015

27.5%(2015:21.7%)

VALUE OF DEFERRED INCOME

2016

2015

CHF133.3mn(2015:CHF147.0mn)

2.2 Real Estate and Construction

TheRealEstateSegmentKPIs,asofDecember31,2016

Value of contracted units )CHF mn(

Number of contracted units

Average Selling Price )CHF/m2(

Value of deferred Income )CHF mn(

Country Destination FY 16 FY 15 FY 16 FY 15 FY 16 FY 15 FY 16 FY 15

Egypt ElGouna 85.5 71.4* 215 183 2,721 2,541 53.6 79.3

Fayoum 0.4 0.2 4 3 821 539 0.6 3.2

Makadi 0.5 1.0 16 20 477 640 - 0.5

Gardania 0.8 2.7 1 4 1,276 1,329 - -

Oman JebelSifah 16.5 4.3 80 5 1,948 2,381 28.9 17.0

HawanaSalalah 1.5 4.1 3 15 3,228 3,685 5.3 15.9

Montenegro LušticaBay 17.3 11.1 37 24 5,883 4,812 44.9 27.0

ODH Group 122.5 94.8 356 254 2,692 2,543 133.3 142.9

Numbers net of cancellations1:

ODH Group 115.2 57.3 319 180

*1Cancellationsoftheaccumulatedsalesfrompriorperiods. *Thenumbershavebeenre-statedaftertakingoutmansion-landsales.

EgyptOmanMontenegro

87.2

18.0

17.3

VALUE OF CONTRACTED

UNITS (CHF MN)

02ORASCOM BUSINESS SEGMENTS

02ORASCOM BUSINESS SEGMENTS

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Destination Management Environment in 2016

Aseriesofrestructuringinitiativesandnewcollaborationswereinitiatedwithinseveraldestinations.Themaindriversbehindthoseorganizationalstructurereformsweretostreamlineoperations,eliminatewasteandimproveprofitability.Thefirststepstakenincludedre-organizingthecurrentsegmentstructuretoadestinationbasedstructure,pushingmoreauthorityandresponsibilityonthegroundofeachdestination,tobetterincreaseoperationalefficiency.

Key events

VariousmaintenanceworksandupgradeswithinElGounawereperformedduringtheyear,wefocusedmoreonthedestination’slivelihoodandpromotedthestateofmindcampaign.Werenovatedthemarinaflooring,streetsidewalks,andmultipleroadpavementswhichenhancedthetrafficandflowwithinthedestination.Wealsoadded19newberthstoAbuTigmarina.Wesuccessfullymanagedtorent41newstoresduring2016andcurrentlystudyingfurtheropportunitiesinexpandingwarehouses.

Weshiftedmorefocusonimprovingthequalityofservicesprovidedtoownersandresidents,thoughsupportingtheCustomerServiceunitwithmoretools–soweintroducedElGounamobileapplication,trackingsystemandshortnumber.Wecollaboratedwithanumberofserviceproviderstoenhancetheportfolioofactivitiesthroughaddinglandsailingandadirtbiketrack.Inaddition,tobuildingasquashcourtandsigningacontractwith7SportsManagementtomanagetherenovatedtennisandfootballpitch.Lastbutnotleast,wesuccessfullyorganizedanumberofbranded“ElGouna”eventsnamely:NewYear’sParty,SquashTournament,SandboxPartyandWorldKiteboardingChampionship.

JebelSifahandHawanaSalalaharebecomingamongsttheleadingITCandtourismdestinationsinOman,withongoingadditionstothedestinations’facilitiesandactivities.InJebelSifah,theconstructionofthe9-holesHarradinegolfcoursewasfasttrackedandconstructionalsostartedonthebeach-frontinfinitypoolandclubhouse.Newretailoutletsalsoopenedincludinganinternationalcuisinerestaurantandagym,aswellastheadditionoftheWibitfloatingwaterpark.JebelSifahhostedseasonalcommunitybeachevents,aswellasOman’sfirstandinternationallyacclaimedSpartanRaceArabia.

InHawanaSalalah,wefinalizedthedesignofthewaterparkandareplanningitsconstructionduringthefirsthalfof2017.WefasttrackedworkontheSoulyCampEco-lodgeandisnearingcompletion.Avarietyofretailoutletsandactivitieswereopenedinthedestinationaswellincludingachocolatier,restaurants,Turkishsilverware,greenhouseandAlFanarHotelandResidences’watersports.

InLusticaBay,Montenegro,RentalManagementProgram(RMP)wassuccessfullystartedin2016underthedirectionofsalesdepartmentandsupportedbythefacilityteam.Wehostedtwomajorevents,MilosKaradaglic’sconcertandJossStoneconcert,alongwithnumerousminorones.Wealsofocusedonavailingmoreactivitiestoourresidentsandvisitorsincludingbeachentertainment,watersportactivities,golflessonsanddrivingrangeandabar.

Financial Review 2016

Revenuesinthedestinationmanagementhasslightlyincreasedby1.9%inFY16toreachCHF15.9millioncomparedtoCHF15.6millioninFY15.Around36.0%oftherevenuesweregeneratedfromutilityfunctionssuchaswaterandelectricitygeneration,whiletheremaining64.0%werederivedfromcommercial,urbanandcommunityservices,infrastructureandmaintenanceactivities.ThesegmentreportedAdjustedEBITDAlossesofCHF6.4millioninFY16comparedtoalossofCHF3.9millioninFY15.

Outlook for 2017

InEgypt,specificallyinElGouna,wewillcontinuetostrengthenourbrandawarenessandensurethatguests/residentsexperienceour“lifeasitshouldbe”visioninourdestinations.WewillworkonpositioningElGounaasanallyearrounddestinationandwideningthetargetedaudiencebyprovidinganallyearroundcalendarofactivitiesthatlastsfrommorningtillnightforallage-groups,throughdifferententertainmentandsportsevents.

Inadditiontofocusingoncreatingmorejobopportunitiesthroughestablishingabusinessparkandstartuphubtoencouragemorepeople

tomovetoElGounaontheotherside,weareplanningtoadd12newberthsinAbuTigMarinaduringthefirsthalfof2017.

JebelSifahisexpectedtolaunchthe9-holeHarradinegolfcoursebytheinSeptember2017,aswellastheinfinitypoolandclubhouse.ItisworthmentioningthatfirstDesertBajawilltakeplaceincloseproximitytoJebelSifah,whereallbackendandrallyactivitieswillbehostedatthedestination.The2ndSpartanRaceArabiawillalsotakeplaceinthesecondhalfoftheyear.Retailandfacilitiestobeopenedincludebarbershop,laundry,chocolateshop,skyloungerestaurant,andchildren’sclimbing

wall.AsforHawanaSalalah,theEco-lodgeisexpectedtolaunchinthefirsthalfof2017.Also,thefirstSpartan’sRaceArabiaisplannedtotakeplaceinHawanaSalalah.ConstructionwillalsostartontheHawanaSalalahwaterpark,duringthefirsthalfoftheyearwithplanstobefinalizedbeforetheendof2017.NewretailshopsincludeTurkishfashion,Sabayaabayas,housewareandwomen/childrenclothing.

ForLusticaBay,Montenegro,thesoftopeningofMarinaisalsoscheduledinsummer2018andweshallexpandourbeachfrontspaceaccordingtothegrowingnumberofhomeowners.

New Restructuring and More Life to the Destinations

DESTINATION MANAGEMENT REVENUES

2016

2015

CHF15.9mn(2015:CHF15.6mn)

SHARE OF GROUPS REVENUE

2016

2015

6.7%(2015:5.1%)

ADJUSTED EBITDA

2016

2015

CHF(6.4mn)(2015:CHF(3.9mn)

ElGouna

TabaHeights

Makadi

Oman

TheCove

2

2

5

11

DESTINATION MANAGEMENT REVENUES BY DESTINATION

(% TOTAL)

80

Utilities

CommercialServices

InfrastructureandMaintenance

UrbanServices

CommunityServices

Others

36

25

16

14

18

DESTINATION MANAGEMENT REVENUES BY SERVICE TYPE

(% TOTAL)

2.3 Destination Management

02ORASCOM BUSINESS SEGMENTS

02ORASCOM BUSINESS SEGMENTS

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Includesaleoflandandlandrightstothirdpartiesonwhichthegrouphavedevelopedorwilldevelopcertaininfrastructurefacilitiesandwherethegroupdoesnothavefurtherdevelopmentcommitments.

ThedropintheGroup’stotalrevenueswasmainlydrivenbythedecreaseinthelandsegment’srevenuetoreachCHF2.0millioninFY16comparedtoCHF67.6millioninFY15.

Asapartofthenewmanagementstrategythatstartedin2016,movingforward,thecompanydecidedtobemoreselectiveintermsoflandsales,optingtocreatethemaximumvaluepossibleforitsshareholders.

AsaresultofthislandrevenuessegmenthastremendouslydecreasedinFY16toreachCHF2.0millioncomparedtoCHF67.6millioninFY15.InFY15revenuesincludedCHF65.2millionfromlandsalesinElGouna,Egyptforsub-developmentagreements.

ThesegmentotheroperationscombinethosebusinessesofOrascomDevelopmentthatarenotclassifiedinanyoftheotherbusinesssegments.Thesegmentincludesactivitiessuchasmortgagefinancing,rentalofvillasandapartments,hospitalandeducationalservices,marina,limousinerentals,laundryandotherservices.During2016,revenuesofthesegmentotheroperationsincreasedby5.0%toreachCHF33.9millioncomparedtoCHF32.3millioninFY15,inparticularduetotheincreaseofTamweelMortgagefinancebusinessoperation.

Itisimportanttohighlightthatin-linewiththecompany’sinitiativetofocusonitscoredestinationsinEgypt,OmanandMontenegro,theGroupisundertakingeffortstosellitsnon-strategicassetsandaccordinglyhasreclassifiedTamweelGroupcompaniesasanassetheldforsale.

Ourotheroperationsaccountedfor14.3%ofourtotalrevenuesinthefinancialyear2016.

LAND SALES REVENUE (CHF)

2016

2015

CHF2.0mn(2015:CHF67.6mn)

SHARE OF GROUPS REVENUE

2016

2015

0.8%(2015:22.1%)

ADJUSTED EBITDA

2016

2015

CHF2.4mn(2015:CHF68.6mn)

OTHER OPERATIONS REVENUE

2016

2015

CHF33.9mn(2015:CHF32.3mn)

ADJUSTED EBITDA

2016

2015

CHF8.4mn(2015:CHF8.3mn)

2015

SHARE OF GROUPS REVENUE

2016

14.3%(2015:10.6%)

2.4 2.5Land Sales Other Operations

02ORASCOM BUSINESS SEGMENTS

02ORASCOM BUSINESS SEGMENTS

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3.1 Egypt 3.2 Oman 3.3 UAE 3.4 Montenegro 3.5 Switzerland 3.6 Morocco 3.7 UnitedKingdom

ORASCOM COUNTRIES03

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OperatingTownsTOTALLANDBANK

100.3millionm2

HOTELROOMSOPERATING

8,016millionm2

IN7DESTINATION

35Hotels

OrascomDevelopment

OrascomDevelopmenthasadiversifiedportfolioofdestinations,whichisspreadoversevenjurisdictionscoveringEgypt,UAE,Oman,Switzerland,Morocco,MontenegroandUnitedKingdom.Itisaleadingdeveloperoffullyintegratedandinfrastructure-supporteddestinationsthatincludehotels,privatevillas,apartmentsandleisurefacilities–namely,golfcoursesandmarinas.

Ourstrategyisbasedonthecreationofvalueinourlandbankforthemediumandlong-termstakeholders.Tothatend,weaccumulatelargetractsoflandwithenoughspacetodevelopself-sufficientcommunitiesandtowns.

Subjecttocertainconditions,theGrouphas,uptothisdate,securedlandbanksofapproximately100.3millionm2inseveraljurisdictions.Moreover,OrascomDevelopmentholdsitsundevelopedlandbanks

primarilybywayofcontractualrightsorusufructs,withtheoptiontoacquirelegaltitle.

TheGrouphasalsodevelopedtenoperatingdestinationsincludingtouristdestinationssuchasElGounaontheRedSeaCoast,TabaHeightsintheSinaiPeninsula,MakadiintheRedSeadistrictandByouminFayoum,TheCoveinRasAlKhaimahinUAE,JebelSifahandHawanaSalalahinOman,LušticaBayinMontenegroandAndermattinSwitzerland,inadditiontothebudgethousingcommunityofHarramCityintheGreaterCairoinEgypt.

Furthermore,severaldestinationsarecurrentlyinvariousstagesofdevelopmentandplanninginOman,Morocco,andtheUnitedKingdom.

OrascomDevelopment’sLandBank

Land categories Definition

TotalLandBank

Anyplotofland,developedorundeveloped,whichisunderthedirectorindirectpossessionofOrascomDevelopmentbyvirtueoflease,usufructand/orownershiprightsandoverwhichOrascomDevelopmentmayhavefurtherrightstodevelop,fullyown,leasetothirdparties,selltothirdparties,grantsub-usufructrightstothirdparties,orotherwisedisposetothirdparties.EachplotoflandisgovernedbytherespectiveagreementbetweenOrascomDevelopment(directlyorindirectly)andtherespectivegovernmentalentity,shareholders,and/orinvestors

Completed Anyplotoflandwhereinfrastructureiscompletedandindividualelementsoftheprojectsarecompleted

Underconstruction Anyplotoflandwhereinfrastructureiscompletedandindividualelementsoftheprojectsareunderconstruction

UnderDevelopment Anyplotoflandwhereinfrastructureisunderconstructionbutnotyetcompleted

Undeveloped Anyplotwithzeroinfrastructure(rawland)

Destination Name Total landbank Completed Under

construction Under

development Undeveloped

EGYPT 49.11 14.52 5.81 1.73 27.05

ElGouna 36.92 9.36 5.46 1.29 20.81

TabaHeights 4.27 2.56 0.00 0.02 1.69

HaramCity 2.60 1.93 0.25 0.24 0.18

Fayoum 1.08 0.25 0.07 0.08 0.68

QenaGardens 0.80 0.00 0.00 0.01 0.79

Makadi 3.44 0.42 0.03 0.09 2.90

UAE 0.29 0.29 0.00 0.01 0.01

TheCove 0.29 0.29 0.00 0.01 0.01

OMAN 20.84 1.70 0.15 3.80 15.19

JebelSifah 6.20 0.20 0.05 1.50 4.45

HawanaSalalah 13.60 1.50 0.10 1.50 10.50

AsSodahIsland 1.00 0.00 0.00 0.80 0.20

CityWalk 0.04 0.00 0.00 0.00 0.04

SWITZERLAND 1.57 1.21 0.07 0.29 0.00

Andermatt 1.57 1.21 0.07 0.29 0.00

MOROCCO 15.00 0.00 0.00 3.00 12.00

Chbika 15.00 0.00 0.00 3.00 12.00

MONTENEGRO 6.90 0.02 0.12 0.39 6.37

Luštica 6.90 0.02 0.12 0.39 6.37

UNITEDKINGDOM 6.54 0.00 0.00 0.00 6.54

Eco-Bos 6.54 0.00 0.00 0.00 6.54

Total 100.25 17.73 6.16 9.21 67.15

Percentage of Total Land bank Size 17.68 6.14% 9.34% 66.98%

3.0 COUNTRIES

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TOTALPROJECTAREA

36.92millionm2

COMPLETED

14.82millionm2

ElGounaisOrascomDevelopment’sflagshiptownandtheGroup’s“Lifeasitshouldbe”developmentbenchmark.Itisaself-sufficient,fullyintegratedresorttown,withawater-tides’naturallyprotectedarea,thankstothesurroundingreefs.Thenameofthetownwasdrivenfromtheancientword“ElGouna”whichmeantprotected.Thetownisstretchingacross10kmofpristineshorelineonthebeautifulRedSeacoastwithatotallandareaof36.92millionm2ofwhich14.82millionm2hasbeendeveloped,ElGounaisamultinationalcommunitythatcontinuestogrow.

ElGounaoffersunparalleledlifestyleattractingagrowingmultinationalcommunity.Year-roundsunshine,shimmeringlagoons,turquoisebeaches,andbeinga4-hourflightfromEuropemakeElGounatheultimateparadiseescape.Itboastsworldclassinfrastructure,upscaleservicesandishometosomeoftheworld’smostreputablebrandsinthetourismandleisureindustries.

ElGounaoffersawiderangeofinternational-standardfacilities.Itoffersawiderangeofrealestateunits,fromexclusiveprivatevillastocozyapartments,allinharmony,yetwithauniqueidentity,17hotelswith2,650guestroomswithamixof5,4and3starhotels,alandingstrip,aworld-classhospital,anursinginstitute,twochampionships18-holegolfcourse,threemarinaswithacapacityof380berthsincludingdrydocks,463commercialoutlets,100restaurants,barsandeateries,aweatherstation,conferenceandmeetingfacilities,

beautysalons,spas,postoffice,laundryserviceandbanks.ElGounaalsohostsasatellitecampusoftheTechnischeUniversityBerlin,whichoffersthreeMaster'sdegreeprograms,avarietyofbothinternationalandEgyptiancurriculumschoolsandalibrarylinkedtoBibliothecaAlexandrinaaswellasaslidercableparkwithacompletewatersportsfacilitiessuchasdivingcenters,kitesurfing,amosqueandchurch,inadditiontoculturalfestivalsandmajoreventsandmanyotherfacilities.

ElGounaishonoredtobethefirstdestinationinAfricaandtheArabRegiontoreceivetheGlobalGreenAward.SponsoredbytheUnitedNationsEnvironmentProgram,thisawardishandedtocitiesdisplayingsubstantialmeasuresandeffortsinprogresswithinthefieldofenvironmentalsustainability.

Events2016:

* KitesurfingWorldChampionship–ElGounaGrandSlam

* KiteJamboreeSpringandFall2016

* WomenForSuccessConference

* GlobalBikingInitiative(GBI)

* ElGounaRally

* ElGounaFishingCompetition

* ElGounaInternationalSpinningMarathon

* ElGounaInternationalSquashOpen

* WellspringKidsCamp

* MBCGreenAppleShowSummerFinaleEpisode

* Sandbox

* MusicHall

* Halloweekend

* 3-CushionBilliardWorldCup

* ElGounaWonderlandWeekend

* MidnightinWonderlandNewYear'sParty

* MirrorMirrorNewYear'sParty

Highlights2016:

* OpenedAncientSandHotelinApril2016with56roomsand120hotelapartments.

* LaunchedanewrealestateprojectinApril2016,“FanadirBay”,withatotalinventoryofUSD60millionandmanagedtosellmorethan90%oftheproject.

* Launchedalimitedprojectcalled“TheWestVillas”inJuly2016,holding11units

foratotalvalueofUSD3.0million,whichhassuccessfullysoldoutduring48hoursfromitslaunch.

* Launchedfirstphaseof“Tawila”realestateprojectinOctober2016withatotalinventoryofUSD21.6millionandmanagedtosellmorethan68%oftheproject.

* Upgradedthesportsfacilitiesandfinalizedadealwithasportsmanagementcompanytomanagethefacility.

* ExpandedAbuTigMarinaby19newberths.

* Rented41newstoresduring2016.

* Delivered102unitsduring2016andstartedtheconstructionof134unitstobedeliveredin2017.

* SuccessfullylaunchedElGouna“StateofMind”marketingcampaignandpositioning.

EL GOUNA EGYPTOPERATINGDESTINATION

ElGounaboastsworldclassinfrastructure,upscaleservicesandishometosomeoftheworld’smostreputablebrandsinthetourismandleisureindustries

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TOTALPROJECTAREA

4.27millionm2

COMPLETEDAREA

2.56millionm2

TabaHeightsisoursecondfullyself-sufficientresorttown,locatedinTabaoveratotallandareaofapproximately4.27millionm2,ofwhichapproximately2.56millionm2hasbeendeveloped.Thebreathtakingnaturalsettingiscomplementedbyanofferingoflavishfourandfive-starhotels.Worldwidehospitalityleadersprovideanunparalleledexperienceinrelaxationandleisure.

TabaHeightsislocatedinTaba,asmallEgyptiantownnearthenortherntipoftheGulfofAqabaontheSinaiPeninsula,approximately200kmnorthofSharmEl-Sheikhandapproximately20kmsouthoftheIsraelitownEilat,whichmakesitapopularstartingpointforexcursionstoUNESCOWorldHeritagesites,suchasthemonasteryofSaintCatherine,therose-redcityofPetra,thedesertofWadiRum,theholycityofJerusalemandtheDeadSea.TabaInternationalAirportisonlyapproximately25kmawayfromTabaHeights.

Thetownoffersawiderangeofinternational-standardfacilitiessuchasaSix(4-and5-starHotelswith2,365guestrooms),amedicalcenter,childdaycareservicesandatowncenterandmanyotherfacilities.Furthermore,thetownfeatures111outletsincludingcafés,bars,restaurantsandshoppingfacilities,25hotelswimmingpools,variousspas,5-starwatersportscenter,tennisandsquashcourts,man-madesaltcaveandan18-holechampionshipgolfcourse.Inaddition,TabaHeightsoffersayachtmarinawithberthingcapacityfor50yachtsandprovidesovernightmooring.

Highlights2016:

* TabahotelscontinuedtosufferfromtravelbanstotheSinaiPeninsulaissuedbymostWesternEuropeancountriessinceOctober2015.Asaresults,fiveoutofoursixhotelswereclosedkeepingonlySofitelHotelopenwith442roomsaswearecontinuingwiththecost-cuttingmeasures.

* InQ2andQ32016demandforTabaHeightshotelsstartedtopickupwhichledtothere-openingof276roomsinStrandBeachandGolfResortoutofthehotels’503rooms.In2016wehaveatotalof718operatingroomsinTabaHeightsoutof2,365rooms.

TABA HEIGHTS EGYPTOPERATINGDESTINATION

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TOTALPROJECTAREA

3.44millionm2

COMPLETEDAREA

0.45millionm2

SettledintheheartoftheRedSeaonly30kmawayfromHurghadaInternationalAirport,laystheuniqueresidentialandtouristiccommunity,Makadi.AstheonlyresidentialcommunityinMakadiBay,thedestinationaddsadifferentflavortotheareawhencomparedtoitsneighboringresortbasedcommunities.

Makadistretchesacrossapproximately3.44millionm2providingbothitsresidentsandvisitorsalltheservicesandfacilitiesthattheywouldrequireanddesire.Withamissiontoprovideuppermiddleclassfamiliestheopportunitytoownahomeataffordableprices,thetownresortisnowfeaturingavarietyofresidentialunits,andalsoanoperatinghotelwithatotalcapacityof283rooms.

BeingthefirstgatedcommunityinHurghada,Makadiisdestinedtoprovidethecommunitywithhighqualityservices,amongwhichisHurghada’sfirst"clubhouse"thatofferssocialandsportsactivities,nottomentionthespaciouscommercialarea,hotels,medicalcenterandschool.Withsuchservicesbeingprovided,notonlyownersandhotelvisitorsofMakadiwillenjoytheirstay,butalsoallofHurghadawillfindsomethingsuitableinMakaditofulfilltheirneeds.

LocatedatMakadibay,oneofHurghada’sfascinatingshores,30kmawayfromHurghadaInternationalAirport.RoyalAzurHotelwith491guestroomsandClubAzurHotelwith339guestrooms.

Thetwohotelsoverlooktheirownspaciousprivatesandybeach,offeringsixteenrestaurantsandbars,fullyequippedwatersportscenter,tenniscourts,squashcourt,billiards,afullyequippedfitnessroomandswimmingpools.HotelsoccupancieswereaffectedfromtheongoingRussiantravelbans,asaresultsofthis,themanagementtookthedecisiontoshutdownClubAzurandMakadiGardensHotelsinDecember2015.Nevertheless,wesuccessfullyintroducedmeasurestoovercomethedropinbusinessandhavesigneda3-yearleaseagreementstarting1stofNovember2016,withFTIGroupfor3ofourhotelsinMakadiforatotalofEUR3.3millionperannumnettoowner,subjecttoanannualincreaseof5%. CitadelAzurisa5-stardeluxeresort,builtin2008.

ItislocatedinSahl-Hasheeshwhichis18kmSouthofHurghadaInternationalAirportand20kmsouthofHurghadaCityitself.

Thetotalsiteareaisapproximately553,448sqmonwhichthereare8buildings.These8buildingscompriseatotalof514rooms.CitadelAzurhasaprivatebeachthatextendsto1.6kmlongontheRedSeaCoast,offeringthreeswimmingpools,restaurantsandbars,fullyequippedwatersportscenter,afullyequippedfitnessandmanyotheramenities.InJuly2016,wemanagedtotakethefullownershipofthehotel.

Highlights2016:

* HotelsoccupancieswereaffectedfromtheongoingRussiantravelbans,asaresultsofthis,themanagementtookthedecisiontoshutdownClubAzurHotelinDecember2015.Nevertheless,wesuccessfullyintroducedmeasurestoovercomethedropinbusinessandhavesigneda3-yearleaseagreementstarting1stofNovember2016,withFTIGroupfor3ofourhotelsinMakadiforatotalofEUR3.3millionperannumnettoowner,subjecttoanannualincreaseof5%.

* Delivered16unitsduring2016andstartedtheconstructionoftheclubhouseexpectedtobefinalizedduring2017.

RoyalM A K A DI BAY

Grand Resorts

ClubM A K A DI BAY

Club

MAKADI EGYPTOPERATINGDESTINATION

ROYAL AZUR AND CLUB AZUR EGYPTOTHERHOTELS

CITADEL AZUR EGYPTOTHERHOTELS

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Located100kmsouthwestofCairoinanideallocationoverlookingthespirituallakeofQarun.TheplanissettodeveloptwoluxuryresidentialcommunitiesByoumandAlRoboua,inFayoum.

In1998,theGroupacquiredfromthirdpartieslandrightsinitiallyacquiredfromtheGovernmentofEgyptatElFayoumforaresidentialrealestatedevelopmentproject.Totallandparcelssecuredcoverapproximately1.08millionm2.Al-Robouaprojectoffers36standalonevillasintraditionalNubianstylewithallsupportingamenities.Duringthethirdquarterof2008,Byoum,anewresidentialrealestateproject,waslaunchedcoveringatotalareaofapproximately446,507m2outofthetotalawardedland.Byoum,isplannedtoofferrealestateunits,a4-starhotel,beachclub,huntinglodge,Pierandcommercialareas.WeareplanningtolaunchnewrealestateproductswithatotalinventoryofCHF3.4millioninQ22017.

Highlights2016

* InSeptember2016,wesuccessfullyheldthesoftopeningofByoumLakesideHotelafour-starshotelwitha50rooms.

1.08millionm2

TOTALPROJECTAREA

0.32millionm2

COMPLETEDAREA

FAYOUM EGYPTOPERATINGDESTINATION

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TOTALPROJECTAREA

2.60millionm2

COMPLETEDAREA

2.18millionm2

Duringthelastquarterof2006,OrascomDevelopmententeredthebudgethousingarena,abusinessstrategicallyfocusedondevelopingaffordableincomehousingthroughoutEgyptbyestablishingthroughitssubsidiaryOrascomHotelsandDevelopment(OHD)thebudgethousingcompanyOrascomHousingCommunities(OHC).OHCisthefirstEgyptiancompanytofocusonthedevelopmentofhigh-qualityaffordablehousingunitswithinsustainableandfully-integratedtownshipsinEgypt.

OrascomHousingCommunities,a35.25%ownedbyOrascomHotelsandDevelopment,managesthislineofbusiness.Launchedin2007asthefirstofitskindinEgypt,HarramCity’sawardwinningmodelofaffordablehousingwithinasustainableandfullyintegratedtownshipencouragessocialresponsibilityandcivilengagement.Locatedin6thofOctober,20kmwestofCairo,HarramCityspansoverapproximately2.60millionm2ofland,andisnowhometomorethan40,000residents.Asatrulyintegrateddevelopment,HarramCityofferscomprehensivecommunityfacilitiesincludingschools,clinics,worshiphouses,sportingamenities,acinema,policestation,nurseriesandcommercialoutlets.Beyondensuringthetown’s

self-sustainabilitythroughemploymentopportunitiesincommercialandindustrialsectors,thecityhostsvariousprojectsdesignedtostimulatejobcreationandbenefitstheoverallcommunityaswellasunderprivilegedsegments.Inordertoimprovethequalityofeducationofthetownstudents,theGroupsubsidizesfourpublicschoolssuchasHarramCityLanguageSchoolandOrascomLanguageSchool,makingthemmoreaffordablefortheenrolledstudentstolearnEnglish,German,andArabic.

Highlights2016:

* Startedtheconstructionof240unitstobedeliveredduring2017and2018.

* Delivered256unitsduring2016andstartedtheexcavationof176newunits.

* Continuedtheinfrastructureof120acres(includingroads,hardscape,planting,plumpingpipes,waterandfirepipes,andmediumandlowvoltagecables).

* Openedthepolicestationandthechurchduring2016.

* ProceedingwiththeconstructionofElectricstationandOrascomLanguageSchool.

HARRAM CITY EGYPTOPERATINGDESTINATION

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DescribedasoneofEgypt’smostspaciouscruiseshipswith27cabins.

OberoiZahraoffersthehigheststandardsofhospitalityandservice.TheOberoiZahraistheonlyNileCruiserwithafullservicespaandhasbeenrecognizedbytheEgyptianMinistryofTourismasthe“BestCruiserontheRiverNile”.

In2010,followingthesuccessofHarramCity,OHCwasallocated0.8millionm2oflandintheQenaGovernorate,UpperEgypt.

QenaGardensistoprovideahigh-qualityaffordablehousingunitswithinsustainableandfully-integratedtownshipsinQena.Theprojectisplannedtoincorporateresidentialunits,aschool,clinics,shoppingareas,andanentertainmentvenue.

Highlights2016

* Delivered35unitsin2016.

0.80millionm2

TOTALPROJECTAREA

QENA GARDENS EGYPTDEVELOPINGDESTINATION

ZAHRA OBEROI EGYPTOPERATINGDESTINATION

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TOTALPROJECTAREA

6.20millionm2

COMPLETEDAREA

0.25millionm2

AnaturalgatewaylocatedontheshoresofOman,JebelSifahisashortdrivefromMuscatandlocated20minutesfromBandarKhayran.NestledbetweenthemajesticAlHajarMountainrangeandtheArabianSea,JebelSifahisspreadover6.20millionm2,with5kmofbeautifulOmanibeaches.ItisODH’sthirdbiggesttown.

JebelSifahboastsarangeoffreeholdwaterfrontapartments,luxuryoceanviewvillasandtherecentlylaunchedGolfLakeapartments,overlookingthelargesttwoholesoftheHarradinegolfcourse.Asanintegratedtourismcomplex,thedestinationoffersindividualsandinvestorsalikeanattractiveproposaloffreeholdrealestateoptionsandresidencystatuswithanalternativelifestyleinamulticulturalcommunity.

AttheheartofJebelSifahisthe85-berthMarina,whereyachtownersareassuredasafehavenfortheirboats,withanadditionalcapacityof150dryberths.Themarinaishometothefour-star67-roomSifawyBoutiqueHotel,thefirstoffiveplanned5-starexclusivehotels,featuringtheJebelSifahHotel,ResortandSpa,byAnantara,sub-developedbytheleadingpropertydeveloperandinvestorMusstir.

AlsooverlookingtheMarinaisanarrayoflivelyrestaurants,shopsandserviceoutlets,allcomplementedbyahostoffirst-classrecreationandentertainmentfacilities.TheseincludethechancetoviewOman’samazingtreasurechestofmarinelifeupclose,fun-filledwatersportsandtheexhilaratingfloatingwaterpark.

AddingtothemixistheJebelSifah9-holeresortgolfcourseanddrivingrangedesignedwiththeenvironmentinmindbytherenownedPeterHarradine.ThismasterpieceissettobelaunchedinSeptember2017.

AnaturalgatewaylocatedontheshoresofOman,JebelSifahisODH’sthirdbiggesttown.

Highlights2016

* Progresswithgolfcourseconstruction.ExpectedtobelaunchedinSeptember2017.

* NewamenitiesandshopsopeningsincludinggymandSMErestaurantservinginternationalcuisine.

* Infrastructurecompletedinthemainresortboulevardanddifferentvillazonesincludingwaterplumbing,electricallinkageandlandscape.

* PartneredupwithinvestorstodeveloptwoEcoLodgeHuts.

* Launchedanewrealestateproject“GolfLakeResidence”inOctoberwithatotalinventoryofCHF22.16mn,comprisingof131apartmentsandsucceededtosell60%ofthetotalprojectsincelaunch.

* Openedfloatingfuelstationonthemarina.

* Plantolaunchnewrealestateprojectsin2017.

JEBEL SIFAH OMANOPERATINGDESTINATION

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TOTALPROJECTAREA

13.60millionm2

COMPLETEDAREA

1.60millionm2

LocatedintheancientGovernorateofDhofar,andstretchingoversevenkilometersofphenomenallywhitebeautifulIndianOceancoastlineand13.6millionm2ofland,HawanaSalalahisasustainablybuiltever-evolving,low-densitytown.ItisourflagshipdestinationinOmanandfollowingthemodelsuccessfullybuiltinElGouna.

HawanaSalalahincorporatesluxuryfreeholdvillasandone,twoandthreebedroomapartments,allenjoyingspectacularviewsofthebreath-takingocean,marinaorthetranquillagoons.Withspaceforthecommunity,publicandrecreationareasaboundtoencouragewell-being,familytime,get-togethersandconnections.

Centraltothedestinationisitsluxurioushotelsandresortexperienceswiththefirstthreehotels,ofthesevenplannedhotels,alreadyopen:the82-roommarina-sideJuweiraBoutiqueHotel;theluxurious400-room5-starSalalahRotanaResortwithitselegantwaterwaysandcoconut-fringedprivatebeach,andthe218-roomFanarHotelandResidences,whichrecentlyincreaseditscapacitywithanadditional84roomsinDecember2016.Thusbringingthenumberofroomsto302rooms.

Creatinganenvironmentthatbringspeopletogetherandnurturinglocalbusinesses,HawanaSalalahoffersresidents,visitorsandtouristsanexceptionalrangeoffacilitiesandleisureoptionsincludingastate-of-the-art171berthsuperyachtmarinawithanadditional109dryberths,thecommunity’ssocialhubandapopularportofcallforseafarersfromaroundtheworld.Settobeamagnetforfun-seekersisthedestination’sworld-classwaterpark,whichisscheduledforlaunchbytheendof2017.HawanaSalalahalsooffersagrowingrangeofrestaurants,cafés,andlounges,wateractivitiesandseaexcursions,aswellasculturalandretailoutlets.

HawanaSalalahistuckedawayjust20minutesfromSalalah’snewlyrefurbishedinternationalairport,withregulardirectflightsfromneighboringandEuropeandestinations.

Highlights2016:

* Planningtostarttheconstructionofthewaterparkwithplanstobefinalizedbytheendof2017.

* Partneredupwithinvestorstodevelopnewsubprojectsthatwilladdcriticalmasstoourdestinations,including"SoulyLodgewhichcomprisesof14beach-fronteco-lodgehutswhichlaunchedinFebruary2017.

* OpenedFanarHotel&Residencesextension(84rooms)onDecember22,2016.

* NewhotelchartercontractsfromPolandandSlovakia.

* Additionalpontoon

* Plantolaunchnewrealestateprojectsin2017.

Creatinganenvironmentthatbringspeopletogetherandnurturinglocalbusinesses,HawanaSalalahoffersresidents,visitorsandtouristsanexceptionalrangeoffacilities.HAWANA SALALAH

OMANOPERATINGDESTINATION

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Asecludedislandcovering11.0millionm2,AsSodahislocatedoffthesoutherncoastofOmanoppositetoHawanaSalalah.

TheIslandissettobetheregion’snichedestination,comprisinga32rooms5-starsluxuryboutiquehotel.Thehotelspansanareaof1.0millionm2andfeaturesexclusivepavilionswithswimmingpoolsandprivateaccessbeach.Thehotel’splanalsoincludesamainlodgeandaspa.

CityWalkMuscat,avibrantbeachfrontcommercialcitycomplexlocatedinNorthAlHail,Muscat.

Thelandcoversanareaofapproximately47,499m2thatwillcomprisea355-meterwaterfront,aretailareawithshopsandrestaurants,aswellasanupscale123-room5-starhotel.Additionally,theprojectwillfeatureacommercialareawithofficesandadedicatedcinemacomplex.

InNovember2016,theGroupsignedthedevelopmentagreementbasedonausufructconcessionfor50yearswithfeespayablestartingfromyearsix.

1.00millionm2

TOTALPROJECTAREA

0.04millionm2

TOTALPROJECTAREA

AS SODAH ISLAND OMANDEVELOPINGDESTINATION

CITY WALK MUSCAT OMANDESTINATIONINTHEPIPELINE

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TOTALPROJECTAREA

0.29millionm2

COMPLETEDAREA

0.29millionm2

TheCoveRotanaResortislocatedonanidyllicwaterinletontheRasAl-Khaimahbeachfront,offeringspectacularviewsovertheArabianGulf.Just8kmfromtheCityCentre,20kmfromtheRasAl-KhaimahAirportandan87kmdrivefromDubai.

TheCovecomprisesatotalareaofaround290,000m2,ofwhichapproximately285,000m2havebeendeveloped.TheCoveopeningtookplaceinearlyFebruary2009,offering346rooms.Thetotalnumberof346roomsconsistsof204hotelrooms(hotelbuilding)plus142roomsresultedfrom80residentialunitsbeingleasedbacktotheRAKTIandmanagedbyRotanaaspartofthehotelrooms’inventory.Meanwhile,anewstaffhousingbuildingwasconstructedandfinishedinNovember2015.Inadditiontothat,theGroupdecidedtoconverttheoldseniorexecutives’staffhousingbuildingintoa145roomhotelextensiontoincreasetheexistingroomcapacityanditisexpectedtobefinalizedin2017.

TheCoveRotanaResortisanidealdestinationforleisuretravelersandweekendbreakers.TheCoveoffers3fully-equippedandflexiblemeetingroomswiththelatestaudio-visualequipment,6attractivechoicesofrestaurants,barsandlounges,thefullyequippedBodylinesFitnessandWellnessClub,kidsarea,600metersofpristinebeach,2swimmingpoolsand7exquisitelydesignedmassagetreatmentroomsareamongthemanyfacilitiesofferedatTheCoveRotanaResort–RasAlKhaimah.

AwardsReceivedfor2016

WorldLuxuryHotelAward2016

* LuxuryCoastalResort–CountryWinnerUnitedArabEmirates

TripAdvisor2016Winner

* CertificateofExcellence

HolidayCheckAward2016

* VotedasoneofthemostpopularHotelsWorldwide

THE COVE UAEOPERATINGDESTINATION

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LušticaDevelopmentA.D.isdevelopingafullyintegrated,self-sufficientandluxurytouristicdestinationontheMontenegrinAdriaticcoastattheidyllicTrašteBaywithalandbankofapproximately6.90millionm2,placedashortdistancefromthreeinternationalairports(only10kmfromTivatairportandPodgorica90kmandĆilipi-Dubrovnik46km).TheGrouphadconcludedtheleaseanddevelopmentagreementwiththeGovernmentofMontenegroandtheMunicipalityofTivatonthe23rdofOctober2009.

ThegoalofLušticaBayistocreateadistinctcommunity,withinaself-sufficientextraordinarysetting,whereresidentscancreateahomearoundthelifetheywanttolive.CombiningMontenegro’sbeautyandculturewithOrascomDevelopment’sexperienceofcultivatingenvironmentally-centred,luxuryresidentialliving,itprovidesafoundationthatwillgroworganically.

LušticaBayissettobecomeasustainable,fully-integrated,state-of-the-arttown.Designedtoblendseamlesslyintoitssurroundingsitwillbecomeapermanenthometoafewthousandresidents.Itcomprisesavarietyofresidentialofferings,hotelsandlifestylefacilities,offeringbothtranquilityandprivacy,discoveryandadventure.AsecludedoasisandagatewaytotherestofMontenegro.

Theintegratedprojectisplannedtoofferresidentialunits,7worldclasshotels,2marinaswithmooringand

dockingsupportfacilitiesontheAdriaticSea,an18-holegolfcoursewithclubhouse,commercialfacilities,atowncenter,andbasicinfrastructurerequirementsandmanyotheramenities.

ConstructionstartedinSeptember2013andthefirsttwobuildingsclusters(10buildingscomprising70apartments)havebeenfullyfinishedanddeliveredin2015,withresidentsmovinginthesummerof2015.AfterthreeyearsLušticaBayisnowlive,andgrowingnewtownproject.

2017willseeheavyconstructionworksbeingcarriedoutinalldirections–fromthemarina,hotelandinfrastructuretoprogresswithotherresidentialzones.

LušticaBayoffersawiderangeofproperties,fromwaterfrontapartments,charminghillsidetownhouses.Adiversebutdistinctcommunityforthosewhoseekalifelikenoother.

Highlights2016

* ProgressingaheadofschedulewiththeconstructionofthenewFandGbuildingscomprising88apartmentsexpectedtobefinalizedbyearly2017.

* Finalizedthemarinasuperstructure,planningtolaunchthemarinainthesummerof2018.

* ExcavationworksfortheGolfCourseiscompletedandtheconstructionpermithasbeenobtained(thefirstGolfCoursepermitinMontenegro).

* Thefirst5-starhotelinpartnerwithworld-renownedluxuryhotelbrandTheChedi.SettobecomethesecondEuropeanhotelofTheChedibrand,thehotelwilloperateonaspectacularcentralpositionwithintheLušticaBaymainmarinapromenade,affordingstunningviewsoverthemarinaandtheAdriaticSea.

* PlanningtostarttheconstructionofthefirsthotelinLušticaBayheadedbyluxuryhotelbrandTheChediinthefirsthalfof2017.

TOTALPROJECTAREA

6.90millionm2

COMPLETEDAREA

0.14millionm2

LUŠTICA BAY MONTENEGROOPERATINGDESTINATION

03ORASCOM COUNTRIES

03ORASCOM COUNTRIES

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TheAndermattSwissAlpsdevelopmentistransformingthetraditionalSwissAlpinevillageintooneofthebestyear-rounddestinationsinSwitzerlandcomprisingsomeofthefinestfacilities.

Withatotallandbankofapproximately1.57millionm2,Andermattissituatedat1,440metersabovesealevelandliesapproximately1.5hoursbycarfromZurichand2hoursfromMilan.Itscentrallocationresultsinexcellentconnectionstothemajornationalandinternationaltransportroutes.EverybuildinginAndermattSwissAlpsDevelopmenthasbeenindividuallydesignedbyoneofover30selectedSwissandinternationalarchitectstocreateabeautifulandeclecticappearanceforthemaster-plannedresort.

Tomaintainaperfectlyharmoniousandpeacefulenvironmentthevillagecentrewillbeacarfreezoneandenoughundergroundparkingspacesareprovidedforvisitorsandresidents.Thenewaccommodationandsportsfacilitiesmeanthatwhetheryouseek

adrenalinorrelaxationyourneedsarecateredforinthemostspectacularsurroundings,fromanecologicallydesigned18-holegolfcoursemeetinginternationaltournamentstandardsidealforoutdoorsummeractivities,tomodernizedskifacilitieslinkingupwiththeneighboringskiareaofSedruntoforma120-kilometerskidomain.Thehighlyintegratedinfrastructureandstateoftheartfacilitieswillalsomakethevillagetheperfectlocationforculturaleventsandcongresses.

TheGrouphasashareofinterestof49%inAndermattSwissAlpsAG,remainscommittedtotheprojectandwillbenefitfromanyfutureupside.InNovember2015ASAsuccessfullysoldbondsintheamountofCHF50millionwhichwillhelpinfundingthenecessarynextstepsofthedevelopment.

Highlightsin2016

* OfficialOpeningoftheAndermattSwissAlpsGolfCourseandhostingtheSwissPGAduringitsfirstyearofoperation

* The5-stardeluxeHotelTheChediAndermattwasannouncedGaultMillauHoteloftheYear2017,andbestwinterhotelofSwitzerlandbythenationalSwissNewspaperSonntagsZeitung

* OccupancyratescontinuetoincreasesignificantlyinTheChediAndermatt

* Toppingoutceremonyofthreenewapartmenthouses,theGotthardResidenceswithpublicspaandswimmingareasanda4-starhotel

* RadissonBluannouncedastheoperatorofthenew4-starHotel

* Startingtheplanningofthenextapartmenthouseswhichuponits

completionthedestinationwillhaveitsfirstvillagesquare

*Offeringnewretailspaceswiththenewapartmenthouses

* 70%ofallthebuiltandoccupiedapartmentsaresoldwithanincreaseinthenumberofrentedapartments

* TheSkiArenaAndermatt-Sedrunhastwonewchairliftsinoperation–oneisaPorscheDesignunitwithheatedseats

* StartofconstructionoftheGondola-corepiecefortheskiingarea“Nätschen-Gütsch”

* IntheprocesstofinalizetheconnectionbetweenthetwoskiareasAndermattandSedrunbyahorse-drawnsledge

* ThevalleyrunsinAndermattandSedrunaresnowsecurethankstotechnicalsnowmaking

Andermattisaplacewhereyoucanbreatheinthefreshalpineairandstayrelaxedwithinamostfascinatingsetting.

1.57millionm2

TOTALPROJECTAREA

1.28millionm2

COMPLETEDAREA

ANDERMATT SWITZERLANDOPERATINGDESTINATION

03ORASCOM COUNTRIES

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TheGroupformallyestablishedEco-BosDevelopmentLtdinMay2010asajointventurewithImerys,amultinationalindustrialmineralscompany,todevelopaseriesofsustainablecommunitiesinCornwallUnitedKingdom.Thetotallandbankisover6.54millionm2dividedover6separatesites.

TheschemewasoriginallyconceivedaspartoftheUKGovernment’sEco-towncompetitiontopromotethegrowthofsustainablecommunitiesandtheinnovativeEco-Bosproposalstoregeneratelandformerlyusedformineralsextractionandprocessingreflectsthepotentialandaspirationsofsuch“green”developmentinitiatives.

TheEco-Bosproposalswillofferamixedportfolioofaround5,000realestatedwellingsacrossallmarketsectorsalongwithassociatedretailandemploymentspaces.Leisureandrecreationfacilitiesarealsoplannedwithproposalsforoneocean-facingsiteincludinga5-starhoteland

marinadevelopment.Thecompanyhasfocusedonsecuringplanningandcommencingdevelopmentforthefirstphaseofthesesitesandtheplanningauthorityhasrecentlytakenafavorableviewofthebenefitstheseproposalswouldbring,inparticularcreatinghousing,employmentandleisurefacilitiesandvotedinfavourofgrantingaplanningpermit.

Thisisamajorstepforwardfortheprojectandallowsustonowfinalisethisstageoftheprocessandthenproceedtothenextstageofdetaileddesignandphasedimplementation.

6.54millionm2

TOTALPROJECTAREA

ECO-BOS UKDESTINATIONINTHEPIPELINE

Comingacrossalocationofsuchuntappedbeautyalongwiththeuniquelandscapeoftheocean,mountainsandsandharmoniouslyco-existing;hascontributedtothemoldingofChbika’sarchitecturewiththenaturalsurroundings.Chbikaisideallylocatedapproximately400kmsouthofAgadirdirectlyinfrontoftheCanaryIslandofFuerteventuraontheAtlanticOcean,withatotallandareaof15.0millionm2.

Themasterplanoftheprojectreflectsamodernoasisofharmonycharacterizedbyawestern,Moroccanculturalblend.Hometoworldclasshotels,mixofvillasandapartments,atmosphericriads,andevencustomizablemansionsintheKosourneighborhood,Chbika,likeallotherOrascomDevelopmentsignaturetowns,willfeaturestate-of-artfacilitiesincludingshops,diningoutlets,aswellasamedina-stylehandcraftcenterandamedicalfacility.

Theprojecthasbeengrantedthestatusofnewintegratedtourismzone.Theprojectcompany(OuedChbika)hastherighttoacquireandtransferfreeholdtitletothelandareaofapproximatelyfivemillionm2(Phase1)andapproximatelytenmillionm2(Phase2)subjecttocertainconditions.

Theprojectcompanyhastherighttotransferitsrightsunderthedevelopmentagreementsubjecttocertainconditions.

WeaimatdevelopingatouristdynamicengineofsocialandculturaldevelopmentintheprovincesofsouthernMorocco,incorporatinglocalpeople.

TOTALPROJECTAREA

15.0millionm2

CHBIKA MOROCCODEVELOPINGDESTINATION

03ORASCOM COUNTRIES

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ORASCOM CORPORATE GOVERNANCE04

4.1 GroupStructureandSignificantShareholders

4.2 CapitalStructure

4.3 BoardofDirectors

4.4 ExecutiveManagement

4.5 CompensationShareholdingandLoans

4.6 Shareholders'Participation

4.7 ChangesofControlandDefenseMeasures

4.8 Employees

4.9 ExternalAuditors

4.10 InformationPolicy

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4.1 Group structure and significant shareholders

Groupstructure(ReportingStructure)

TheoperatingbusinessofOrascomDevelopmentHoldingAG(“OrascomDevelopment”orthe“Company”)isorganizedintothefollowingsegments:Hotels,RealEstate&Construction,LandSales,DestinationManagement,andOtherOperations.

ThesharesoftheCompanyarelistedontheSIXSwissExchange.Inaddition,thesharesoftheCompany'ssubsidiaryOrascomHotelsandDevelopmentS.A.E.arelistedontheEGXEgyptianExchange.Seebelowformoreinformationonthelisting.

Foralistofthegroup'sunlistedsubsidiariesseenote18ofthenotesoftheconsolidatedfinancialstatements.

Significantshareholders

ThefollowingshareholdershavedisclosedascurrentlyholdingaparticipationintheCompanyof3.0%ormoreinvotingrights(inaccordancewithArt.120FMIA1):

Cross-Shareholdings

Therearenocross-shareholdingsbetweentheCompanyandanyotherentitythatwouldexceed5.0%ofcapitalorvotingrightsonbothsides.

OnApril4,2016,JanusCapitalManagementGroupdisclosedthattheirparticipationintheCompanyhadfallenbelow3.0%invotingrights.

OnMay3,2016,SamihO.SawirisandOnsiSawirisdisclosedthecreationofashareholdergroupholding72.7%ofthevotingrightsintheCompany.

Asidefromtheabove,theCompanyisnotawareofashareholderholdingaparticipationof3.0%ormorevotingrights.

Company

ORASCOM DEVELOPMENT HOLDING AG

(ALTDORF,SWITZERLAND)

ThemarketcapitalizationofOrascomDevelopmentasperDecember31,2016isCHF206.49million.ThesharesofOrascomDevelopmentarelistedontheSIXSwissExchangeaccordingtotheInternationalReportingStandard.ThesecondarylistingintheformofEDRs(EgyptianDepositaryReceipts)ontheEGXEgyptianExchange(20EDRs=1equityshare)willbediscontinuedduringthefirsthalfof2017andtheEDRswillbedelisted.

ListingontheSIXSwissExchange

Exchange SIXSwissExchange

Symbol ODHN

Securitynumber 003828567

ISIN CH0038285679

ORASCOM HOTELS AND DEVELOPMENT S.A.E.

(CAIRO,EGYPT)

EGXRegistration

Exchange EGXEgyptianExchange

Marketcapitalization EGP1,400.00million

Symbol ORHD

ISIN EGS70321C012

OrascomHotelsandDevelopmentS.A.E.is84.79%ownedbyOrascomDevelopment.

Name of shareholder Number of shares as of December 31, 2016

Percentage of ownership of the total equity capital

and voting rights 2

SAMIH O. SAWIRIS AND ONSI SAWIRIS3 29,359,216 72.7

Orascom Development Holding AG

Hotels

RealEsta

te&

Constr

uction

DestinationManagement

Land

Sa

les

Other

Operations

1SwissFederalActonFinancialMarketInfrastructuresand

MarketConductinSecuritiesandDerivativesTrading

(FMIA).2Thetableshowssignificantshareholdersaslastdisclosedto

theCompanypursuanttoArt.120FMIA.Thenumberof

sharesandpercentagesshownconformtothesituationat

thetimeoftherespectivelastdisclosure.Theydonotneces-

sarilyconformtothesituationasperDecember31,2016,

giventhatashareholdermayhavepurchasedorsoldshares

subsequenttothelastdisclosure,butmaynothavethereby

reachedorcrossedadisclosurethreshold.Forinformation

ontheparticipationsofshareholdersexceeding3.0%of

votingrightsasreflectedintheCompany’sshareregisteras

ofDecember31,2016,refertoNote27.5oftheCompany’s

non-consolidatedfinancialstatements.3ThesharesareheldthroughtheentitiesThursdayHolding,

SOSHoldingandOSHolding.

04ORASCOM CORPORATE GOVERNANCE

04ORASCOM CORPORATE GOVERNANCE

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Capital

AsofDecember31,2016,theCompany’sissuedsharecapitalamountedtoCHF937’510’283.20andwasdividedinto40’409’926registeredshareswithanominalvalueofCHF23.20each.

Authorized and conditional capital

Authorized capital

TheordinarymeetingofshareholdersheldonMay18,2015authorizedtheBoardofDirectorstoincreasethesharecapitaloftheCompanybyamaximumofCHF278,400,000.00byissuingupto12’000’000fullypaid-upregisteredshareswithaparvalueofCHF23.20eachuntilMay18,2017.

Partialincreasesarepermitted.TheBoardofDirectorsdeterminesthedateofissue,theissueprice,thetypeofcontribution,thedateofdividendentitlementaswellastheallocationofnon-exercisedpre-emptiverights.Thesubscriptionrightsoftheexistingshareholdersshallbegranteddirectlyorindirectly(e.g.byunderwrittenofferingfollowedbyanoffertothethen-existingshareholdersoftheCompany).

FollowinganincreaseofthesharecapitaloutoftheauthorizedsharecapitalonDecember15,2015,theBoardofDirectorsremainsauthorizedtoincreasethecapitaloftheCompanybyamaximumofCHF3,090,272.20byissuingofupto133'221fullypaid-upregisteredshareswithaparvalueofCHF23.20eachuntilMay18,2017.

Forthefullwordingregardingtheauthorizedsharecapital,seeArt.4aoftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Conditional capital

PursuanttoArt.4boftheArticlesofIncorporationregardingtheCompany’sconditionalcapital,theCompany'ssharecapitalmaybeincreasedbyamaximumamountofCHF139,200,000throughtheissuanceofupto6,000,000fullypaidregisteredshareswithanominalvalueofCHF23.20each,(a)uptotheamountofCHF23,200,000correspondingto1,000,000fullypaidregisteredsharesthroughtheexerciseofoptionrightsgrantedtothemembersoftheBoardofDirectorsandthemanagement,furtheremployeesand/oradvisorsofthecompanyoritssubsidiaries,(b)uptotheamountofCHF116,000,000correspondingto5,000,000fullypaidregisteredsharesthroughtheexerciseofconversionrightsand/orwarrantsgrantedinconnectionwiththeissuanceofnewlyoralreadyissuedbondsorotherfinancialinstrumentsbytheCompanyoroneofitsgroupcompanies.

Thesubscriptionrightsoftheshareholdersshallbeexcluded.TheBoardofDirectorsmayrestrictorwithdrawtherightforadvancesubscription(Vorwegzeichnungsrecht)oftheshareholdersinconnectionwith(i)thefinancing(refinancinginclusively)ofacquisitionsofenterprisesorpartsthereof,participationsorotherinvestmentprojectsofthecompanyand/oritssubsidiariesor(ii)theplacementofconvertiblebondsorfinancialinstrumentswithconversionoroptionrightsonthenationalorinternationalcapitalmarket.

AsofDecember31,2016,nooptionrights,conversionrights,orwarrantshadbeengrantedonthebasisofArt.4b.

Forthefullwordingregardingtheauthorizedsharecapital,seeArt.4boftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Changes in capital in the past three years

2014

Thesharecapitalwasnotchangedduringthe2014financialyear.TheregisteredsharecapitalasofDecember31,2014amountedtoCHF662,201,010.40,dividedinto28,543,147registeredshareswithaparvalueofCHF23.20each.

2015

OnDecember14,2015,theCompanycompletedanauthorizedcapitalincreaseintheamountofCHF275,309,272.80throughtheissuanceof11,866,779registeredshareswithaparvalueofCHF23.20each.Theshareswereofferedtotheexistingshareholdersbywayofarightsoffering.Thenewshareswerepaidupincash,byconversionofaloanfromtheCompany’smajorshareholder,SamihO.Sawiris,andbyconversionofcapitalcontributionreservesintoequity.

2016

Theordinarysharecapitalwasnotchangedduringtheyearunderreview.

TheCompany'sannualgeneralmeetingheldonMay9,2016,resolvedtoincreasetheconditionalsharecapitalpursuanttoarticle4blit.aoftheArticlesofIncorporationfromCHF14,489,699.20,correspondingto624,556shareswithaparvalueofCHF23.20each,toCHF23,200,000.00,correspondingto1,000,000shareswithaparvalueofCHF23.20each,andtoamendarticle4blit.aoftheArticlesofIncorporationaccordingly.

4.2 Capital Structure

Shares and participation certificates

The40,409,926registeredshareswithaparvalueofCHF23.20arefullypaidin.Theyareintheformofdematerializedsecurities(Wertrechte,withinthemeaningoftheSwissCodeofObligations)andintermediatedsecurities(Bucheffekten,withinthemeaningoftheSwissFederalIntermediatedSecuritiesAct).Eachregisteredsharecarriesonevoteandanequalrighttodividendpayments.Nopreferentialorsimilarrightshavebeengranted.

AsofDecember31,2016,noparticipationcertificates(Partizipationsscheine)havebeenissued.

Profit sharing certificates

TheCompanyhasnotissuedanyprofitsharingcertificates(Genussscheine).

Limitation on transferability and nominee registrations

Limitations on transferability PursuanttoArt.5oftheArticlesofIncorporation,theCompanymaintainsashareregisterinwhichthefullname,addressandnationality(incaseoflegalentities,thecompanynameandregisteredoffice)oftheholdersandusufructuariesofregisteredsharesarerecorded.

UponapplicationtotheCompany,acquirersofregisteredshareswillberecordedintheshareregisterasshareholderswiththerighttovote,providedthattheyexplicitlydeclaretohaveacquiredthesharesintheirownnameandfortheirownaccount.

Acquirerswhodonotmakethisdeclarationwillberecordedintheshareregisterasshareholderswithouttherighttovote(foranexceptiontopermitnomineeregistrations,seebelow).

Exemptions in the year under review Noexemptionsfromthelimitationsontransferabilityofshareshavebeengrantedintheyearunderreview.

Nominee registration PursuanttotheCompany’sRegulationsontheRegistrationofNominees,theCompanymayregisteranomineeinitsshareregisterasashareholderwiththerighttovoteifeithersuchnominee’sshareholdingsdonotexceed5%oftheissuedsharecapitalassetforthintheCommercialRegister,or,ifsuchnominee’sshareholdingsexceedthatthreshold,therespectivenomineedisclosestotheCompanythenames,addresses,locationsorregisteredoffices,nationalitiesandthenumberofsharesheldonbehalfofallbeneficialownerswhosebeneficialshareholdingsexceed0.5%oftheissuedsharecapital.

Procedure and conditions for cancelling statutory privileges and limitations on transferabilityTheArticlesofIncorporationdonotprovideforanyprivileges.ThelimitationsontransferabilityoftheCompany’sshares,asdescribedbefore,maybecancelledbyaresolution(amendingtheArticlesofIncorporation)ofanordinarygeneralmeetingofshareholdersreunitingtheabsolutemajorityofvotesrepresentedatthemeeting,orbyaresolutionofanextraordinarygeneralmeetingofshareholdersreunitingamajorityoftwothirdsofthevotesrepresented(seeSection4.7below).

Convertible bonds and warrants/options

TheCompanyhasnotissuedanyconvertiblebonds,warrantsoroptions.

04ORASCOM CORPORATE GOVERNANCE

04ORASCOM CORPORATE GOVERNANCE

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Mr.Sieber,borninLucerne,Switzerland,studiedeconomicsattheBusinessSchoolinLausanne.Aftergraduatingwithabusinessdegree,in1989hetookoverthefamilyownedcompanySIGAHoldingLtd.togetherwithhisbrother.

Mr.SiebermanagedtotransformSIGAintoacompanywhichoperatesinternationallyandwhichhasover450employees.

SIGAdevelopsandproducesproductsfortheconstructionsector,namelyinthefieldofenergy-savingsealings.Mr.Sieberisamemberofseveralboards.

Mr.NaguibS.SawirisistheFounderandCEOofYup(2014-present),aSanFranciscobasededucationtechnologycompany.Yupprovideson-demandpersonalizedlearningthroughmobilechatwithover500,000studentsign-ups.YuphasraisedUSD7.5millionfromleadingtechandeducationinvestorsincludingIndexVentures,FloodgateFund,andStanfordUniversity'sStartXFund.Mr.NaguibS.SawirisattendedStanfordUniversitywherehedesignedhisownmajor,EconomicandEnterpriseEngineering.

Heisanactiveangelinvestor,havinginvestedinover20companiesincludingDoctorOnDemand,Transcriptic,andWomply.HisinvestmentshavewentontoraisemorethanUSD200millioninsubsequentrounds.

AfterreceivinghisDiplomaineconomicengineeringfromtheTechnicalUniversityofBerlinin1980,Mr.Sawirisfoundedhisfirstcompany,NationalMarineBoatFactory.In1996,heestablishedOrascomProjectsforTouristicDevelopmentandin1997OrascomHotelHoldings,thetwocompanieslatermergedtoformOrascomHotelsandDevelopmentS.A.E.(OHD).Furthermore,Mr.SawirisestablishedElGounaBeveragesCo.in1997,whichhesoldin2001whenitwasthelargestbeveragecompanyinEgypt.

AsofApril1,2014,Mr.SawiristookoverthepositionoftheCEOonad-interimbasisofOrascomDevelopmentuntilDecember31,2015.HealsoservesasChairmanoftheBoardofDirectors.

Mr.JürgenFischerisfounderof“ThePearlManagementConsultants”inDubai,UAE.PreviouslyhewasCEOofDubaiPropertiesLLC,amajorrealestatedeveloperintheUAE.Besideslookingafter20,000residentialleasingunits,50,000sqmofretailspace,thousandsof“BuilttoSell”apartmentsandvillasandseveralmasterdevelopmentsinDubai,hewasaswellinvolvedininternationaldevelopmentsofSamaDubaiGroupin,amongothers,MoroccoandOman.DuringhistimewithDubaiPropertiesheoversawseveralthemeparkandtouristprojects.Between1995and2008JürgenFischerheldseveralseniorpositionswithHiltonInternational,suchasPresidentCommercialOperationsandPresidentforContinentalEurope,MiddleEastandAfrica,aswellasPresidentofScandicHotelsAB.Since2008FischerisaswellaNonExecutiveBoardmemberofMovenpickHotels&ResortsandNonExecutiveChairmansince2014todate.

PriortojoiningHilton,heworkedfortheWaltDisneyCompanyindifferentrolesinFloridaandParisincludingVicePresidentSalesandMarketingforDisneylandParis,DirectorofResortDevelopmentatDisneylandParisandGeneralManagerofthe«GrandFloridianBeachResortandSpa»atWaltDisneyWorld,Florida.FischerheldseveralhotelmanagementpositionsinEuropeandMiddleEastafterstartinghisprofessionallifeasachefin1970.HelatergraduatedfromtheEcoleHôtelièreLausanne,SwitzerlandandobtainedanMBAwithHonorsfromIMEDE/IMD,Lausannein1988.

Ms.Müller-MöhlisaSwissfounder,investorandphilanthropist.Since2000,CarolinaMüller-MöhlhasmanagedandpresidedovertheMüller-MöhlGroup,asingle-familyofficethatactivelymanagesthefamily'sinvestments.ShecurrentlyservesontheboardofdirectorsofGebrüderMüllerImmobilienAG(since2000),AGfürdieNeueZürcherZeitung(since2010),amajormediagroupinSwitzerland,andin2015alsobecameaboardmemberofFielmannAG,Europe'slargestoptician.

Ms.Müller-Möhlishighlycommittedtoaddresssocio-politicalcausesandbringshereffortsundertheMüller-MöhlFoundation,whichfocusesoncompatibilityofworkandfamilylife,education,promotionofafreemarketinSwitzerlandandphilanthropyingeneral.Furthermore,shesitsonvariousfoundationandadvisoryboardsthatsupporttheabovecausessuchasDepartmentofEconomics,UniversityofZurich,UniversityofSt.Gallen,MBAforWomenFoundation,EDGE,AvenirSuisse,SwissEconomicForum,SchweizerischeManagementGesellschaftandBertelsmannStiftung,Germany.

Ms.Müller-Möhlstudiedpolitics,historyandlawandgraduatedasM.A.PoliticalSciencefromFreieUniversitätBerlin.Inrecognitionofhersuccessandherphilanthropiccommitment,theWorldEconomicForumnominatedherasaYoungGlobalLeaderin2007.

Mr.WeberholdsanMBAwithaMajorinFinanceandStrategicPlanningfromtheWhartonSchool,UniversityofPennsylvania.Mr.WeberpreviouslystudiedCivilEngineeringattheSchoolofEngineeringinSwitzerlandandMicroeconomicsandEnglishattheUniversityofCalifornia,SantaBarbara.

BeforehispresentpositionasDivisionCEOofSIXPaymentServicesandChairmanoftheBoardofTWINT,Mr.WeberwasCEOandpartialownerofBoynerFinancialServicesinIstanbulandanentrepreneurincardissuing,purchasefinanceandpaymentservices.PreviouslyhewasaconsultantatMcKinsey&CompanywhereheservedSwissbankingclientsandlaterco-leadthefoundingoftheIstanbulOffice,leadingtohisnominationforPartner.BeforethatMr.WeberservedasprojectassistanttotheViceChairmanofUBSPhillips&DrewinLondonandasprojectmanagerfortheCEOofUBSNorthAmericainNewYork,wherehewaselectedintothe“UBSLeadershipProgram”withasponsorshipforMBA.

SamihO.SawirisCHAIRMAN, NON-EXECUTIVE MEMBER

JürgenFischerNON-EXECUTIVE MEMBER

Mr.Egle’sbackgroundisinstrategydevelopment,corporatecommunications,mediaandPR.AfterholdingseniorpositionsintheprivatesectorhewasinchargeofcommunicationsattheSwissFederalDepartmentofForeignAffairsandadvisortotheMinisterofForeignAffairs(1993-1998).

Beforeco-foundingDynamicsGroup,aSwisscompanyprovidingstrategicconsulting,communicationmanagementandresearchanalysis,Mr.EglewasapartnerofHirzel.Schmid.NefKonsulenten,acommunicationandfinancialconsultancyfirm(1999-2006).Mr.EgleholdsaDoctor’sdegreeinsociologyfromtheUniversityofZurich.

FranzEgleNON-EXECUTIVE MEMBER

CarolinaMüller-MöhlNON-EXECUTIVE MEMBER

Mr.DouiriisthefoundingshareholderandCEOofMutandis,aMoroccanconsumergoodsmanufacturinggroupestablishedin2008.Mr.DouiriservedinHisMajestyKingMohamedVI’sGovernmentasMinisterofTourism(2002-2004)andlaterasMinisterforTourism,CraftsandSocialEconomy(2004-2007).In1992Mr.DouirifoundedCasablancaFinanceGroup(laterrenamedCFGGroup),thecountry’sfirstinvestmentbank.

TodayCFGGouphasbecomeCFGBank,afull-fledgedMoroccantechnologydrivenbank,ofwhichMrDouiricurrentlyservesaschairmanoftheboard.HeisalsoaboardmemberofResidencesDarSaada,apubliclylistedMoroccanrealestatedeveloperandofMFEx,aStockholmbasedtechnologycompanyservingthefinancialindustry.Mr.DouirigraduatedasanengineerfromtheEcoleNationaledesPontsetChaussées(ENPC)inParis.

AdilDouiriNON-EXECUTIVE MEMBER

MarcoSieberNON-EXECUTIVE MEMBER

NaguibS.SawirisNON-EXECUTIVE MEMBER

JürgWeberLEAD DIRECTOR, NON-EXECUTIVE MEMBER

4.3 Board of Directors

Photographer:MarcWelt

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ThecurrentmembersoftheBoardofDirectorsareallnon-executive.Mr.SawirisservedasChiefExecutiveOfficeroftheCompanyonanadinterimbasisfromApril1,2014toDecember31,2015.WiththeexceptionoftheChairman,noneofthecurrentmembersoftheBoardofDirectorsheldexecutivepositionswithOrascomDevelopmentduringthethree

financialyearsprecedingtheyearunderreview.Otherthanasindividuallymentionedabove,noneofthesemembers,andnoenterpriseororganizationrepresentedbythemmaintainsanysubstantialbusinessrelationshipwithanOrascomDevelopmentsubsidiary.

MembersoftheBoardofDirectors

Name Function Nationality Birth Elected first Elected until

Audit Committee

Nomination and Compensation

Committee

SamihO.Sawiris Chairman Egyptian 1957 2008 2017

AdilDouiri Member Moroccan 1963 2008 2017 Member

FranzEgle Member Swiss 1957 2008 2017 Member

JürgenFischer Member Swiss 1955 2014 2017

CarolinaMüller-Möhl Member Swiss 1968 2008 2017

NaguibS.Sawiris Member Egyptian 1991 2016 2017

MarcoSieber Member Swiss 1959 2013 2017 Chair

JürgWeber Member Swiss 1961 2014 2017 Chair

Elections and terms of office

ThemembersoftheBoardofDirectorsanditsChairmanareelectedbythegeneralmeetingofshareholdersindividuallyforatermofoneyearuntilthecompletionofthenextordinarygeneralmeeting.InaccordancewiththeArticlesofIncorporation,theBoardofDirectorsiscomposedofaminimumofthreeandamaximumoffifteenmembers.Themembersmaybere-elected.

External mandates

ForrestrictionsregardingthenumberofexternalmandatesseeArt.20oftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Internal organizational structure

Board of Directors

TheBoardofDirectorsgovernstheCompanyandisultimatelyresponsiblefortheCompany’sbusinessstrategyandmanagement.IthastheauthoritytodecideonallcorporatemattersnotreservedbylawortheArticlesofIncorporationtothegeneralmeetingofshareholdersortoanotherbody.

Subjecttoitsinalienabledutiespursuanttothelawandtoanumberofadditionalmatters,theBoardofDirectorshasdelegatedthemanagementoftheCompany’sbusinesstotheCEO.TheBoardofDirectorsappointstheCEOandtheothermembersofExecutiveManagement.

Subjecttothepowerofthegeneralmeeting,theBoardofDirectorsconstitutesitselfautonomouslyandappointsitsSecretary,whodoesnothavetobeamemberoftheBoardofDirectors.Itisquorateifamajorityofmembersarepresentatameeting.Decisionsaretakenbythemajorityof

votescast.Incaseofadeadlock,theChairmanhasacastingvote.AmemberoftheBoardofDirectorsshallabstainfromvotingifheorshehasapersonalinterestinamatterotherthananinterestinhisorhercapacityasshareholderoftheCompany.

Committees

TwopermanentcommitteeshavebeenformedtosupporttheBoardofDirectors;thesearetheAuditCommitteeandtheNominationandCompensationCommittee.Thedutiesandcompetencesofbothcommitteesareoutlinedbelow.

Audit Committee

TheAuditCommitteecurrentlyconsistsoftwonon-executivemembersoftheBoardofDirectors.ThemembersandthechairmanoftheAuditCommitteeareelectedbytheBoardofDirectors.ThetwoAuditCommitteememberscurrentlyappointedhavebroadexperienceinfinanceandaccountingonthebasisoftheirprofessionalbackgrounds.

ThemissionoftheAuditCommitteeistoassisttheBoardofDirectorsinthedischargeofitsresponsibilitieswithrespecttofinancialreportingandaudit.ThecommitteereportsandissuesrecommendationstotheBoardofDirectorsregardingyearlyandinterimfinancialstatements,theauditingprocess,theinternalcontrolsystem,theintegrityandeffectivenessoftheCompany’sexternalandinternalauditorsandothertopicssubmittedtoitbytheBoardofDirectorsfromtimetotime.TheAuditCommitteehasnodecision-makingpower.

Nomination and Compensation Committee

TheNominationandCompensationCommitteecurrentlyconsistsoftwonon-executivemembersoftheBoardofDirectors.Themembersareelectedbythegeneralmeetingofshareholdersindividuallyforatermofoneyearuntilthecompletionofthenextordinarygeneralmeeting.ThechairmanoftheNominationandCompensationCommitteeisappointedbytheBoardofDirectors.

ThemissionoftheNominationandCompensationCommitteeistoassisttheBoardofDirectorsinthedischargeofitsresponsibilitiesandtodischargecertainresponsibilitiesoftheBoardofDirectorsrelatingtocompensationandnominationofmembersoftheBoardofDirectorsandtheExecutiveManagement.

TheNominationandCompensationCommitteeissuesrecommendationstotheBoardofDirectorsregardingmattersofthecompensationofexecutivemembersoftheBoardofDirectorsandmembersofExecutiveManagementandregardingothermattersofcompensation.ItalsoissuesrecommendationsregardingthenominationofmembersoftheBoardofDirectorsandofExecutiveManagement,andothertopicssubmittedtoitbytheBoardofDirectorsforthecommittee’sconsideration.

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Work methods of the Board of Directors and its committees

InvitationstoattendmeetingsoftheBoardofDirectorsareextendedbytheChairmanortheSecretaryoftheBoardofDirectors.AnymemberoftheBoardofDirectorsmayrequesttheChairmantoconveneameeting.ThemembersoftheBoardofDirectorsandthecommitteesareprovidedwithallnecessarysupportingmaterialbeforeameetingisheld,enablingthemtopreparefordiscussionoftherelevantagendaitems.

PursuanttotheirrespectiveCharters,thecommitteesoftheBoardofDirectorsconveneatleastonce(inthecaseoftheNominationandCompensationCommittee)ortwiceayear(inthecaseoftheAuditCommittee),butcanbesummonedbytheirrespectivechairmanasoftenasthebusinessrequires.

MeetingsoftheAuditCommitteemay,uponinvitationbyitschairmanandinanadvisoryfunction,beattendedbymembersofExecutiveManagement.TheCompany'sauditorsareinregularcontactwiththechairmanoftheAuditCommitteeandhavetherighttohaveitemsaddedtoitsagenda.

Inthe2016financialyear,theBoardofDirectorsconvenedforninemeetings,andpassedonecircularresolutions.Oftheninemeetings,fourwereheldasphysicalmeetingsandfivemeetingswereheldbytelephoneconference.TheAuditCommitteeconvenedforfourmeetings.TheNominationandCompensationCommitteeconvenedforonemeeting.

Definition of areas of responsibility

BasedontheprovisionofArt.15oftheArticlesofIncorporationgoverningthedelegationofduties,theBoardofDirectorshasentrustedthepreparationandtheexecutionofcertaindecisions,thesupervisionofcertaintasks,aswellascertaindecision-makingpowerstothepermanentcommittees.TheBoardofDirectorshasdelegatedthemanagementoftheCompany'sbusinesstotheCEO,whomayfurtherdelegateanyofhisdutiesandcompetenciestoExecutiveManagementandothermembersoftheCompany'smanagementalthoughtheCEOremainsfullyresponsibleforalldutiesandcompetenciesdelegatedtohimbytheBoardofDirectors.

ExcludedfromsuchdelegationtotheCEOaretheinalienabledutiesoftheBoardofDirectorsasdefinedbylaw(Art.716aPara.1oftheSwissCodeofObligations),thedutiesoftheBoardofDirectors’permanentcommittees(asdescribedabove),andcertainmatterswhichremainreservedtotheBoardofDirectorspursuanttotheCompany'sInternalRegulations.

Information and control instruments vis-a-vis senior management

ToensurethatcomprehensiveinformationisprovidedtotheBoardofDirectorsontheperformanceofthefunctionsdelegatedbyit,membersofExecutiveManagementandotherseniormanagersareregularlyinvitedbytheChairmanortheLeadDirectortoattendmeetingsoftheBoardofDirectors,ortoparticipatewhenindividualagendaitemsarediscussed.

Forexample,duringtheyearunderreview,theCEOandtheCFOwerepresentatallphysicalmeetingsoftheBoardofDirectors.Alsoduringtheyearunderreview,individualBoardofDirectorsmemberssupportedExecutiveManagementinvariousprojects.Furthermore,

membersoftheBoardofDirectorscultivatearegularinformalexchangeofideaswithCompanymanagementandregularlyvisittheCompany'slocations.

Thecompany’smanagementhasbeenmanagingtoenhancetheinternalgovernancebyincreasingthecapacityoftheinternalauditfunctions.Duringtheyearunderreview,PwCMuscathasbeenappointedtoprovidetheservicesofinternalauditinOman.Ingeneral,thein-houseinternalauditfunctionhasperformedmanyad-hocassignmentsinadditiontothepre-plannedassignments.Foreachassignment,areportofmajorfindingswaspresentedtoanddiscussedwiththemanagement

ontheentitylevel,andcorrectiveactionswereagreed.

ExecutiveManagementmeetings,chairedbytheCEO,areheldatleastonamonthlybasisinwhichperformanceofoperatingprojectsisreviewedalongsidethebudgetandpreviousfinancialyear.Keyperformanceindicatorsarereviewedandupdatesonnewprojects,whetheroff-planorunderconstruction,aresharedandfuturestepsagreedupon.

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Definition of areas of responsibility

TheCEOwhoisresponsiblefortheday-to-dayoperationalmanagementoftheCompanyissupportedbytheExecutiveManagement.TheExecutiveManagementassiststheCEOindevelopingandimplementingthestrategicbusinessplansfortheCompanyoverallaswellasfortheprincipalbusinesses,subjecttoapprovalbytheBoardofDirectors.

TheExecutiveManagementfurtherreviewsandcoordinatessignificantinitiatives,projectsandbusinessdevelopmentsinthesegments,regionsandinthecorporateservicesfunctionsandimplementsCompany-widepolicies.

Appointment of New Members

EffectiveApril1,2017,AshrafNessimhasbeenappointedasanExecutiveManagementmemberandChiefFinancialOfficeronapermanentbasisafterhavingalreadyservedinthisfunctiononanadinterimbasissinceMay2016.NermineFaltas,GroupChiefHumanResources&OrganizationDevelopmentOfficer,andTarekGadallah,GroupGeneralCounsel,havealsobeenappointedasmembersoftheExecutiveManagementwitheffectasofthesamedate.

External mandates

ForrestrictionsregardingthenumberofexternalmandatesseeArt.20oftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

AnEgyptiannational,born1971,Mr.KhaledBicharacurrentlyholdsthepositionofChiefExecutiveOfficerofOrascomDevelopmentHolding.HeisalsoaCo-FounderofAcceleroCapital.Mr.BicharapreviouslyservedasGroupPresidentandChiefOperatingOfficerofVimpelComLtd(“VimpelCom”).HewasalsoChiefExecutiveOfficerofOrascomTelecomHoldingS.A.E.(“OTH”)aswellasChiefOperatingOfficerofWindTelecomunicazioniS.p.A.(“WindItaly”).

HeplayedapivotalroleinthemergerofVimpelComwithWindTelecomS.p.A,(“WindTelecom”)foratotalconsiderationofUSD25.7Billiontocreatetheworld’ssixthlargesttelecommunicationscarrier.Mr.BicharamanagedtenoperationsacrosstheglobethroughOTHandWindItalyand22operationsacrosstheglobe

AnEgyptiannational,born1965,Mr.Nessimhasmorethan20yearsofexperienceinvariousfieldsincludingfinance,infrastructureandhospitality.HecurrentlyholdsthepositionoftheGroup’sChiefFinancialOfficerofOrascomDevelopmentHolding.HeisalsotheChiefFinancialOfficerofOrascomHotelsandDevelopmenttheEgyptianlargestsubsidiaryofthegroup.Priortojoiningthegroup,hewastheChiefFinancialOfficerrepresentingBeltonePrivateEquityintheirPickAlbatrosInvestment.

From2007to2010hewastheGroupChiefFinancialOfficerofMobiserve,akeyplayerinthemobiletelecomnetworkinfrastructurein9countrieswithintheMiddleEastandSouthAsia.PriortoshiftinghiscareertofinanceheestablishedtheoperationofRayaDistributioninAlgeriaandmanagedmerchandisingactivitiesinall34shopsofNokiaandSamsunginEgypt.Mr.NessimholdsaBachelordegreeinMechanicalEngineeringandheisalsooneoftheearlierpeopleinEgypttoholdtheCFAdesignationin2004.

AnEgyptiannational,born1975,Mr.Abouyoussefisatourismentrepreneurwhostartedhiscareerindesignandinstallationofhotelelectro-mechanicalsystemsin1998movingontoProjectManagementandOwner’sRepresentationuntil2004whenhefoundedhisfirstcompanyShoresHotelstomanageasinglehotelof200guestrooms.

WiththegrowthofShoresHotels’portfolio,Mr.AbouyoussefpursuedHotelDevelopmentdevelopingthreehotelsinthreedifferentdestinationsacrossEgypt.Mr.AbouyoussefisaholderofaB.S.inMechanicalEngineeringfromtheAmericanUniversityinCairoandaMaster’sofSciencefromtheUniversityofCaliforniaatBerkeley.HeisalsoacommissionmemberoftheInternationalFederationoftheAutomobile(FIA).

throughVimpelCom.In2009,Mr.BicharawasappointedChiefExecutiveOfficerofOTHandWindTelecom,bringingwithhimawealthofexperienceinbothtelecommunicationandinformationtechnologycoupledwithstrongmanagementandentrepreneurialexpertise.Priortothisposition,Mr.BicharawasChiefOperatingOfficer(“COO”)ofWindItaly,whichhejoinedin2005,headingthefixedlineandportalbusinessunitbeforebeingpromotedtoCOOofthecompany.

Heplayedakeyroleinrestructuringthecompany’sorganization,resultinginthesuccessfulturnaroundofWindItalyfromacontinuouslylossmakingcompanytoaleadingmobile,fixedlineandbroadbandintegratedoperatorinEuropewithinathree-yeartimespan.PriortojoiningWindItaly,hewastheco-founder,ChairmanandCEOof“LINKdotNET”(“LDN”),oneofthelargestprivateInternetServiceProvidersintheMiddleEast.In2001,followingsuccessfulnegotiations,MicrosoftchosetopartnerwithLDNtolaunchMSNArabia,theMiddleEast’sfirstglobalportal,bringingthefullinternetexperienceofMSNtousersintheregion.In2011,Mr.BicharaalsoservedasGroupExecutiveChairmanofOTHaswellasChairmanofWindItaly.Mr.BicharacurrentlyservesasaboardmemberofvarioustelecomandITcompanies,includingOrascomTelecomMediaandTechnologyHoldingS.A.E.;andSUPERNAPInternationalS.A.,thedeveloperoftheworld-renownedSUPERNAPdatacenters.HeisthechairmanoftheboardofItaliaonlineS.p.A.(acompanylistedontheMilanStockExchange),theItalianleaderininternetservicesforSMEs(website,directories,localadvertising),aswellasthe#1internetplatformandemailserviceinItaly.

HeisalsoaboardmemberofOrascomConstructionLimited,acompanyduallylistedonNASDAQDubaiandtheEgyptianStockExchange,aswellasaboardmemberofOrascomHotelsandDevelopmentS.A.E.,acompanylistedontheEgyptianStockExchange.Mr.BicharaisalsoamemberoftheAdvisoryBoardfortheComputerScienceandEngineeringDepartmentoftheAmericanUniversityinCairo.HewaspreviouslyamemberoftheGSMAboard.Mr.BicharaholdsaBachelorofSciencedegreefromtheAmericanUniversityinCairo.

Members of Executive Management

ASHRAF NESSIM

ChiefFinancialOfficeradinterim

ABDELHAMID ABOUYOUSSEF

ChiefHotelOfficer

KHALED BICHARA

ChiefExecutiveOfficer

4.4 Executive Management

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FordetailedinformationoncompensationpaidtomembersoftheBoardofDirectorsandtomembersofExecutiveManagementforthefinancialyear2016,andonsharesandoptionsheldbyandloansgrantedtothesepersonsasofDecember31,2016,pleaserefertotheCompensationReport2016andtoNote12.1oftheconsolidatedfinancialstatements.

ThecompensationofthemembersoftheBoardofDirectorsandofExecutiveManagementisdeterminedasspecifiedbelow.TheCompanydoesnothaveanyformalstockownershiporoptionplansformembersoftheBoardofDirectorsorExecutiveManagement.Itdoesnotemployexternaladvisorsorsystematicallyuseexternalbenchmarksforfixingcompensation.

Board of Directors

FortheirserviceontheBoardofDirectorsanditscommitteesin2016,theBoardofDirectorsdecidedtopaycompensationofgrossCHF120’000forallmembersoftheBoardofDirectors.ThecompensationispaidoutintheformofsharesoftheCompany.ThesharesoftheCompanyallocatedtothemembersoftheBoardofDirectorsascompensationare,forthatpurposeandifnotavailabletotheCompanyalready,purchasedbytheCompanyonthemarketandtheirvaluation(forpurposesofthecalculationofthenumberofsharesallocatedtoeachmemberoftheBoardofDirectors)isbasedontheaveragesharepriceoftheCompany'ssharesontheSIXSwissExchangeduringthelastsixmonthsofthepreviousfinancialyear.

InadditiontothebasecompensationforallmembersoftheBoardofDirectors,members(andchairs)ofoneoftheCommitteesreceiveanadditionalcompensationofgrossCHF20,000.TheLeadDirectorreceivesanadditionalcompensationofgrossCHF40,000.

Executive Management

CompensationofthemembersofExecutiveManagementfortheirserviceinExecutiveManagementconsistsofabasesalaryandabonuspaymentwhichisannuallydetermined,asfurtherdescribedbelow.ThecompensationofthemembersofExecutiveManagementisbasedon

anevaluationoftheCompanyperformance,oftheindividualperformanceofeachmember,aswellasoftheperformanceofthebusinessareaforwhicheachmemberisresponsible.TheNominationandCompensationCommitteediscussestheproposalspresentedbytheCEOandsubsequentlypresentsaproposaltotheBoardofDirectorsforapproval.

MembersofExecutiveManagementdonothavearighttoattendmeetingsoftheNominationandCompensationCommitteeatwhichdecisionsaretakeninrespecttotheircompensation,orotherwisetoparticipateinthedecisionprocess.

Performance related remuneration

In2014,theBoardofDirectorsrevisedtheCompany'sbonuspolicy.Thepolicyincludesacash-bonusandadeferredshare-bonus.100%ofthecash-bonusand40%oftheshare-bonusarebasedontheExecutiveManagementmember'spersonalperformance.60%oftheshare-bonusisbasedonthe(financial)performanceoftheGroup.

Thecash-bonuscanreachatmaximum25%oftheExecutiveMember’sannualgrossbasesalary.Theshare-bonuscanreachatmaximum100%oftheExecutiveMember’sannualgrossbasesalary.

ThesharepricethatisrelevanttodeterminethenumberofODHsharestobegrantedtothememberoftheExecutiveManagementistheaveragesharepriceofthesharesoftheCompanyontheSIXSwissExchangeduringthelastsixmonthsoftheperformanceyear.AsthefinancialperformancetargetsoftheCompanywerenotachievedin2016andduetothechallengingeconomicandpoliticalenvironment,theBoardofDirectorsdecidedthatnobonusshallbepaidtotheExecutiveManagementfortheirperformancein2016.

Contingent compensation of the CEO

Inadditiontothebasesalary,theCEOwasgrantedacontingentcompensationwhichisdependentsolelyonthedevelopmentofthesharepriceoftheCompany.ThecontingentcompensationisdeterminedaccordingtoaformulawhichtakesintoaccountthedevelopmentoftheCompany'sshareprice.Inessence,thenewCEOshallbeentitledto10%oftheincrementalmarketcapitalizationof

theCompanyaboveahurdlerateorminimumyieldof8%perannum.Theawardaccruesoveravestingperiodofsixyearsandissubjecttousualforfeitureandaccelerationprovisions.Forexample,thecontingentcompensationwillbeforfeitedandlostincasetheCEOterminateshisemploymentrelationshipwiththeCompanywithoutcause.Thecontingentcompensationmaybepaidincashor,attheCompany'sdiscretion,in(wholeorinpartin)sharesoftheCompany.Ifpaymentismadeinshares,thenumberofshareswillbecalculatedaccordingtoaformulawhichisbasedonanaverageofthesharepriceatthetimeimmediatelypriortothedeliveryoftheshares.

IfthemarketcapitalizationoftheCompanydoesnotexceedthehurdlerateof8%perannum,theCEOdoesnotreceiveanypaymentsunderthecontingentcompensation.TheBoardofDirectorsbelievesthatavestingperiodofsixyearsrewardsalong-termperformanceandshowsalong-termcommitmentofthenewCEOtowardstheCompany.Theawardof10%oftheincrementalmarketcapitalizationoftheCompanyaboveahurdlerateof8%perannumaimsensuresthatthenewCEOispaidforhiscontributiontoCompanyperformance.

Principles on compensation in the Articles of Incorporation

SeeArt.21oftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Shareholder approval of compensation

SeeArt.22oftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Loans, credit and pension contributions

SeeArt.26oftheArticlesofIncorporationwhichareavailableontheCompany'swebsitehttps://www.orascomdh.com,followingthelinkstoInvestorRelationsandCorporateDocuments.

Voting rights and representation restrictions

Withtheexceptionofrestrictionsontheregistrationofshares(seeSection4.2.above),therearenolimitationsonvotingrights.Atageneralmeetingofshareholders,eachshareentitlesitsownertoonevote.Bymeansofawrittenproxy,eachshareholdermayberepresentedbyathirdpersonwhoneednothimselfbeashareholder.

Statutory quora

AccordingtoArt.10oftheArticlesofIncorporation,theholdersofatleast25.0%ofissuedsharesmustbepresentorrepresentedatanordinarygeneralmeetingofshareholdersforthemeetingtobevalidlyconstituted.Similarly,holdersofatleast50.0%ofissuedsharesmustbepresentorrepresentedatanextraordinarygeneralmeetingofshareholdersforthemeetingtobevalidlyconstituted.

Resolutionsaregenerallypassed,inthecaseofanordinarygeneralmeetingofshareholders(exceptformatterssubjecttoahighermajorityrequirementbylaw),withtheabsolutemajorityofthesharesrepresented.Inthecaseofanextraordinarygeneralmeetingofshareholders,resolutionsaregenerallypassedwithamajorityoftwo-thirdsofthesharesrepresented.

Resolutionsrelatingtothefollowingmatters,however,requireamajorityof75.0%ofsharesrepresentedatthemeeting:(a)capitalincreasespursuanttoArt.650COandreductionsofthesharecapitalpursuanttoArt.732CO;(b)dissolvingtheCompanybeforeitsterminationdateorchangingitsduration(which,pursuanttotheArticlesofIncorporation,is99yearsfromitsformation);(c)changingtheCompany’spurpose;and(d)anymergerwithanothercompany.

Convocation of the general meeting of shareholders

Anordinarygeneralmeetingofshareholdersistobeheldannuallyfollowingthecloseofthefinancialyear.ItiscalledbytheBoardofDirectorsor,ifnecessary,bytheauditors.ExtraordinarygeneralmeetingsmaybecalledbytheBoardofDirectors,theauditors,theliquidators,orbythegeneralmeetingofshareholdersitself.

Oneormoreshareholdersrepresentingatleast10%ofthesharecapitalmayrequestinwritingthattheBoardofDirectorscallanextraordinarygeneralmeetingofshareholders.Therequestmuststatethepurposeofthemeetingandtheagendatobesubmitted.GeneralmeetingsofshareholdersareheldatthestatutoryseatoftheCompanyoratsuchotherplaceasdeterminedbytheBoardofDirectors.

NoticeofageneralmeetingofshareholdersisgivenbymeansofasinglepublicationintheSwissOfficialGazetteofCommerce(SchweizerischesHandelsamtsblatt)orbyregisteredlettertotheshareholdersofrecord.Theremustbeatimeperiodofnotlessthan20calendardaysbetweenthedayofthepublicationorthemailingofthenoticeandthescheduleddateofthemeeting.ThenoticeofthegeneralmeetingofshareholdersmustindicatetheagendaandthemotionsbytheBoardofDirectors.

Agenda

ShareholderswhorepresentshareswithaparvalueofatleastCHF1,000,000mayrequestthatanitembeplacedontheagenda.TherequestmustbecommunicatedtotheBoardofDirectorsinwriting,statingtheitemtobeplacedontheagendaandtheshareholder’scorrespondingmotion,atleast45dayspriortothegeneralmeetingofshareholders.

Record date for entry into the share register

Onlyshareholderswhoareregisteredintheshareregisterasshareholderswithvotingrightsattherecorddateareentitledtoattendanordinarygeneralmeetingandtoexercisetheirvotingrights.TheBoardofDirectorsensuresthattherecorddateissetascloseaspossibletothedateoftheordinarygeneralmeeting.TherecorddateispublishedtogetherwiththeinvitationtotheordinarygeneralmeetingintheSwissOfficialGazetteofCommerce.

4.5 4.6Compensation, shareholdings and loans

Shareholders' participation

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Duty to make an offer

TheArticlesofIncorporationdonotprovideforany“optingout”or“optingup”arrangementswithinthemeaningofArt.125andArt.135FMIA.

Clauses of change of control

NochangeofcontrolclausesbenefitingmembersoftheBoardofDirectors,ExecutiveManagementorothermembersoftheCompany’smanagementhavebeenagreedupon.

AsofDecember31,2016,theCompanyhad8,549employeesworldwide,ofwhich7,316wereinEgypt.Thenumberofemployeesdecreasedby567employees.comparedtotheendof2015.

Duration of the mandate and term of office of the lead auditor

SincethefoundationoftheCompanyonJanuary17,2008,DeloitteAG,Zurich,hasbeenthestatutoryauditorwithresponsibilityfortheauditoftheCompany’snon-consolidatedandconsolidatedfinancialstatements.TheCompany’ssubsidiaryOHDisauditedbyDeloitteSaleh,BarsoumandAbdelAziz,Cairo.TheauditorinchargefortheCompanyatDeloitteAGcurrentlyisRolandMullersincethe2013financialyear.Arotationcycleof7yearsisforeseenforthepositionoftheauditorincharge.TheBoardofDirectorswillproposetotheordinarygeneralmeetingofshareholdersonMay9,2017tore-electDeloitteAG,Zurichasthestatutoryauditorforthe2017financialyear.

Auditing fees

DeloittereceivedthefollowingfeesforitsservicesasthestatutoryauditoroftheCompanyandthemajorityofOrascomDevelopmentcompaniesontheonehand,andfornon-auditservicesontheotherhand:

Informational instruments pertaining to the external audit

TheBoardofDirectors’AuditCommitteehasthetaskofensuringtheeffectiveandregularsupervisionofthestatutoryauditors’reportingwiththeaimofensuringitsintegrity,transparencyandquality.Inadvanceofeachfinancialyear,theproposedauditingscheduleispresentedtoanddiscussedwiththeAuditCommittee.Aftereachaudit,importantobservationsbythestatutoryauditor,togetherwithappropriaterecommendations,arepresentedtotheAuditCommittee(afterdiscussionswiththeCFO)duringitsrelevantmeeting.Subsequently,membersoftheAuditCommitteereceivethestatutoryauditors’managementletterinfinalform.Duringtheyear,thestatutoryauditorisinregularcontactwiththechairmanoftheAuditCommitteetodiscussmattersarisingintheperformanceofitstask.

BasedonthesecommunicationstheAuditCommitteediscussesitsimpressionoftheintegrityandeffectivenessofthestatutoryauditors’work,andissuesarecommendationtotheBoardofDirectorsconcerningtheproposaltothegeneralmeetingofshareholderswhethertore-electthestatutoryauditorsforthefollowingyear.

InCHF 2016 2015

AuditServices 1,860,000 1,790,322

IPO/Listingrelatedservices - 398,000

TaxAdvisoryServices 12,228 -

Total 1,872,228 2,188,322

4.7 4.9Changes of control and defense measures

4.8Employees

External auditors

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TheCEO,theCFO,andtheInvestorRelationsDepartmenttookcareofthecommunicationwithinvestorsduring2016.TheCompanyintendstoupdatethefinancialcommunitythroughpersonalcontacts,discussions,andpresentationsheldthroughvariousroadshowsandinvestorconferences.

OrascomDevelopmentiscommittedtoanopeninformationpolicyandprovidesshareholders,thecapitalmarket,employeesandallstakeholderswithopen,transparentandtimelyinformation.TheinformationpolicyaccordswiththerequirementsoftheSIXSwissExchangeaswellastherelevantstatutoryrequirements.AsacompanylistedonSIXSwissExchange,OrascomDevelopmentalsopublishesinformationrelevanttoitsstockpriceinaccordancewithArt.53oftheListingRulesoftheSIXSwissExchange(adhocpublicity).

Thefinancialreportingsystemiscomprisedofquarterly,interim(semiannual),andannualreports.ConsolidatedfinancialstatementsarepreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)incompliancewithSwisslawandtherulesoftheSIXSwissExchange.

InvitationstotheannualandextraordinarygeneralmeetingsarepublishedintheSwissOfficialGazetteofCommerceandsenttoregisteredshareholdersbyletter.

Inaddition,theCompanyutilizeselectronicnewsreleasestoreportthelatestchangesanddevelopmentstoensureequaltreatmentforallcapitalmarketparticipants.

Corporate Calendar

Annualgeneralmeetingofshareholders:May9,2017

Firstquarter2017results:May16,2017

Secondquarter2017results: August15,2017

Thirdquarter2017results: November15,2017

Further information and contact

InvestorsandotherinterestedstakeholderscanfindfurtherinformationonOrascomDevelopmentonlineatwww.orascomdh.com.NewsitemsarepublishedonthewebsitefollowingthelinkstoInvestorRelationsandNews.StakeholdersmaysubscribetotheCompany’se-mailalertservicetoreceivenewsreleasesatwww.orascomdh.com/en/media-center/news-alert.html.InvestorsmayalsocontacttheInvestorRelationsDepartmentasfollows:

SaraElGawahergyHeadofInvestorRelationsT.:+20224618961T.:[email protected]

Registered office

TheCompany'sregisteredofficeisatGotthardstrasse12,6460Altdorf,Switzerland.

4.10 Information policy

04ORASCOM CORPORATE GOVERNANCE

04ORASCOM CORPORATE GOVERNANCE

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ORASCOM INVESTOR INFORMATION05

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OrascomDevelopmentHoldingAGhasaduallistingwithitsprimarylistingonthemainboardoftheSIXSwissExchange.ThesecondarylistingisintheformofEgyptianDepositoryReceipts(EDRs)ontheEGXEgyptianExchange.

Overview

Date 31.12.2016 31.12.2015

SWITZERLAND

SharesheldwithSISandregisteredintheshareregister 26,735,126 25,769,127

Disposhares 3,739,307 4,599,165

EGYPT

ShareequivalentsincustodyofMCDR’sdepositarybank(EDRs) 9,060,077 9,935,493

SharesincustodyofMCDR(NotTraded) 875,416 875,416

Total Shares 40,409,926 40,409,926

Market capitalization )in CHF Million( 206,49 414,20

Shareinformation1

Shareslisting Zurich,Switzerland

Numberofshares 31,349,849

ISINcode CH0038285679

Currency SwissFranc

Tickercode(Bloomberg) ODHN:SW

Tickercode(Reuters) ODHN.S

EDRsinformation1

EDRslisting Cairo,Egypt

NumberofEDRs2 181,201,540

ISINcode EGG676K1D011

Currency EgyptianPound

Tickercode(Bloomberg) ODHR:EY

Tickercode(Reuters) ODHR.CA

1Asatendof2016.2Implyingaconversionratioof20:1,where20EDRsareequivalentto1registeredshare.

Persharedata1

Date 31.12.2016 31.12.2015

Sharepriceatyear-end(inCHF) 5.11 10.25

Highestsharepriceduringtheyear(inCHF) 10.45 20.00

Lowestsharepriceduringtheyear(inCHF) 4.40 9.33

Numberoftradedshares(inmillions) 4.94 5.17

Valueoftradedshares(inCHFmillion) 32.76 69.51

Averagenumberoftradedsharesperday 19,433 20,579

Averagetradedvalueperday(inCHF) 128,979 277,358

1Source:ThomsonReuters.

PerEDRdata1

Date 31.12.2016 31.12.2015

Marketpriceatyear-end(inEGP) 5.17 4.48

Highestmarketpriceduringtheyear(inEGP) 5.87 8.06

Lowestmarketpriceduringtheyear(inEGP) 3.45 4.15

NumberoftradedEDRs(inmillions) 71.76 30.73

ValueoftradedEDRs(inEGPmillion) 319.34 184.26

AveragenumberoftradedEDRsperday 300,245 127,525

Averagetradedvalueperday(inEGP) 1,336,163 764,573

1Source:ThomsonReuters.

5.0 Investor Information

05ORASCOM INVESTOR INFORMATION

05ORASCOM INVESTOR INFORMATION

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Shareholding Structure

A)Shares B)EDRs

Shareholdersbytype EDRsholdersbytypeShareholdersbycountry EDRsholdersbycountry

Categories Number of shareholders

Number of Registered shares

Legalpersons 68 12,592,215

Naturalpersons 3,596 11,052,786

Banks 20 2,491,364

Investmenttrusts 28 562,432

Pensionfunds 7 24,613

Foundations 3 8,356

Insurancecompanies 1 3,170

Publiccorporations 2 190

Total 3,725 26,735,126

Categories Number of EDRs Holders

Number of EDRs

Naturalpersons 1,725 149,920,245

Legalpersons 19 28,779,301

Banks 2 1,417,980

Investmenttrusts 3 903,014

Pensionfunds 1 181,000

Foundations 0 0

Insurancecompanies 0 0

Publiccorporations 0 0

Total 1,777 181,201,540

Distributionofshareholdings1

Number of Registered shares

Number of Registered shares

1 10 303 2,097

11 100 1,045 57,525

101 1,000 1,743 754,134

1,001 10,000 583 1,584,305

10,001 100,000 40 1,163,807

100,001 1,000,000 7 2,594,167

1,000,001 999,999,999 4 20,579,091

Total 3,725 26,735,126

DistributionofEDRsHolders1

Number ofEDRs Holders

Number of EDRs

1 10 130 258

11 100 103 5,713

101 1,000 547 295,002

1,001 10,000 721 2,817,983

10,001 100,000 229 6,917,446

100,001 1,000,000 37 11,747,661

1,000,001 999,999,999 10 159,417,477

Total 1,777 181,201,540

Country Number of shareholders

Number of Registered shares

Egypt 10 18,716,314

Switzerland 3,665 3,870,567

UnitedKingdom 7 2,408,283

Belgium 2 520,890

CaymanIslands 1 511,136

UnitedStatesofAmerica 6 400,792

Liechtenstein 5 242,515

Malta 2 17,600

Brazil 1 14,413

Luxembourg 1 10,118

Austria 4 9,100

Italy 2 5,880

Germany 10 5,460

UnitedArabofEmirates 2 691

Bahamas 1 500

Ireland 1 360

France 2 205

Spain 1 200

SaudiArabia 1 100

Denmark 1 2

Total 3,725 26,735,126

Country Number of EDRs Holders

Number of EDRs

Egypt 1,718 147,744,920

UnitedKingdom 8 22,076,347

SaudiArabia 23 9,615,653

Luxembourg 1 849,999

Lebanon 2 276,236

UnitedArabofEmirates 6 267,969

Germany 2 265,000

Yemen 1 27,941

Tunis 1 20,000

Palestine 3 19,240

Jordan 2 12,360

Malaysia 1 9,100

Oman 1 8,240

Italy 1 3,850

UnitedStatesofAmerica 4 2,931

Libya 2 1,750

Switzerland 1 4

Total 1,777 181,201,540

1Distributionofregisteredshares/EDRsasatDecember31,2016.

05ORASCOM INVESTOR INFORMATION

05ORASCOM INVESTOR INFORMATION

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Significantshareholders1

Categories2016 2015

Number of shares issued

Percentage of ownership )%(

Number of shares issued

Percentage of ownership )%(

SamihSawiris2 27,391,814 67.78 29,355,452 72.64

OSHolding 2,049,782 5.07 - -

JanusCapitalManagementLLC - - 1,494,207 3.70

Others 10,968,330 27.14 9,560,267 23.66

Total 40,409,926 100.00 40,409,926 100.00

1OverviewofsignificantshareholdersasatDecember31,2016.2ThesharesofSamihO.SawirisarehelddirectlyandthroughhisentitiesThursdayHoldingandSOSHolding.

CorporateCalendar

Date Event

9May2017 9thAnnualGeneralMeeting

16May2017 FirstQuarter2017Results

15Aug2017 FirstHalf2017Results

15Nov2017 NineMonths2017Results

InvestorContacts

SaraElGawahergy

HeadofInvestorRelations

T:+20224618961

[email protected]

Forpublicationsandfurtherinformationvisit

http://www.orascomdh.com/en/investor-relations

05ORASCOM INVESTOR INFORMATION

05ORASCOM INVESTOR INFORMATION

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OrascOm Financial statements06

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06OrascOm FINaNcIaL sTaTEmENTs

06OrascOm FINaNcIaL sTaTEmENTs

Annual Report - 2016 Strategically decentralized F- 21F-

Contents

6.0 Orascom Development Holding AG (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 statement of cash flows F-7

Notes to the consolidated financial statements F-10

7.0 Orascom Development Holding AG (statutory financial statements)

Income statement F-86

Statutory balance sheet F-87

Statement of changes in equity F-88

Cash flow statement F-89

Notes to the financial statements F-90

6.0 Orascom Development Holding AG

Consolidated finanCial statements

together with auditor's report for

the year ended 31 deCember 2016

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06OrascOm FINaNcIaL sTaTEmENTs

06OrascOm FINaNcIaL sTaTEmENTs

Annual Report - 2016 Strategically decentralized F- 43F-

F-­‐3  

Orascom  Development  Holding  AG  Consolidated  statement  of  comprehensive  income  for  the  year  ended  31  December  2016    

CHF    Notes     2016   2015  

         

CONTINUING  OPERATIONS  Revenue    6/7   237,361,504   306,064,168  Cost  of  sales    7.2   (226,055,966)   (234,953,377)  

GROSS  PROFIT     11,305,538   71,110,791  

Investment  income    9   6,370,112   9,984,457  Other  gains      10   3,064,859   7,884,044  Administrative  expenses     (46,710,878)   (39,403,630)  

Finance  costs   11   (44,800,269)   (33,596,120)  

Share  of  losses  of  associates    19   (17,299,645)   (19,436,964)  

Other  losses   12   (147,414,540)   (14,886,221)  

(LOSS)  BEFORE  TAX     (235,484,823)   (18,343,643)  

Income  tax  expense    14   (8,351,012)   (4,175,658)  

(LOSS)  FOR  THE  YEAR       (243,835,835)   (22,519,301)          OTHER  COMPREHENSIVE  INCOME,  NET  OF  INCOME  TAX    

     

Items  that  will  not  be  reclassified  subsequently    to  profit  or  loss  

     

Net  (loss)  on  revaluation  of  financial  assets  at  FVTOCI     (2,666,099)   (2,942,440)  Remeasurement  of  defined  benefit  obligation   39   (14,281)   (304,423)  

    (2,680,380)   (3,246,863)  

Items  that  may  be  reclassified  subsequently    to  profit  or  loss        

Exchange  differences  arising  on  translation  of  foreign  operations  

  (124,790,087)   (34,206,243)  

    (124,790,087)   (34,206,243)  

TOTAL  OTHER  COMPREHENSIVE  INCOME  FOR  THE  YEAR,  NET  OF  INCOME  TAX    

  (127,470,467)   (37,453,106)  

TOTAL  COMPREHENSIVE  INCOME  FOR  THE  YEAR       (371,306,302)   (59,972,407)  

(Loss)/profit  attributable  to:        

Owners  of  the  Parent  Company     (196,415,554)   (19,052,959)  

Non-­‐controlling  interests     (47,420,281)   (3,466,342)  

      (243,835,835)   (22,519,301)  

Total  comprehensive  income  attributable  to:        

Owners  of  the  Parent  Company     (274,771,316)   (50,043,036)  Non-­‐controlling  interests     (96,534,986)   (9,929,371)  

      (371,306,302)   (59,972,407)  

Earnings  per  share  from  continuing  operations        

Basic   15   (4.86)   (0.66)  

Diluted   15   (4.86)   (0.66)  

In  the  comparative  period,  the  amounts  of  other  gains  and  other  losses  were  split  compared  to  prior  year  financial  statements,  where  they  were  shown  as  a  net  position.  

       Khaled  Bichara             Ashraf  Nessim  Group  CEO             Group  CFO    

F-­‐4  

Orascom  Development  Holding  AG  Consolidated  statement  of  financial  position  at  31  December  2016    

CHF    Notes     31  December  2016   31  December  2015  

ASSETS              

NON-­‐CURRENT  ASSETS              

Property,  plant  and  equipment    16   762,596,957   940,356,468  

Investment  property   17   5,501,334   10,981,552  

Goodwill   18   2,893,347   6,476,682  

Investments  in  associates    20   78,551,111   100,678,830  

Non-­‐current  receivables   21   42,450,100   124,906,207  

Deferred  tax  assets   14.4   992,920   12,693,483  

Finance  lease  receivables   25   -­‐   38,632,861  

Other  financial  assets   22   3,516,633   5,649,259  

TOTAL  NON-­‐CURRENT  ASSETS       896,502,402   1,240,375,342  

CURRENT  ASSETS          

Inventories    23   124,960,013   191,289,618  

Trade  and  other  receivables    24   55,834,930   61,414,053  

Finance  lease  receivables   25   -­‐   9,844,267  

Current  receivables  due  from  related  parties   42   19,930,353   35,006,557  

Other  financial  assets   22   -­‐   3,544,372  

Other  current  assets    26   40,055,756   99,502,308  

Cash  and  bank  balances   27   80,834,952   167,636,917  

    321,616,004   568,238,092  

Assets  held  for  sale   28   67,230,735   -­‐  

TOTAL  CURRENT  ASSETS       388,846,739   568,238,092  

TOTAL  ASSETS     1,285,349,141   1,808,613,434  

   

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06OrascOm FINaNcIaL sTaTEmENTs

06OrascOm FINaNcIaL sTaTEmENTs

Annual Report - 2016 Strategically decentralized F- 65F- F-­‐5  

Orascom  Development  Holding  AG  Consolidated  statement  of  financial  position  at  31  December  2016    

CHF    Notes     31  December  2016   31  December  2015  

EQUITY  AND  LIABILITIES            

CAPITAL  AND  RESERVES            

Issued  capital     29   937,510,283   937,510,283  

Reserves   30   (365,520,995)   (291,172,731)  

(Accumulated  losses)/Retained  earnings     31   (120,782,194)   78,164,830  

Equity  attributable  to  owners  of  the  Parent  Company       451,207,094   724,502,382  

Non-­‐controlling  interests   32   140,467,237   232,127,614  

TOTAL  EQUITY       591,674,331   956,629,996  

NON-­‐CURRENT  LIABILITIES          

Borrowings   33   137,631,013   224,752,279  

Trade  and  other  payables   34   11,576,940   17,128,923  

Retirement  benefit  obligation   39   647,232   623,793  

Notes  payable     -­‐   282,289  

Deferred  tax  liabilities    14.4   22,925,809   43,047,276  

TOTAL  NON-­‐CURRENT  LIABILITIES       172,780,994   285,834,560  

CURRENT  LIABILITIES          

Trade  and  other  payables   34   24,690,585   29,913,933  

Borrowings   33   231,937,486   282,275,360  

Due  to  related  parties   42   859,940   2,192,765  

Current  tax  liabilities   14.3   2,128,992   4,605,237  

Provisions   35   68,626,934   82,521,775  

Other  current  liabilities   36   138,530,986   164,639,808  

    466,774,923   566,148,878  

Liabilities  directly  associated  with  assets  held  for  sale   28   54,118,893   -­‐  

TOTAL  CURRENT  LIABILITIES       520,893,816   566,148,878  

TOTAL  LIABILITIES       693,674,810   851,983,438  

TOTAL  EQUITY  AND  LIABILITIES       1,285,349,141   1,808,613,434  

   

     

 Khaled  Bichara             Ashraf  Nessim  Group  CEO             Group  CFO

F-­‐6  

Orascom

 Develop

ment  H

olding

 AG  

Consolidated  statement  o

f  chang

es  in  equity  for  the  year  end

ed  31  Decem

ber  2016  

  CHF  

Issued  

Capital  

Share  

prem

ium  

Treasury  

shares  

Share-­‐based  

paym

ent  

reserve  

Investments  

revaluation  

reserve  

General  

reserve  

Foreign  

currency  

translation  

reserve  

Reserve  from

 common

 control  

transactions  

Equity  swap  

settlement  

(Accum

ulated    

losses)/  

Retained  

earnings  

Attribu

table  

to  owners  of  

the  Parent  

Company  

Non

-­‐controlling

 interests  

Total  

Balance  at  1  January  2015  (note  30)  

662,201,010  

243,799,019  

(5,471,285)  

-­‐  (11,647,720)  

4,916,86

8  (248,250,610)  

(121,749,573)  

(2,114,229)  

99,060,154  

620,743,634  

200,456,351  

821,199,98

5  

Loss  fo

r  the

 yea

r  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

(19,05

2,95

9)  

(19,05

2,95

9)  

(3,466

,342

)  (22,51

9,30

1)  

Other  com

preh

ensive

 inco

me  for  the

 yea

r,  net  of  inc

ome  tax  

-­‐  -­‐  

-­‐  -­‐  

(2,942

,440

)  -­‐  

(27,74

3,21

4)  

-­‐  -­‐  

(304

,423

)  (30,99

0,07

7)  

(6,463

,029

)  (37,45

3,10

6)  

Total  com

prehensive  income  for  the  year  

-­‐  -­‐  

-­‐  -­‐  

(2,942,440)  

-­‐  (27,743,214)  

-­‐  -­‐  

(19,357,382)  

(50,043,036)  

(9,929,371)  

(59,972,407)  

Distribution  of  ordinary  sh

ares  

-­‐  -­‐  

2,20

2,60

4  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  (1,537,942

)  66

4,66

2  -­‐  

664,66

2  

Capital  inc

rease  (note  29

.2)  

275,30

9,27

3  (141

,452

,006

)  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  133,85

7,26

7  -­‐  

133,85

7,26

7  

Capital  inc

rease  tran

saction  co

st  

-­‐  (3,776

,769

)  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  (3,776

,769

)  -­‐  

(3,776

,769

)  

Sale  of  1

5%  in

terest  in

 OHD  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  22

,858

,157  

-­‐  -­‐  

22,858

,157  

36,147

,080

 59

,005

,237  

Acq

uisitio

n  of  non

-­‐con

trollin

g  interests’  sha

re  in

 sub

sidiaries  

   

   

   

 19

8,46

7    

-­‐  19

8,46

7  (861

,844

)  (663

,377)  

Non

-­‐con

trollin

g  interests’  sha

re  in

 sub

sidiaries’  cap

ital  inc

rease  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  6,315,39

8  6,315,39

8  

Balance  at  31  Decem

ber  2015  (note  30)  

937,510,283  

98,570,244  

(3,268

,681)  

-­‐  (14,590,160)  

4,916,86

8  (275,993,824)  

(98,69

2,949)  

(2,114,229)  

78,164,830  

724,502,382  

232,127,614  

956,629,99

6  

   

   

   

   

   

   

   

Balance  at  1  January  2016  (note  30)  

937,510,283  

98,570,244  

(3,268

,681)  

-­‐  (14,590,160)  

4,916,86

8  (275,993,824)  

(98,69

2,949)  

(2,114,229)  

78,164,830  

724,502,382  

232,127,614  

956,629,99

6  

Loss  fo

r  the

 yea

r  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

(196

,415

,554

)  (196

,415

,554

)  (47,42

0,28

1)  

(243

,835

,835

)  

Other  com

preh

ensive

 inco

me  for  the

 yea

r,  net  of  inc

ome  tax  

-­‐  -­‐  

-­‐  -­‐  

(2,666

,099

)  -­‐  

(75,67

5,38

2)  

-­‐  -­‐  

(14,28

1)  

(78,35

5,76

2)  

(49,114,70

5)  

(127

,470

,467

)  

Total  com

prehensive  income  for  the  year  

-­‐  -­‐  

-­‐  -­‐  

(2,666

,099

)  -­‐  

(75,675,382)  

-­‐  -­‐  

(196

,429,835)  

(274,771,316)  

(96,534,98

6)  

(371,306,302)  

Distribution  of  ordinary  sh

ares  

-­‐  -­‐  

3,24

1,88

4    

 -­‐  

-­‐  -­‐  

-­‐  (2,517,189

)  72

4,69

5  -­‐  

724,69

5  

Tran

sactions

 cos

ts  in

 relatio

n  to  delistin

g  of  EDRs

 in  Egy

pt  

-­‐  (82,00

0)  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  -­‐  

(82,00

0)  

-­‐  (82,00

0)  

Share-­‐ba

sed  pa

ymen

ts  (n

ote  41

)  -­‐  

-­‐  -­‐  

833,333  

 -­‐  

-­‐  -­‐  

-­‐  -­‐  

833,333  

-­‐  83

3,333  

Non

-­‐con

trollin

g  interests’  sha

re  in

 equ

ity  of  c

onso

lidated

 sub

sidiaries  

-­‐  -­‐  

-­‐    

 -­‐  

-­‐  -­‐  

-­‐  -­‐  

-­‐  4,87

4,60

9  4,87

4,60

9  

Balance  at  31  Decem

ber  2016  (note  30)  

937,510,283  

98,488

,244  

(26,797)  

833,333  

(17,256,259)  

4,916,86

8  (351,669

,206)  

(98,69

2,949)  

(2,114,229)  

(120,782,194)  

451,207,094  

140,467,237  

591,674,331  

   

   

   

   

   

   

   

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F-­‐7  

Orascom  Development  Holding  AG  Consolidated  cash  flow  statement  for  the  year  ended  31  December  2016    

CHF    Notes              2016            2015  

       

CASH  FLOWS  FROM  OPERATING  ACTIVITIES        

Loss  for  the  year     (243,835,835)   (22,519,301)  Adjustments  for:        Income  tax  expense  recognized  in  profit  or  loss      14.1   8,351,012   4,175,658  

Share  of  losses  of  associates     20   17,299,645   19,436,964  

Finance  costs  recognized  in  profit  or  loss   11   44,800,269   33,596,120  

Investment  income  recognized  in  profit  or  loss   9   (6,370,112)   (9,984,457)  

Write  down  on  inventory   23   13,529,631    

Impairment  loss  on  receivables  and  other  current  assets   24   6,360,984   2,172,965  Reversal  of  impairment  loss  on  trade  receivables     24   (109,181)   (113,506)  Impairment  loss  of  receivables  on  acquisition  of  subsidiary  

  843,588   -  

Impairment  loss  on  property,  plant  and  equipment   12/16   18,611,089   9,128,902  Gain  on  sale  or  disposal  of  property,  plant  and  equipment   10   (14,944)   (289,015)  Gain  on  disposal  of  subsidiaries   10/38   -­‐   (1,736,869)  Gain  on  disposal  of  financial  investments     (2,888,614)   -  Gain  on  revaluation  of  investment  properties   17   (161,301)   (118,103)  Depreciation  and  amortization  of  non-­‐current  assets   16   35,958,484   28,735,476  Share-­‐based  payments     833,333   -  Unrealized  net  foreign  exchange  losses   12   113,243,690   5,757,319  

MOVEMENTS  IN  WORKING  CAPITAL        

(Increase)  in  trade  and  other  receivables     (26,113,426)   (52,522,695)  (Increase)/decrease  in  finance  lease  receivables     (1,800,511)   2,609,243  Decrease/(increase)  in  inventories     7,344,753   (18,831,501)  Decrease  in  other  assets     15,628,489   14,806,485  (Decrease)  in  trade  and  other  payables     (5,316,634)   (5,969,203)  (Decrease)/increase  in  provisions     (14,458,403)   1,907,629  Increase  in  other  liabilities     22,891,260   1,330,965  

Cash  generated  by  operations       4,627,266   11,573,076  

Interest  paid     (9,701,214)   (30,108,232)  Income  tax  paid     (3,980,401)   (5,174,017)  

Net  cash  (used  in)  operating  activities     (9,054,349)   (23,709,173)  

 

   

-­‐

F-­‐8  

Orascom  Development  Holding  AG  Consolidated  cash  flow  statement  for  the  year  ended  31  December  2016    

CHF    Notes              2016            2015  

       

CASH  FLOWS  FROM  INVESTING  ACTIVITIES        

Payments  for  property,  plant  and  equipment   16   (41,684,521)   (46,398,486)  Proceeds  from  disposal  of  property,  plant  and  equipment     452,858   259,929  Proceeds  on  sale  of  financial  assets       2,888,614   419,848  Payments  to  acquire  financial  assets  (at  amortised  cost)   22   -­‐   (160,381)  Payments  to  acquire  investment  in  associates   20   -­‐   (9,908,175)  Interest  received     6,370,112   9,984,457  Net  cash  inflow  from  acquisition  of  subsidiaries   37   2,516,016    Net  cash  inflow  on  deconsolidated  subsidiaries   38   -­‐   9,801,160  

Net  cash  (used  in)  investing  activities     (29,456,921)   (36,001,648)  

       

CASH  FLOWS  FROM  FINANCING  ACTIVITIES        

Proceeds  from  capital  increase   29   -­‐   49,615,380  Payments  for  transaction  costs  due  to  capital  increase     (1,873,095)   (1,862,696)  Non-­‐controlling  interests  shares  in  change  of  equity  for  consolidated  subsidiaries  

32   4,874,609   64,657,258  

Repayment  of  borrowings   33   (45,695,877)   (31,998,070)  Proceeds  from  borrowings   33   18,013,828   52,755,858  

Net  cash  (used  in)/generated  by  financing  activities     (24,680,535)   133,167,730  

       

Net  (decrease)/increase  in  cash  and  cash  equivalents     (63,191,805)   73,456,909  

Cash  and  cash  equivalents  at  the  beginning  of  the  year     167,636,917   100,658,860  

Effects  of  exchange  rate  changes  on  the  balance  of  cash  held  in  foreign  currencies       (22,272,800)   (6,478,852)  

Cash  and  cash  equivalents  at  the  end  of  the  year     82,172,312   167,636,917  

Included  in  cash  and  cash  equivalents   27   80,834,952   167,636,917  

Included  in  assets  held  for  sale   28   1,337,360   -­‐  

 

   

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Index  to  the  notes  to  the  consolidated  financial  statements   Page  

1   General  information   10  

2   Application  of  new  and  revised  International  Financial  Reporting  Standards   10  3   Significant  accounting  policies   13  4   Critical  accounting  judgments  and  key  sources  of  estimation  uncertainty   26  5   The  group  and  major  changes  in  group  entities   28  

6   Revenue   28  7   Segment  information   28  8   Employee  benefits  expense   32  9   Investment  income   33  10   Other  gains     33  

11   Finance  costs   33  12   Other  losses   34  13   Compensation  of  key  management  personnel   34  14   Income  taxes  relating  to  continuing  operations   35  15   Earnings  per  share   38  

16   Property,  plant  and  equipment   39  17   Investment  property   41  18   Goodwill   41  19   Subsidiaries   43  20   Investments  in  associates   46  

21   Non-­‐current  receivables   49  22   Other  financial  assets   49  23   Inventories   50  24   Trade  and  other  receivables   50  25   Finance  lease  receivables   51  

26   Other  current  assets   52  27   Cash  and  cash  equivalents   52  28   Assets  held  for  sale   53  29   Capital   54  

30   Reserves  (net  of  income  tax)   55  31   (Accumulated  losses)/retained  earnings   58  32   Non-­‐controlling  interests   58  33   Borrowings   59  34   Trade  and  other  payables   59  

35   Provisions   60  36   Other  current  liabilities   61  37   Acquisition  of  a  subsidiary   61  38   Disposal  of  a  subsidiary   62  39   Retirement  benefit  plans   63  

40   Financial  instruments   65  41   Share-­‐based  payments   71  42   Related  party  transactions   72  43   Non-­‐cash  transactions   74  44   Operating  lease  arrangements   74  

45   Commitments  for  expenditure   75  46   Litigation   76  47   Other  significant  events  that  occurred  during  the  reporting  period   77  48   Subsequent  events   78  49   Approval  of  financial  statements   78  

F-­‐10  

Notes  to  the  consolidated  financial  statements  for  the  year  ended  31  December  2016  1  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   eight   jurisdictions,   with   primary   focus   on   touristic   towns   and   recently   affordable   housing.   The  Group's  diversified  portfolio  of  destinations  is  spread  over  seven  jurisdictions  (Egypt,  UAE,  Oman,  Switzerland,  Morocco,  Montenegro  and  United  Kingdom),  with  primary   focus  on   touristic  destinations.  The  Group  currently  operates   ten  destinations;   five   in  Egypt   (El  Gouna,  Taba  Heights,  Fayoum  Makadi,  and  Harram  City),  The  Cove  in  the  United  Arab  Emirates,  Jebel  Sifah  and  Salalah  Beach  in  Oman,  Luštica  Bay  in  Montenegro  and  Andermatt  in  Switzerland.  

In  January  2015,  the  Group  has  sold  a  15%  stake  in  its  Egyptian  subsidiary  Orascom  Hotels  and  Development  S.A.E.  (“OHD”).  This  transaction  marks  the  return  of  OHD’s  active  trading  on  the  EGX  since  2008.  For  further  detail  refer  to  note  32.  

In   June   2015,   the   Group   has   lost   control   over   its   investment   in   Golden   Beach   for   Hotels   Company,   Jordan,   to   an   associated  company  of  the  Group.  For  further  detail  refer  to  note  38.  

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  Amendments  to  IFRSs  and  the  new  Interpretation  that  are  mandatorily  effective  for  the  current  year  

In  the  current  year,  the  Group  has  applied  a  number  of  amendments  to  IFRSs  and  a  new  Interpretation  issued  by  the  International  Accounting  Standards  Board  (IASB)  that  are  mandatorily  effective  for  the  current  year.  None  of  the  revised  Standards  and  the  new  Interpretation   has   had   a   material   effect   on   these   financial   statements.   The   details   of   the   revised   Standards   and   the   new  Interpretation  are  as  follows:    

Amendments  to  IFRS  11  Joint  Arrangements  –  Accounting  for  acquisition  of  interests  in  joint  operations  

The  Group  has  applied  the  amendments  to  IFRS  11  Joint  Arrangements  regarding  accounting  for  acquisitions  of  interests  in  joint  operations  for  the  first  time  in  the  current  year.  IFRS  11  Joint  Arrangements  is  amended  to  require  an  acquirer  of  an  interest  in  a  joint  operation  in  which  the  activity  constitutes  a  business  (as  defined  in  IFRS  3  Business  Combinations)  to:  

-­‐ apply  all  of  the  business  combinations  accounting  principles  in  IFRS  3  and  other  IFRSs,  except  for  those  principles  that  conflict  with  the  guidance  in  IFRS  11  

-­‐ disclose  the  information  required  by  IFRS  3  and  other  IFRSs  for  business  combinations.  

The  amendments  apply  both  to  the  initial  acquisition  of  an  interest  in  joint  operation,  and  the  acquisition  of  an  additional  interest  in  a  joint  operation  (in  the  latter  case,  previously  held  interests  are  not  remeasured).  

The   application   of   these   amendments   has   had   no   impact   on   the   disclosures   or   on   the   amounts   recognised   in   the   Group’s  consolidated  financial  statements  as  the  Group  has  not  been  a  party  to  any  joint  arrangement  in  the  current  year.  

   

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F-­‐11  

Amendments  to  IAS  1  Presentation  of  Financial  Statements  –  Disclosure  Initiative  

The  Group  has  applied  the  amendments  to  IAS  1  Presentation  of  Financial  Statements  in  relation  to  the  disclosure  initiative  for  the  first   time   in   the   current   year.   IAS   1   Presentation   of   Financial   Statements   is   amended   to   address   perceived   impediments   to  preparers  exercising  their  judgement  in  presenting  their  financial  reports  by  making  the  following  changes:  

-­‐ clarification   that   information   should   not   be   obscured   by   aggregating   or   by   providing   immaterial   information,   materiality  considerations   apply   to   the   all   parts   of   the   financial   statements,   and   even   when   a   standard   requires   a   specific   disclosure,  materiality  considerations  do  apply;  

-­‐ clarification  that  the  list  of  line  items  to  be  presented  in  these  statements  can  be  disaggregated  and  aggregated  as  relevant  and  additional   guidance   on   subtotals   in   these   statements   and   clarification   that   an   entity's   share   of   OCI   of   equity-­‐accounted  associates  and  joint  ventures  should  be  presented  in  aggregate  as  single  line  items  based  on  whether  or  not  it  will  subsequently  be  reclassified  to  profit  or  loss;  

-­‐ additional   examples   of   possible   ways   of   ordering   the   notes   to   clarify   that   understandability   and   comparability   should   be  considered  when  determining  the  order  of  the  notes  and  to  demonstrate  that  the  notes  need  not  be  presented  in  the  order  so  far  listed  in  paragraph  114  of  IAS  1.  

The  application  of  these  amendments  had  some  impact  on  the  presentation  of  the  statement  of  comprehensive  income  as  well  as  on  the  disclosures  within  the  notes.  However,  it  did  not  have  any  impact  on  the  amounts  recognised  in  the  Group’s  consolidated  financial  statements.  

Amendments  to  IAS  16  Property,  Plant  and  Equipment  and  IAS  38  Intangible  Assets  –  Clarification  of  acceptable  methods  of  depreciation  and  amortisation  

The  Group   has   applied   the   amendments   to   IAS   16   Property,   Plant   and   Equipment   and   IAS   38   Intangible  Assets   regarding   the  clarification  of  acceptable  methods  of  depreciation  and  amortisation  for  the  first  time  in  the  current  year.   IAS  16   is  amended  to  prohibit  entities  from  using  a  revenue-­‐based  depreciation  method  for  items  of  property,  plant  and  equipment.  The  amendments  to  IAS  38  introduce  a  rebuttable  presumption  that  revenue  is  not  an  appropriate  basis  for  amortisation  of  an  intangible  asset.  This  presumption  can  only  be  rebutted  in  limited  circumstances.  

The   application   of   these   amendments   has   had   no   impact   on   the   disclosures   or   on   the   amounts   recognised   in   the   Group’s  consolidated  financial  statements.  

Amendments  resulting  from  annual  improvements  2012  –  2014  Cycle  

Makes  amendments  to  the  following  applicable  standards:  

-­‐ IFRS   5   —   Adds   specific   guidance   in   IFRS   5   for   cases   in   which   an   entity   reclassifies   an   asset   from   held   for   sale   to   held   for  distribution  or  vice  versa  and  cases  in  which  held-­‐for-­‐distribution  accounting  is  discontinued  

-­‐ IFRS   7   —   Additional   guidance   to   clarify   whether   a   servicing   contract   is   continuing   involvement   in   a   transferred   asset,   and  clarification  on  offsetting  disclosures  in  condensed  interim  financial  statements  

-­‐ IAS   19  —   Clarify   that   the   high   quality   corporate   bonds   used   in   estimating   the   discount   rate   for   post-­‐employment   benefits  should  be  denominated  in  the  same  currency  as  the  benefits  to  be  paid  

-­‐ IAS  34  —  Clarify  the  meaning  of  'elsewhere  in  the  interim  report'  and  require  a  cross-­‐reference  

The   application   of   these   amendments   has   had   no   impact   on   the   disclosures   or   on   the   amounts   recognised   in   the   Group’s  consolidated  financial  statements.  

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.  

New,  amended  and  revised  Standards  and  Interpretations   effective  from  

IFRS  2   Amends   IFRS  2  Share-­‐  based  Payment   to  clarify   the   standard   in   relation   to   the  accounting   for   cash-­‐settled   share-­‐based   payment   transactions   that   include   a  performance   condition,   the   classification   of   share-­‐based   payment   transactions  with   net   settlement   features,   and   the   accounting   for   modifications   of   share-­‐based  payment  transactions  form  cash-­‐settled  to  equity-­‐settled.  

Annual  periods  beginning  on  or  after  1  January  2018  

IFRS  9   The  Group  has  early  applied  IFRS  9  (issued  in  November  2009  and  October  2010)  as  at  1  January  2011  which   included  new  requirements  for  the  classification  and  measurement   of   financial   assets   and   financial   liabilities   as   well   as   for  derecognition.   However,   the   Group   has   not   yet   applied   the   requirements   for  general  hedge  accounting  (issued  in  November  2013)  and  another  revised  version  of  IFRS  issued  in  July  2014  which  mainly  includes  a)  impairment  requirements  for  financial   assets   and   b)   limited   amendments   to   the   classification   and  measurement   requirements   by   introducing   a   “fair   value   through   other  comprehensive  income”  (FCTOCI)  measurement  category  for  certain  simple  debt  instruments.  Financial  liabilities  are  classified  in  a  similar  manner  as  under  IAS  39,  however  there  are  differences  in  the  requirements  applying  to  the  measurement  

Annual  periods  beginning  on  or  after  1  January  2018  

F-­‐12  

of  an  entity's  own  credit   risk,  only   for   financial   liabilities   that  are  designated  on  initial  recognition  as  at  FVTOCI  

IFRS  15   The  new  Standard  IFRS  15  establishes  a  single  comprehensive  model  for  entities  to  use   in  accounting  for  revenue  arising  from  contracts  with  customers.   IFRS  15  will   supersede   the   current   revenue   recognition   guidance   including   IAS   18  Revenue,   IAS  11  Construction  Contracts  and   the   related   Interpretations  when   it  becomes  effective.    

The  core  principle  of  IFRS  15  is  that  an  entity  should  recognise  revenue  to  depict  the   transfer   of   promised   goods   or   services   to   customers   in   an   amount   that  reflects  the  consideration  to  which  the  entity  expects  to  be  entitled  in  exchange  for   those   goods   or   services.   Specifically,   the   Standard   introduces   a   5-­‐step  approach  to  revenue.  

Under   IFRS   15,   an   entity   recognises   revenue   when   (or   as)   a   performance  obligation  is  satisfied,  i.e.  when  “control”  of  the  goods  or  services  underlying  the  particular   performance   obligation   is   transferred   to   the   customer.   Far   more  prescriptive  guidance  has  been  added   in   IFRS  15  to  deal  with  specific  scenarios.  Furthermore,  extensive  disclosures  are  required  by  IFRS  15.    

Unlike  the  scope  of  IAS  18,  the  recognition  and  measurement  of  interest  income  and  dividend  income  from  debt  and  equity  investments  are  no  longer  within  the  scope   of   IFRS   15.   Instead,   they   are   within   the   scope   of   IFRS   9   Financial  Instruments.  

Annual  periods  beginning  on  or  after  1  January  2018  

IFRS  16   The  new  Standard  provides  a  comprehensive  model  for  the  identification  of  lease  arrangements  and  their  treatment  in  the  financial  statements  of  both  lessees  and  lessors.  It  supersedes  IAS  17  Leases  and  its  associated  interpretative  guidance.  

IFRS   16   applies   a   control   model   to   the   identification   of   leases,   distinguishing  between   leases   and   service   contracts   on   the   basis   of   whether   there   is   an  identified  asset  controlled  by  the  customer.  

Significant   changes   to   lessee   accounting   are   introduced,   with   the   distinction  between   operating   and   finance   leases   removed   and   assets   and   liabilities  recognised   in   respect   of   all   leases   (subject   to   limited   exceptions   for   short-­‐term  leases  and  leases  of  low  value  assets).  In  contrast,  the  Standard  does  not  include  significant  changes  to  the  requirements  for  accounting  by  lessors.  

Annual  periods  beginning  on  or  after  1  January  2019  

IAS  7   Amends   IAS   7   Statement   of   Cash   Flows   to   clarify   that   entities   shall   provide  disclosures   that   enable   users   of   financial   statements   to   evaluate   changes   in  liabilities  arising  from  financing  activities.  

Annual  periods  beginning  on  or  after  1  January  2017  

IAS  12   Amends  IAS  12  Income  Taxes  to  clarify  the  following  aspects:  

-­‐ Unrealised  losses  on  debt  instruments  measured  at  fair  value  and  measured  at  cost  for  tax  purposes  give  rise  to  a  deductible  temporary  difference  regardless  of   whether   the   debt   instrument's   holder   expects   to   recover   the   carrying  amount  of  the  debt  instrument  by  sale  or  by  use.  

-­‐ The   carrying   amount   of   an   asset   does   not   limit   the   estimation   of   probable  future  taxable  profits.  

-­‐ Estimates  for  future  taxable  profits  exclude  tax  deductions  resulting  from  the  reversal  of  deductible  temporary  differences.  

-­‐ An  entity  assesses  a  deferred  tax  asset  in  combination  with  other  deferred  tax  assets.  Where   tax   law   restricts   the   utilisation   of   tax   losses,   an   entity   would  assess   a  deferred   tax   asset   in   combination  with  other  deferred   tax   assets  of  the  same  type.  

Accounting  periods  beginning  on  or  after  1  January  2017  

IAS  40   Amend   IAS   40   Investment   Property   to   state   that   and   entity   shall   transfer   a  property   to,   or   from,   investment   property   when,   and   only   when,   there   is  evidence  of  a  change  in  use.  A  change  of  use  occurs  if  property  meets,  or  ceases  to   meet,   the   definition   of   investment   property.   A   change   in   management’s  intentions   for   the   use   of   a   property   by   itself   does   not   constitute   evidence   of   a  change   in   use.   The   list   of   examples   of   evidence   is   now   presented   as   a   non-­‐exhaustive  list  of  examples  instead  of  the  previous  exhaustive  list.  

Accounting  periods  beginning  on  or  after  1  January  2018  

Various   Annual   Improvements   to   IFRS   Standards   2014-­‐2016   makes   relevant  amendments  to  the  following  standard:  

IFRS   12   –   Clarifies   the   scope   of   the   standard   by   specifying   that   the   disclosure  requirements   in   the  standard,  except   for   those   in  paragraphs  B10-­‐B16,  apply   to  an   entity’s   interests   listed   in   paragraph   5   that   are   classified   as   held   for   sale,   as  held  for  distribution  or  as  discontinued  operations  in  accordance  with  IFRS  5.  

Accounting  periods  beginning  on  or  after  1  January  2017  

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F-­‐13  

The  Group  is  currently  assessing  whether  these  changes  will   impact  the  consolidated  financial  statements  in  the  period  of  initial  application.   Regarding   IFRS   15,   the  Group   is   currently   assessing   its   revenue   streams   and   expects   to   have   some   impact   on   the  financial  statements  in  relation  to  its  revenue  from  real  estate  construction.  Regarding  IFRS  16,  the  Group  is  currently  looking  at  all  its   lease   contracts   and   expects   some   additional   property,   plant   and   equipment   as  well   as   financial   liabilities   recognised   on   its  statement  of  financial  position  on  first-­‐time  application  of  the  Standard.  Other  than  that,  the  Group  does  not  expect  any  major  changes  from  the  other  new  or  amended  Standards.  

 

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).  

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.    

The  principal  accounting  policies  are  set  out  below.  

3.3  Basis  of  consolidation  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  when  the  Company  has  power  over  the  investee,  is  exposed,  or  has  rights,  to  variable  returns  from  its  involvement  with  the  investee  and  has  the  ability  to  use  its  power  to  affect  its  returns  

The  Company  reassesses  whether  or  not  it  controls  an  investee  if  facts  and  circumstances  indicate  that  there  are  changes  to  one  or  more  of  the  three  elements  of  control  listed  above.  

When  the  Company  has   less  than  a  majority  of  the  voting  rights  of  an   investee,   it  has  power  over  the   investee  when  the  voting  rights   are   sufficient   to   give   it   the   practical   ability   to   direct   the   relevant   activities   of   the   investee   unilaterally.   The   Company  considers  all  relevant  facts  and  circumstances  in  assessing  whether  or  not  the  Company’s  voting  rights  in  an  investee  are  sufficient  to  give  it  power,  including:  

– The  size  of  the  Company’s  holding  of  voting  rights  relative  to  the  size  and  dispersion  of  holdings  of  the  other  vote  holders;  

– Potential  voting  rights  held  by  the  Company,  other  vote  holders  or  other  parties;  

– Rights  arising  from  other  contractual  arrangements;  and  

– Any  additional  facts  and  circumstances  that  indicate  that  the  Company  has,  or  does  not  have,  the  current  ability  to  direct  the  relevant  activities  at  the  time  that  decisions  need  to  be  made,  including  voting  patterns  at  previous  shareholders’  meetings.  

Consolidation  of  a  subsidiary  begins  when  the  Company  obtains  control  over  the  subsidiary  and  ceases  when  the  Company  loses  control  of  the  subsidiary.  Specifically,  income  and  expenses  of  a  subsidiary  acquired  or  disposed  of  during  the  year  are  included  in  the  consolidated  statement  of  profit  or  loss  and  other  comprehensive  income  from  the  date  the  Company  gains  control  until  the  date  when  the  Company  ceases  to  control  the  subsidiary.  

Profit  or  loss  and  each  component  of  other  comprehensive  income  are  attributed  to  the  owners  of  the  Company  and  to  the  non-­‐controlling   interests.   Total   comprehensive   income  of   subsidiaries   is   attributed   to   the   owners   of   the  Company   and   to   the   non-­‐controlling  interests  even  if  this  results  in  the  non-­‐controlling  interests  having  a  deficit  balance.  

When  necessary,  adjustments  are  made  to  the  financial  statements  of  a  group  entity  to  bring  its  accounting  policies  into  line  with  the  Group’s  accounting  policies.  

All   intra-­‐group  assets  and   liabilities,  equity,   income,  expenses  and  cash   flows   relating   to   transactions  between  members  of   the  Group  are  eliminated  in  full  on  consolidation.  

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  or  receivable  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  

F-­‐14  

accounting  under  IFRS  9  Financial  Instruments  or,  when  applicable,  the  cost  on  initial  recognition  of  an  investment  in  an  associate  or  a  jointly  controlled  entity.  

3.4  Business  combinations  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  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  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.  

Business  combinations  that  took  place  prior  to  1  January  2010  were  accounted  for  in  accordance  with  the  previous  version  of  IFRS  3.  The  policy  described  above  is  applied  to  all  business  combinations  that  took  place  on  or  after  January  2010.  

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   carrying   amount   of   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.  

3.5  Investments  in  associates  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.    

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  

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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.  

3.6  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  3.4)  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  profit  or  loss  in  the  consolidated  statement  of  comprehensive  income.  An  impairment  loss  recognised  for  goodwill  is  not  reversed  in  subsequent  periods.  

The  Group’s  policy  for  goodwill  arising  on  the  acquisition  of  an  associate  is  described  in  note  3.5.  

3.7  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  information.  

Accounting  policies   Segments  classified  by  type  of  activity  

3.7.1      Revenue  on  sale  of  land   Sale  of  land  

3.7.2      Revenue  from  agreements  for  construction  of  real  estate   Real  estate  and  construction  

3.7.3      Construction  revenue   Real  estate  and  construction  

3.7.4      Revenue  from  the  rendering  of  services  

Hotels    

Destination  management  

Other  operations  

3.7.5      Dividend  and  interest  income   Other  operations  

3.7.6      Rental  income   Other  operations  

 

3.7.1  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.  

3.7.2  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  3.7.3  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  3.7.3).  

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.  

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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.  

3.7.3  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,  their  amount  can  be  measured  reliably  and  its  receipt  is  considered  probable.  

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.  

When  contract  costs  incurred  to  date  plus  recognized  profits  less  recognized  losses  exceed  progress  billings,  the  surplus  is  shown  as  amounts  due  from  customers  for  contract  work.  For  contracts  where  progress  billings  exceed  contract  costs   incurred  to  date  plus   recognized   profits   less   recognized   losses,   the   surplus   is   shown   as   amounts   due   to   customers   for   contract  work.   Amounts  received  before   the   related  work   is  performed  are   included   in   the  consolidated  statement  of   financial  position,  as  a   liability,  as  advances   received.   Amounts   billed   for   work   performed   but   not   yet   paid   by   the   customer   are   included   in   the   consolidated  statement  of  financial  position  under  trade  and  other  receivables.  

Construction  contract  revenue  comprises  revenue  arising  from  finishing  of  sold  units,  extra  works  requested  by  customers  and  any  construction  agreement  with  third  parties.  

3.7.4  Revenue  from  the  rendering  of  services  Revenue  from  services  is  recognised  in  the  accounting  periods  in  which  the  services  are  rendered.  

3.7.5  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.  

3.7.6  Rental  income  The  Group’s  policy  for  recognition  of  revenue  from  operating  leases  is  described  in  3.8.1.    

3.7.7  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,   such   as   corporate   companies,   holding   companies   and   start   up  companies.  Companies  providing  these  services  are  marked  as  HQ  in  the  subsidiaries'  list  in  note  19.  

   

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3.8  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.  

3.8.1  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  straight-­‐line  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.  

3.8.2  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  3.10  below).  Contingent  rentals  are  recognised  as  expenses  in  the  periods  in  which  they  are  incurred.  

If   a   sale   and   leaseback   transaction   results   in   a   finance   lease,   the   asset   is   recognized   at   its   previous   carrying   amount   and   any  gain/loss  recognized  over  the  lease  term.  In  case  of  a  loss,  management  assesses  whether  the  asset  is  impaired.  

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.  

3.9  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  monetary   items   that   qualify   as   hedging   instruments   in   transactions   entered   into   to  hedge   certain  foreign  currency  risks  (see  3.22.1  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,  or  a  disposal  involving  loss  of  significant  influence  over  an  associate  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   of   a   subsidiary   that   does   not   result   in   the   Group   losing   control   over   the   subsidiary,   the  proportionate  share  of  accumulated  exchange  differences  are  re-­‐attributed  to  non-­‐controlling  interests  and  are  not  recognized  in  

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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.    

The  exchange  rates  for  the  major  foreign  currencies  against  CHF  relevant  to  the  annual  consolidated  financial  statements  were:  

Currency  table  2016   2015  

Average   Year  end   Average   Year  end  

1  EGP  Egyptian  Pound   0.1047   0.0566   0.1248   0.1267  

1  USD  US  Dollar   0.9848   1.0190   0.9625   0.9922  

1  EUR  Euro   1.0899   1.0713   1.0682   1.0807  

1  OMR  Oman  Rial   2.5551   2.6427   2.4986   2.5749  

1  AED  United  Arab  Emirates  Dirham   0.2681   0.2774   0.2620   0.2691  

1  MAD  Moroccan  Dirham   0.1002   0.1006   0.0986   0.0999  

1  JOD  Jordanian  Dinar   1.3889   1.4385   1.3574   1.3983    

3.10  Borrowing  costs  Borrowing   costs   directly   attributable   to   the   acquisition,   construction   or   production   of   qualifying   assets,   which   are   assets   that  necessarily  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.    

All  other  borrowing  costs  are  recognised  in  profit  or  loss  in  the  period  in  which  they  are  incurred.  

As   the   financing   activity   is   co-­‐ordinated   centrally   and   generally   by   the   parent   and   some   of   the   main   subsidiaries,   the   group  determines  the  amount  of  borrowing  costs  eligible  for  capitalisation  by  applying  a  capitalisation  rate  to  the  expenditures  on  that  asset.  The  group  includes  all  borrowings  of  the  parent  and  its  subsidiaries  when  computing  the  weighted  average  of  the  borrowing  costs  applicable  to  the  borrowings  that  are  outstanding  during  the  period  other  than  borrowings  made  specifically  for  the  purpose  of  obtaining  a  qualifying  asset.  

The   amount   of   borrowing   costs   that   an   entity   capitalises   during   the   period   shall   not   exceed   the   amount   of   borrowing   costs   it  incurred  during  that  period,  provided  that  the  carrying  amount  of  the  qualifying  asset  on  which  eligible  borrowing  costs  have  been  capitalized  does  not  exceed  its  recoverable  amount  (being  the  higher  of  fair  value  less  costs  to  sell  or  amount  in  use  for  that  asset).  

3.11  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   are   recognized  immediately  through  other  comprehensive  income,  whereas  past  service-­‐costs  (vested  and  unvested)  are  recognized  immediately  in  profit  or  loss.  

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The  retirement  benefit  obligation  recognised  in  the  consolidated  statement  of  financial  position  represents  the  present  value  of  the  defined  benefit  obligation  reduced  by  the  fair  value  of  plan  assets.  Any  asset  resulting  from  this  calculation  is   limited  to  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.  

3.12  Taxation  Income  tax  expense  represents  the  sum  of  the  tax  currently  payable  and  deferred  tax.  

3.12.1  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.  

3.12.2  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.  

3.12.3  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.    

3.13  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   note   3.10.   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.  

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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.  However,  when  there  is  no  reasonable  certainty  that  ownership  of  the  leased  asset  will  be  obtained  by  the  end  of  the  lease  term,  assets  are  depreciated  over  the  shorter  of  the  lease  term  and  their  useful  lives.  

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  net  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   20  –  50  years  

Plant  and  equipment   4  –  25  years  

Furniture  and  fixtures   3  –  20  years  

3.14  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   price   that   would   be   received   to   sell   an   asset   in   an   orderly   transaction   between   market   participants   at   the  measurement  date.  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  or  internal  valuations.    

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.  

3.15  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.  

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.  A  reversal  of  an  impairment  loss  is  recognized  immediately  in  profit  or  loss.  

3.16  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).  

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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   item-­‐by-­‐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.  

3.17  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.  

3.18  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   (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.  

3.19  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.  

All  recognised  financial  assets  are  subsequently  measured  in  their  entirety  at  either  amortised  cost  or  fair  value,  depending  on  the  classification  of  the  financial  assets.  

3.19.1  Classification  of  financial  assets  Debt  instruments  that  meet  the  following  conditions  are  subsequently  measured  at  amortised  cost   less  impairment  loss  (except  for  debt  investments  that  are  designated  as  at  fair  value  through  profit  or  loss  on  initial  recognition):  

– the  asset  is  held  within  a  business  model  whose  objective  is  to  hold  assets  in  order  to  collect  contractual  cash  flows;  and  

– the  contractual   terms  of   the   instrument  give   rise  on  specified  dates   to  cash   flows   that  are  solely  payments  of  principal  and  interest  on  the  principal  amount  outstanding.  

All  other  financial  assets  are  subsequently  measured  at  fair  value.  

3.19.2  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  measured  subsequently  at  amortised  cost.  Interest  income  is  recognised  in  profit  or  loss  and  is  included  in  the  “investment  income”  line  item.  

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3.19.3  Financial  assets  at  fair  value  through  other  comprehensive  income  (FVTOCI)  On   initial   recognition,   the   Group   can   make   an   irrevocable   election   (on   an   instrument-­‐by-­‐instrument   basis)   to   designate  investments   in   equity   instruments   as   at   FVTOCI.   Designation   at   FVTOCI   is   not   permitted   if   the   equity   investment   is   held   for  trading.  

A  financial  asset  is  held  for  trading  if:  

– it  has  been  acquired  principally  for  the  purpose  of  selling  it  in  the  near  term;  or  

– on   initial   recognition   it   is   part   of   a   portfolio   of   identified   financial   instruments   that   the  Group  manages   together   and   has  evidence  of  a  recent  actual  pattern  of  short-­‐term  profit-­‐taking;  or  

– it  is  a  derivative  that  is  not  designated  and  effective  as  a  hedging  instrument  or  a  financial  guarantee.  

Investments   in   equity   instruments   at   FVTOCI   are   initially  measured  at   fair   value  plus   transaction   costs.  Subsequently,   they  are  measured  at   fair   value  with  gains   and   losses   arising   from  changes   in   fair   value   recognised   in  other   comprehensive   income  and  accumulated  in  the  investments  revaluation  reserve.  The  cumulative  gain  or  loss  will  not  be  reclassified  to  profit  or  loss  on  disposal  of  the  investments.  

The  Group  has  designated  all  investments  in  equity  instruments  that  are  not  held  for  trading  as  at  FVTOCI  on  initial  application  of  IFRS  9.  

Dividends   on   these   investments   in   equity   instruments   are   recognised   in   profit   or   loss   when   the   Group’s   right   to   receive   the  dividends  is  established  in  accordance  with  IAS  18  Revenue.  Dividends  earned  are  recognised  in  profit  or  loss  and  are  included  in  the  ‘investment  income’  line  item.  

3.19.4  Financial  assets  at  fair  value  through  profit  or  loss  (FVTPL)  Investments   in   equity   instruments   are   classified   as   at   FVTPL,   unless   the   Group   designates   an   investment   that   is   not   held   for  trading  as  at  fair  value  through  other  comprehensive  income  (FVTOCI)  on  initial  recognition.  

Debt   instruments   that   do   not   meet   the   amortised   cost   are  measured   at   FVTPL.   In   addition,   debt   instruments   that   meet   the  amortised  cost  criteria  but  are  designated  as  at  FVTPL  are  measured  at  FVTPL.  A  debt  instrument  may  be  designated  as  at  FVTPL  upon   initial   recognition   if   such  designation  eliminates  or   significantly   reduces  a  measurement  or   recognition   inconsistency   that  would  arise  from  measuring  assets  or  liabilities  or  recognising  the  gains  and  losses  on  them  on  different  bases.  The  Group  has  not  designated  any  debt  instrument  as  at  FVTPL.  

Debt  instruments  are  reclassified  from  amortised  cost  to  FVTPL  when  the  business  model  is  changed  such  that  the  amortised  cost  criteria   are   no   longer   met.   Reclassification   of   debt   instruments   that   are   designated   as   at   FVTPL   on   initial   recognition   is   not  allowed.  

Financial   assets   at   FVTPL   are  measured   at   fair   value   at   the   end   of   each   reporting   period,   with   any   gains   or   losses   arising   on  remeasurement   recognised   in  profit   or   loss.  The  net  gain  or   loss   recognised   in  profit   or   loss   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  40.12.  

Interest  income  on  debt  instruments  as  at  FVTPL  is  included  in  the  net  gain  or  loss  described  above.  

Dividend  income  on  investments  in  equity  instruments  at  FVTPL  is  recognised  in  profit  or  loss  when  the  Group's  right  to  receive  the  dividends  is  established  in  accordance  with  IAS  18  Revenue  and  is  included  in  the  net  gain  or  loss  as  described  above.  

3.19.5  Impairment  of  financial  assets  Financial  assets  that  are  measured  at  amortised  cost  are  assessed  for  impairment  at  the  end  of  each  reporting  period.  

Financial   assets   are   considered   to   be   impaired   when   there   is   objective   evidence   that,   as   a   result   of   one   or   more   events   that  occurred  after  the  initial  recognition  of  the  financial  assets,  the  estimated  future  cash  flows  of  the  asset  have  been  affected.  

Objective  evidence  of  impairment  could  include:  

– significant  financial  difficulty  of  the  issuer  or  counterparty;  or  

– breach  of  contract,  such  as  a  default  or  delinquency  in  interest  or  principal  payments;  or  

– 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  asset,  such  as  trade  receivables,  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  of  60  days,  as  well  as  observable  changes   in  national  or   local  economic  conditions  that  correlate  with  default  on  receivables.  

The  amount  of   the   impairment   loss   recognised   is   the  difference  between   the  asset's   carrying  amount  and   the  present  value  of  estimated  future  cash  flows  reflecting  the  amount  of  collateral  and  guarantee,  discounted  at  the  financial  asset's  original  effective  interest  rate.  

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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.  

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.  

3.19.6  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  when   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  derecognition  of  a   financial  asset  measured  at  amortised  cost,   the  difference  between   the  asset’s   carrying  amount  and   the  sum  of  the  consideration  received  and  receivable  is  recognised  in  profit  or  loss.  

On   derecognition   of   a   financial   asset   that   is   classified   as   FVTOCI,   the   cumulative   gain   or   loss   previously   accumulated   in   the  investments  revaluation  reserve  is  not  reclassified  to  profit  or  loss,  but  is  reclassified  to  retained  earnings.  

3.20  Financial  liabilities  and  equity  instruments  3.20.1  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  with  the  substance  of  the  contractual  arrangements  and  the  definitions  of  a  financial  liability  and  an  equity  instrument.  

3.20.2  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.  

Repurchase  of  the  Company’s  own  equity  instruments  is  recognised  and  deducted  directly  in  equity.  No  gain  or  loss  is  recognised  in  profit  or  loss  on  the  purchase,  sale,  issue  or  cancellation  of  the  Company’s  own  equity  instruments.  

3.20.3  Financial  liabilities  All  financial  liabilities  are  subsequently  measured  at  amortised  cost  using  the  effective  interest  method  or  at  FVTPL.  

A  financial  liability  is  classified  as  current  liability  when  it  satisfies  any  of  the  following  criteria:  

-­‐ It  is  expected  to  be  settled  in  the  entity’s  normal  operating  cycle  

-­‐ It  is  held  primarily  for  the  purposes  of  trading;  

-­‐ It  is  due  to  be  settled  within  twelve  months  after  the  reporting  period;  

-­‐ The   entity   does   not   have   an   unconditional   right   to   defer   settlement   of   the   liability   for   at   least   twelve   months   after   the  reporting  period.  

All  other  financial  liabilities  are  classified  as  non-­‐current.  

However,   financial   liabilities   that   arise   when   a   transfer   of   a   financial   asset   does   not   qualify   for   derecognition   or   when   the  continuing   involvement   approach   applies,   financial   guarantee   contracts   issued   by   the  Group,   and   commitments   issued   by   the  

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Group  to  provide  a   loan  at  below-­‐market   interest   rate  are  measured   in  accordance  with   the  specific  accounting  policies  set  out  below.  

Financial  liabilities  subsequently  measured  at  amortised  cost  

Financial  liabilities  that  are  not  held-­‐for-­‐trading  and  are  not  designated  as  at  FVTPL  are  measured  at  amortised  cost  at  the  end  of  subsequent  accounting  periods.  The  carrying  amounts  of  financial  liabilities  that  are  subsequently  measured  at  amortised  cost  are  determined  based  on  the  effective  interest  method.  Interest  expense  that  is  not  capitalised  as  part  of  costs  of  an  asset  is  included  in  the  'finance  costs'  line  item.  

Derecognition  of  financial  liabilities  

The  Group  derecognises  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,  including  any  non-­‐cash  assets  transferred  or  liabilities  assumed,  is  recognised  in  profit  or  loss.  

3.21  Derivative  financial  instruments  If   required,   the   Group   enters   into   derivative   financial   instruments  mainly   to  manage   its   exposure   to   interest   rate   and   foreign  exchange  rate  risk.  Derivatives  are   initially   recognised  at   fair  value  at  the  date  the  derivative  contracts  are  entered   into  and  are  subsequently  re-­‐measured  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.  

3.22  Assets  held  for  sale  Non-­‐current  assets  and  disposal  groups  are  classified  as  held  for  sale  if  their  carrying  amount  will  be  recovered  principally  through  a  sale  transaction  rather  than  through  continuing  use.  This  condition  is  regarded  as  met  only  when  the  sale  is  highly  probable  and  the  non-­‐current  asset  (or  disposal  group)  is  available  for  immediate  sale  in  its  present  condition.  Management  must  be  committed  to  the  sale,  which  should  be  expected  to  qualify  for  recognition  as  a  completed  sale  within  one  year  from  the  date  of  classification.  

When  a  Group  entity  acquires  a  non-­‐current  asset  (or  disposal  group)  exclusively  with  a  view  to  its  subsequent  disposal,  it  classifies  the  non-­‐current  asset  (or  disposal  group)  as  held  for  sale  at  the  acquisition  date  only  if  the  one-­‐year  requirement  above  is  met  and  it   is   highly  probable   that   the  other   criteria   above   that   are  not  met  at   that  date  will   be  met  within  a   short  period   following   the  acquisition.  

When   the   Group   is   committed   to   a   sale   plan   involving   loss   of   control   of   a   subsidiary,   all   of   the   assets   and   liabilities   of   that  subsidiary  are  classified  as  held  for  sale  when  the  criteria  described  above  are  met,  regardless  of  whether  the  Group  will  retain  a  non-­‐controlling  interest  in  its  former  subsidiary  after  the  sale.  

Non-­‐current  assets  (and  disposal  groups)  classified  as  held  for  sale  are  measured  at  the   lower  of  their  previous  carrying  amount  and  fair  value  less  costs  to  sell.  

When  the  above  criteria  required  for  the  held  for  sale  classification  are  no  longer  met,  the  Group  ceases  to  classify  the  asset  (or  disposal  group)  as  held  for  sale.  At  that  date,  the  Group  measures  any  non-­‐current  asset  that  ceases  to  be  classified  as  held  for  sale  (or  ceases  to  be  included  in  a  disposal  group  classified  as  held  for  sale)  at  the  lower  of:  

– Its   carrying   amount   before   the   asset   (or   disposal   group)   was   classified   as   held   for   sale,   adjusted   for   any   depreciation,  amortization  or  revaluations  that  would  have  been  recognized  had  the  asset  (or  disposal  group)  not  been  classified  as  held  for  sale;  and  

– Its  recoverable  amount  at  the  date  of  subsequent  decision  not  to  sell.  

The  Group  includes  any  required  adjustment  to  the  carrying  amount  of  a  non-­‐current  asset  (or  disposal  group),  that  ceases  to  be  classified   as   held   for   sale,   in   profit   or   loss   from   continuing   operations   in   the   period   in   which   the   criteria   of   held   for   sale  classification   are   no   longer  met.   The  Group   presents   that   adjustment   in   the   same   caption   in   the   statement   of   comprehensive  income  used  to  present  any  gain  or  loss  recognized  on  the  remeasurement  of  that  non-­‐current  asset  (or  disposal  group)  that  had  been   previously   classified   as   held   for   sale   provided   that   it   had   not  met   the   definition   of   a   discontinued   operation   upon   initial  classification  as  held-­‐for-­‐sale.  

   

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Comparative  figures  in  the  financial  statements  for  prior  periods  presented  are  not  restated  as  a  result  of  the  change  in  the  plan  to  sell  unless  the  non-­‐current  asset  (or  disposal  group)  had  previously  met  the  definition  of  a  discontinued  operation,  in  which  case,  the  results  of  operations  of  the  component  previously  presented  in  discontinued  operations  is  reclassified  and  included  in  income  from   continuing  operations   for   the   prior   period  presented   in   the   statement   of   comprehensive   income.   This   also   applies   to   the  presentation  of  the  statement  of  cash  flows.  

3.23   Share-­‐based  payment  arrangements  3.23.1   Share-­‐based  payment  transactions  of  the  Parent  Company  Share-­‐based   payment   transactions   in   which   the   terms   of   the   arrangement   provide   the   entity   with   the   choice   to   settle   the  transaction  in  cash  (or  other  assets)  or  in  equity  instruments  issued  by  the  entity,  are  accounted  for  as  a  cash-­‐settled  share-­‐based  payment  transaction  if,  and  to  the  extent  that,  the  entity  has  incurred  a  liability  to  settle  in  cash  or  other  assets,  or  as  an  equity-­‐settled  share-­‐based  payment  transaction  if,  and  to  the  extent  that,  no  such  liability  has  been  incurred.    

Share-­‐based  payment  arrangements  whose  terms  provide  the  Company  with  the  choice  to  settle  the  transaction  in  cash  or,  at  its  discretion,  in  its  own  equity  shares  issued  to  employees  are  accounted  for  as  equity-­‐settled  and  measured  at  the  fair  value  of  the  contingent  consideration  by  reference  to  the  market  price  of  the  Company's  equity  shares  at  the  grant  date.  Details  regarding  the  determination  of  the  fair  value  of  equity-­‐settled  share-­‐based  payment  transaction  are  set  out  in  note  41.  

The  fair  value  determined  at  the  grant  date  of  the  equity-­‐settled  share-­‐based  payments  is  expensed  on  a  straight-­‐line  basis  over  the  vesting  period,  based  on  the  Group's  estimate  of  equity  instruments  that  will  eventually  vest,  with  a  corresponding  increase  in  equity.  At  the  end  of  each  reporting  period,  the  Group  revises  its  estimate  of  the  number  of  equity  instruments  expected  to  vest.  The  impact  of  the  revision  of  the  original  estimate,  if  any,  is  recognized  in  profit  or  loss  such  that  the  cumulative  expense  reflects  the  revised  estimate,  with  a  corresponding  adjustment  to  the  equity-­‐settled  share-­‐based  payment  reserve  in  equity.  

Upon  settlement  of  a  share-­‐based  payment  transaction  in  which  the  terms  of  the  arrangement  provide  the  entity  with  a  choice  of  settlement,  then:  

– if   the   entity   elects   to   settle   in   cash,   the   cash   payment   is   accounted   for   as   the   repurchase   of   an   equity   interest   (i.e.   as   a  deduction  from  equity,  except  as  noted  in  (c)  below.  

– if   the   entity   elects   to   settle   by   issuing   equity   instruments,   no   further   accounting   is  made   (other   than   a   transfer   from   one  component  of  equity  to  another,  if  necessary),  except  as  noted  in  (c)  below.  

– if  the  entity  elects  the  settlement  alternative  with  the  higher  fair  value,  as  at  the  date  of  settlement,  an  additional  expense  is  recognized  for  the  excess  value  given  (i.e.  the  difference  between  the  cash  paid  and  the  fair  value  of  the  equity   instruments  that  would   otherwise   have   been   issued,   or   the   difference   between   the   fair   value   of   the   equity   instruments   issued   and   the  amount  of  cash  that  would  otherwise  have  been  paid,  whichever  is  applicable.    

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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,  management  is  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),  that  management  has  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  and  IFRIC   15   Agreements   for   the   Construction   of   Real   Estates.   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  and  IFRIC   15   -­‐   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  reporting  period.  

Given   the   structure   of   the   real   estate   sale   contracts   and   the   application   of   IAS   18   and   IFRIC   15   as   described   above,   revenue  recognition  from  residential  construction  projects  can  occur  in  independent  stages  which  consist  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  Deferred  taxation  on  investment  property  For   the   purposes   of   measuring   deferred   tax   liabilities   or   deferred   tax   assets   arising   from   investment   properties  management  concluded  that  the  Group’s  investment  properties  are  held  under  a  business  model  whose  objective  is  to  consume  substantially  all  of  the  economic  benefits  embodied  in  the  investment  properties  over  time,  rather  than  through  sales.  Therefore,  in  determining  the  Group’s   deferred   taxation   on   investment   properties,  management   has   determined   that   the   presumption   that   the   carrying  amounts  of  investment  properties  measured  using  the  fair  value  model  are  recovered  entirely  through  sale  is  rebutted.  As  a  result,  the  Group  has  recognised  deferred  taxes  on  changes  in  fair  value  of  investment  properties.  

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  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   2016   at   CHF   762,596,957   and   CHF   78,551,111   respectively   (31   December   2015:   CHF   940,356,468   and  CHF  100,678,830).  

In  2016,  the  impairment  reviews  resulted  in  total  impairment  losses  of  CHF  18.6  million  on  property  under  construction  (2015.  CHF  9.1  million   on   property   under   construction).   The   impairment   reviews   in   2016   and   2015   did   not   result   in   any   other   impairment  losses  of  property,  plant  and  equipment  or  investments  in  associates.    

Management  is  aware  that  the  slow-­‐down  in  processes  and  logistics  still  impacts  the  business  operations  considerably.  Therefore,  they  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  management   is   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.    

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4.2.2  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  762,596,957  (31  December  2015:  CHF  940,356,468).  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  experiences  with  comparable  assets.  A  change  in  the  useful  life  of  any  asset  may  affect  the  amount  of  depreciation  that  is  to  be  recognized  in  profit  or  loss  for  future  periods.  

4.2.3  Provisions    The   carrying   amount   of   provisions   at   the   end   of   the   current   reporting   period   is   CHF   68,626,934   (31   December   2015:  CHF  82,521,775).  This  amount   is  based  on  estimates  of   future  costs   for   infrastructure  completion,   legal  cases,  government  fees,  employee  benefits  and  other  charges  including  taxes  in  relation  to  the  Group’s  operations  (see  note  35).  As  the  provisions  cannot  be   determined   exactly,   the   amount   could   change   based   on   future   developments.   Changes   in   the   amount   of   provisions   due   to  change  in  management  estimates  are  accounted  for  on  a  prospective  basis  and  recognized  in  the  period  in  which  the  change  in  estimates  arises.  

4.2.4  Impairment  of  trade  and  other  receivables  An   allowance   for   doubtful   receivables   is   recognized   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  18,340,388  (31  December  2015:  CHF  20,959,808)  (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.  

4.2.5  Classification  and  valuation  of  investment  property  Generally   real   estate   units   are   constructed   either   for   the   Group’s   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  measured  at   the   fair   value  obtained   from   independent,  third  party  valuation  experts.  The  fair  value  of   investment  properties  at  31  December  2016  is  CHF  5,501,334  (31  December  2015:  CHF  10,981,552).  

The   fair   values  at   31  December  2016  were  determined  based  on  an   internal   valuation  model.  The   last  external   valuations  were  prepared  as  at  31  December  2012  by  Fincorp,  an  accredited  valuation  specialist   in  Egypt.  Note  17  provides  detailed   information  about  the  valuation  techniques  applied  and  the  key  assumptions  used   in  the  determination  of  the  fair  value  of  each   investment  property.  

4.2.6  Net  realisable  value  of  inventory  Inventory  mainly   includes   real   estate   construction  work  under  progress  which   is   recognised  at   cost  or  net   realisable   value.  The  majority  of  real  estate  under  construction  (approximately  three  quarters)   is  already  sold  at  market  prices  which  are  significantly  higher  than  construction  cost.  Therefore,  the  estimation  uncertainty  only  relates  to  the  unsold  real  estate  under  construction.  In  general,  the  profit  margins  on  these  real  estate  projects  are  high  and  management  currently  does  not  expect  any  of  these  projects  to  be  sold  below  cost  except  for  the  following:  

– In  2016,  an   impairment  of  CHF  13.5  million  was  made   in  relation  to   inventory  of  development  projects.   In  2015,  none  of  the  inventory  was  impaired  

4.2.7  Infrastructure  cost  The  Group  has  an  obligation  under  the  terms  of  its  sale  and  purchase  agreements  to  develop  the  infrastructure  of  the  sold  land.  Infrastructure  cost  is  deemed  to  form  part  of  the  cost  of  revenue  and  is  based  on  management  estimate  of  the  future  budgeted  costs  to  be  incurred  in  relation  to  the  project  including,  but  are  not  limited  to,  future  subcontractor  costs,  estimated  labour  costs,  and  planned  other  material  costs.  The  provision  for  infrastructure  costs  requires  the  Group’s  management  to  revise  its  estimate  of  such  costs  on  a  regular  basis  in  light  of  current  market  prices  for  inclusion  as  part  of  the  cost  of  revenue.    

4.2.8  Liquidity  shortages  and  related  uncertainties  For  further  details  on  management’s  plans  to  manage  liquidity  shortages  and  related  uncertainty  please  refer  to  note  27.1.  

4.2.9  Minimum  building  obligations  One  part  of  the  Group’s  business  is  to  acquire  land  for  the  development  of  tourism  projects.  Out  of  these  business  opportunities  often  no  legally  binding  commitments  incur  however  the  Group  has  unbinding  business  opportunity  commitments  in  relation  to  their  projects.  These  contingent  liabilities  are  further  explained  in  note  45.1.  Due  to  the  complexity  of  the  projects  and  the  ongoing  negotiations,  estimation  of  the  contingent  liability  involves  a  high  degree  of  uncertainty.  

   

F-­‐29  

5  THE  GROUP  AND  MAJOR  CHANGES  IN  GROUP  ENTITIES    The  Group  comprises  the  Parent  Company  and  its  subsidiaries  operating  in  different  countries.  

Except  for  the  acquisition  of  Mozn  Investment  &  Tourism  S.A.E.  (“Mozn”),  the  entity  owning  the  Citadel  Azur  hotel,   in  2016  (for  further  details  see  note  37),  disposal  of  15%  of  OHD  in  2015  (for  further  details  see  note  32)  and  the  disposal  of  Golden  Beach  for  Hotels  Company  in  Jordan  in  2015  (for  further  details  see  note  38)  there  have  been  no  major  changes  in  the  group  structure  in  2016  and  2015.    

Orascom  Hotels  &  Development  SAE  (“OHD”)  remains  the  principal  operating  subsidiary  and  is  located  in  Egypt.  

The  group  controls  its  subsidiaries  directly  and  indirectly.    

 

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

 CHF   2016   2015  

Revenue  from  the  rendering  of  services  and  rental  income   169,916,662   172,082,609  

Revenue  from  agreements  for  construction  of  Real  Estate  and  construction  revenue   65,432,308   66,387,282  

Revenue  on  sale  of  land   2,012,534   67,594,277  

 TOTAL   237,361,504   306,064,168    

7  SEGMENT  INFORMATION    

7.1  Products  and  services  from  which  reportable  segments  derive  their  revenues  The  Group  has   four   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.  

–   Destination  management  –  Include  provision  of  facility  and  infrastructure  services  at  operational  resorts  and  towns.  

The   real   estate   and   construction   segment   includes   two   lines   of   business   each   of   which   is   considered   as   a   separate   operating  segment.  For  financial  statements  presentation  purposes,  these  individual  operating  segments  have  been  aggregated  into  a  single  operating  segment  taking  into  account  the  following  factors:  

–   These  operating  segments  have  similar  long-­‐term  gross  profit  margins;  

–   The  nature  of  the  products  and  production  processes  are  similar.  

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  2016  or  2015.      

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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  

2016   2015  

Hotels     Hotels  managed  by  international  chains   66,032,406   61,483,056  

  Hotels  managed  by  local  chains   16,139,841   22,839,021  

  Hotels  managed  by  the  Group   38,002,104   39,844,612  

    Segment  total     120,174,351   124,166,689  

Real  estate  and  construction   Tourism  real  estate   64,932,570   66,268,885  

  Construction  work   499,738   118,397  

    Segment  total     65,432,308   66,387,282  

Land  sales   Sales  of  land  and  land  rights   2,012,534   67,594,277  

Destination  management   Utilities  (e.g.  water,  electricity)   15,866,467   15,641,985  

Other  operations   Mortgage  (Real  estate  financing)   8,022,882   8,456,831  

  Sport  (Golf)   755,121   1,546,523  

  Rentals  (ii)   3,662,727   4,329,115  

  Hospital  services   3,718,242   4,053,539  

  Educational  services   2,120,816   2,279,333  

  Marina   4,568,022   3,400,256  

  Limousine   34,905   52,650  

  Laundry  services     28,444   45,334  

  Others   10,964,685   8,110,354  

    Segment  total     33,875,844   32,273,935  

TOTAL       237,361,504   306,064,168    (i) Rentals   include   income   from   investment  property  of  CHF  3,662,727   (2015:  CHF  4,242,564)  and   from  other   short   term   rent  

contracts  in  hotels,  marinas  and  golf  courses  of  CHF  0  (2015:  CHF  86,551).    

F-­‐31

 

7.2  Se

gmen

t  reven

ue  and

 results  

The  fo

llowing  is  an  an

alys

is  of  t

he  G

roup

’s  re

venu

e  an

d  re

sults

 from

 con

tinuing

 ope

ratio

ns  by  re

portab

le  seg

men

ts:  

CHF  

Total  seg

men

t  reven

ue  

Inter-­‐segm

ent  reven

ue  

Reven

ue  externa

l  customers  

Cost  of  reven

ue  

Dep

reciation  

Gross  profit/(loss)  

Segm

ent  result  

2016

 2015  

2016

 2015  

2016

 2015  

2016

 2015  

2016

 2015  

2016

 2015  

2016

 2015  

Hot

els  

121,24

8,44

8  12

4,55

4,97

9  (1,074

,097

)  (388

,290

)  12

0,17

4,35

1  12

4,16

6,68

9  (9

6,00

8,53

4)  

(109

,200

,529

)  (13,41

6,23

5)  

(17,35

0,12

9)  

10,749

,582

 (2

,383

,969

)  (2

4,83

3,86

0)  

(9,837

,873

)  

Real  estat

e  an

d  co

nstruc

tion  

72,560

,397

 89

,181

,710

 (7,128

,089

)  (2

2,79

4,42

7)  

65,432

,308

 66

,387

,282

 (4

8,53

9,73

6)  

(53,08

5,06

1)  

(134

,226

)  (148

,123

)  16

,758

,346

 13

,154

,098

 51

,245

,283

 21

,190

,436

 

Land

 sales

 1,33

1,41

8  67

,761

,513

 68

1,11

6  (167

,236

)  2,01

2,53

4  67

,594

,277

 (1,802

,755

)  (8

32,612

)  (6

86,887

)  (1,007

,706

)  (4

77,108

)  65

,753

,959

 24

,819

,389

 66

,885

,687

 

Des

tinat

ion  m

anag

emen

t  33

,356

,556

 34

,742

,779

 (17,49

0,08

9)  

(19,10

0,79

4)  

15,866

,467

 15

,641

,985

 (19,23

7,48

8)  

(17,28

0,78

6)  

(6,336

,559

)  (4

,935

,305

)  (9

,707

,580

)  (6

,574

,106

)  (11,92

6,56

1)  

(8,237

,361

)  

Oth

er  ope

ratio

ns  

43,343

,053

 44

,799

,534

 (9

,467

,209

)  (12,52

5,60

0)  

33,875

,844

 32

,273

,935

 (2

4,50

8,96

9)  

(28,64

6,93

9)  

(15,38

4,57

7)  

(2,466

,188

)  (6

,017

,702

)  1,16

0,80

9  (2

,510

,767

)  1,56

2,74

4  

 Total  

271,83

9,87

2  361,04

0,515  

(34,478,368)  

(54,976,347)  

237,361,504  

306,06

4,16

8  (190

,097,482

)  (209

,045,927)  

(35,958,48

4)  

(25,90

7,451)  

11,305,538  

71,110,791

 36,793,484

 71,563,633  

Una

llocated  item

s  1):  

   

   

   

   

   

   

   

Shar

e  of

 (los

ses)  of  a

ssoc

iate

s    

   

   

   

 (17,29

9,64

5)  

(19,43

6,96

4)  

Oth

er  gains

   

   

   

   

   

   

 2,90

1,39

3  6,82

0,57

0  

Oth

er  lo

sses

   

   

   

   

   

   

 (181

,316

,575

)  (18,17

1,75

0))  

Inve

stm

ent  inc

ome  

   

   

   

   

   

   

1,54

2,88

5  4,67

4,90

4  

Cent

ral  a

dministrat

ion  co

sts  an

d  dire

ctor

s’  salar

ies  

   

   

   

   

(46,71

0,87

8)  

(39,40

3,63

0)  

Fina

nce  co

sts  

   

   

   

   

   

   

(31,39

5,48

7)  

(24,39

0,40

6)  

Loss  before  tax  (con

tinu

ing  op

erations)  

   

   

   

   

(235,484

,823)  

(18,343,64

3)  

Inco

me  ta

x  ex

pens

es  

   

   

   

   

(8,351

,012

)  (4

,175

,658

)  

Loss  fo

r  the

 year  (continuing

 ope

ration

s)  

   

   

   

   

(243,835,835)  

(22,519,301)  

  1)  F

or  th

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ve  bee

n  alloca

ted  in  th

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releva

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ting  po

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portab

le  seg

men

ts  are

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me  as

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up’s  acc

ount

ing  po

licies  de

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ed  in

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e  3.  Seg

men

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 by  ea

ch  seg

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s’  salar

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sses

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s,  in

vestm

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ome,  oth

er  gains

 and

 loss

es,  finan

ce  cos

ts  and

 inco

me  ta

x  ex

pens

e,  as  includ

ed  

in  th

e  inte

rnal  m

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emen

t  rep

orts  th

at  are

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larly

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rd  of  D

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s.  This  m

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re  is

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n  an

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sess

men

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ent  p

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pt  fo

r  the

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irmen

t  los

s  of

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.6  m

illion  on

 pro

perty  un

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ction  of

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t  pro

jects  in  201

6  (2

015:  CHF  9.1  m

illion)

,  no  im

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s  in  re

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t  pro

perty,  plant

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15.  

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r,  an  im

pairm

ent  o

f  CHF  13

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illion  was

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e  in  re

latio

n  to

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ntor

y  of

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elop

men

t  pro

jects  in  201

6  (n

ote  23

).  Th

e  im

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ses  ha

ve  bee

n  alloca

ted  to

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al  estat

e  an

d  co

nstruc

tion  se

gmen

t.  In

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5,  no  su

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ntor

y.

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7.3  Segment  assets  and  liabilities  7.3.1  Segment  assets  and  liabilities  

CHF   31  December  2016   31  December  2015  

SEGMENT  ASSETS          

Hotels   482,382,904   649,751,820  

Real  estate  and  construction   468,610,543   659,273,746  

Land  sales   194,273,533   388,246,579  

Destination  management   79,635,393   147,741,223  

Other  operations   280,022,695   367,189,806  

Segment  assets  before  elimination   1,504,925,068   2,212,203,174  

Inter-­‐segment  elimination   (684,242,468)   (757,497,313)  

Segment  assets  after  elimination   820,682,600   1,454,705,861  

Unallocated  assets   397,435,806   353,907,573  

Assets  held  for  sale   67,230,735   -­‐  

CONSOLIDATED  TOTAL  ASSETS   1,285,349,141   1,808,613,434  

     

CHF   31  December  2016   31  December  2015  

SEGMENT  LIABILITIES      

Hotels   240,545,744   306,465,420  

Real  estate  and  construction   271,393,094   431,303,175  

Land  sales   52,001,900   106,015,849  

Destination  management   73,322,825   108,635,083  

Other  operations   277,579,803   390,806,172  

Segment  liabilities  before  elimination   914,843,366   1,343,225,699  

Inter-­‐segment  elimination   (522,967,523)   (766,678,121)  

Segment  liabilities  after  elimination   391,875,843   576,547,578  

Unallocated  liabilities   247,680,074   275,435,860  

Liabilities  directly  associated  with  assets  held  for  sale   54,118,893   -­‐  

CONSOLIDATED  TOTAL  LIABILITIES   693,674,810   851,983,438  

 For  the  purposes  of  monitoring  segment  performance  and  allocation  of  resources  between  segments,  all  assets  and  liabilities  are  allocated  to  reportable  segments  except  for  the  assets  of  holding  companies  or  companies  which  are  not  yet  operational.  Goodwill  is  allocated  to  reportable  segments  as  described  in  note  18.  

It   is  the  Group’s  policy  to  reassess  the  classification  of  certain  assets  and  liabilities  within  the  reporting  segments  once  a  certain  development  stage  of  the  destination  is  achieved.  In  2016  and  2015  no  such  transfers  were  made.  

7.3.2  Additions  to  non-­‐current  assets  

CHF   2016   2015  

Hotels   22,857,636   32,396,739  

Real  estate  and  construction   244,910   13,406,471  

Land  sales   -­‐   -­‐  

Destination  management   15,191,687   6,953,586  

Other  operations   3,897,173   15,120,040  

Unallocated   -­‐   -­‐  

TOTAL   42,191,406   67,876,836  

   

F-­‐33  

7.4  Geographical  information  The  Group  currently  operates  in  eight  principal  geographical  areas  –  Egypt,  Oman,  United  Arab  Emirates,  Jordan,  Switzerland,  UK,  Montenegro  and  Morocco.  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   2016   2015   2016   2015  

Egypt     157,982,742   220,055,941   185,613,535   456,477,589  

Oman     47,233,458   36,059,077   397,502,323   385,779,340  

United  Arab  Emirates     28,903,499   26,806,627   58,822,085   54,546,079  

Jordan     -­‐   536,091   -­‐   -­‐  

Montenegro   184,639   18,915,307   61,663,108   48,138,912  

Morocco     40,123   23,733   243,511   3,141,845  

Others   3,017,043   3,667,392   67,147,076   9,730,937  

TOTAL   237,361,504   306,064,168   770,991,638   957,814,702  

 The  revenue  realized  from  a  single  client  did  not  exceed  the  rate  of  10%  or  more  of  the  total  Group’s  revenue  during  2016  while  for  2015  the  revenues  of  only  one  client  reached  14%  of  the  total  group  revenue.  

Non-­‐current  assets  exclude  investments  in  associates,  financial  instruments  and  deferred  tax  assets.  

7.5  Additional  information  on  segment  results  The  aftermath  of  the  Arab  Spring  continues  to  affect  the  Group’s  performance  in  2016  as  the  political  uncertainty  and  the  after-­‐effects  of  the  extraordinary  events  that  took  place  in  Egypt  and  other  countries  in  the  Middle  East  have  had  a  significant  impact  on  the   general   business   environment   in   these   countries.   The   slow-­‐down   in   processes   and   logistics   still   impacts   the   business  operations  considerably.  For  further  detail  on  the  political  situation  refer  to  note  47.  

Total  segment  result  of  CHF  36.8  million  (2015:  CHF  71.6  million)  mainly  decreased  due  to  the  following:  

-­‐   There  was  a  small  decrease  in  the  real  estate  and  construction  segment  revenue  as  a  similar  number  of  units  was  delivered  in  Egypt  and  Oman  compared  to  prior  year  period.  However,  there  was  an  increase  in  the  segment  result  compared  to  prior  year  period  due  foreign  currency  exchange  gains  on  USD  receivables.  

-­‐   While  Hotels  in  Makadi  and  Taba  Heights  -­‐    50%  of  the  Group’s  hotel  inventory  -­‐  continued  to  suffer  the  consequences  of  the  aircraft  Incident  of  October  2015,  in  2016  the  hotels’  segment  achieved  a  GOP  growth  of  28%  going  from  CHF  27.8  million  to  CHF  35.7  million  (year  to  year).  This  performance  boost  came  as  an  accumulated  result  of  the  minimized  costs  at  Taba  Heights  and  Makadi  as  well  as  successful  operations  in  El  Gouna,  Salalah  and  The  Cove.  In  2016,  Taba  Heights  and  Makadi  collectively  maintained  a  positive  GOP  of  CHF  1.9  million  sliding  down  from  CHF  3.2  million.  El  Gouna,  on  the  other  hand,  achieved  a  GOP  growth  of   14%,  going   from  CHF  12.3  million   to  CHF  14.1  million   (year   to  year).  Similarly,  The  Cove   in  RAK   reported  a  GOP  growth  of  22%  going  from  CHF  8.9  million  to  CHF  10.9  million  in  2016  (year  to  year).  Further,  Salalah  Beach  in  Oman  reported  a  notable  GOP  growth  of  CHF  169%,  going  from  CHF  3.3  million  in  2015  to  CHF  8.8  million  in  2016.  

-­‐   During  2014,  a  subsidiary  of  the  Group  entered  into  an  agreement  with  a  third-­‐party  investor  to  sub-­‐develop  a  real  estate  and  touristic  project  in  El  Gouna  with  a  total  land  area  of  168,779  square  metre.  In  2015,  the  second  and  third  plot  containing  a  total  of  136,779  square  meter  was  sold  and  recognised  as  revenue   in  the  total  amount  of  USD  44.2  million  (CHF  42.8  million).  No  significant  sale  of   land   incurred   in  2016.  The  segment  profit   in  2016  mainly   results   from  foreign  exchange  gains   in  Egyptian  subsidiaries  due  to  outstanding  receivables  in  USD.  

 

8  EMPLOYEE  BENEFITS  EXPENSE    

CHF   2016   2015  

Employee  benefits  expense   78,124,234   86,802,923  

Thereof  included  in  cost  of  sales   60,577,748   67,037,497  

Thereof  included  in  administration  expenses   17,546,486   19,765,426    

   

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9  INVESTMENT  INCOME    

CHF   2016   2015  

Interest  income:      

 -­‐  Bank  deposits     2,253,002   4,015,946  

 -­‐  Other  loans  and  receivables     4,104,644   5,925,004  

Dividends  received  from  equity  investments   12,466   43,507  

 TOTAL   6,370,112   9,984,457  

Investment   income   earned   on   financial   assets   by   category   of   assets   is   CHF   6,357,646   (2015:   CHF   9,940,950)   for   loans   and  receivables  including  cash  and  bank  balances  as  well  as  CHF  12,466  (2015:  43,507)  for  financial  assets  at  fair  value  through  other  comprehensive  income.  

Gains  or  (losses)  relating  to  financial  assets  classified  as  at  fair  value  through  profit  or  loss  is  included  in  “Other  gains”  in  note  10.  

 

10  OTHER  GAINS    

CHF   2016   2015  

Gain  on  disposal  of  subsidiaries  (note  38)   -­‐   1,736,869  

Gain  from  change  in  fair  value  of  investment  property  (note  17)   161,301   118,103  

Gain  on  disposal  of  property,  plant  and  equipment   14,944   289,015  

Gain  on  disposal  of  financial  investments  (i)   2,888,614    

Other  gains  (ii)   -­‐   5,740,057  

TOTAL   3,064,859   7,884,044  

 (i) Gain  from  selling  shares  in  stock  exchange  

(ii) In  2015,  includes  reversal  of  provisions  of  CHF  4.6  million  

 

11  FINANCE  COSTS    

CHF   2016   2015  

Interest  on  bank  overdrafts  and  loans   (47,429,715)   (36,637,974)  

Total  interest  expense  for  financial  liabilities  not  classified  as  at  fair  value  through  profit  or  loss  

(47,429,715)   (36,637,974)  

Less:  amounts  included  in  the  cost  of  qualifying  assets  (i)     2,629,446   3,041,854  

TOTAL   (44,800,269)   (33,596,120)  

(i) The  amount  of  capitalization  cost  of  qualifying  assets  (project  under  construction  and  work  in  progress)  has  decreased  compared  to  prior  year.  This  is  mainly  due  to  decreased  activities  in  relation  to  the  current  hotel  projects  and  real  estate  projects   in  Egypt  and  Oman,  which  are  eligible   for   the  capitalization  of   interest  expense.  Beside  a  general   increase   in  finance  costs,  this  led  to  an  increase  in  finance  cost  by  CHF  11.2  million  from  CHF  33.6  million  to  CHF  44.8  million.  

The  rate  used  by  the  Group  to  determine  the  amount  of  borrowing  costs  eligible  for  capitalization  is  7.75%  per  annum  (2015:  7.84%  per  annum).  

In   line   with   the   Central   Bank   of   Egypt's   efforts   to   support   the   tourism   industry,   Orascom   Hotels   &   Development   (“OHD”),   the  largest  subsidiary  of   the  Company,  signed  a  debt   refinancing  package  allowing  OHD  to  postpone   its  principal  payments   for   the  coming  3  years  and   its   interest  payments   for   financial  year  2016  with  an  option  to  postpone  the   interest  payments   for   financial  year  2017.  As  a  result,  the  balance  sheet  of  the  Group  will  be  strengthened  and  thereby   lead  to  more  flexibility  to  advancing   its  projects.    

The  transaction  involves  the  payment  of  CHF  33.5  million  from  the  CHF  120.5  million  of  short  term  facilities  and  refinancing  the  remaining  balance  of  CHF  87.2  million   into  one  8.5  years'   syndicated  term   loan,   in  addition   to   the  payment  of  CHF  14.9  million  from  CHF  156.2  million  of  medium  term  loans  and  the  refinancing  of  the  remaining  balance  of  CHF  140.6  million   into  7.5  years'  tenor  term  loans,  all  under  a  common  terms  agreement  frame  work.  

   

F-­‐35  

12  OTHER  LOSSES    

CHF   2016   2015  

Net  foreign  exchange  (losses)/gains  (i)   (113,243,690)   (5,757,319)  

Impairment  related  to  property  under  construction  (ii)   (18,611,089)   (9,128,902)  

Write-­‐down  on  inventory(iii)   (13,529,631)   -­‐  

Impairment  loss  of  receivables  on  acquisition  of  subsidiaries  (note  38)   (843,588)   -­‐  

Other  losses     (1,186,542)   -­‐  

TOTAL   (147,414,540)   (14,886,221)  

 (i) For  further  details  on  foreign  exchange  losses  in  2016  refer  to  note  30.6  

(ii) In   2016,   impairment   losses   on   property   under   construction   of   18.6   million   (2015:   CHF   9.1   million)   were   recognised   on  development  projects.    

(iii) In   2016,   impairment   losses   on   inventory   of   CHF   13.5   million   (2015:   none)   were   recognised   on   inventory   of   development  projects.  

 

13  COMPENSATION  OF  KEY  MANAGEMENT  PERSONNEL    

CHF   2016   2015  

Salaries   3,485,161   4,185,000  

Other  short-­‐term  employee  benefits   141,290   307,500  

Post  employment  benefits   48,968   90,000  

TOTAL  COMPENSATION  OF  KEY  MANAGEMENT  PERSONNEL   3,675,419   4,582,500  

 There   is   a   compensation   plan   in   place   for   the   Board   of   Directors   which   consists   of   a   fixed   compensation   subject   to   an   annual  review.  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  approved  by   the  Nomination  &  Compensation  Committee.   In   respect  of   the  bonus  part  of   the  compensation,  proposals  by   the  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   each  member  is  responsible  (in  case  of  the  executive  members  of  the  Board,  the  performance  of  the  Orascom  Development  Group  as  a  whole).  The  CEO  forms  the  respective  proposals  in  his  discretion,  based  on  his  judgment  of  the  relevant  individuals'  and  business  areas'  achievements.  

The   disclosures   required   by   the   Swiss   Code   of   Obligations   on   Board   and   Executive   committee   compensation   are   shown   in   the  compensation  report.  

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).  

   

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F-­‐36  

13.1  Holding  of  Shares  

        2016   2015  

        ODH  shares  OHD  shares  

ODH  shares  OHD  shares  

BOARD  OF  DIRECTORS            

Samih  Sawiris1   Chairman   27,391,814   -­‐   29,355,452   -­‐  

Franz  Egle   Member   51,285   -­‐   40,588   -­‐  

Adil  Douiri   Member   25,379   -­‐   19,469   -­‐  

Carolina  Müller-­‐Möhl   Member   36,272   -­‐   31,488   -­‐  

Eskandar  Tooma  2   Member   -­‐   -­‐   93,500   -­‐  

Naguib  S.  Sawiris  4   Member   -­‐   -­‐   -­‐   -­‐  

Marco  Sieber     Member   27,195   -­‐   20,816   -­‐  

Jürgen  Fischer   Member   94,868   -­‐   3,482   -­‐  

Jürg  Weber     Member   23,929   -­‐   3,482   -­‐  

TOTAL  BOARD  OF  DIRECTORS   27,650,742   -­‐   29,568,277   -­‐  

EXECUTIVE  MANAGEMENT          

Samih  Sawiris  2,  3   CEO   -­‐   -­‐   -­‐   -­‐  

Eskandar  Tooma  2,  3   CFO   -­‐   -­‐   -­‐   -­‐  

Khaled  Bichara  5   CEO   -­‐   -­‐   -­‐   -­‐  

Ashraf  Nessim  6   CFO   -­‐   -­‐   -­‐   -­‐  

Abdelhamid  Abouyoussef   Chief  Hotels  Officer   90,830   -­‐   86,207   -­‐  

TOTAL  EXECUTIVE  MANAGEMENT   90,830   -­‐   86,207     -­‐    

1   total  includes  direct  and  indirect  holding  ownership  as  per  note  29.4.  2   The  holding  of  shares  of  Samih  Sawiris  and  Eskandar  Tooma  are  shown  within  the  Board  of  Directors’  table.  3   As  at  31  December  2015,  Samih  Sawiris  and  Eskandar  Tooma  have  resigned  from  the  Executive  Management.  Further  

Eskandar  Tooma  did  not  stand  for  re-­‐election  as  Member  of  the  Board  of  Directors  at  the  Annual  General  Meeting  on  10  May  2016  

4   During   the   Annual   General   Meeting   on   10   May   2016,   Naguib   S.   Sawiris   was   elected   as   new   member   of   the   Board   of  Directors.  

5   As  at  1  January  2016,  Khaled  Bichara  was  appointed  as  Group  CEO  6   As  at  10  May  2016,  Ashraf  Nessim  was  appointed  as  interim  Group  CFO  

As  at  31  December  2016,  an  amount  of  CHF  250,432  was  due  from  key  executives  relating  to  the  allocation  of  OHD  shares  in  2007.  No  other   loans  or  credits  were  granted   to  members  of   the  Board,   the  Executive  Management  or  parties  closely   linked   to   them  during  2016  and  2015.  

 

14  Income  taxes      

14.1  Income  tax  recognised  in  profit  or  loss  CHF   2016   2015  

CURRENT  TAX          Current  tax  (income)/expense  for  the  current  year   4,563,472   3,607,731  

  4,563,472   3,607,731  

DEFERRED  TAX      

Deferred  tax  (income)/expense  recognized  in  the  current  year   3,787,540   1,091,490  

Adjustments  to  deferred  tax  attributable  to  changes  in  tax  rates  and  laws   -­‐   (523,563)  

  3,787,540   567,927  

TOTAL  INCOME  TAX  EXPENSE  RECOGNIZED  IN  THE  CURRENT  YEAR  RELATING  TO  CONTINUING  OPERATIONS  

8,351,012   4,175,658  

F-­‐37  

The  following  table  provides  reconciliation  between  income  tax  expense  recognized  for  the  year  and  the  tax  calculated  by  applying  the  applicable  tax  rates  on  accounting  profit:  

CHF   2016   2015  

Profit/(loss)  before  tax  from  continuing  operations   (235,484,823)   (18,343,643)  

Income  tax  expense/(benefit)  calculated  at  13.25%  (2015:  19.58%)   (31,203,798)   (3,591,686)  

Unrecognized  deferred  tax  assets  during  the  year   42,637,842   12,275,505  

Effect  of  income  that  is  exempt  from  taxation   (9,860,142)   (8,963,765)  

Effect  of  deferred  tax  balances  due  to  changes  in  income  tax   -­‐   (523,563)  Effect  of  (income)/expenses  that  are  not  (added)/deductible  in  determining  taxable  profit  

6,777,110   4,979,167  

INCOME  TAX  EXPENSE  RECOGNIZED  IN  PROFIT  OR  LOSS   8,351,012   4,175,658  

The  average  effective  tax  rate  of  13.25%  (2015:  19.58%)  is  the  effective  tax  rate  from  countries  in  which  the  company  generates  taxable  profit.  The  average  effective  tax  rate  mainly  decreased  due  to  the  following:  

In  August  2015,  the  income  tax  rate  in  Egypt  was  changed  to  a  unified  rate  of  22.5%  instead  of  25%  which  affected  the  income  tax  expense  in  2015.    

14.2  Income  tax  recognized  in  other  comprehensive  income    CHF   2016   2015  

DEFERRED  TAX      

Fair  value  measurement  of  hedging  instruments  entered  into  in  a  cash  flow  hedge  

-­‐   -­‐  

Remeasurement  of  defined  benefit  obligation   -­‐   -­‐  

TOTAL  INCOME  TAX  RECOGNISED  IN  OTHER  COMPREHENSIVE  INCOME   -­‐   -­‐  

 

14.3  Current  tax  assets  and  liabilities  CHF   2016   2015  

Current  tax  expense   4,563,472   3,607,731  

Advance  payment  in  relation  to  current  tax  of  current  year   -­‐   473,943  

Foreign  currency  difference   (2,434,480)   523,563  

CURRENT  TAX  LIABILITIES   2,128,992   4,605,237  

 

14.4  Deferred  tax  balances  Deferred  tax  assets  and  liabilities  arise  from  the  following:  

2016      CHF  

Opening  balance  

Charged  to  income  

Exchange  difference  

 Recognized  in  other  

comprehen-­‐sive  income  

Acquisition/  disposal  of  Subsidiary  

Closing  balance  

ASSETS              

Temporary  differences              

Property,  plant  &  equipment     4,521,152   (2,959,192)   (569,040)   -­‐   -­‐   992,920  

Tax  losses     8,172,331   (6,852,186)   (1,320,145)   -­‐   -­‐   -­‐  

    12,693,483   (9,811,378)   (1,889,185)   -­‐   -­‐   992,920  

LIABILITIES              

Temporary  differences              

Property,  plant  &  equipment     40,865,187   (6,020,209)   (14,065,385)   1,219,890   -­‐   21,999,483  

Investment  property   2,182,089   (3,628)   (1,252,135)   -­‐   -­‐   926,326  

    43,047,276   (6,023,837)   (15,317,520)   1,219,890   -­‐   22,925,809  

NET  DEFERRED  TAX  LIABILITY   30,353,793   3,787,541   (13,428,335)   1,219,890   -­‐   21,932,889  

 

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Annual Report - 2016 Strategically decentralized F- 3837F-

F-­‐38  

2015      CHF  

Opening  balance  

Charged  to  income  

Exchange  difference  

Recognized  in  other  

comprehen-­‐sive  income  

Acquisition/  disposal  of  Subsidiary  

Closing  balance  

ASSETS              

Temporary  differences              

Property,  plant  &  equipment     5,380,705   (492,791)   (366,762)   -­‐   -­‐   4,521,152  

Tax  losses     10,643,839   (1,855,350)   (616,158)   -­‐   -­‐   8,172,331  

    16,024,544   (2,348,141)   (982,920)   -­‐   -­‐   12,693,483  

LIABILITIES              

Temporary  differences              

Property,  plant  &  equipment     41,895,558   1,350,173   (2,380,544)   -­‐   -­‐   40,865,187  

Investment  property   5,769,081   (3,130,387)   (456,605)   -­‐   -­‐   2,182,089  

    47,664,639   (1,780,214)   (2,837,149)   -­‐   -­‐   43,047,276  

NET  DEFERRED  TAX  LIABILITY   31,640,095   567,927   (1,854,229)   -­‐   -­‐   30,353,793  

 14.5  Unrecognized  deferred  tax  assets    

Deferred  tax  assets  not  recognized  at  the  reporting  date:  

CHF   2016   2015  

Tax  losses  in  Parent  Company  (expiry  in  2016)  (i)   -­‐   275,640,031  

Tax  losses  in  Parent  Company  (expiry  2018)  (i)   846,695,821   846,695,821  

Tax  losses  in  Parent  Company  (expiry  2019)  (i)   1,032,630,753   1,032,630,753  

Tax  losses  in  Parent  Company  (expiry  2020)  (i)   29,383,250   29,383,250  

Tax  losses  in  Parent  Company  (expiry  2021)  (i)   86,373,116   86,373,116  

Tax  losses  in  Parent  Company  (expiry  2022)  (i)   2,955,358   -­‐  

Temporary  differences  in  subsidiaries  (ii)   104,045,729   226,472,442  

 (i)   At  31  December  2015,  the  Parent  Company’s  tax  losses  amounted  to  CHF  2,270,722,971  which  mainly  related  to  tax  losses  

caused  by  impairment  charges  recognized  on  investments  as  result  of  the  original  restructuring  of  the  Group.  The  historical  cost  value  of  these  investments  was  the  fair  value  of  the  investments  at  the  date  of  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  than  tax  exempted  dividend  income  in  the  foreseeable  future  and  therefore  it  is  not  probable  that  the  unused  tax  losses  can  be  utilized.  Therefore,  and  unchanged  to  prior  year,  all  tax  losses  accumulated  in  the  Parent  Company  which  amounted  to  CHF  2,273,678,329  at  31  December  2016  were  treated  as  unrecognized  deferred  tax  assets.  

(ii)   At   31   December   2016,   the   Group   has   not   recognised   deferred   tax   assets   for   gains   recognized   at   the   subsidiaries   level   on  intercompany   land  sales  which   took  place   in  2010   in   the  amount  of  CHF  92,071,502   (31  December  2015:  CHF  206,099,642).  During   2016,   the   Group   has   not   recognised   any   deferred   tax   asset   on   the   sale   transaction   as   the   development   of   this   land  either  has  not  yet  been  started  or  is  still  in  the  early  stages  of  development  and  therefore  it  is  not  evident  that  future  taxable  profits  are  probable.  The  residual  temporary  differences  are  unrecognized  tax  losses  in  subsidiaries  which  expire  in  2017.  

 

   

F-­‐39  

15  EARNINGS  PER  SHARE    Basic  earnings  per  share  is  calculated  by  dividing  the  earnings  from  continuing  operations  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.  

The  earnings   from  continuing  operations  and  weighted  average  number  of  ordinary   shares  used   in   the  calculation  of  basic  and  diluted  earnings  per  share  are  as  follows:    

CHF   2016   2015  

EARNINGS  (for  basic  and  diluted  earnings  per  share)      

(Loss)/profit  for  the  period  attributable  to  owners  of  the  parent   (196,415,554)   (19,052,959)  

NUMBER  OF  SHARES  (for  basic  and  diluted  earnings  per  share)      

Weighted  average  number  of  ordinary  shares  for  the  purposes  of  EPS   40,399,443   28,951,419  

EARNINGS  PER  SHARE  FROM  CONTINUING  OPERATIONS   (4.86)   (0.66)  

 

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06OrascOm FINaNcIaL sTaTEmENTs

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Annual Report - 2016 Strategically decentralized F- 4039F-

F-­‐40

 

16  P

RO

PER

TY,  P

LAN

T  A

ND

 EQ

UIP

MEN

T  

 

CHF  

Free

hold

 land

   B

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ings

   P

lant

 and

 eq

uipm

ent  

Furn

itur

e  an

d  fix

ture

s  P

rope

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unde

r  co

nstr

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on    

Ass

ets  

unde

r  fin

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 leas

e  To

tal  

COST

   

   

   

   

Bal

ance

 at  1

 Jan

uary

 201

5  13

4,97

8,32

7  63

1,30

4,01

4  12

3,57

1,14

3  82

,522

,428

 18

1,98

8,72

5  6,

936,

223  

1,16

1,30

0,86

0  

Add

ition

s  37

6,37

4  7,

746,

110  

4,16

4,94

1  1,

338,

878  

54,2

50,5

33  

-­‐  67

,876

,836

 

Tran

sfer

 from

 inve

ntor

y    

-­‐  -­‐  

-­‐  -­‐  

90,7

95,9

56  

-­‐  90

,795

,956

 

Tran

sfer

 to  in

vent

ory    

(321

,024

)  (2

,871

,954

)  (1

8,74

5)  

(18,

284)

 -­‐  

-­‐  (3

,230

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)  

Tran

sfer

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 pro

perty  un

der  c

onst

ruct

ion  

22,5

81  

14,8

69,9

70  

630,

267  

7,40

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0,21

8)  

-­‐  -­‐  

Dispo

sals  

(218

,053

)  (1

,656

,363

)  (2

27,1

29)  

(721

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)  -­‐  

-­‐  (2

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)  

Der

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d  on

 loss

 of  c

ontrol

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s  (6

23,5

93)  

(16,

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886)

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(1,2

66,2

45)  

-­‐  -­‐  

(18,

878,

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Fore

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curren

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ence

s  (8

,478

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(8,1

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09)  

(6,9

26,2

92)  

(6,6

28,2

00)  

-­‐  (7

0,03

3,72

7)  

Bal

ance

 at  1

 Jan

uary

 201

6  12

5,73

6,34

8  59

3,47

5,52

9  11

9,04

7,56

3  74

,936

,127

 30

4,87

6,79

6  6,

936,

223  

1,22

5,00

8,58

6  

Add

ition

s  78

4,90

9  18

,255

,345

 6,

193,

555  

5,30

2,37

7  11

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41,7

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(not

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)  29

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 23

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,101

 17

3,53

9  35

,107

 1,

719,

654  

-­‐  54

,544

,821

 

Tran

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 pro

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onst

ruct

ion  

-­‐  24

,807

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 -­‐  

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4,80

7,26

7)  

-­‐  -­‐  

Tran

sfer

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ntor

y  (n

ote  

23)  

2,24

6  2,

369,

589  

167,

363  

-­‐  -­‐  

-­‐  2,

539,

198  

Rec

lass

ified

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ld  fo

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(5,2

96)  

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82,5

74)  

(157

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(498

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)  

Dispo

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91,5

36)  

(440

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)  (3

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71)  

(40,

188)

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)  

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curren

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differ

ence

s  (2

8,30

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(232

,113

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)  (4

1,57

4,94

5)  

(24,

573,

326)

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3,14

4,50

5)  

(4,0

51,1

38)  

(353

,759

,353

)  

Bal

ance

 at  3

1  D

ecem

ber  2

016  

127,

583,

763  

429,

851,

720  

83,4

13,4

73  

55,1

99,6

40  

269,

662,

291  

2,88

5,08

5  96

8,59

5,97

2      

 

F-­‐41

 

CHF  

Free

hold

 land

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uild

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lant

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tal  

ACC

UM

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TED

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D  IM

PA

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Bal

ance

 at  1

 Jan

uary

 201

5  -­‐  

111,

102,

421  

90,5

72,6

92  

63,7

19,4

41  

7,65

5,79

8  1,

490,

891  

274,

541,

243  

Elim

inat

ed  o

n  di

spos

als  of

 ass

ets  

-­‐  (1

,437

,422

)  (2

26,2

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(667

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)    

-­‐  (2

,331

,640

)  

Der

ecog

nize

d  on

 loss

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ontrol

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ubsidi

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s  -­‐  

(2,2

75,6

31)  

(704

,664

)  (8

83,4

47)  

 -­‐  

(3,8

63,7

42)  

Tran

sfer

 to  in

vent

ory  (n

ote  

23)  

-­‐  (6

15,5

34)  

(2,5

17)  

(2,4

91)  

-­‐  -­‐  

(620

,542

)  

Dep

reciat

ion  

expe

nse  

-­‐  14

,576

,079

 8,

750,

828  

5,01

5,36

7    

393,

202  

28,7

35,4

76  

Impa

irmen

t  los

s  (n

ote  

12)  

-­‐  -­‐  

-­‐  -­‐  

9,12

8,90

2  -­‐  

9,12

8,90

2  

Fore

ign  

curren

cy  e

xcha

nge  

differ

ence

s  -­‐  

(9,7

47,9

65)  

(7,4

40,2

46)  

(3,2

50,7

96)  

(498

,572

)  -­‐  

(20,

937,

579)

 

Bal

ance

 at  1

 Jan

uary

 201

6  -­‐  

111,

601,

948  

90,9

49,8

69  

63,9

30,0

80  

16,2

86,1

28  

1,88

4,09

3  28

4,65

2,11

8  

Elim

inat

ed  o

n  di

spos

als  of

 ass

ets  

-­‐  (1

5,78

2)  

(266

,380

)  (2

03,0

41)  

-­‐  -­‐  

(485

,203

)  

Rec

lass

ified

 to  a

sset

s  he

ld  fo

r  sal

e  -­‐  

(221

)  (1

35,9

21)  

(167

,358

)  -­‐  

-­‐  (3

03,5

00)  

Dep

reciat

ion  

expe

nse  

-­‐  14

,957

,404

 8,

689,

680  

12,0

09,0

47  

-­‐  30

2,35

3  35

,958

,484

 

Impa

irmen

t  los

s  (n

ote  

12)  

-­‐    

   

18,6

11,0

89  

 18

,611

,089

 

Fore

ign  

curren

cy  e

xcha

nge  

differ

ence

s  -­‐  

(56,

196,

500)

 (3

9,34

5,65

6)  

(32,

275,

845)

 (3

,254

,091

)  (1

,361

,881

)  (1

32,4

33,9

73)  

Bal

ance

 at  3

1  D

ecem

ber  2

016  

-­‐  70

,346

,849

 59

,891

,592

 43

,292

,883

 31

,643

,126

 82

4,56

5  20

5,99

9,01

5  

CAR

RY

ING

 AM

OU

NT  

   

   

   

 

At  3

1  Dec

embe

r  201

5  12

5,73

6,34

8  48

1,87

3,58

1  28

,097

,694

 11

,006

,047

 28

8,59

0,66

8  5,

052,

130  

940,

356,

468  

At  3

1  D

ecem

ber  2

016  

127,

583,

763  

359,

504,

871  

23,5

21,8

81  

11,9

06,7

57  

238,

019,

165  

2,06

0,52

0  76

2,59

6,95

7     At  3

1  Dec

embe

r  201

6,  p

rope

rty,

 pla

nt  a

nd  e

quip

men

t  (PP

E)  o

f  the

 Gro

up  w

ith  a

 car

ryin

g  am

ount

 of  C

HF  

88.3

 mill

ion  

(31  Dec

embe

r  201

5:  C

HF  

96.6

 mill

ion)

 wer

e  pl

edge

d  to

 sec

ure  

borrow

ings

 of  t

he  

Gro

up  a

s  de

scrib

ed  in

 not

e  33

.  See

 not

e  11

 for  t

he  cap

italiz

ed  fi

nanc

e  co

st  d

urin

g  th

e  ye

ar.  

In  2

016,

 impa

irmen

t  los

ses  on

 pro

perty  un

der  c

onst

ruct

ion  

of  C

HF  

18.6

 mill

ion  

(201

5:  C

HF  

9.1  m

illio

n)  w

ere  

reco

gnised

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deve

lopm

ent  p

roje

cts.  

 

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Annual Report - 2016 Strategically decentralized F- 4241F-

F-­‐42  

17  INVESTMENT  PROPERTY    The  following  table  summarizes  movements,  which  have  occurred,  during  the  current  reporting  period,  on  the  carrying  amount  of  investment  property.  

     CHF   2016   2015  

FAIR  VALUE  OF  COMPLETED  INVESTMENT  PROPERTY  

Balance  at  the  beginning  of  the  year     10,981,552   11,922,802  

Addition   439,486   -­‐  

Revaluation  gain   161,301   118,103  

Foreign  currency  translation  adjustment   (6,081,005)   (1,059,353)  

Balance  at  the  end  of  the  year   5,501,334   10,981,552  

 

The  fair  values  at  31  December  2016  were  determined  based  on  an  internal  valuation  model  performed  by  Group  management.  The   last   external   valuations  were   prepared   as   at   31   December   2012   by   Fincorp,   an   accredited   valuation   specialist   in   Egypt.   In  estimating  the  fair  value  of  the   investment  properties,  management  considers  the  current  use  of  the  properties  as  their  highest  and  best  use.  

The   internal   valuation  model   relies   on   the  Discounted  Cash   Flow   (DCF)  method   to   determine   the   fair   value   of   the   investment  property.  The  Discounted  Cash  Flow  (DCF)  approach  describes  a  method  to  value  the  investment  property  using  the  concepts  of  the  time  value  of  money.  All  future  cash  flows  are  estimated  and  discounted  to  give  them  a  present  value.  This  valuation  method  is  in  conformity  with  the  International  Valuation  Standards.  The  same  method  was  used  for  any  previous  external  valuations.  As  investment  property  only  consists  of  a  few  properties  in  Egypt,  management  has  decided  to  use  an  internal  valuation  model  due  to  efficiency  and  cost  saving  reasons.    

For  the  valuation  of  the  investment  property  which  is  situated  in  Egypt  the  model  used  cash  flow  projections  based  on  financial  budgets  for  the  next  five  years  and  an  average  discount  rate  of  22.7%  (cost  of  equity).  For  the  terminal  value  a  perpetual  growth  rate  of  3%  was  used.  In  2015  an  average  discount  rate  of  19.5%  and  a  perpetual  growth  rate  of  3%  were  used.  

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   2016   2015  

Rental  income  from  investment  properties  (i)   3,662,727   4,242,564  

Direct  operating  expenses  (including  repairs  and  maintenance)  arising  from  investment  properties  that  generated  rental  income  during  the  period  

179,832   324,810  

 (i)   See  note  7.1  for  further  information  on  the  Group’s  rental  income.    

18  GOODWILL    

CHF   2016   2015  

Cost   2,893,347   6,476,682  

Accumulated  impairment  losses   -­‐   -­‐  

 Carrying  amount  at  end  of  year   2,893,347   6,476,682  

 

CHF   2016   2015  

COST          

Balance  at  beginning  of  year     6,476,682   7,109,426  

Effect  of  foreign  currency  exchange  differences   (3,583,335)   (632,744)  

 Balance  at  end  of  year   2,893,347   6,476,682  

   

F-­‐43  

18.1  Allocation  of  goodwill  to  cash-­‐generating  units  Annual  test  for  impairment  

An  impairment  test  of  goodwill  was  performed  by  the  Group  to  assess  the  recoverable  amount  of  its  goodwill.  No  impairment  was  recorded  as  result  of  this  test.  All  cash-­‐generating  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.  A  further  description  of  the  assumptions  used  in  the  model  is  given  in  the  following  paragraphs.  

The  carrying  amount  of  goodwill  that  has  been  allocated  for  impairment  testing  purposes  is  as  follows:  

CHF   Segment   2016   2015  

Hotel  companies  *    Hotels     2,893,347   6,476,682  

        2,893,347   6,476,682  

*Each  subsidiary  considered  separately  

Hotels  

As  already  mentioned,  Egypt  has  been  on  the  brink  of  social  and  political  turmoil  in  the  past  few  years.  While  the  Egyptian  uprising  has  come  with  the  promise  of  major  political  reform,  it  has  led  to  the  temporary  disruption  of  economic  activity.  Looking  beyond  the  current  crisis,  Egypt  can  benefit  from  maintaining  its  current  momentum  towards  economic  liberalization,  privatization,  and  a  more  efficient  government.  This  will   improve  Egypt’s  economic  position  and  help   foster  a  sustained  growth  once  the   inevitable  global  economic  upturn  materializes.  Considering  the  previously  mentioned  analysis,  the  impairment  model  has  taken  the  current  economic  situation  of  Egypt  into  close  consideration.  

The  recoverable  amount  of  each  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  management  covering  a  ten-­‐year  period  that  consists  of  two  phases.  The  first  phase  shows  the  evolving  status  of  the  hotel  segment  indicated  by  being  back  to  the  operating  levels  of  the  year  2010.  And  the  second  phase  shows  steady  performance  of   the  hotel  operations.  An  average  discount  rate  of  22.7%  per  annum  (2015:  18.1%  per  annum)  was  used  for  the  value  in  use  calculation.  The  discount  rate  is  based  on  a  risk  free  post-­‐tax  interest  rate  of  13.8%  (the  pre-­‐tax   risk   free   rate  used   is   17.3%;   applying   the  20%  Egyptian   tax   rate   for   sovereign  bonds,   the  post-­‐tax   risk   free   rate  of  13.8%  resulted),  a  beta  of  1.27  (2015:  0.83)  as  well  as  a  risk  premium  of  7%  (2015:  7%).  For  the  terminal  value  calculation,  a  terminal  growth  rate  of  3%  (2015  3%)  was  used.  

Sensitivity  analysis,  where  the  average  discount  rate  was  increased  by  4.5%  and  the  growth  rate  reduced  by  0.5%,  which  according  to  management  is  a  reasonably  possible  change  in  key  assumptions,  did  not  cause  the  aggregate  carrying  amount  to  exceed  the  aggregate  recoverable  amount  of  the  cash-­‐generating  unit.  

Furthermore,  management  believes  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  cash-­‐generating  unit.  

 

   

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Annual Report - 2016 Strategically decentralized F- 4443F-

F-­‐44  

19  SUBSIDIARIES  

The  Group  has   control   over   all   the   subsidiaries  below  either  directly  or   indirectly   through   subsidiaries   controlled  by   the  Parent  Company.  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   DM   Other   HQ  

Egypt                                            

Abu  Tig  for  Hotels  Company   Red  Sea     EGP   3,412,500   84.54%   2                      

Accasia  for  Hotels  Company   Cairo     EGP   25,000,000   84.54%   5                      

Arena  for  Hotels  Company  S.A.E   Cairo     EGP   20,000,000   100.00%   4                      Azur  for  Floating  Hotels  Company  S.A.E    1)  

Cairo     EGP   3,000,000   43.24%   5                      

Captain  for  Hotels  Company   Red  Sea     EGP   768,750   84.54%   3                      

El  Dawar  for  Hotels  Company   Cairo     EGP   9,560,000   84.54%   3                      El  Khamsa  for  Hotels  &  Touristic  Establishments  

Red  Sea   EGP   48,000,000   84.51%              

El  Golf  for  Hotels  Company  &  Touristic        Establishments  

Cairo     EGP   22,000,000   84.54%   5                      

El  Gouna  for  Hotels  Company  S.A.E   Cairo     EGP   79,560,000   59.78%   5                      

El  Gouna  Hospital  Company   Red  Sea     EGP   19,000,000   64.02%                          

El  Gouna  Services  Company   Red  Sea     EGP   250,000   84.79%                          

El  Mounira  for  Hotels  Company  S.A.E   Red  Sea     EGP   14,000,000   63.35%   4                      El  Tebah  for  Hotels  &  Touristic  Establishments  Company  

Cairo     EGP   52,000,000   59.77%   5                      

El  Wekala  for  Hotels  Company   Cairo     EGP   39,000,000   63.56%   4                      International  Company  for  Taba  Touristic  Projects  (Taba  Resorts)  

Cairo     EGP   96,000,000   54.84%   5                      

International  Hotel  Holding     Cairo     EGP   452,367,300   84.54%                          Marina  2  for  Hotels  &  Touristic  Establishments  Company  

Cairo     EGP   19,250,000   50.72%   4                      

Marina  3  for  Hotels  &  Touristic  Establishments  Company  

Cairo     EGP   26,000,000   84.54%   4                      

Med  Taba  for  Hotels  Company  S.A.E   Cairo     EGP   51,000,000   56.61%   4                      

Misr  El  Fayoum  for  Touristic  Development  Company  S.A.E  

Cairo     EGP   28,000,000   57.03%                          

Mokbela  for  Hotels  Company  S.A.E   Cairo     EGP   85,000,000   69.62%   5                      

Orascom  Hotels  &  Development  S.A.E   Cairo     EGP   1,108,307,375   84.79%                          

Orascom  Housing  Company   Cairo     EGP   22,000,000   84.79%                          

Paradisio  for  Hotels  &  Touristic  Establishments  Company  S.A.E  

Red  Sea     EGP   18,500,000   84.54%   4                      

Rihana  for  Hotels  Company  S.A.E   Red  Sea     EGP   13,000,000   50.72%   4                      

Roaya  for  Tourist  &  Real  Estate  Development  SAE  

Red  Sea     EGP   50,000,000   63.15%                          

Royal  for  Investment  &  Touristic  Development  S.A.E  

Cairo     EGP   50,000,000   50.71%   4                      

Taba  First  Hotel  Company  S.A.E   Cairo     EGP   105,000,000   50.68%   5                      

Taba  Heights  Company  S.A.E  South  Sinai    

EGP   157,510,000   83.94%                          

Tamweel  Leasing  Finance  Co.  ILC   Cairo     EGP   50,000,000   73.08%                          Tamweel  Mortgage  Finance  Company  S.A.E  

Cairo     EGP   100,000,000   74.18%                          

Tawila  for  Hotel  Company  S.A.E   Cairo     EGP   68,000,000   84.54%   5                      Mozn  Investment  and  Tourism  S.A.E.   Red  Sea   EGP   268,520,000   99.99%   5            

 

 

F-­‐45  

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   DM   Other   HQ  

Montenegro                      

Lustica  Development  Ad  Podgorica  Podgo-­‐rica  

EUR   11,025,000   90.90%              

Morocco                                            

Oued  Chibika  Development  (SA)  Casa-­‐blanca    

MAD   367,420,258   55.00%                          

Chbika  Rive  Hotel  Casa-­‐blanca  

MAD   66,000,000   100.00%   UC            

Oman                                            Madrakah  Hotels  Management  Company  LLC  

Muscat     OMR   4,350,000   70.00%                          

Muriya  Tourism  Development  Company  (S.A.O.C)  

Muscat     OMR   25,525,800   70.00%                          

Salalah  Beach  Tourism  Development  Company  (S.A.O.C)  

Muscat     OMR   35,922,530   70.00%                          

Sifah  Tourism  Development  Company  (S.A.O.C)  

Muscat     OMR   42,947,800   70.00%                          

Soda  Tourism  Development  Co.  2)   Muscat   OMR   12,646,260   49.00%              Wateera  Property  Management  Company  LLC  

Muscat     OMR   270,000   70.00%                          

United  Arab  Emirates                                            

RAK  Tourism  Investment  FZC  Ras  al  Khaimah  

AED   7,300,000   73.00%   5                      

United  Kingdom                                          Eco-­‐Bos  Development  Limited   Cornwall   GBP   10,000,000   75.00%                          

1) The  direct  ownership  in  Azur  for  Floating  Hotels  Company  S.A.E.  is  51%  therefore  the  Group  has  control  over  this  company.  

2) The  Group  has  control  over  Soda  Tourism  Development  Company  as  one  of  Group’s  subsidiaries  holds  a  70%  interest.  

 

Abbreviations:  

HO   Hotels  

R&C   Real  estate  and  construction  

LS     Land  sales  

DM   Destination  management  

HQ   Headquarter  or  not  yet  operational  

Other   Other  operations  

*   Number  of  stars  the  hotel  holds  

UC   Hotel  under  construction  

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19.1.  Details  of  non-­‐wholly  owned  subsidiaries  that  have  material  non-­‐controlling  interests  The  table  below  shows  details  of  non-­‐wholly  owned  subsidiaries  of   the  Group  that  have  material  non-­‐controlling   interests.  The  assessment  whether  a  non-­‐controlling  interest  is  material  is  based  on  the  carrying  amounts  of  such  non-­‐controlling  interests.  

Name  of  subsidiary  

Proportion  of  ownership  interest  and  voting  power  held  by  non-­‐controlling  

interests  

Profit/(loss)  allocated  to  non-­‐controlling  interests  

Accumulated  non-­‐controlling  interests  

  31/12/2016   31/12/2015   31/12/2016   31/12/2015   31/12/2016   31/12/2015  

Orascom  Hotels  &  Development  S.A.E.  

15.21%   15.21%   (26,021,932)   3,913,622   20,137,970   60,994,701  

Sifah  Tourism  Development  Co.   30.00%   30.00%   (4,012,170)   (2,251,412)   30,541,755   32,966,201  

RAK  Tourism  Investment  FZC   27.00%   27.00%   (87,553)   169,025   13,133,936   13,183,421  

Individually  immaterial  subsidiaries  with  non-­‐controlling  interests   76,653,576   124,983,291  

 TOTAL             140,467,237   232,127,614  

Summarised  financial   information  in  respect  of  each  of  the  Group’s  subsidiaries  that  has  material  non-­‐controlling  interests  is  set  out  below.  The  summarised  financial  information  below  represents  amounts  before  intragroup  eliminations.  

  OHD   Sifah   RAK  

  31/12/2016   31/12/2015   31/12/2016   31/12/2015   31/12/2016   31/12/2015  

Current  assets   233,194,040   318,967,439   82,734,908   85,669,322   7,717,081   8,217,637  

Non-­‐current  assets   240,291,944   628,500,084   102,417,943   95,806,790   76,399,769   71,372,126  

Current  liabilities   (330,161,230)   (415,421,855)   (83,316,341)   (71,535,970)   (32,559,943)   (22,285,315)  

Non-­‐current  liabilities   (82,077,620)   (190,844,391)   (30,661)   (52,789)   (2,912,700)   (8,476,964)  

Equity  attributable  to  owners     (41,109,164)   (280,206,576)   (71,264,094)   (76,921,152)   (35,510,271)   (35,644,063)  

Non-­‐controlling  interests   (20,137,970)   (60,994,701)   (30,541,755)   (32,966,201)   (13,133,936)   (13,183,421)  

             

Revenue   148,479,624   221,281,224   6,976,443   6,447,898   28,903,499   26,791,095  

Profit/(loss)  for  the  year   (171,084,363   25,730,582   (13,373,899)   (7,504,705)   (324,272)   626,017  

     attributable  to  owners     (145,062,431)   21,816,960   (9,361,729)   (5,253,293)   (236,719   456,992        attributable  to  non-­‐controlling          interests   (26,021,932)   3,913,622   (4,012,170)   (2,251,412)   (87,553)   169,025  

Other  comprehensive  income  for  the  year  

(155,029,062)   (41,761,546)   1,170,814   (1,056,955)   1,498,512   (146,033)  

     attributable  to  owners     (131,449,142)   (35,409,615)   819,570   (739,869)   1,093,914   (106,604)        attributable  to  non-­‐controlling          interests  

(23,579,920)   (6,351,931)   351,244   (317,086)   404,598   (39,429)  

Total  comprehensive  income  for  the  year   (326,113,425)   (16,030,964)   (12,203,085)   (8,561,660)   1,174,240   479,984  

     attributable  to  owners     (276,511,573)   (13,592,655)   (8,542,159)   (5,993,162)   857,195   350,388        attributable  to  non-­‐controlling          interests  

(49,601,852)   (2,438,309)   (3,660,926)   (2,568,498)   317,045   129,596  

             

Net  cash  inflow/(outflow)   7,732,041   44,672,265   2,090,211   (509,122)   38,454   (1,972,356)  

     from  operating  activities   75,596,834   78,999,480   2,090,211   (6,349,682)   4,366,440   3,355,039  

     from  investing  activities   (38,140,967)   (20,342,088)   -­‐   -­‐   (4,327,986)   (5,327,395)  

     from  financing  activities   (29,723,826)   (13,985,127)   -­‐   5,840,560   -­‐   -­‐    

Except   for   exchange  differences  arising  on   translating   the   foreign  operations   there  are  no  other   items  of  other   comprehensive  income.  

   

F-­‐47  

19.2  Changes  in  the  Group’s  ownership  interests  which  have  occurred  during  the  year  In  2016,  the  Group  has  acquired  a  100%  stake  in  Mozn  Investment  &  Tourism  S.A.E.  (refer  to  note  37  for  further  details).  

In  2015,  the  Group  has  sold  a  15%  stake  in  its  Egyptian  subsidiary  Orascom  Hotels  and  Development  S.A.E.  (refer  to  note  32  for  further   details).   Further,   the   Group   has   lost   control   over   its   investment   in   Golden   Beach   for   Hotels   Company,   Jordan,   to   an  associated  company  of  the  Group  (refer  to  note  38  for  further  detail).  

 

20  INVESTMENTS  IN  ASSOCIATES    Details  of  the  Group’s  associates  at  the  end  of  the  reporting  period  are  as  follows:  

Name  of  associate  Place  of  incorporation  

Proportion  of  ownership  interest  and  voting  

power  held  by  the  Group  

Carrying  value    (CHF  )  

    2016   2016   2015  

Andermatt  Swiss  Alps  AG  (i)   Switzerland   49.00%   56,549,204   73,231,607  

Orascom  Housing  Communities  (ii)   Cairo   35.25%   4,497,608   12,423,795  

Jordan  Company  for  Projects  and  Touristic  Development  (iii)  

Jordan   18.33%   15,820,535   15,023,428  

Red  Sea  for  Construction  &  Deveolpment  (iv)   Cairo   47.18%   1,683,764   -­‐  

Orascom  for  Housing  and  Establishments  (v)   Cairo   39.90%   -­‐   -­‐  

International  Stock  Company  for  Floating  Hotels  &  Touristic  Establishments  (vi)  

Cairo   30.00%   -­‐   -­‐  

Mirotel  for  Floating  Hotels  Company  (vi)   Cairo   30.00%   -­‐   -­‐  

Tarot  Garranah  &  Merotil  for  Floating  Hotels  (vi)   Cairo   30.00%   -­‐   -­‐  

Tarot  Tours  Company  (Garranah)  S.A.E  (vi)   Cairo   30.00%   -­‐   -­‐  

Al  Tarek  for  Tourist  &  Hotel  Cruises  (vi)   Cairo   30.00%   -­‐   -­‐  

TOTAL       78,551,111   100,678,830  

 The   Group   measures   all   its   associates   using   the   equity   method   of   accounting   as   described   in   policy   3.5   of   the   notes   to   the  consolidated   financial   statements.   None   of   the   Group’s   equity-­‐method   investments   are   listed   on   Stock   Exchanges   and,  accordingly,  they  do  not  have  quoted  market  prices.  Management  considers  ASA,  OHC  and  JPTD  as  the  only  associate  that  are  material  to  the  Group.  The  Group  did  not  receive  any  dividends  during  the  current  year  from  its  material  investments  (2015:  none).  

The  Group  has  stopped  recognizing  its  share  of  losses  of  its  other  immaterial  associates.  The  Group’s  unrecognized  share  of  losses  amounts  to  CHF  1,515,228  and  CHF  3,093,644  both  for  the  current  year  and  cumulatively  as  of  31  December  2016.  

(i)  Andermatt  Swiss  Alps  AG  

On  25  June  2013,  the  Group  lost  control  over  Andermatt  Swiss  Alps  AG  (“ASA”)  due  to  various  capital  increases  in  ASA  in  which  the  Group  did  not   fully  participate.  With  a   remaining  share  of   interest  of  49%   in  ASA,   the   investment   is   classified  as   investment   in  associates.    

The   fair  value  of  ASA  on   initial   recognition  as   investment   in  associates   is  based  on  a   third-­‐party  valuation  which  supported   the  transaction  price  paid  by  Mr.  Samih  Sawiris.  

ASA   is  not  subject   to  any  restrictions  on  transferring   funds  to  ODH  whether   resulting   from  regulatory   requirements,  borrowing  arrangements  or  contractual  arrangements  between  ASA  and  ODH.  

   

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Summarised  financial  information  in  respect  of  ASA  is  set  out  below:  

  2016   2015  

Current  assets   208,613,209   268,316,841  

Non-­‐current  assets   261,235,099   199,520,699  

Current  liabilities   (73,194,325)   (87,544,353)  

Non-­‐current  liabilities   (295,142,870)   (242,714,164)  

Net  assets   101,511,113   137,579,023  

     

Revenue  for  the  year   80,725,764   144,935,056  

(Loss)  for  the  year   (34,045,191)   (34,622,848)  

Other  comprehensive  income  for  the  year     -­‐  

Total  comprehensive  income  for  the  year   (34,045,191)   (34,622,848)  

Group’s  share  of  comprehensive  income  for  the  year   (16,682,144)   (16,965,195)  

 

Reconciliation   of   the   above   summarised   financial   information   to   the   carrying   amount   of   the   interest   in  ASA   recognised   in   the  consolidated  financial  statements:  

  2016   2015  

Net  assets  of  the  associate  over  Group  level   115,406,539   149,452,258  

Proportion  of  the  Group’s  ownership  interest  in  ASA   49%   49%  

Carrying  amount  of  the  Group’s  interest  in  ASA   56,549,204   73,231,607  

 

(ii)  Orascom  Housing  Communities  (“OHC”)  

In  June  2014,  the  Group  lost  control  over  OHC  as  they  did  not  participate  in  the  capital  increase  of  OHC.  With  a  remaining  share  of  interest  of  35.25%  in  OHC,  the  investment  is  classified  as  investment  in  associates.    

The   fair   value  of  OHC  on   initial   recognition  as   investment   in  associates   is  based  on  a   fair   value  which  has  been  determined  by  Fincorp,  an  accredited  valuation  specialist  in  Egypt,  using  a  DCF  model.  With  a  remaining  share  of  interest  of  35.25%  the  fair  value  on  initial  recognition  as  at  30  June  2014  was  CHF  14.6  million.    

Summarised  financial  information  in  respect  of  OHC  is  set  out  below:  

  2016   2015  

Current  assets   14,441,830   83,877,929  

Non-­‐current  assets   18,911,772   19,883,298  

Current  liabilities   (29,190,252)   (82,393,695)  

Non-­‐current  liabilities   (3,119,514)   (7,649,430)  

Net  assets   1,043,836   13,718,102  

     

Revenue  for  the  year   5,878,339   29,707,239  

Profit/(loss)  for  the  year   (5,520,591)   (6,091,785)  

Other  comprehensive  income  for  the  year   -­‐   -­‐  

Total  comprehensive  income  for  the  year   (5,520,591)   (6,091,785)  

Group’s  share  of  comprehensive  income  for  the  year   (1,945,759)   (2,147,079)  

 

Reconciliation  of   the   above   summarised   financial   information   to   the   carrying   amount  of   the   interest   in  OHC   recognised   in   the  consolidated  financial  statements:  

  2016   2015  

Net  assets  of  the  associate  over  Group  level   12,759,173   35,244,809  

Proportion  of  the  Group’s  ownership  interest  in  OHC   35.25%   35.25%  

Carrying  amount  of  the  Group’s  interest  in  OHC   4,497,608   12,423,795  

 

F-­‐49  

(iii)  Jordan  Company  for  Projects  and  Touristic  Development  (JPTD)  

JPTD   is   investing   in   property,   destination  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.    

Summarised  financial  information  in  respect  of  JPTD  is  set  out  below:  

  2016   2015  

Current  assets   46,303,928   46,571,838  

Non-­‐current  assets   131,416,736   130,020,208  

Current  liabilities   (29,382,174)   (34,033,048)  

Non-­‐current  liabilities   (59,054,335)   (57,457,683)  

Net  assets   89,284,155   85,101,315  

Group’s  share  of  net  assets  of  associate   16,365,786   15,599,071  

     

Revenue  for  the  year   30,322,208   10,789,041  

Profit/(loss)  for  the  year   1,740,317   (2,076,051)  

Other  comprehensive  income  for  the  year   -­‐   -­‐  

Total  comprehensive  income  for  the  year   1,740,317   (2,076,051)  

Group’s  share  of  comprehensive  income  for  the  year   319,054   (324,694)  

 

Reconciliation  of   the  above   summarised   financial   information   to   the   carrying  amount  of   the   interest   in   JPTD   recognised   in   the  consolidated  financial  statements:  

  2016   2015  

Net  assets  of  the  associate  over  Group  level   86,309,520   81,960,873  

Proportion  of  the  Group’s  ownership  interest  in  JPTD   18.33%   18.33%  

Carrying  amount  of  the  Group’s  interest  in  JPTD   15,820,535   15,023,428  

 

 (iv)  Red  Sea  for  Construction  &  Development  (“RSCD”)  

During  2016,  Red  Sea   for  Construction  &  Development,  of  which  the  Group  held  a  direct   interest  of  0.4%  as  well  as   an   indirect  interest  of  14%  through  OHC,  increased  its  share  capital  from  EGP  25  million  to  EGP  50  million.  Of  these  EGP  25  million,  the  Group  invested  EGP  20  million   (CHF  2.2  million),   resulting   in  a   total   interest  of  47.18%.  Hence,   the   investment   is  now  classified  as  an  associate.  The  investment  in  associates  is  initially  recognised  at  the  consideration  paid  for  the  capital  increase  with  any  previously  acquired  interests  recognised  at  fair  value.  

Summarised  financial  information  in  respect  of  RSCD  is  set  out  below:  

  2016   2015  

Current  assets   18,591,781   -­‐  

Non-­‐current  assets   1,234,697   -­‐  

Current  liabilities   (17,446,344)   -­‐  

Non-­‐current  liabilities   -­‐   -­‐  

Net  assets   2,380,134   -­‐  

Group’s  share  of  net  assets  of  associate   1,122,914   -­‐  

     

Revenue  for  the  year   55,482,195   -­‐  

Profit/(loss)  for  the  year   2,139,111   -­‐  

Other  comprehensive  income  for  the  year   -­‐   -­‐  

Total  comprehensive  income  for  the  year   2,139,111   -­‐  

Group’s  share  of  comprehensive  income  for  the  year   1,009,203   -­‐  

 

   

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Reconciliation  of   the  above  summarised   financial   information  to   the  carrying  amount  of   the   interest   in  RSCD  recognised   in   the  consolidated  financial  statements:  

  2016   2015  

Net  assets  of  the  associate  over  Group  level   3,568,809   -­‐  

Proportion  of  the  Group’s  ownership  interest  in  RSCD   47.18%   -­‐  

Carrying  amount  of  the  Group’s  interest  in  RSCD   1,683,764   -­‐  

 

 (v)  Orascom  for  Housing  and  Establishment  

The   company  develops   real   estate   and  housing  projects   located   in  Egypt   for   the   low   cost   sector.   The  proportion  of   ownership  interest  held  by  the  Group  at  31  December  2016  is  unchanged  to  prior  year.  In  previous  years,  the  investment  was  reduced  to  CHF  nil  as  the  losses  in  their  last  financial  statements  exceeded  the  carrying  amount  of  the  investment.  

(vi)  ODH  investments  in  Garranah  Group  subsidiaries  

The  Group  continues  to  hold  a  30%  interest  in  the  four  operating  floating  hotels  and  a  tour  operator  entity  of  the  Garranah  Group.  In  previous  years,  the  carrying  amount  of  the  investments  in  Garranah  was  fully  impaired.    

 21  NON-­‐CURRENT  RECEIVABLES    

CHF   2016   2015  

Trade  receivables   33,058,066   105,547,136  

Notes  receivable   9,392,034   19,359,071  

 TOTAL   42,450,100   124,906,207    Non-­‐current  receivables  include  long  term  receivables  for  land  and  real  estate  contracts,  which  will  be  collected  over  an  average  collecting  period  of  5.5  years  (2015:  5.5  years).  None  of  these  non-­‐current  receivables  is  impaired  and/or  overdue.    

The  decrease   in  non-­‐current   receivables   is  mainly  due   to   the   reclassification  of  Tamweel  as  disposal  group   (note  28)  as  well   as  foreign  currency  exchange  losses.  

In  2016,  due  to  the  reclassification  of  Tamweel  Group  as  disposal  group,  none  of  the  receivables  were  pledged.  In  2015,  Tamweel  Mortgage  Finance  Company  S.A.E.  had  pledged  trade  receivable  with  a  carrying  amount  of  CHF  26.6  million  to  secure  borrowings.  

 22  OTHER  FINANCIAL  ASSETS      

Details  of  the  Group’s  other  financial  assets  are  as  follows:  

CHF  Current   Non-­‐current  

2016   2015   2016   2015  

Financial  assets  carried  at  fair  value  through  other  comprehensive  income  (FVTOCI)  

       

Nasr  City  company  for  Housing  &  Development  (N.C.H.R.)     -­‐   -­‐   2,545   3,771  Egyptian  Resort  Company  (i)   -­‐   -­‐   2,889,523   5,030,403  Reclaim  Limited   -­‐   -­‐   481,604   561,271  Desert  Cruise  LLC   -­‐     118,921   -­‐  Camps  and  Lodges  Company   -­‐   -­‐   14,152   31,680  Palestine  for  Tourism  Investment  Company   -­‐   -­‐   9,696   21,703  El  Koseir  Company     -­‐   -­‐   192   431  

Financial  assets  carried  at  amortized  cost          Bonds  issued  by  the  Egyptian  Government  (11.50%,  November  2016)  

-­‐   3,121,781   -­‐   -­‐  

Bonds  issued  by  the  Egyptian  Government  (11.30%,  November  2016)  

-­‐   422,591   -­‐   -­‐  

 TOTAL   -­‐   3,544,372   3,516,633   5,649,259  

   

F-­‐51  

(i) Egyptian  Resort  Company  

The  investment  in  Egyptian  Resort  Company  (“ERC”),  which  is  listed  in  EGX,  remains  unchanged  to  prior  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”).    

In   contrast   to   the   overall  market   environment,   the   share   price   of   the   listed   Egyptian   Resort   Company,   the   Group’s   most  significant  financial  assets  carried  at  FVTOCI,  has  dropped  significantly  in  2016.  CHF  2.7  million  are  recorded  in  net  losses  on  financial  assets  at  FVTOCI  within  other  comprehensive   income.  These   losses  were  partly  compensated  by   foreign  currency  exchange  gains  of  CHF  0.6  million  which  are  also  shown  within  other  comprehensive  income.  

 

23  INVENTORIES      CHF   2016   2015  

Construction  work  in  progress  (i)   84,300,498   92,775,132  

Land  held  for  development  under  purchase  agreements  (ii)   24,695,522   63,852,503  

Other  inventories    (iii)   15,963,993   34,661,983  

 TOTAL   124,960,013   191,289,618  

 (i) This  amount  includes  real  estate  construction  work  under  progress.  The  real  estate  units  are  sold  off  plan.  The  main  reasons  

for  the  decrease  in  inventory  compared  to  31  December  2015  are  foreign  currency  exchange  losses  due  to  the  devaluation  of  the  Egyptian  Pound.  The  main  part  of  the  decreases  as  netted-­‐off  by  capitalized  construction  cost  in  relation  to  development  projects   in  Egypt  and  Montenegro.  For   further  details  on   the  net   realisable  value  of   construction  work   in  progress   refer   to  note  4.2.10.  

(ii) In   2008,   the   finance   leases   between   OHD   and   General   Authority   for   Touristic   and   Development   (“GATD”)   in   Egypt   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  decrease  compared  to  prior  year  is  due  to  the  devaluation  of  the  Egyptian  Pound  and  amortisation  of  infrastructure.  

The  value  of  land  shown  above  is  for  those  plots  of  land  assigned  for  development  and  not  yet  sold  by  OHD.  

(iii) This  amount   includes  hotels   inventory  of  CHF  9.7  million   (2015:  CHF  19.7  million)  as  well  as  completed  but  unsold  units  of  CHF  8.2  million  (2015:  CHF  15.8  million)  

In  2016,  inventory  of  development  projects  was  written  down  by  CHF  13.5  million.    

 

24  TRADE  AND  OTHER  RECEIVABLES      

CHF   2016   2015  

Trade  receivables  (i)   46,171,705   53,292,676  

Notes  receivable   28,003,613   29,081,185  

Allowance  for  doubtful  debts  (see  below)   (18,340,388)   (20,959,808)  

 TOTAL   55,834,930   61,414,053  

(i) Trade  and  other  receivables  decreased  by  CHF  7.1  million  due  to  reclassification  into  non-­‐current  receivables  as  well  as  foreign  currency  translation  losses  due  to  the  devaluation  of  the  Egyptian  Pound  (note  30.6).  The  decrease  was  partly  netted  of  by  an  increase  due   to   increased  operating  activities.  The  average  credit  period  on   sales  of   real-­‐estate   is   5.5  years.  No  contractual  interest  is  charged  on  trade  receivables  arising  from  the  sale  of  real  estate  units.  Interest  is  only  charged  in  case  of  customer’s  default.   The  Group  has   recognised   an   allowance   for   doubtful   debts   of   25%   (2015:   25%)   based  on   individual   bad  debts   and  allowances   due   to   past   due   amounts.   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.    

   

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Movement  in  the  allowance  for  doubtful  debt:  

CHF   2016   2015  

Balance  at  beginning  of  year   (20,959,808)   (29,911,892)  

Impairment  losses  recognised  on  receivables   (6,360,984)   (2,172,965)  

Amounts  written  off  during  the  year  as  uncollectable     146,424   8,933,851  

Impairment  losses  reversed  (allowance  no  longer  used)   109,181   113,506  

Reclassified  (from)/to  assets  held  for  sale   1,576,401   -­‐  

Foreign  exchange  translation  gains  and  losses   7,148,398   2,077,692  

Balance  at  end  of  year   (18,340,388)   (20,959,808)  

Included  in  the  Group’s  trade  and  other  receivable  balance  are  debtors  with  a  carrying  amount  of  CHF  29.0  million  (2015:  CHF  36.8  million)  which  are  past  due  but  not  impaired  at  the  reporting  date.  The  Group  has  not  built  an  allowance  for  impairment  loss  for  the   past   due   amounts   reported   below   as   there   has   not   been   a   significant   change   in   credit   quality   and   the   amounts   are   still  considered  recoverable  (see  note  40).  

Aging  of  receivables  that  are  past  due  but  not  impaired:  

CHF   2016   2015  

Less  than  30  days     7,788,904   10,288,904  

Between  30  to  60  days     4,195,001   5,795,001  

Between  60  to  90  days   2,754,133   3,754,133  

Between  90  to  120  days   1,687,209   2,387,209  

More  than  120  days   12,594,217   14,593,637  

TOTAL   29,019,464   36,818,884  

 

25  FINANCE  LEASE  RECEIVABLES      

CHF   2016   2015  

Current  finance  lease  receivables   -­‐   9,844,267  

Non-­‐current  finance  lease  receivables   -­‐   38,632,861  

TOTAL   -­‐   48,477,128  

Due  to  the  planned  disposal  of  Tamweel,  all   finance   lease  receivables  were  reclassified  to  assets  held  for  sale.  For  further  detail  refer  to  note  28.  

25.1  Leasing  arrangements  Tamweel  Leasing  Finance  Co.,  a  subsidiary  of  the  Group  entered  into  finance  lease  arrangements  for  buildings,  cars,  equipment,  computer  hardware  and  software  as  a  lessor.  All  leases  are  denominated  in  EGP.  The  average  term  of  finance  leases  entered  into  was  ten  years.  In  2016,  Tamweel  was  reclassified  as  disposal  group.  

25.2  Amounts  receivable  under  finance  lease  

  Minimum  lease  payments  Present  value  of  

minimum  lease  payments    CHF   2016   2015   2016   2015  

Not  later  than  one  year   -­‐   23,540,730   -­‐   9,844,267  

Later  than  one  year  and  not  later  than  five  years   -­‐   44,768,780   -­‐   37,151,394  

Later  than  five  years   -­‐   1,731,267   -­‐   1,481,467  

    -­‐   70,040,777   -­‐   48,477,128  

Less:  unearned  finance  income   -­‐   (21,563,649)   -­‐   -­‐  

Present  value  of  minimum  lease  payments   -­‐   48,477,128   -­‐   48,477,128  

The  interest  rate  inherent  in  the  leases  is  fixed  at  the  contract  date  for  the  entire  lease  term.  The  average  effective  interest  rate  contracted  was  approximately  15.5%  per  annum  as  at  31  December  2015.    

The  finance  lease  receivables  as  at  31  December  2015  included  CHF  262,680  which  was  past  due.  None  of  these  was  impaired.  

   F-­‐53  

26  OTHER  CURRENT  ASSETS      

CHF   2016   2015  

Advance  to  suppliers  (i)   16,844,505   10,011,045  

Deposit  with  others   5,471,972   3,592,506  

Prepaid  expenses   5,000,567   5,396,436  

Prepaid  sales  commissions  related  to  uncompleted  units   4,005,504   5,932,142  

Withholding  tax   3,629,337   3,924,241  

Other  debit  balances     3,496,691   7,528,598  

Letters  of  guarantee  –  cash  margin   564,201   1,348,799  

Accrued  revenue   438,923   1,298,449  

Cash  imprest   340,582   594,790  

Amounts  due  from  employees  and  the  management  team  (ii)   247,227   303,283  

Down  payments  for  investments     16,247   37,637  

Amounts  due  in  relation  to  settlement  with  Falcon  (note  37)   -­‐   59,534,382  

 TOTAL   40,055,756   99,502,308  

(i) Advance  to  suppliers  relates  to  advances  paid  in  Oman,  Egypt  and  Montenegro.  The  increase  is  mainly  due  to  an  increase  in  advances  in  Montenegro  and  Oman.  

(ii) This  amount   is  due  from  employees  and  management  team  including  executive  board  members  as  a  result  of  receiving  two  million  OHD   shares   in   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).  All  shares  were  swapped  at  a  rate  of  1:10  for  ODH  shares  in  2008.  On  one  side  payment  of  the  share  price  was  deferred  and  payback  period  was  extended  each  year,  on  the  other  side  employees  and  management  were  instructed  not  to   sell   their   unpaid   shares.  As   the   share   price   decreased   substantially   since   the   allocation   of   the   shares,   provisions   against  these   receivables  were   recognized   in   2011   and   2012.   In  March   2013,   the   terms   and   conditions   of   the   final   settlement  were  ultimately  determined  by  the  Board  of  Directors  based  on  the  share  price  as  at  31  December  2012.  This  resulted  in  a  residual  amount   of   CHF   250,432   (2015:   303,283)   which   is   due   from   employees   and   management   team   including   executive   board  members  and  a  residual  provision  of  CHF  247,227  (2015:  CHF  303,283).  All  other  amounts  due  were  netted  off.    

 

27  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.  

Cash  and  cash  equivalents  at  year  end  as  shown  in  the  consolidated  statement  of  cash  flows  can  be  reconciled  to  the  related  items  in  the  consolidated  statement  of  financial  position  as  follows:  

     CHF   2016   2015  

Cash  and  cash  equivalents   80,834,952   167,636,917  

Cash  and  cash  equivalents  included  in  assets  held  for  sale   1,337,360    

Balance  at  the  end  of  the  year   82,172,312   167,636,917  

 

27.1  Management’s  plans  to  manage  liquidity  shortages  and  related  uncertainty  During   this   past   year,   we   have   experienced   and   successfully   navigated   through   several   periods   of   volatility   and   turbulences.    Although  we  are  not  immune  from  what  is  happening  around  us,  the  company  managed  to  do  better  job  operationally  than  the  year  before  in  most  of  our  destinations.  Results  were  impacted  by  the  political  and  economic  backdrop  in  Egypt.  However,  Oman  continued   its   positive   contribution   in   terms   of   real   estate   sales   and   hotels   operations.     In   addition,   Montenegro   has   also  contributed  positively  in  terms  of  real  estate  sales.      

During  2016  our  initial  focus  was  on  identifying  our  organizational  challenges  and  development  areas  related  to  strategy,  visibility  and   accountability.   Accordingly,   we   started   working   on   re-­‐organizing   the   current   segment   structure   to   a   destination   based  structure,  pushing  more  authority  and  responsibility  on  the  ground  of  each  destination,  to  better  increase  operational  efficiency,  shorter  the  decision-­‐making  process  and  improve  market  transparency.    

We  now  have  a  clear  view  of  where  each  destination  is  going  to  be  over  the  short-­‐term  course  5  years  and  we  have  also  indicated  the  needed  sources  of  funding  that  we  have  been  working  on  diligently  to  make  sure  the  plan  unfolds  in  the  direction  we  want  it  to.    

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F-­‐54  

The  actions  taken  by  the  Group  so  far  towards  managing  this  situation  are  as  follows:  

Commitment  from  Chairman  

In  April  2016,  the  Chairman  signed  a  letter  of  commitment  in  favour  of  the  Group  to  avail  up  to  CHF  40  million  until  31  May  2017  should   the  Group   require   it.  Of   the  committed  amount  CHF  4.7  million  were  drawn-­‐down  by   the  Group  until   end  of  December  2016.     In   February   2017,   the   chairman   renewed   his   commitment   letter   vowing   to   avail   up   to   CHF   60.0   million   until   end   of  December  2018.  

Monetization  plan,  financing  and  loans  

The  monetization   initiatives   that   the  management   started   since   2012   to   generate   cash   to   be   injected   into   the   business   of   the  Group  is  continuing  and  has  proved  its  success.    Under  this  notion,  in  2016  Tamweel  Holding  Group  was  identified  as  a  non-­‐core  asset  to  the  Group  and  has  been  put  in  the  monetization  list  and  assigned  as  an  asset  held  for  sale.  By  selling  Tamweel  we  will  be  able  to  deconsolidate  its  debt  from  our  books  and  the  proceeds  of  its  sale  are  earmarked  to  further  reduce  the  debt  balance.  

Moreover,  OHD  –  the  largest  subsidiary  of  ODH  –  signed  a  CHF  228.67  million  debt  refinancing  package  with  its  banks  allowing  the  company   to   postpone   its   principal   payments   for   the   coming   3   years   and   its   interest   payments   for   financial   year   2016  with   an  option  to  postpone  the   interest  payments   for   financial  year  2017.  Thus,   the  balance  sheet  of   the  company  will  be  strengthened  and  thereby  lead  to  more  flexibility  to  advancing  its  projects.  Even  though  we  have  successfully  concluded  the  refinancing  package  that  we  had  been  working  on  since  2014,  we  still  plan  to  further  reduce  our  debt  balance  to  levels  that  we  foresee  as  sustainable  enough  to  be  covered  by  the  projected  levels  of  operations.  

Management   is   continuously   looking   for   local   partner   to   inject   funds   into   new   projects   in   Oman   and   Montenegro.   Further,  management   is   considering   to  propose  new   financing   structures  on  ODH   level,   including  new  debt,  equity  or   structured  equity  instruments.    

In  addition,  from  an  operational  perspective  the  management  is  continuing  with  its  cost  saving  initiatives  that  will  generate  further  savings   in  overhead  expenses,  direct  expenses  and  interest  expenses.  These  initiatives  target  enhancing  the  performance  of  the  group  in  certain  segments  where  we  believe  that  there  is  room  for  enhancement.  Management  tackled  those  findings  through  the  re-­‐organization   of   the   current   segment   structure   to   a   destination   based   structure.   The  model   proved   successful   after  we   have  implemented   it   in  Taba  and  Fayoum.   In  Taba,  we  managed  to  cut   the  annual  GOP   losses   from  CHF  4.5  million   in   financial  year  2015  to  CHF  1.7  million  in  financial  year  2016.  

Management  believes  that  these  plans  are  sufficient  to  substantially  mitigate  the  liquidity  risk.    Given  that  there  is  a  certain  degree  of   uncertainty   in  major   countries   where   the   Group   operates,   especially   Egypt,   the   loan   from   our   Chairman   as   noted   above   is  extended   to   support   the   company   in   the   coming   few  months   should   such   uncertainties   prevail.   However,  management   keeps  monitoring  the  events  as  they  unfold  in  case  further  immediate  action  is  required.  

 

28  ASSETS  HELD  FOR  SALE    

28.1  Planned  disposal  of  Tamweel  In  the  second  half  of  2016,  the  Board  of  Directors  decided  to  sell  its  Tamweel  Group  companies  (“Tamweel”)  and  management  has  engaged  a  third  party  as  sell  side  advisor.  The  sale  process  has  started   in  July  2016  after  all  necessary  documentation  had  been  prepared   by   the   sell   side   advisor.   So   far   the   Group   received   non-­‐binding   offers   from   interested   third   parties   however   are   still  looking  for  further  investors.      

Tamweel  does  not  qualify  as  discontinued  operation  as   it   is  neither  a  separate  major   line  of  business  nor  a  geographical  area  of  operations.  

   

F-­‐55  

The  non-­‐current  assets  held  for  sale  and  the  liabilities  associated  with  non-­‐current  assets  held  for  sale  were  reclassified  from  the  following  categories  of  assets  and  liabilities:  

CHF     2016  

Non-­‐current  assets      

Property,  plant  and  equipment     195,184  

Non-­‐current  receivables     21,752,349  

Finance  lease  receivables     28,553,814  

Current  assets      

Inventories     222,431  

Trade  and  other  receivables     6,403,184  

Finance  lease  receivables     7,254,695  

Other  financial  assets     1,047,635  

Other  currents  assets     464,083  

Cash  and  bank  balances     1,337,360  

Assets  classified  as  assets  held  for  sale     67,230,735  

Non-­‐current  liabilities      

Non-­‐current  borrowings     (35,712,509)  

Deferred  tax  liabilities     (380)  

Current  liabilities      

Trade  and  other  payables     (1,440)  

Current  borrowings     (16,441,930)  

Current  tax  liabilities     (651,419)  

Provisions     (267,638)  

Other  current  liabilities     (1,043,577)  

Liabilities  associated  with  assets  classified  as  assets  held  for  sale     (54,118,893)  

Net  assets  classified  as  disposal  group     13,111,842  

The  above  amounts  represent  the  carrying  amounts  on  date  of  reclassification.  No  adjustments  to  fair  value  less  costs  to  sell  had  to  be  made.  

 

29  CAPITAL      

29.1  Issued  capital    

CHF   2016   2015  

Par  value  per  share   23.20  CHF   23.20  CHF  

Number  of  ordinary  shares  issued  and  fully  paid   40,409,926   40,409,926  

Issued  capital   937,510,283   937,510,283  

 29.2  Fully  paid  ordinary  shares  In  December  2015,  the  share  capital  was  increased  from  CHF  662,201,010  to  CHF  937,510,283  by  issuing  11,866,779  ordinary  shares  at  the  par  value  per  share  of  CHF  23.20.  There  were  no  changes  to  the  share  capital  in  the  current  financial  year.    

The   new   registered   shares   were   offered   at   the   offer   price   of   CHF   11.28   per   share   at   a   slight   premium   to   the   30   day   Volume  Weighted  Average  Price   (VWAP).   The   exercise  of   12   subscription   rights   entitled   the  holder   the   right   to  purchase   5   new   shares  against  payment  of   the  offer  price.  66.6%  of   the  subscription   rights  were  exercised,   corresponding   to  7,903,387  new  registered  shares.  3,963,392  offered  shares  for  which  rights  were  not  exercised  were  purchased  by  Samih  Sawiris,  through  a  controlled  entity  (SOS  Holding),  for  an  aggregate  amount  of  CHF  44.7  million  at  the  same  conditions  as  for  existing  shareholders  of  the  Company.  

   

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29.3  Authorized  capital  

The  ordinary  meeting  of  shareholders  held  on  18  May  2015  authorized  the  Board  of  Directors  to  increase  the  share  capital  of  the  Company  by  a  maximum  of  CHF  278  million  by  issuing  up  to  12,000,000  fully  paid-­‐up  registered  shares  with  a  par  value  of  CHF  23.20  each  until  18  May  2017.  Partial  increases  are  permitted.  Following  an  increase  of  the  share  capital  out  of  the  authorized  share  capital  on  15  December  2015,  the  Board  of  Directors  remains  authorized  to  increase  the  capital  of  the  Company  by  a  maximum  of  CHF  3,090,272.20  by  issuing  of  up  to  133'221  fully  paid-­‐up  registered  shares  with  a  par  value  of  CHF  23.20  each  until  18  May  2017.  

29.4  Conditional  capital  

The  share  capital  may  be  increased  by  a  maximum  amount  of  CHF  139.2  million  through  the  issuance  of  up  to  6  million  fully  paid  registered  shares  with  a  nominal  value  of  CHF  23.20  each  

a) up  to  the  amount  of  CHF  23  million  corresponding  to  1  million  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   116  million   corresponding   to   5  million   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   may   restrict   or   withdraw   the   right   for  advance  subscription  (“Vorwegzeichnungsrecht”)  of  the  shareholders  in  connection  with  (i)  the  financing  (refinancing  inclusively)  of  acquisitions  of  enterprises  or  parts  thereof,  participations  or  other  investment  projects  of  the  company  and/or  its  subsidiaries  or  (ii)   the  placement  of  convertible  bonds  or  financial   instruments  with  conversion  or  option  rights  on  the  national  or   international  capital  market.  

At  31  December  2016,  no  option  rights,  conversion  rights  or  warrants  had  been  granted  on  that  basis.  

29.5  Significant  shareholders    

The  following  significant  shareholders  are  known  to  us.  

    2016   2015  

CHF   Number  of  shares   %   Number  of  shares   %  

Samih  Sawiris  (i)   27,391,814   67.78%   29,355,452   72.64%  

SOS  Holding   2,049,782   5.07%   -­‐   -­‐  

Janus  Capital  Management  LLC   -­‐   -­‐   1,494,207   3.70%  

Others   10,968,330   27.15%   9,560,267   23.66%  

TOTAL   40,409,926   100.00%   40,409,926   100.00%  

(i)   The  shares  of  Samih  Sawiris  are  held  directly  and  through  his  entities  Thursday  Holding  and  SOS  Holding.  

 

30  RESERVES  (NET  OF  INCOME  TAX)    CHF   2016   2015  

Share  premium  (note  30.1)   98,488,244   98,570,244  

Treasury  shares  (note  30.2)   (26,797)   (3,268,681)  

Share-­‐based  payment  reserve  (note    30.3)   833,333   -­‐  

Investments  revaluation  reserve  (note  30.4)   (17,256,259)   (14,590,160)  

General  reserve  (note  30.5)   4,916,868   4,916,868  

Foreign  currencies  translation  reserve  (note    30.6)   (351,669,206)   (275,993,824)  

Reserve  from  common  control  transactions  (note  30.7)   (98,692,949)   (98,692,949)  

Equity  swap  settlement  (note  30.8)   (2,114,229)   (2,114,229)  

TOTAL   (365,520,995)   (291,172,731)  

 

   

F-­‐57  

30.1  Share  premium    

CHF   2016   2015  

Balance  at  beginning  of  year   98,570,244   243,799,019  

Transaction  costs  in  relation  to  delisting  of  EDRs  in  Egypt  (note  48)   (82,000)   -­‐  

Issuance  of  ordinary  shares  (note  29.2)   -­‐   (141,452,006)  

Share  capital  increase  costs  (note  29.2)   -­‐   (3,776,769)  

Balance  at  end  of  year   98,488,244   98,570,244  

 30.2  Treasury  shares    

CHF   2016   2015  

Balance  at  beginning  of  year   (3,268,681)   (5,471,285)  

Acquisition  of  treasury  shares     -­‐  

Distribution  of  treasury  shares  (i)   3,241,884   2,202,604  

Balance  at  end  of  year   (26,797)   (3,268,681)  

As  of  31  December  2016,  the  Company  owned  516  own  shares   (31  December  2015:  62,877).  A  total  of  150,612  own  shares  were  received  in  2010  (26,171  shares)  and  2013  (124,441  shares)  as  part  of  the  compensation  for  the  sale  of  the  six  percent  stake  in  the  former  Garranah  subsidiaries  (note  30.8).    

(i) During   2016,   ODH   transferred   a   total   of   62,361   own   shares   to   the   members   of   the   Board   of   Directors   as   part   of   their  remuneration   (CHF   0.7   million).   The   treasury   shares   reserve,   which   values   the   shares   at   original   purchase   price   (CHF   3.2  million),   has   been   reduced   accordingly   and   the   resulting   difference   has   been   recognized   as   loss   directly   through   retained  earnings  (CHF  2.5  million).  

In  March  and  September  2015,  ODH  transferred  a  total  of  42,369  own  shares  to  the  members  of  the  Board  of  Directors  as  part  of  their  remuneration  (CHF  0.7  million).  The  treasury  shares  reserve,  which  values  the  shares  at  original  purchase  price  (CHF  2.2  million),  has  been  reduced  accordingly  and  the  resulting  difference  has  been  recognized  as  loss  directly  through  retained  earnings  (CHF  1.5  million).  

30.3  Share-­‐based  payment  reserve    

CHF   2016   2015  

Balance  at  beginning  of  year   -­‐   -­‐  

Share-­‐based  payments  (note  41)   833,333   -­‐  

Balance  at  end  of  year   833,333   -­‐  

 

30.4  Investments  revaluation  reserve    

CHF   2016   2015  

Balance  at  beginning  of  year   (14,590,160)   (11,647,720)  

Net  (loss)  arising  on  revaluation  of  financial  assets  at  FVTOCI   (2,666,099)   (2,942,440)  

Balance  at  end  of  year   (17,256,259)   (14,590,160)  

The  investments  revaluation  reserve  represents  the  cumulative  gains  and  (losses)  arising  on  the  revaluation  of  financial  assets  at  fair  value  through  other  comprehensive  income  (“FVTOCI”).  

30.5  General  reserve    

CHF   2016   2015  

Balance  at  beginning  of  year   4,916,868   4,916,868  

Balance  at  end  of  year   4,916,868   4,916,868  

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.  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   has   returned   330   029   of   the   borrowed   ODH   shares   to   Mr.   Samih   Sawiris   on   28   July   2011   by   way   of   capital  increase,   which   is   further   explained   in   note   42.   All   of   the   remaining   956,324   shares,   which   were   not   used   during   the   above  mentioned  tender  offer,  were   returned  to  Mr.  Samih  Sawiris  by  31  December  2013.  The  difference  between  the  balance,  which  

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was  reported  in  equity  as  “equity  swap  settlement”,  measured  at  the  fair  value  of  the  share  at  the  end  of  the  tender  offer,  and  the  fair  value  amount  of  the  capital  increase  was  recognised  as  ”general  reserve”.  

30.6  Foreign  currencies  translation  reserve    

CHF   2016   2015  

Balance  at  beginning  of  year   (275,993,824)   (248,250,610)  

Exchange  differences  arising  on  translating  the  foreign  operations   (75,675,382)   (27,743,214)  

Balance  at  end  of  year   (351,669,206)   (275,993,824)  

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  results  and  net  assets  of  foreign  operations  are  reclassified  to  profit  or  loss  on  the  disposal  and/or  deemed  loss  of  control  of  a  foreign  operation.  

In  2016,  the  Egyptian  Pound  dropped  by  55%  against  the  Swiss  Franc.  Compared  to  this  significant  devaluation,  the  decrease  of  the  Swiss  Franc  against  the  US  Dollar  only  had  an  insignificant  positive  impact.  This  resulted  in  a  net  loss  for  the  year  of  CHF  124.8  million.  

The  devaluation  of  the  Egyptian  Pound  was  initiated  in  the  first  half  of  2016  by  the  decision  of  the  Egypt  Central  Bank  to  devalue  the  Egyptian  Pound  against  USD  by  approximately  14%  compared  to  the  foreign  exchange  rate  as  at  31  December  2015  resulting  in  a  similar  devaluation  of  the  Egyptian  Pound  against  the  Swiss  Franc.  

The  decision  taken  by  the  central  bank  of  Egypt  in  November  2016  to  float  the  Egyptian  pound  in  an  attempt  to  stabilize  the  economy  has  had  a  significant  impact  on  many  companies  that  operate  in  Egypt  including  the  Group.  The  102.7%  appreciation  of  the  U.S.  Dollar  against  the  EGP  from  8.88  to  18.0  resulted  in  substantial  revaluations  of  the  debt  held  in  USD  at  the  subsidiaries  and  subsequently  negatively  impacted  the  Group’s  income  statement  with  a  non-­‐cash  foreign  exchange  loss  of  CHF  120.0  million.  On  the  other  hand,  total  debt  of  Egyptian  subsidiaries  on  ODH’s  balance  sheet  has  decreased  by  24%.  It  is  important  to  note  that  the  Group’s  hotels  and  real  estate  income  is  mostly  in  foreign  currency  and  therefore  ODH  borrows  also  in  USD  and  benefits  from  a  lower  interest  rate.    

30.7  Reserve  from  common  control  transactions    

CHF   2016   2015  

Balance  at  beginning  of  year   (98,692,949)   (121,749,573)  

Sale  of  15%  of  OHD  (note  32)   -­‐   22,858,157  

Non-­‐controlling  interests’  share  in  equity  of  consolidated  subsidiaries   -­‐   198,467  

Balance  at  end  of  year   (98,692,949)   (98,692,949)  

The  reserve  from  common  control  transactions  mainly  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  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  the  previous  carrying  amount  of  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.  

   

F-­‐59  

30.8  Equity  swap  settlement  CHF   2016   2015  

Balance  at  beginning  of  year   (2,114,229)   (2,114,229)  

Balance  at  end  of  year   (2,114,229)   (2,114,229)  

The  consolidated  statement  of  changes  in  equity  includes  a  balance  of  CHF  2.1  million  outstanding  at  31  December  2016  which  has  originally  arisen   from  the  Group’s  sale  of   the  six  percent  stake   in  Garranah  companies   to   the  Garranah   family  during  2010.  The  unsettled  consideration  at  31  December  2012  amounted  to  CHF  10.6  million  of  which  CHF  10.2  million  were  reported  as  a  negative  component   in   equity.   The   remaining   balance   arising   from   such   sale   of   CHF   0.4   million   was   classified   as   trade   and   other  receivables.  On  12  November  2013,  the  Garranah  family  has  settled  part  of  the  outstanding  consideration  by  transferring  124,441  ODH  shares.  This  led  to  a  corresponding  transfer  of  CHF  8.1  million  from  this  reserve  to  treasury  shares  (note  30.2).  The  residual  amount  as  at  31  December  2016  is  due  to  EDRs  which  are  held  in  an  escrow  account  and  remained  unchanged  since  31  December  2014.      

31  (ACCUMULATED  LOSSES)/RETAINED  EARNINGS      

CHF   2016   2015  

Balance  at  beginning  of  year   78,164,830   99,060,154  

Loss  attributable  to  owners  of  the  Parent  Company   (196,415,554)   (19,052,959)  

Remeasurement  gain/(loss)  on  defined  benefit  obligation   (14,281)   (304,423)  

Distribution  of  treasury  shares  (note  30.2)   (2,517,189)   (1,537,942)  

Balance  at  end  of  year   (120,782,194)   78,164,830  

During   2015   and   2016   no   dividends   had   been   paid.   In   respect   of   the   current   year,   the   Board   of   Directors   does   not   propose   a  dividend  or  a  capital  reduction  to  the  shareholders  at  the  Annual  General  Meeting.  

 

32  NON-­‐CONTROLLING  INTERESTS    

CHF   2016   2015  

Balance  at  beginning  of  year   232,127,614   200,456,351  

Share  of  loss  for  the  year   (47,420,281)   (3,466,342)  

Exchange  differences  arising  on  translation  of  foreign  operations   (49,114,705)   (6,463,029)  

Sale  of  15%  interest  in  OHD  (i)   -­‐   36,147,080  

Acquisition  of  non-­‐controlling  interests  in  consolidated  subsidiaries  (ii)   -­‐   (861,844)  

Other  non-­‐controlling  interest  share  in  equity  of  consolidated  subsidiaries     4,874,609   6,315,398  

Balance  at  end  of  year   140,467,237   232,127,614  

(i) On  4  January  2015  ODH  completed  the  subscription  in  the  public  offering  of  its  Egyptian  subsidiary  OHD,  through  the  sale  of  33,294,349   shares   at   a   price   of   EGP   15.20   (approximately   CHF   1.85)   per   share.   The   offering   generated   EGP   506.1  million  (approximately  CHF  61.5  million)   in  total  proceeds  for  the  Group.  This   is   lower  than  the  CHF  69.9  million  announced  earlier  due  to  significant  changes  in  the  foreign  currency  exchange  rate.  Net  proceeds  were  CHF  2.5  million  lower  due  to  transaction  costs  which  were  recognised  directly  through  equity.  The  net  gain  from  this  transaction  of  CHF  22.9  million  was  recognised  through  reserve  from  common  control  transactions.  As  a  result  of  strong  investor  demand  (oversubscription  of  3.8x  in  total),  ODH  elected  to  proceed  with  the  sale  of  a  15%  stake  in  OHD,  which  is  the  top  end  of  the  range  approved  by  ODH’s  Board  of  Directors.  This  transaction  marks  the  return  of  OHD’s  active  trading  on  the  EGX  since  2008.  

(ii) In   2015,   the   Group   bought   the   remaining   shares   of   Captain   for   Hotels   Company   (Egypt)   from   the   non-­‐controlling  shareholders.  

 

   

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33  BORROWINGS    

    Current   Non-­‐current  

CHF   2016   2015   2016   2015  

Secured  -­‐  at  amortized  cost          

Credit  facilities  (i)   94,290,856   154,436,267   -­‐   -­‐  

Bank  loans  (ii)   137,137,050   126,917,461   136,504,475   221,113,293  

Finance  lease   509,580   921,632   1,126,538   3,638,986  

TOTAL     231,937,486   282,275,360   137,631,013   224,752,279  

 

33.1  Summary  of  borrowing  arrangements  The  weighted  average  contractual  effective  interest  rate  for  all  credit  facilities  and  loans  are  7.40%  (2015:  8.22%).  It  is  calculated  by  dividing  the  forecasted  contractual   interest  expense  due  next  year  by  the  total  outstanding  credit  facilities  and  bank  loans  at  the  end  of  the  current  reporting  period.  For  a  breakdown  of  debts  bearing  variable  and  fixed  interest  see  note  40.10.1.  

(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  2016  is  9.13%  (2015:  9.62%).  

(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  88.3  million  (2015:  CHF  96.6  million)  and  receivables  with  a  carrying  amount  of  CHF  12.1  million  (2015:  CHF  26.6  million)  have  been  pledged  to  secure  borrowings  (see  notes  16  and  24).    

In   2016,   borrowings   decreased   by   CHF   137.5   million   mainly   due   to   the   devaluation   of   the   Egyptian   Pound   as   well   as   the  reclassification  of  Tamweel  as  disposal  group  (note  28)  and  repayment  of  loans  in  Egypt  and  Oman.  The  decrease  was  partly  set-­‐off  by  new  loan  agreement  in  Egypt,  Oman  and  Montenegro.  

33.2  Breach  of  loan  agreement  

In   Q4   2016,   OHD,   an   Egyptian   subsidiary,     signed   a   syndication   agreement  with   all   its   short-­‐term   lenders   while   subsequently  signing  a  common  terms  and  inter-­‐creditor  agreement  (CTIA)  with  all   lenders  (including  both  the  short-­‐term  lenders  and  exiting  medium   terms   lenders).   The   syndication   agreement   groups   all   short-­‐term   lenders   under   one   legal   document   and   converts   the  debt  from  short  term  loans  (overdraft  lines)  to  one  single  medium  term  loan  with  a  door  to  door  tenor  of  8.5  years  from  the  date  of  signing  the  CTIA.  The  CTIA  is  a  document  that  governs  the  terms  of  all  OHD  loans  (the  newly  signed  syndication  agreement  and  the  various  existing  bilateral  medium  term  loans)  so  that  terms  are  unified  except  for  the  collateral  structure  which   is  unique  to  each  individual  legal  document.  It  is  worthy  to  mention  that  the  previously  mentioned  cash  proceeds  from  the  OHD  relisting  was  used  to  pay  down  the  bank  debt  balances  of  OHD  on  a  pro-­‐rata  basis  and  that  OHD  rescheduled  all  its  existing  bilateral  medium  term   loans   to   loans  with   a   door   to   door   tenor   of   7.5   years   from   the   date   of   signing   the   CTIA.   All  OHD   loans   after   the   signed  transaction  were  granted  a   3-­‐year  grace  period  of   loan  principal   repayment   from  30   June  2016  and   the  ability   to   capitalize   the  interest  expense  for  the  full  year  2016  as  well  as  the  option  to  capitalize  the  interest  expense  for  the  full  year  2017  if  OHD  elects  to,  based  on  performance.  OHD  is  currently  working  with  the   lender’s   legal  counsel  to  finalize  the  conditions  required  to  effect  the  terms  under  both  these  loan  agreements  which  is  expected  during  Q2  of  the  year  2017.                            

It  is  also  worth  mentioning  that  in  addition  to  the  above,  and  until  these  loan  agreements  become  effective,  all  covenant  breaches  were  waived  by  every  ODH  lender  for  the  year  2016  and  2017.  

 

34  TRADE  AND  OTHER  PAYABLES    

CHF   2016   2015  

Non-­‐current  trade  payables   11,576,940   17,128,923  

Current  trade  and  other  payables   24,690,585   29,913,933  

TOTAL   36,267,525   47,042,856  

Trade   and   other   payables   decreased   by   CHF   10.8   million   mainly   due   to   foreign   currency   exchange   differences   based   on   the  devaluation  of  the  Egyptian  Pound  (note  30.6).  There  were  no  other  significant  changes  in  2016.  

 

   

F-­‐61  

35  PROVISIONS      

CHF   2016   2015  

Current   68,626,934   82,521,775  

Non-­‐Current   -­‐   -­‐  

TOTAL   68,626,934   82,521,775  

 

CHF  Provision  for  infrastructure  completion  

Provision  for  legal  cases  

Provision  for  governmental  

fees  

Provision  for  employee  benefits  

Other  provisions  

Total  

  (i)   (ii)   (iii)   (iv)   (v)    

Balance  at  1  January  2015   16,934,850   17,659,014   6,362,380   4,830,504   36,735,027   82,521,775  

Additional  provisions  recognized  

416,205   4,158,422   19,227   1,152,472   3,732,709   9,479,035  

Provision  reversed  as  no  longer  required  

-­‐   -­‐   -­‐   -­‐   (203,137)   (203,137)  

Reductions  arising  from  payments  

-­‐   -­‐   (1,535,109)   (270,150)   (1,202,400)   (3,007,659)  

Transfer  to  assets  held  for  sale  

-­‐   -­‐   -­‐   -­‐   (433,081)   (433,081)  

Acquired  through  business  combination  

-­‐   -­‐   -­‐   -­‐   831,200   831,200  

Exchange  differences     (3,713,435)   (1,416,682)   (2,264,572)   159,330   (13,325,840)   (20,561,199)  

Balance  at  31  December  2016  

13,637,620   20,400,754   2,581,926   5,872,156   26,134,478   68,626,934  

 (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  on  the  date  on  which  all  the  criteria  for  revenue  recognition  are  met.  

(ii) Provision  for  legal  cases  consists  of  expected  cash  outflows  for  the  settlement  of  pending  litigations.  The  increase  is  primarily  due  to  various  new  legal  cases  in  Egypt  and  Oman.  

(iii) Provision  for  government  fees  relates  to  cash  outflows  for  fees  due  on  the  sale  of  land  and  /  or  any  profit  thereon  which  were  recorded  during  the  current  year.  Such  provision  is  calculated  and  recorded  using  the  locally  enacted  fee  structures.    

(iv) Provision   for   employee   benefits   partly   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  basis.    

(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  as  well  as  provisions   in   relation  to  various  assets  of   the  Group.   In  addition,   it  covers   the  Group’s  exposures  to  tax  risks.    

Management  annually  reviews  and  adjusts  these  provisions  based  on  the  latest  developments,  discussions  and  agreements  with  the  involved  parties.      

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36  OTHER  CURRENT  LIABILITIES    CHF   2016   2015  

Advances  from  customers  (i)   61,945,102   81,350,530  

Amounts  due  to  shareholders  (ii)   21,913,765   18,953,355  

Other  credit  balances     20,041,084   20,739,655  

Accrued  expenses  (iii)   19,262,811   23,545,811  

Deposits  from  others   8,291,650   10,492,839  

Taxes  payable  (other  than  income  taxes)   6,478,813   8,442,156  

Due  to  management  companies   597,761   1,115,462  

TOTAL   138,530,986   164,639,808  

(i) Advances  from  customers  include  amounts  received  (progress  payments)  from  buyers  of  real  estate  units  between  the  time  of  the  initial  agreement  and  contractual  completion.  The  increase  related  to  advances  from  customers  in  Montenegro,  Oman  and  Egypt  was  netted  off  by  foreign  currency  exchange  gains  based  on  the  devaluation  of  the  Egyptian  Pound  (note  30.6).    

(ii) Amounts   due   to   shareholders   include   amounts   owed   to  Mr.   Samih   Sawiris   in   the   total   of   CHF  21.3  million   (2015:   CHF   17.3  million)  as  well  as  amounts  owed  to  other  shareholders  in  the  total  of  CHF  0.6  million  (2015:  1.4  million).    

(iii) Accrued  expenses  mainly  include  operating  costs  for  the  hotel  and  destination  management  activities.  The  decrease  is  mainly  due  to  foreign  currency  exchange  gains  based  on  the  devaluation  of  the  Egyptian  Pound  (note  30.6)  

 

37  ACQUISITION  OF  A  SUBSIDIARY    

37.1  Description  of  transactions    

On  27  July  2016,  based  on  the  settlement  agreement  with  Falcon,  the  full  control  and  ownership  of  the  entity  owning  the  Citadel  Azur  hotel  was  transferred  to  ORH  Investment  Holding  Company,  a  subsidiary  of  ODH,  as  compensation  for  the  amount  due  from  the  settlement  agreement  of  USD  60  million  (CHF  58.2  million).  For  further  details  on  the  settlement  agreement  refer  to  notes  42  and  46).  

37.2  Consideration  transferred        

The  amount  due  from  the  settlement  agreement  with  Falcon  of  USD  60  million  (CHF  58.2  million),  which  was  classified  as  other  current  asset  in  the  balance  sheet  is  the  consideration  transferred.  

37.3  Analysis  of  assets  acquired  and  liabilities  recognised  at  the  date  of  acquisition    

CHF     2016  

Non-­‐current  assets      

Property,  plant  and  equipment     54,544,821  

Current  assets      

Inventories     211,054  

Trade  and  other  receivables     2,185,062  

Other  currents  assets     461,503  

Cash  and  bank  balances     2,516,016  

Non-­‐current  liabilities      

Deferred  tax  liabilities     (1,103,765)  

Current  liabilities      

Trade  and  other  payables     (552,102)  

Provisions     (831,200)  

Other  current  liabilities     (86,977)  

Net  assets  acquired     57,344,412  

     

F-­‐63  

37.4  Impairment  of  receivable  amount  due        

CHF     2016  

Receivable  amount  due  at  acquisition  (other  current  assets)     58,188,000  

Less:  Fair  value  of  identifiable  net  assets  (consideration  received)     (57,344,412)  

Impairment  of  receivable  amount  due     843,588  

 

37.5  Net  cash  inflow  on  acquisition  of  the  subsidiary        

CHF     2016  

Cash  and  cash  equivalent  balances  acquired     2,516,016  

Less:  consideration  paid  in  cash     -­‐  

Net  cash  inflow  on  acquisition  of  subsidiary     2,516,016  

 

37.6  Impact  of  acquisition  on  the  results  of  the  Group    

Included   in  the  result   for  the  year   is  a  profit  of  CHF  4.3  million  attributable  to  the  additional  business  generated   in  the  acquired  hotel  business.  

 

38  DISPOSAL  OF  A  SUBSIDIARY    

38.1  Description  of  transactions    

During  2015,  Jordan  Company  for  Projects  and  Touristic  Development  (“JPTD”),  an  associate  of  the  Group,  purchased  100%  of  the  shares  of  a  subsidiary  of  the  Group  which  holds  100%  of  the  Golden  Beach  for  Hotels  Company  (“Golden  Beach”).  Control  of  the  Golden  Beach  Hotel  was  transferred  on  24  June  2015  through  change  of  possession  and  composition  of  Board  of  Directors  of  the  Golden  Beach  for  Hotels  Company  was  changed  to  include  representatives  of  JPTD.  Since  then  all  shares  transactions  have  been  completed  and  the  cash  has  been  received.  

As  Golden  Beach   and   its  Hotel   do   not   represent   a  major   line   of   business   or   a   principal   geographical   area   of   operations   of   the  Group,  the  sold  operations  are  not  recognized  as  discontinued  operations".  

38.2  Consideration  received    

CHF     2015  

Consideration  received  in  cash  and  cash  equivalents     9,908,175  

Consideration  received  as  amounts  due  from  buyers     -­‐  

Total  consideration  received     9,908,175  

 38.3  Analysis  of  assets  and  liabilities  over  which  control  was  lost          

CHF     2015  

Non-­‐current  assets      

Property,  plant  and  equipment     15,014,287  

Current  assets      

Inventories     122,254  

Trade  and  other  receivables     224,906  

Due  from  related  parties     547,991  

Other  currents  assets     36,800  

Cash  and  bank  balances     107,015  

Non-­‐current  liabilities      

Non-­‐current  borrowings     (7,030,371)  

Current  liabilities      

Trade  and  other  payables     (258,337)  

Current  borrowings     (338,463)  

Other  current  liabilities     (922,894)  

Net  assets  and  non-­‐controlling  interests  disposed  of     7,503,188  

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38.4  Gain  on  disposal  of  subsidiaries  CHF     2015  

Fair  value  of  consideration  received     9,908,175  

Net  assets  disposed  of     (7,503,188)  

Unrealised  gains  due  to  interests  held  through  JPTD     (376,135)  

Foreign  currency  translation  reserve  recycled  to  profit  or  loss     (291,983)  

Gain  on  disposal     1,736,869  

 

38.5  Net  cash  inflow  on  disposal  of  subsidiaries  CHF     2015  

Consideration  received  in  cash  and  cash  equivalents     9,908,175  

Less:  cash  and  cash  equivalent  balances  disposed  of     (107,015)  

Total  net  cash  inflow     9,801,160  

 

39  RETIREMENT  BENEFIT  PLANS    

39.1  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  2016.  

Swiss   pension   plans   need   to   be   administered   by   a   separate   pension   fund   that   is   legally   separated   from   the   entity.   The   law  prescribes  certain  minimum  benefits.  

The   pension   plans   of   the   employees   of   the   Swiss   entities   are   carried   out   by   collective   funds   with   Allianz   Suisse  Lebensversicherungs-­‐Gesellschaft.  Under  the  pension  plans,  the  employees  are  entitled  to  retirement  benefits  and  risk  insurance  for  death  and  disability.  The  boards  of  the  various  pension  funds  are  composed  of  an  equal  number  of  representatives  from  both  employers  and  employees.  

Due  to  the  requirements  of  IAS  19  the  above  mentioned  pension  plans  are  classified  as  defined  benefit  plans.  The  pension  plans  are  described  in  detail  in  the  corresponding  statues  and  regulations.  The  contributions  of  employers  and  employees  in  general  are  defined   in   percentages   of   the   insured   salary.   The   retirement   pension   is   calculated   based   on   the   old-­‐age   credit   balance   on  retirement  multiplied  by  the  fixed  conversion  rate.  The  employee  has  the  option  to  withdraw  the  capital  at  once.  The  death  and  disability  pensions  are  defined  as  percentage  of  the  insured  salary.  The  assets  are  invested  directly  with  the  corresponding  pension  funds.  

The  pension  funds  can  change  their  financing  system  (contributions  and  future  payments)  at  any  time.  Also,  when  there  is  a  deficit  which  cannot  be  eliminated  through  other  measures,  the  pension  funds  can  oblige  the  entity  to  pay  a  restructuring  contribution.  For   the  pension   funds  of   the  Group  such  a  deficit   currently  cannot  occur  as   the  plans  are   fully   reinsured.  However,   the  pension  funds  could  cancel  the  contracts  and  the  entities  of  the  Group  would  have  to  join  another  pension  fund.  

In  the  current  and  comparative  period  no  plan  amendments,  curtailments  or  settlements  occurred.    

The   fully   reinsured  pension   funds  have  concluded   insurance  contracts   to  cover   the   insurance  and   investment   risk.  The  board  of  each  pension  fund  is  responsible  for  the  investment  of  assets  and  the  investment  strategies  are  defined  in  a  way  that  the  benefits  can  be  paid  out  on  due  date.  

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.  

Amounts  recognised  in  profit  or  loss  in  respect  of  these  defined  benefit  plans  are  as  follows:  

CHF   2016   2015  

Current  service  cost   242,116   152,599  

Past  service  cost   (128,390)   17,778  

Net  interest  expense   6,202   4,332  

Administration  cost  excl.  cost  for  managing  plan  assets   749   349  

Expense  recognised  in  profit  or  loss   120,677   175,058    

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Amounts  recognised  in  other  comprehensive  income  in  respect  of  these  defined  benefit  plans  are  as  follows:  

CHF   2016   2015  

Remeasurement  (gain)/loss  on  defined  benefit  obligation   15,864   304,921  

Return  on  plan  assets  excl.  interest  income   (1,583)   (498)  

Expense  recognised  in  other  comprehensive  income   14,281   304,423    

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   31  December  2016   31  December  2015  

Present  value  of  funded  defined  benefit  obligation   1,808,042   1,497,229  

Fair  value  of  plan  assets   (1,160,810)   (873,436)  

Net  liability  arising  from  defined  benefit  obligation   647,232   623,793    

Movements  in  the  present  value  of  the  defined  benefit  obligation  in  the  current  year  were  as  follows:  

CHF   2016   2015  

Opening  defined  benefit  obligation   1,497,229   699,685  

Current  service  cost   242,116   152,599  

Past  service  cost   (128,390)   17,778  

Interest  expense  on  defined  benefit  obligation   15,308   14,872  

Contributions  from  plan  participants   111,519   100,271  

Benefits  (paid)/deposited   53,647   206,754  

Remeasurement  (gain)/loss  on  defined  benefit  obligation     15,864   304,921  

Administration  cost  (excluding  cost  for  managing  plan  assets)   749   349  

Closing  defined  benefit  obligation   1,808,042   1,497,229  

 

Movements  in  the  present  value  of  the  plan  assets  in  the  current  period  were  as  follows:  

CHF   2016   2015  

Opening  fair  value  of  plan  assets   873,436   455,102  

Interest  income  on  plan  assets   9,106   10,540  

Return  on  plan  assets  excluding  interest  income   1,583   498  

Contributions  from  the  employer     111,519   100,271  

Contributions  from  plan  participants     111,519   100,271  

Benefits  (paid)/deposited   53,647   206,754  

Closing  fair  value  of  plan  assets   1,160,810   873,436  

The  respective  insurance  company  is  providing  reinsurance  of  these  assets  and  bears  all  market  risk  on  these  assets.    

The  actual  return  on  plan  assets  was  CHF  10,689  (2015:  CHF  11,038).    

The  principal  assumptions  used  for  the  purposes  of  the  actuarial  valuations  were  as  follows:  

    2016   2015  

Discount  rates   0.40%   0.90%  

Expected  rates  of  salary  increase   1.00%   1.00%  

Expected  pension  increases   0.00%   0.00%  

Mortality  table   BVG  2015  GT   BVG  2010  GT    

   

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The   following   sensitivity   analyses   -­‐   based   on   the   principal   assumptions   -­‐   have   been   determined   based   on   reasonably   possible  changes  to  the  assumptions  occurring  at  the  end  of  the  reporting  period:  

If  the  discount  rate  would  be  25  basis  points  (0.25  percent)  higher  (lower),  the  defined  benefit  obligation  would  decrease  by  CHF  1.7  million  (increase  by  CHF  1.9  million  if  all  other  assumptions  were  held  constant  

If  the  expected  salary  growth  would  increase  (decrease)  by  0.25%,  the  defined  benefit  obligation  would  increase  by  CHF  1.8  million  (decrease  by  CHF  1.8  million  if  all  other  assumptions  were  held  constant  

If   the   life   expectancy  would   increase   (decrease)  with  one   year   for   both  men  and  women,   the  defined  benefit   obligation  would  increase  by  CHF  1.8  million  (decrease  by  CHF  1.8  million  if  all  other  assumptions  were  held  constant  

The  average  duration  of  the  defined  benefit  obligation  at  the  end  of  the  reporting  period  is  19.5  years  (2015:  18.5  years)  

The   Group   expects   to   make   a   contribution   of   CHF   116,123   to   the   defined   benefit   plans   during   the   next   financial   year   (2015:  CHF  120,628).  

 

40  FINANCIAL  INSTRUMENTS  

40.1  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  2010.  

The  capital  structure  of  the  Group  consists  of  net  debt  (borrowings,  as  detailed  in  note  33,  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  29  to  32).  

The  Group  is  not  subject  to  any  externally  imposed  capital  requirements.  

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  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  2016  of  57.39%  (see  below)  increased  due  to  the  losses  for  the  year  and  was  above  the  target  recommended  by  the  committee.  

The  gearing  ratio  at  the  end  of  the  reporting  period  was  as  follows:  

CHF   2016   2015  

Debt  (i)   421,722,938   507,027,639  

Cash  and  cash  equivalents  (note  27)   (82,172,312)   (167,636,917)  

Net  debt   339,550,626   339,390,722  

Equity  (ii)   591,674,331   956,629,996  

Net  debt  to  equity  ratio   57.39%   35.48%  

 (i) Debt  is  defined  as  long-­‐  and  short-­‐term  borrowings  (excluding  derivatives),  as  detailed  in  (note  33)  as  well  as  long-­‐  and  short-­‐

term  borrowings  included  in  disposal  groups  classified  as  held  for  sale  (note  28).  (ii) Equity   includes   all   capital   and   reserves   of   the   Group   and   non-­‐   controlling   interests   that   are   managed   as   capital   excluding  

equity  of  disposal  groups.  

40.2  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  note  3.18  Financial  instruments.    

   

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40.3  Categories  of  financial  instruments    

CHF   2016   2015  

Financial  assets      

Cash  and  bank  balances   82,172,312   167,636,917  

Fair  value  through  other  comprehensive  income  (FVTOCI)   3,516,633   5,649,259  

Financial  assets  measured  at  amortised  cost  (i)   194,139,536   351,511,001  

Financial  liabilities      

At  amortised  cost  (ii)   536,481,304   639,834,828  

 (i) Includes   trade   and  other   receivables,   finance   lease   receivables   as  well   as   those  other  non-­‐   current   and   current   assets   that  

meet  the  definition  of  a  financial  asset.  A  total  of  CHF  25.9  million  (2015:  CHF  21.3  million)  of  other  current  assets  does  not  meet  the  definition  of  a  financial  asset.  

(ii) Includes  trade  and  other  payables,  borrowings,  notes,  other  financial  liabilities  as  well  as  other  current  liabilities  that  meet  the  definition  of  a  financial  liability.  A  total  of  CHF  61.9  million  (2015:  CHF  81.4  million)  of  other  current  liabilities  does  not  meet  the  definition  of  a  financial  liability.  

40.4  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   2016   and   2015,   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.  

40.5  Market  risk    

The  Group’s  activities  expose  it  primarily  to  the  financial  risks  of  changes  in  foreign  currency  exchange  rates  (see  note  40.6  below)  and  interest  rates  (see  note  40.7  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  

40.6  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  71%  (2015:  34%),  in  EUR  for  3%  (2015:  2%),  in  EGP  for  12%  (2015:  55%),  in  OMR  11%  (2015:  7%)  and  in  AED  3%  (2015:  1%)  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.  

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Borrowing  

CHF   2016   2015  

USD   191,109,413   51%   193,983,296   38%  

OMR   84,462,594   23%   70,848,463   14%  

EGP   42,131,008   12%   191,800,766   38%  

EUR   34,268,406   9%   33,188,873   7%  

AED   17,476,168   5%   16,953,930   3%  

CHF   120,910   0%   252,299   0%  

Total   369,568,499   100%   507,027,627   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  

  2016   2015   2016   2015  

Currency-­‐USD   191,109,413   193,983,296   67,493,643   78,472,523  

Currency  OMR   84,462,594   70,848,463   10,767,206   16,603,075  

Currency-­‐EGP   42,131,008   191,800,766   11,447,801   127,507,661  

Currency-­‐EUR   34,268,406   33,188,873   3,145,093   5,280,198  

Residual  foreign  exchange  exposure  is  managed  by  hedging  through  entering  into  foreign  currency  forward  contracts  if  needed.  

Currency  risk  has  also  recently  developed  due  to  the  Group’s  investments  in  different  markets  such  as  those  in  Egypt,  UAE,  Oman,  Morocco  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.  

40.6.1  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.  

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   Currency  OMR  Impact  

  2016   2015   2016   2015   2016   2015   2016   2015  

Profit  or  loss   6,047,369   5,771,378   1,556,105   1,394,562   1,526,688   3,496,976   3,684,769   2,712,269  

Equity   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐  

The  Group's  sensitivity  to  foreign  currency  has  changed  in  accordance  with  the  changes  in  EGP,  USD  and  AED  borrowings.  

   

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40.7  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.  

During  2016  and  2105  the  Group  did  not  hold  any  derivative  financial  instruments.  

40.7.1  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  ended  31  December  2016  would  decrease  /  increase  by  CHF  2.2  million  (2015:  decrease  /  increase  by  CHF  2.1  million).  This  is  mainly  attributable  to  the  Group’s  exposure  to  interest  rates  on  its  variable  rate  borrowings.  

40.8  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.  

40.9  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.  

40.10  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.  Regarding  management’s  plans  to  manage   liquidity  shortages  and  related  uncertainty  please  refer  to  note  27.1.  

As  of  31  December  2016,  total  un-­‐drawn  facilities,   that  the  Group  has  at   its  disposal   in  order  to  further  reduce   liquidity  risk,  are  CHF  40.2  million  (31  December  2015:  CHF  9.7  million).  

Further,   please   refer   to   note   27.1   regarding   the   disclosures   on  management’s   plans   to  manage   liquidity   shortages   and   related  uncertainties.  

   

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40.10.1  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  cash  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  

2016   Weighted  average  effective  interest  

rate  

Less  than  6  month  

6  months  to  one  year  

1  –  5  years   5  +  years   Total  CHF  

Non-­‐interest  bearing     102,136,409   -­‐   11,576,940   -­‐   113,713,349  Variable  interest  rate  instruments   7.75%   103,760,063   116,552,453   61,136,151   1,425,463   282,874,129  

Fixed  interest  rate  instruments   6.51%   18,408,389   14,205,153   71,044,064   21,785,381   125,442,987  

TOTAL       224,304,861   130,757,606   143,757,155   23,210,843   522,030,465  

 

2015   Weighted  average  effective  interest    

rate  

Less  than  6  month  

6  months  to  one  year  

1  –  5  years   5  +  years   Total  CHF  

Non-­‐interest  bearing   -­‐   115,396,076   -­‐   17,128,923   -­‐   132,524,999  Variable  interest  rate  instruments   7.82%   228,837,587   34,377,962   100,428,527   4,962,507   368,606,583  

Fixed  interest  rate  instruments   9.02%   22,957,437   32,667,292   122,850,847   33,441,422   211,916,998  

 TOTAL     367,191,100   67,045,254   240,408,297   38,403,929   713,048,580  

 

CHF     2016   2015    

Counterparty   Rating   Credit  limit   Carrying  amount   Credit  limit   Carrying  amount    

Bank  1   B2   26,324,162   12,115,917   27,459,769   22,399,246   *  

Bank  2   -­‐   5,547,888   5,167,594   12,418,560   12,461,024    

Bank  3   BBB   34,511,370   24,256,533   36,675,919   37,184,782    

Bank  4   AA-­‐   24,252,196   10,254,875   23,614,779   21,680,658   *  

Bank  5   B-­‐   11,605,276   10,903,908   13,090,176   13,093,783      *  Outstanding  amount  includes  interest  charged  

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.  

40.11  Impairment  losses  on  financial  assets  CHF   2016   2015  

Impairment  loss  on  trade  receivables     7,204,572   2,172,965  

TOTAL   7,204,572   2,172,965  

 

   

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40.12  Fair  value  measurement  40.12.1  Fair  value  of  financial  instruments  carried  at  amortised  cost  Except   as   detailed   in   the   following   table,   management   considers   that   the   carrying   amounts   of   financial   assets   and   financial  liabilities  recognised  in  the  consolidated  financial  statements  approximate  their  fair  values.  

  31  December  2016   31  December  2015  

CHF   Carrying  amount   Fair  value   Carrying  amount   Fair  value  

Financial  liabilities          

Borrowings/bank  loans   421,722,938   474,917,757   507,027,639   580,523,569  

Finance  lease  receivables  

As  at  31  December  2016,  due  to  the  reclassification  of  Tamweel  as  disposal  group,  there  were  no  finance  lease  receivables.  As  at  31  December   2015   ,   the   fair   value  of   finance   lease   receivables  was   estimated   to   be  CHF  48.4  million)   using   a   15.5%  discount   rate  based  on  an  average  six  year  tenor  and  adding  a  credit  margin  that  reflects  the  secured  nature  of  the  receivables.    

40.12.2  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   unlisted   and   listed   equity   investments   classified   as   at   FVTPL   and   FVTOCI  respectively).  

– 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.  

40.12.3  Fair  value  measurements  recognised  in  the  consolidated  statement  of  financial  position  The   following   table   provides   an   analysis   of   financial   and   non-­‐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).  

2016          

CHF     Level  1   Level  2   Level  3   Total  

Financial  assets  at  FVTOCI          

Listed  and  unlisted  shares  measured  at  FV   2,892,067   -­‐   624,566   3,516,633  

  2,892,067   -­‐   624,566   3,516,633  

Other  assets  at  fair  value          

Investment  property  1)   -­‐   -­‐   5,501,334   5,501,334  

  -­‐   -­‐   5,501,334   5,501,334  

 

   

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2015          

CHF   Level  1   Level  2   Level  3   Total  

Financial  assets  at  FVTPL          

Non-­‐derivative  financial  assets  held  for  trading   -­‐   -­‐   -­‐   -­‐  

    -­‐   -­‐   -­‐   -­‐  

Financial  assets  at  FVTOCI          

Listed  and  unlisted  shares  measured  at  FV   5,034,175   -­‐   615,084   5,649,259  

    5,034,175   -­‐   615,084   5,649,259  

Other  assets  at  fair  value          

Investment  property  1)   -­‐   -­‐   10,981,552   10,981,552  

  -­‐   -­‐   10,981,552   10,981,552  

There  were  no  transfers  between  Level  1  and  2  in  the  period.  The  financial  assets  at  FVTOCI  were  measured  at  fair  value  based  on  a  method  that  combined  the  earning  and  net  equity  book  values  of  the  companies.  

1)  The  reconciliation  for  investment  property  is  shown  in  note  17.  

 

Reconciliation  of  Level  3  fair  value  measurements  of  financial  assets  

  Unquoted  equity  securities  

CHF   2016   2015  

Opening  balance   615,085   1,242,091  

Additions   118,921   -­‐  

Total  losses  recognized  in  other  comprehensive  income   (109,440)   (627,006)  

Closing  balance   624,566   615,085    

 

41  SHARE-­‐BASED  PAYMENTS    

The   Company   has   contractually   granted   a   variable   compensation   amount   to   its   new   CEO,   Khaled   Bichara   (“Contingent  Compensation”).  The  compensation  amount  is  due  6  years  after  the  start  date  (1  January  2016)  or  earlier  if  an  acceleration  event  occurs.  In  summary,  the  compensation  amount  is  10%  of  the  share  price  increase  above  an  annual  average  increase  of  8%  (based  on  the  fixed  spot  share  price  of  CHF  11.37).  The  Contingent  Compensation  will  be  paid  in  cash  or,  at  ODH’s  discretion,  in  shares  if  the   annual   average   increases   in   the   share   price   are   met.   As   of   9   May   2016,   the   General   Assembly   of   ODH   approved   the  abovementioned   compensation   plan.   The   calculated   fair   value   of   the   Contingent   Compensation   as   at   grant   date   of   CHF   5.0  million,  which  was  calculated  by  an  independent  third  party  valuation  company,  is  recognised  over  the  6  year  vesting  period  on  a  linear  basis  within  profit  or  loss.  The  accumulated  amount  is  shown  as  a  separate  share-­‐based  payment  reserve  within  equity.  

At  31  December  2015,  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  compensates  the  members  of  the  Board  with  a  fixed  fee  of  CHF  1.04  million  (note  13.1)  which  is  payable  in  unrestricted  shares  of  the  Parent  Company  based  on  the  quoted  market  price  at  grant  date  as  well  as  in  cash.  The  amount  has  been  recognized  in  the  consolidated  statement  of  comprehensive  income  as  part  of  administrative  expenses.  It  will  be  transferred  to  the  members  of  the  Board  in  2017.  

 

   

F-­‐74  

42  RELATED  PARTY  TRANSACTIONS    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  of  the  entity  or  a  joint  venture  in  which  the  entity  is  a  venturer  (both  defined  in  IAS  28  Investments  in  Associates  and  Joint  Ventures);  

c)   the  party  is  a  member  of  the  key  management  personnel  of  the  entity  or  its  parent;  

d)   the  party  is  a  close  member  family  of  any  individual  referred  to  in  (a)  or  (b);  

e)   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  (a)  or  (b);  or  

f)   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.  

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  reporting  period.  These  services  related  to  the  leasing  of  office  space  (see  note  13).    

   

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The  following  balances  were  outstanding  at  the  end  of  the  reporting  period:  

  Due  from  related  parties   Due  to  related  parties  

CHF   2016   2015   2016   2015  

Financial  instruments          

Three  Corners  Company   4,439,742   9,595,110   -­‐   -­‐  

Red  Sea  Company  for  Construction  &  Develop.   4,391,883   9,651,747   -­‐   -­‐  

Orascom  Housing  Community   2,563,681   3,265,299   -­‐   -­‐  

El  Gouna  Football  Club     734,337   2,196,473   -­‐   -­‐  

Kingdom  Co.   632,070   1,414,872   -­‐   -­‐  

Camps  and  lodges   520,784   1,165,411   -­‐   -­‐  

Iskan  International  Projects   42,336   49,758   14,206   -­‐  

Other  (balances  less  than  CHF  120  000  each)   480,766   834,504   38,499   385,442  

Non  controlling  shareholders          

Mirotel  For  Floating  Hotels   189,938   425,170   -­‐   -­‐  

Tarot  &  Merotil  Garranah  for  hotels   71,515   160,084   -­‐   -­‐  

Tarot  Garranah  for  touristic  transportation   35,121   78,617   -­‐   -­‐  

Tarot  Tours  Garanah   16,872   37,755   807,235   1,807,323  

Close  family  members          

Samih  Sawiris  –  (i)   -­‐   -­‐   -­‐   -­‐  

Close  family  companies          

Meeting  Point  Egypt   4,413,060   2,751,696   -­‐   -­‐  

FTI   894,800   538,787   -­‐   -­‐  Orascom  for  Touristic  Establishments  company  (OTEC)  

452,548   1,013,040   -­‐   -­‐  

TU  Berline  University   26,579   821,322   -­‐   -­‐  

Orascom  International  Hotels  &  Development   24,321   285,930   -­‐   -­‐  

Other  Related  Party  Receivables   -­‐   720,982   -­‐   -­‐  

Total   19,930,353   35,006,557   859,940   2,192,765  

Current   19,930,353   35,006,557   859,940   2,192,765  

Non-­‐current     -­‐   -­‐   -­‐  

Total   19,930,353   35,006,557   859,940   2,192,765  

(i)  Current  accounts  due  to  Mr.  Samih  Sawiris  are  disclosed   in  note  36.  Transactions   involving  Mr.  Samih  Sawiris,  Chairman  and  major  shareholder:  

Falcon  

During   previous   financial   periods   Orascom   Development   &   Management   Ltd   (“ODM”),   a   Group’s   subsidiary,   entered   into   a  development  agreement  with  Falcon  for  Hotels  S.A.E.  (“Falcon”),  under  which  ODM  was  to  undertake  the  development  activities  of  the  land  bank  owned  by  Falcon.  Due  to  Falcon’s  non-­‐compliance  with  the  terms  of  the  development  agreement,  ODM  filed  a  legal  claim  against  Falcon  asking  for  remuneration  for  profits  ODM  missed  out  on  as  a  result  of  the  non-­‐compliance  with  the  said  agreement.   In   June   2014   the   final   settlement   agreement   regarding   all   the   litigation   proceedings   in   relation   to   the   securities  purchase  agreement  and  the  development  of  the  land  bank  as  well  as  the  proceeds  from  sale  of  Joud  Funds  was  signed  by  both  parties.  

The  residual  amount  due  from  Falcon  of  USD  60  million  (CHF  58.2  million)  was  due  at  31  December  2015  but  was  extended  until  Q2  2016.  It  was  shown  in  the  consolidated  statement  of  financial  position  as  other  current  assets  (at  amortised  cost  of  CHF  58.0  million)  and  is  secured  by  hotel  property.  

In  accordance  with  the  settlement  agreement  both  parties  have  opened  an  escrow  account  and  placed  in  escrow  the  shares  of  the  company  that  ultimately  holds  Citadel  Azur  hotel.  

As  the  15  months  period  in  which  the  payment  should  have  been  effected  in  cash  or  in  kind,  has  lapsed  subsequent  to  30  June  2016  as   the   amount   in   cash   was   not   settled,   in   accordance   with   the   terms   and   conditions   of   the   Settlement   Agreement,   the   full  ownership  of  the  special  purpose  vehicle  owning  the  Citadel  Azur  hotel  has  been  transferred  on  27  July  2016  to  ORH  Investment  Holding  Company,  a  subsidiary  of  ODH.      

   F-­‐76  

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   0.3   million   at   31  December   2015   (31   December   2014:   CHF   0.4   million).   There   are   no   amounts   due   from   executive   board   members   under   this  transaction  in  2015  and  2014.  (see  note  26(ii)).  

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  in  2008,  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.  

Securities  lending  agreement  

For  further  details  on  this  transaction  refer  to  note  30.5.    

Rental  contract  for  office  building  in  Cairo  

Orascom  Hotel  and  Development,  a  major  subsidiary  of  Orascom  Development  Holding  AG,  has  rented  part  of  its  administrative  headquarter  in  Nile  City  from  a  joint  stock  company  owned  by  the  major  shareholders  and  others.  

FTI    

FTI   is  the  fourth   largest  tour  operator   in  Europe.   In  2014,  Mr.  Samih  Sawiris  acquired  a  35%  stake   in  this  tour  operator.   In  2016,  revenue  transactions  for  a  total  of  CHF  26.6  million  (2015:  CHF  24.7  million)  were  done  with  FTI.  

 

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:  

– Capitalization  of  interest  of  CHF  2.6  million  over  projects  under  constructions  (note  11).  

– Transfer  of  treasury  shares  to  Board  of  Directors  as  part  of  their  remuneration  of  2015  which  was  paid  in  2016  (note  30.2)  

– Acquisition  of  subsidiary  (Falcon)  (refer  to  note  37  for  further  details)  

– Tamweel  Group  classified  as  assets  held  for  sale  (refer  to  note  28  for  further  details)  

 

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   2016   2015  

Minimum  lease  payments   228,061   880,124  

 TOTAL   228,061   880,124  

 44.1.3  Non-­‐cancellable  operating  lease  commitments  

    Total  of  future  minimum  lease  payments  

CHF   2016   2015  

Not  longer  than  1  year   232,800   232,800  

Longer  than  1  year  and  not  longer  than  5  years   931,200   931,200  

Longer  than  5  years   2,793,600   3,026,400  

 TOTAL   3,957,600   4,190,400  

In  respect  of  non-­‐cancellable  operating  leases,  no  liabilities  have  been  recognised.  

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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).  These  lease  contracts  do  not  include  a  lease  extension  option  and  are  subject  to  renegotiation  at  the  end  of  the  lease   term.   The   lessee   does   not   have   an   option   to   purchase   the   property   at   the   expiry   of   the   lease   period.   No  material   non-­‐cancellable  operating  lease  receivables  exist  as  at  31  December  2016.  

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  17.  

 

45  COMMITMENTS  FOR  EXPENDITURE    The  following  commitments  for  expenditure  have  been  made  for  the  future  development  of  the  respective  projects:  

CHF   2016  

Eco-­‐Bos  Development  Limited  (i)   4,050,031    (i) As  per  the  property  management  agreement  between  Eco-­‐Bos  and  Imerys  (shareholder  in  Eco-­‐Bos)  ,  Eco-­‐Bos  has  the  right  but  

not  the  obligation  (American  call  option  maturing   in  2030)  to  purchase  part  or  all  of  6.6  million  square  meters   (divided  on  7  independent  plots),  which  is  currently  owned  by  Imerys  Mineral  Limited.  An  annual  option  premium  is  paid  to  retain  the  rights  and  the  purchase  price  is  calculated  based  on  an  agreed  dynamic  pricing  formula.  The  trigger  event  of  the  option(s)  is  at  the  full  discretion  of  Eco-­‐Bos  and  shall  only  be  exercised  when  building  permits  are  attained.  Currently  Eco-­‐Bos  is  in  negotiations  with  the  local  authorities  and  other  investors  and  is  taking  its  time  to  optimize  on  the  best  alternatives  for  the  development.    

45.1  Minimum  Building  Obligations  Beside  the  legally  binding  commitment  for  expenditure  mentioned  above  the,  following  should  be  considered:  

One  part  of  the  Group’s  business  is  to  acquire  land  for  the  development  of  tourism  projects.  Out  of  these  business  opportunities  often  no  legally  binding  commitments  are   incurred.  However,  the  Group  has  non-­‐binding  business  opportunity  commitments   in  relation  to  their  projects.  In  particular,  the  Group  has  minimum  building  obligations  (“MBOs”)  for  the  next  three  years,  which  are  included  in  their  development  agreements  (“DAs”)  with  the  relevant  governments  in  Oman,  Morocco  and  Montenegro.    

The  contingent  liabilities  in  relation  to  the  MBOs  in  Montenegro,  Oman  and  Morocco  are  assessed  by  management  of  the  Group  as  follows:  

Oman  

According  to  the  DAs  for  Salalah  and  Sifah,  the  project  companies,  which  are  subsidiaries  of  the  Group,  shall  use  their  best  efforts  to   substantially   complete   a   defined   number   of   Hotels   and  Golf   Courses  within   an   indicative   timeline.   Based   on   this   indicative  timeline,  the  project  companies  have  been  initially  granted  an  extension  of  time  for  the  substantial  completion  (which  is  defined  as  the  material  elements  of  the  specific  MBOs)  of  the  MBOs  that  elapses  on  1  January  2015.    

Based   on   the   right   to   request   an   extension   of   the   completion   date,  which   is   included   in   the  DAs,   the  Group   has   requested   an  extension   for   the   time   of   completion   of   the   residual   MBOs   until   2018.   The   Sifah   and   Salalah   project   companies   engaged   in  exhaustive  negotiations  with  the  Omani  Government.  Finally  on  30  June  2015  the  Group  and  the  Omani  Government  signed  the  Addenda  (individually  “Addendum“  and  collectively  “Addenda”)  in  which  they  officially  agreed  on  the  extension  of  the  deadline  for  completion   of   the  MBOs   until   1   January   2020   and   1   January   2018   for   Sifah   and   Salalah   respectively.   Furthermore,   the   Parties  agreed  to  amend  certain  elements  of  the  MBOs.  With  regards  to  Sifah  project,  the  Parties  agreed  that  the  Project  Company  shall  deliver  500  hotel  keys  over  three  hotels  instead  of  four  hotels.  The  project  company  has  so  far  finalized  67  rooms.  Additionally,  the  project   company  would  be   required   to   either   develop   an   aquarium  or   a  waterpark  or   increase   the  number   of   hotel   keys   by   60  rooms  within  either  the  four  star  or  five  star  hotel,  and  such  shall  be  determined  at  its  sole  discretion.  Similarly,  with  regards  to  the  Salalah  project,  it  was  agreed  in  the  Addendum  that  the  project  company  would  deliver  700  hotel  keys  and  replace  the  18-­‐hole  golf  course  with  a  waterpark.  To  date,  the  project  company  in  Salalah  has  completed  3  hotels  with  a  total  number  of  784  keys,  hence  completing   its   requirement   with   regards   to   the   touristic   components.   The   Salalah   Addendum   also   stipulates   that   the   Project  Company  shall  grant,  transfer  and  assign  to  the  Omani  Government  an  area  of  land  amounting  to  two  million  square  meters,  while  the  Omani  Government  undertook  to  provide  all  pending  licenses  to  the  Project  Company.  

The   Group   has   requested   the   Omani   Government   to   merge   the   required   minimum   number   of   keys,   and   as   such   the   Project  Companies  shall  be  required  to  complete  a  total  number  of  1200/1260  keys  among  both  the  Sifah  and  Salalah  projects.  Moreover,  the  Group  requested  the  Omani  Government  to  reduce  the  required  number  of  holes  in  the  golf  course  contemplated  in  the  Sifah  project  from  18  to  9.  Said  request  was  due  to  anticipated  shortage  in  the  water  resources  in  the  area  as  suggested  by  experts.    In  March  2017,  the  Omani  government  approved  both  requests  and  sent  a  letter  to  that  effect.  

   

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Morocco  

In   Morocco,   the   DA   does   not   contemplate   the   concept   of   MBOs.   However,   it   sets   out   a   timeline   for   the   performance   of   the  essential   elements   of   a   development   plan.   These   essential   elements   have   no   fixed   dates   but   are   rather   governed   by  interconnected  milestones  that  change  the  date  automatically  on  the  occurrence  of  an  agreed  milestone.  

In  2010,   the  project   company  obtained  an  exception  entitling   it   to   finalize   three  hotels   in  2013  and   the   remaining   two   in  2015.  Since   then   the   project   company   has   created   the   organisational   structure   for   the   creation   of   three   hotels   and   the   related  infrastructure.   However,   further   process   by   the   project   companies   was   delayed   by   various   factors   outside   the   control   of   the  project  companies  and  they  therefore  have  solid  grounds  for  requesting  further  extensions.  In  addition,  the  DA  states  that  in  the  event  the  delay  is  for  reasons  outside  of  the  control  of  the  project  company,  this  would  be  taken  into  consideration  when  assessing  whether  the  project  company  has  fulfilled  its  obligations  or  not.  In  furtherance  and  in  compliance  with  the  obligations  to  which  the  project  company  is  committed  to,  a  new  hotel  holding  structure  has  been  proposed,  the  main  goal  of  which  is  the  creation  of  the  3  Hotels  and  the  associated  infrastructure,  which  is  part  of  phase  1  of  the  project.  The  scope  of  investment  for  the  aforementioned  hotel  holding  structure  is  approximately  CHF  129  million.  The  financing  package  is  currently  being  negotiated,  the  equity  partners  are  already  identified,  the  shareholder  agreement  for  the  hotel  holding  entity  is  currently  under  review.    

On   16   September   2014,   the   Moroccan   Government   granted   the   project   company   an   initial   approval   regarding   the   new   hotel  holding  structure,  as  well  as  the  project  company’s  request  to  extend  the  timeline  for  completion  of  Phases  1  and  2.  The  Group  remains   engaged   in   discussions,   meetings   and   workshops   with   the   state   agency   for   tourism   (“SMIT”)   for   the   purpose   of  integrating   the   amendments   to   the   DA.   Furthermore,   the   Group   has   undertaken   all   necessary   studies   of   the   social   and  environmental   impact  of  the  project  on  the  region,  a  task  to  which  the  financing  of  the  Hotel  Holding  Structure  by  the  financial  institutions   was,   inter   alia,   contingent.   Finally,   the   Group   received   a   comfort   letter   envisaged   in   the   proposal   sent   by   SMIT  suggesting  an  extension  of  the  timeline,  however  still  pending  negotiations  between  the  parties.    

Montenegro    

In   Montenegro,   the   investment   obligations   contemplated   by   the   DAs   span   over   three   phases   of   development.   The   date   of  completion  of  the  initial  phase  is  due  by  2017.  Additionally,  based  on  the  minimum  investment  obligations  set  out  for  the  first  two  years,  the  financial  expenditure  to  date  has  exceeded  the  required  minimum  investment  as  per  the  DA.    

The   initial   phase  of   the  project   entails   the   completion  of   a   four   star  hotel,   in   addition   to   a  main  mooring  area,   an   18  hole  golf  course  and  a  club  house,  as  well  as  a  town  centre  with  several  facilities.  

Whilst   the   initial   phase  of   the  project   should  be   completed  by  2017,   it   should  be  noted   that   the  DA  provides   for   a  mechanism  whereby   the   project   company   is   granted   an   extension   of   time   proportionally   to   the   time   consumed   by   the   Government   in  fulfilment  of  its  obligations.  To  date  the  Government  has  not  yet  finalized  the  steps  it  should  have  taken,  especially  with  regards  to  transfer  of   the   title   to   some  parts  of   the   land,   therefore   the  project  company’s  entitlement   to  an  additional  period,   if   required,  should  not  be  challenged.      

Risk  assessment  of  contingent  liability  

Management   has   analysed   the   various   MBOs   and   is   comfortable   with   the   current   status   of   the   MBOs   and   the   minimum  investment   obligations.   Albeit   that   certain   delays   have   or   may   potentially   occur,   all   such   delays   were   well   founded   and   are  premised  on  legal  grounds  that  would  protect  the  Group  from  any  exposure.  The  Group  has  exerted  a  great  deal  of  negotiations  in  all  destinations  to  ensure  that  any  delays  are  communicated  to  local  authorities  and  thereby  working  alongside  the  government  in  rescheduling   and   extending   the   completion   dates.   Additionally,   the   Group   has   worked   on   securing   finance   schemes   to  accommodate   the   newly   developed   restructuring   of   the   investment   obligations,   or   in   cases  were   completion   dates   are   at   risk,  expending  the  necessary  amounts  to  comply  with  the  contractual  obligations.  

 

46  LITIGATION    Falcon  

The  financial  statements  of  Falcon  Company  for  Hotels  (“Falcon”)  were  incorporated  into  ODH’s  consolidated  financial  statements  on  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.  

   

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Several  arbitration  and  litigation  proceedings  involving  Falcon,  the  Group  and  third  parties  were  pending.  In  July  2013,  an  award  was  issued  in  favour  of  one  of  ODH’s  subsidiaries,  establishing  ODH’s  subsidiary’s  right  for  compensation  for  the  breaches  made  by   Falcon   and   its   owners.   The   exact   amount   of   the   compensation   was   supposed   to   be   subject   to   another   set   of   arbitration  proceedings.  This  had  a  significant  positive  impact  on  strengthening  the  position  of  the  Group  in  recovering  all  its  losses  suffered  as   a   result   of   this   dispute.   As   a   result,   settlement   negotiations   have   commenced   with   Falcon   and   a   memorandum   of  understanding,   setting   forth   the   basic   terms   of   the   settlement,  was   successfully   signed   on   8   January   2014.   The   parties   to   the  dispute   have   continued   to   negotiate   the   remaining   terms   of   the   settlement   and   have   reached   a   final   form   of   the   settlement  agreement,  which  was  signed  by  all  parties  involved  on  20  June  2014  and  thus  ending  all  disputes  in  this  connection.    

In   execution   of   the   terms   and   conditions   of   the   settlement   agreement   the   parties   have   agreed   to   transfer   the   shares   of   the  company  fully  owning  the  Citadel  Azur  hotel  to  a  special  purpose  vehicle  to  be  held  in  an  escrow  account  for  a  period  of  15  months  from  the  date  of  transfer  of  the  shares  in  the  escrow  account.  Initially  the  parties  agreed  that  the  shares  will  be  transferred  on  an  earlier  date,  and  the  payment  of  the  settlement  amount  should  have  been  December  2015.  However,  the  shares  were  transferred  on  3  March  2015,  hence  the  15  months  count  started  from  the  foregoing  date.  Consequently,  the  parties  effectively  extended  the  payment  date  by  virtue  of  joint  instructions  sent  to  the  Escrow  Agent.    

Accordingly,  the  15-­‐months  period  in  which  the  payment  should  have  been  effected  in  cash  or  in  kind,  has  lapsed.  The  amount  in  cash  was  not  settled,  therefore,  in  accordance  with  the  terms  and  conditions  of  the  Settlement  Agreement,  the  full  ownership  of  the   special   purpose   vehicle   owning   the   Citadel   Azur   hotel   has   been   transferred   on   27   July   2016   to   ORH   Investment   Holding  Company,  a  subsidiary  of  ODH.      

 

47  OTHER  SIGNIFICANT  EVENTS  THAT  OCCURRED  DURING  THE  REPORTING  PERIOD    Political  situation  in  Egypt  

On   11   November   2016,   the   Executive   Board   of   the   International   Monetary   Fund   (IMF)   approved   a   three-­‐year   extended  arrangement  under  the  Extended  Fund  Facility  (EFF)  for  the  Arab  Republic  of  Egypt  for  an  amount  equivalent  to  about  USD  12.0  billion   to  support   the  authorities’  economic   reform  program.  Over   the  program  period  general  government  debt   is  expected  to  decline  from  about  98%  in  financial  year  15/16  to  about  88%  of  GDP  in  financial  year  18/19.  In  addition,  the  Central  Bank  of  Egypt  (CBE)  has  floated  the  pound  in  an  attempt  to  stabilize  its  economy,  which  has  been  hampered  by  a  shortage  of  foreign  currency.  The  currency  was  initially  devalued  by  32.3%  to  about  13.0  pounds  per  USD,  down  from  the  previous  peg  of  8.8  per  USD,  which  had  been  in  place  since  March  2016  in  a  dramatic  move  that  met  a  key  demand  from  the  IMF  to  close  the  financial  year  2016  at  EGP  18.0  per  USD.  The  CBE  also  allowed  the  currency  to  float  freely  and  raised  the  benchmark  interest  rate  by  three  percentage  points  (300  basis  points)  to  14.75%.  

The  economy  is  entering  a  new  phase  after  the  IMF  approved  the  USD  12.0  billion  Extended  Fund  Facility  as  part  of  a  wide-­‐ranging  program  of  economic  reform.  The  authorities  will  hope  that  the  liberalization  of  the  exchange  rate  regime  and  the  devaluation  of  the  Egyptian  pound  will  be  a  critical  step  toward  restoring  confidence  in  the  economy  and  eliminating  foreign  exchange  shortages.  However,   critical   structural   reforms   are   needed   for   the   success   of   the   program.   Meanwhile,   the   economy   is   facing   a   modest  recovery  despite  a  number  of  political  and  economic  challenges.  

On   the   other   hand,   Standard   &   Poor's   upgraded   the   future   outlook   of   the   Egyptian   economy   from   negative   to   stable   during  November  2016.  This  came  in  light  of  the  preceding  IMF  endorsement  and  support  of  Egypt.  Standard  &  Poor's  also  predicted  that  the   Egyptian   economy  will   begin   to   recover   during   2018   and   2019,  mitigated   by   increased   foreign   direct   investments   and   the  recovery   of   domestic   consumption.   In   the   same   context,   Fitch  Ratings   affirmed  Egypt   at   “B”  with   stable   future   outlook,  while  Moody's  retained  its  credit  rating  for  Egypt  at  B3  with  a  stable  outlook.  

The  Tourism  sector  is  continuing  to  suffer  due  to  travel  bans  from  most  of  the  European  countries  on  Sinai  Peninsula  and  Sharm  El  Sheikh.    Tourism  revenues  decreased  by  56.1%,  to  reach  USD  758.2  million   (from  USD  1.7  billion   in   the   first  quarter  of   financial  year  2015/2016),  due  to  the  decline  in  the  number  of  tourist  nights  by  61.3%,  to  9.2  million  (against  23.7  million).    According  to  the  latest  figures  by  the  Central  Agency  for  Public  Mobilization  &  Statistics  (CAPMAS),  Egypt  tourist  arrivals  fell  10.5%  year  to  year  to  499,800  tourists  in  November  2016  compared  to  558,600  tourists  in  November  2015.  

However,  on  the  medium-­‐term,  the  outlook  is  more  positive  which  is  reflected  in  the  revised  IMF  outlook  for  Egypt.      

 

   

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48  SUBSEQUENT  EVENTS    Delisting  of  EDRs  from  the  Egyptian  Exchange  

On  1  March  2017,  the  Extraordinary  General  Meeting  of  ODH  approved  the  Board  of  Directors'  proposal  regarding  the  voluntary  delisting  of  the  Egyptian  Depositary  Receipts   (EDRs)  from  the  Egyptian  Exchange.  The  Board  of  Directors  called  the  meeting   in  accordance  with  the  requests  of  the  relevant  authorities  in  Egypt  to  present  to  the  shareholders  of  the  company  the  proposal  to  approve   the   delisting.   Based   on   the   Extraordinary   General   Meeting's   approval   the   currently   proceeds   to   undertake   all   further  actions  required  to  complete  the  delisting  of  the  EDRs.  

There  have  been  no  other  significant  events  subsequent  to  31  December  2016.  

 

49  APPROVAL  OF  FINANCIAL  STATEMENTS    The  financial  statements  were  approved  by  the  directors  and  authorized  for  issue  on  10  April  2017.

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Statutory Auditor’s Report To the General Meeting of ORASCOM DEVELOPMENT HOLDING AG, ALTDORF Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Orascom Development Holding AG and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2016, and the consolidated statements of profit or loss and other comprehensive loss, statement of changes in equity, statement of cash flows and notes to the consolidated financial statements for the year then ended, including a summary of significant accounting policies. In our opinion the consolidated financial statements (pages F-3 to F-78) give a true and fair view of the consolidated financial position of the Group as at December 31, 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. Basis for Opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Deloitte AG General-Guisan-Quai 38 8022 Zürich Schweiz Telefon: +41 (0)58 279 6000 Fax: +41 (0)58 279 6600 www.deloitte.ch  

 

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Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition Key audit matter How the scope of our audit responded

to the key audit matter

As at 31 December 2016, the Group consolidated statement of comprehensive income included Revenue of CHF 237.4 million.

The revenue is measured at the fair value of the consideration received, such revenue is reduced for rebates, estimated customer returns, and other similar allowances. Different policies for revenue recognition apply across the Group's business segments. The two major streams are revenue from services and revenue from agreements for constructions of real estate.

Some terms of the sales arrangements within each of the Group’s companies, including the timing of transfer of risk and rewards, the nature of discount and rebates arrangements and the measurement of the construction progress, generate complexity and judgment in determining occurrence and cut-off for revenues.

The risk is, therefore, that revenue is not recognised in the correct period, or did not occur.¨

Refer to Note 3.7 Revenue recognition, Note 4.1.1 Revenue recognition – Real estate sales to the consolidated financial statements, Note 6 Revenue, and Note 7 Segment Information.

We tested the design and implementation of the Group’s relevant controls in respect of revenue recognition.

We evaluated whether the revenue recognition approach applied by the Group comply with IFRS requirements. More specifically, we evaluated each different revenue stream for its own.

In addition to substantive analytical reviews to understand how the revenue has trended over the year, we performed a detailed testing on transactions through out to the year to address occurrence and on transaction specifically around the year-end to address cut-off, ensuring revenues were recognised in the correct accounting period. Further, our detail test for construction/real estate revenues included comparisons against the contractual terms.

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Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Impairments for property, plant and equipment, receivables and work-in-progress included in inventories

Key audit matter How the scope of our audit responded to the key audit matter

The Group’s statement of financial positions includes CHF 762.6 million of property, plant and equipment (PP&E), CHF 125.0 million inventories, CHF 42.5 million non-current receivables and CHF 55.8 trade and other receivables representing 76.7% of total Group assets. In accordance with IFRS, these balances are tested annually for impairment, if there are triggering events present. A deficit in recoverable value would result in impairment.

The Group is not generating positive cash inflows from operations. This prevailing condition is a fundamental indicator for impairments on the assets used to generate operating cash flows. Further, the current market conditions in main markets indicate a significant risk for uncollectible receivable balances.

The Group’s statement of income includes impairments of CHF 18.6 million for PP&E, of CHF 13.5 million for inventories and of CHF 6.4 million for receivables.

Refer to Note 7.2 Segment revenue, depreciation and results, Note 12 Other losses, Note 16 Property, plant and equipment, Note 23 Inventories, and Note 24 Trade and other receivables.

We tested the design and implementation of the Group’s relevant controls in respect of the impairment process.

Our audit procedures on the impairments, amongst others, included:

corroborating impairments with management and members of the Board of Directors

assessing the counterparties credit risk based on publicly available information and historical information/experience for receivables

auditing the specific valuation for land auditing the valuations of the hotels and verify

the value of the hotel is higher than the PP&E allocated to the respective hotel

challenging the Group’s destinations under development with the current year’s progress, its own plans and the outlook to generate positive cash-flows

F-­‐84  

Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Financing and Liquidity

Key audit matter How the scope of our audit responded to the key audit matter

We identified that the most significant assumption in the assessment on its ability to continue as a going concern is liquidity within the Group, which is ensured by the commitment from the chairman to provide up to CHF 60 million in cash until December 2018. The calculations supporting the assessment require management to make judgments on estimated future cash-inflows and cash-outflows.

The Group’s cash projection is fundamental to assess the appropriateness of the basis adopted for the preparation of the financial statements and therefore represents a key audit matter.

Refer to Note 27.1 Management’s plans to manage liquidity shortages and related uncertainty.

We tested the design and implementation of the Group’s relevant controls and assessed the appropriateness of the methodology applied for the cash projection that builds the basis for the Group’s going concern conclusion. Our audit procedures on the cash projection underlying the going concern conclusion, amongst others, included:

corroborating cash projection with management and members of the Board of Directors

testing mechanical accuracy of the liquidity forecast

critically assessing how the Group’s assumptions tie back to the budget approved by the Board of Directors

audit that the necessary waivers are obtained which support exclusion of cash-outflow for loan repayments and interest payments

performing historical back testing to obtain an understanding of the past precision for the commitments from the chairman to identify potential management bias effects included in the cash projections

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Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Other Information in the Annual Report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements of the Company and our auditor’s reports thereon. The annual report is expected to be made available to us after the date of this auditor’s report. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Responsibility of the Board of Directors for the Consolidated Financial Statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

F-­‐86  

Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse: http://expertsuisse.ch/en/audit-report-for-public-companies.This description forms part of our auditor’s report. Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of 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 Roland Mueller Adrian Kaeppeli Licensed Audit Expert Licensed Audit Expert Auditor in Charge Zurich, April 10, 2017

   

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Orascom  Development  Holding  AG  Income  statement    

CHF   Notes   2016   2015  

       

Gross  revenue  from  services     156,954   119,363  

Net  proceeds  from  services     156,954   119,363  

       

Staff  costs     (4,452,683)   (5,590,826)  

Other  operational  costs     (3,423,285)   (8,016,838)  

Depreciation  on  fixed  assets  items     (3,801)   (1,973)  

Transaction  costs   3.3   -­‐   (2,509,321)  

Impairment  on  investments   3.3   -­‐   (81,233,259)  

Provisions     24,056   (454,439)  

Total  operating  expenditure     (7,855,713)   (97,806,656)  

Operating  Loss     (7,698,759)   (97,687,293)  

       

Financial  expenses   3.10   (701,637)   (1,063,352)  

Financial  income   3.11   5,445,038   4,053,207  

Total  financial  income  /  (expenses)     4,743,401   2,989,855  

       

Annual  loss     (2,955,358)   (94,697,438)  

         

Khaled  Bichara             Ashraf  Nessim  Group  CEO             Group  CFO  

         

Orascom Development Holding AG

statutory finanCial statements

together with auditor's report for

the year ended 31 deCember 2016

7.0

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Orascom  Development  Holding  AG  Statutory  balance  sheet    

CHF   Notes   31  December  2016   31  December  2015  

Assets        

Current  assets        Cash  at  bank   3.1   4,230,381   40,605,624  Other  current  receivables                  -­‐  Related  parties     11,836   11,927            -­‐  Third  parties   3.2   235,322   573,799  Accrued  income  and  prepaid  expenses     -­‐   73,352  

Total  current  assets     4,477,539   41,264,702  

Non-­‐current  assets        Other  non-­‐current  receivables  –  Affiliated  Companies     271,249,263   248,873,722  Investments  in  subsidiaries   3.3   1,193,546,736   1,180,443,903  Tangible  fixed  assets   3.4   124,937   247,545  

Total  non-­‐current  assets     1,464,920,936   1,429,565,170  

Total  assets     1,469,398,475   1,470,829,872  

Liabilities  and  shareholders’  equity        

Current  liabilities        Trade  creditors     225,535   754,534  Current  interest-­‐bearing  liabilities                  -­‐  Shareholder   3.5   20,730,879   15,945,914            -­‐  Affiliated  Companies     -­‐   351,454  Other  current  liabilities   3.6   95,044   127,743  Provision  and  similar  items  required  by  law   3.7   868,383   892,439  Accrued  expenses     3,587,348   4,594,121  

Total  current  liabilities     25,507,189   22,666,205  

Non-­‐current  liabilities        Non-­‐current  interest-­‐bearing  liabilities  –  Affiliated  Companies     16,366,281   30,110,070  

Other  non-­‐current  liabilities     25,866   120,910  Deferred  currency  translation  gain     16,127,271   4,330,157  

Total  non-­‐current  liabilities     32,519,418   34,561,137  

Total  liabilities     58,026,607   57,227,342  

Shareholders’  equity        Share  capital   3.9   937,510,283   937,510,283  Statutory  capital  reserves        Capital  contribution  reserve  (privileged)                    of  which  reserves  from  tax  privileged  capital                contributions   3.8   2,858,520,175   2,858,520,175  Statutory  retained  earnings     12,543,438   12,543,438  Accumulated  losses     (2,397,193,303)   (2,393,941,791)  Own  shares     (8,725)   (1,029,575)  

Total  shareholders'  equity     1,411,371,868   1,413,602,530  

Total  liabilities  and  shareholders‘  equity     1,469,398,475   1,470,829,872  

       

Khaled  Bichara             Ashraf  Nessim  Group  CEO             Group  CFO

F-­‐90

 

Orascom

 Develop

ment  H

olding

 AG  

Statem

ent  o

f  chang

es  in  equ

ity  

  CHF  

Share  capital  

Statutory  Ca

pital  

Reserves    

(tax  privileged)  

Statutory  retained  

earnings  

Accum

ulated  

losses  

Own  shares  

Total  

Balance  at  1

 January  2015  

662,201,010  

2,99

9,972,181  

12,543,438  

(2,299

,215,010)  

(1,723,580)  

1,373,778,039  

Acquisitio

n  of  own  shares  

275,309,273  

(141,452,006

)  -­‐  

-­‐    

133,857,26

7  Distribution  to  Boa

rd  M

embe

rs  and

 Revaluatio

n  -­‐  

-­‐  -­‐  

(29,343)  

694,00

5  66

4,66

2  

Loss  fo

r  the

 period  

-­‐  -­‐  

-­‐  (94,69

7,438)  

-­‐  (94,69

7,438)  

Balance  at  31  Decem

ber  2015  

937,510,283  

2,858,520,175  

12,543,438  

(2,393,941,791)  

(1,029,575)  

1,413,602,530  

Balance  at  1

 January  2016  

937,510,283  

2,858,520,175  

12,543,438  

(2,393,941,791)  

(1,029,575)  

1,413,602,530  

Distribution  to  Boa

rd  M

embe

rs  

-­‐  -­‐  

-­‐  (296

,154)  

1,02

0,850  

724,69

6  

Loss  fo

r  the

 period  

-­‐  -­‐  

-­‐  (2,955,358)  

-­‐  (2,955,358)  

Balance  at  31  Decem

ber  2016  

937,510,283  

2,858,520,175  

12,543,438  

(2,397,193,303)  

(8,725)  

1,411,371,86

8  

 

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Orascom  Development  Holding  AG  Cash  flow  statement    

CHF   Notes   2016   2015  

Cash  flows  from  operating  activities        

Annual  Loss       (2,955,358)   (94,697,438)  

Adjustments  for:        

Depreciation  on  fixed  assets  items     3,801   1,973  

Own  shares     724,696   664,662  

Financial  expenses   3.10   701,637   1,063,352  

Financial  income   3.11   (3,523,020)   (2,920,320)  

Net  foreign  exchange  gain     (274,763)   (318,537)  

Impairment  on  investments   3.3   -­‐   81,233,259  

Provision     (24,056)   454,439  Transaction  cost  of  delisting  EDRs  from  Egypt  exchange     500,000   -­‐  

Movements  in  working  capital        

(Increase)  in  trade  and  other  current  receivables     (21,939,565)   (33,760,599)  (Decrease)  in  trade  creditors  and  other  interest-­‐bearing  liabilities     (14,651,312)   (57,920,976)  

Other  expenditure  not  related  to  cash  flow   3.3/4.7   -­‐   2,509,321  

(Decrease)/increase  in  other  liabilities     10,290,341   5,787,894  

Cash  used  in  operations     (31,147,599)   (97,902,970)  

Interest  paid     (701,637)   (1,063,352)  

Income  tax  paid     -­‐   -­‐  

Cash  outflow  from  operating  activities     (31,849,236)   (98,966,322)  

Cash  flows  from  investing  activities        Payments  for  investments  in  purchase  of  financial  assets  

  (13,102,833)   (14,573,917)  

Payments  for  tangible  assets     (5,922)   (8,499)  

Interest  received   3.11   3,523,020   2,920,320  Receipt  of  payments  from  divestment  of  financial  assets   3.3   -­‐   59,005,239  

Cash  inflow/(outflow)  for  investment  activities     (9,585,735)   47,343,143  

Cash  flows  from  financing  activities        

Receipt  of  payments  from  shareholder  loans     19,050,965   35,180,562  

Repayments  of  loans  to  shareholder     (14,266,000)   -­‐  

Receipt  of  payments  from  capital  increase     -­‐   49,615,380  

Cash  inflow  from  financing  activities     4,784,965   84,795,942  

Net  increase/(decrease)  in  cash  and  cash  equivalents    

(36,650,006)   33,172,763  

Cash  and  cash  equivalents  as  at  beginning  of  the  financial  year  

  40,605,624   7,114,324  

Effect  of  foreign  exchange  rate  changes     274,763   318,537  

Cash  and  cash  equivalents  as  at  end  of  the  financial  year     4,230,381   40,605,624  

 

F-­‐92  

Notes  to  the  financial  statements  1  GENERAL  INFORMATION    Orascom  Development  Holding  AG  was  established  in  Switzerland  as  Joint  Stock  Company  and  is  domiciled   in  Altdorf,  Uri.  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.    

The  accounts  for  the  period  from  1  January  to  31  December  2016  were  approved  by  the  Board  of  Directors  on  10  April  2017.  The  Company  has  an  annual  average  of  less  than  10  full-­‐time  employees  (previous  year:  less  than  10  full-­‐time  employees).    

 

2  KEY  ACCOUNTING  AND  VALUATION  PRINCIPLES    

2.1  Principal  of  Financial  Reporting  The   present   accounts   for  Orascom  Development  Holding  AG   have   been   prepared   in   accordance  with   the   requirements   of   the  Swiss  Financial  Reporting  Law.  The  main  accounting  and  valuation  principles  used,  which  are  not  already  specified  by  the  Swiss  Code  of  Obligations,  are  described  as  follows.  

2.2  Estimates  and  Assumptions  made  by  management  Financial  reporting  under  the  Swiss  Code  of  Obligations  requires  certain  estimates  and  assumptions  to  be  made  by  management.  These  are  on-­‐going  and  are  based  on  past  experience  and  other   factors   (e.g.  expectations  of   future  results   for   investments  and  budget).   The   result   subsequently   achieved  may   change   from   these   estimates.   Items   in   the   accounts,   which   are   based   on   the  estimates  and  assumptions  made  by  management,  are  as  follows:  

– Investments  

– Direct  taxes  

– Tangible  fixed  assets  

– Provisions  

2.3  Foreign  Currency  items  The  currency  in  which  Orascom  Development  Holding  AG  operates   is  Swiss  Francs  (CHF).  Transactions   in  foreign  currencies  are  converted  into  the  currency  in  which  the  company  operates  (CHF)  at  the  exchange  rate  on  the  day  of  the  transaction  takes  place.  

– Monetary  assets  and   liabilities   in   foreign  currencies  are  converted   into  CHF  at  the  exchange  rate  on  the  balance  sheet  date.  Any  profit   or   losses   from   the  exchange  are   recorded   in   the   income   statement  except  net  unrealized  gain   from  non-­‐current  items,  which  are  deferred  in  the  balance  sheet.  

– Non-­‐monetary   assets   and   liabilities   at   historical   costs   are   converted   at   the   foreign   exchange   rate   at   the   time   of   the  transaction.  

2.4.  Cash  Flow  Statement  The  company  presents  as  a  holding  company  the  movements  on  long-­‐term  interest-­‐bearing  liabilities  –  affiliated  companies  and  other  non-­‐current  receivables  –  affiliated  companies  in  the  cash-­‐flow  from  operating  activities.  

2.5  Related  parties  Related   parties   include   subsidiary   companies,   members   of   the   Board   of   Directors   and   Orascom   Development   Holding   AG  shareholders.  Transactions  with  related  parties  take  place  under  proper  market  conditions  (dealing  at  an  arm’s  length).  

2.6  Cash  and  Cash  Equivalents  and  current  assets  with  a  stock  exchange  price  The   cash   and   current   assets   with   a   stock   exchange   price   include   cash   holdings,   bank   deposits   and   short-­‐term  money  market  investments  maturing  in  a  maximum  of  3  months.  They  are  recorded  at  their  nominal  value.  

2.7  Current  Assets  with  a  stock  exchange  price  and  financial  assets  Current  assets  with  a  stock  exchange  price  are  valued  at  the  stock  exchange  price  on  the  balance  sheet  closing  date.  There  is  no  provision  for  a  fluctuation  reserve.  Financial  assets   include  long-­‐term  securities  without  a  stock  exchange  price  or  an  observable  market  price.  These  are  valued  no  higher  than  the  acquisition  cost  less  any  value  adjustment.  

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2.8  Tangible  Fixed  Assets  The   straight-­‐line   depreciation   method   is   used   for   tangible   fixed   assets   according   to   their   expected   useful   life.   Useful   life   is  established  as  follows  and  is  revised  each  year:  

– Machinery  and  Equipment     5  Years  

– Office  Equipment  and  Computers     3  Years  

– Furniture  and  fixtures       3  Years  

2.9  Own  Shares  Own  Shares  are  recorded  at  acquisition  cost  on  the  balance  sheet  as  a  deduction  to  equity.  If  they  are  resold  at  a  later  date,  the  profit  or  loss  is  recorded  in  retained  earnings,  respectively  accumulated  losses.  

2.10  Shareholder  rights  and  options  Own   shares   are   allocated   to   management   and   administrative   bodies   or   to   employees   as   shareholder   rights   or   options.   The  difference  between  the  acquisition  value  and  any  payments  to  counterparties  during  share  allocation  is  shown  as  staff  costs.  

2.11  Leasing  transactions  Leasing  and  rental  contracts  are  accounted  for   in  accordance  with   legal  ownership.  Expenses  as  a   lessee  or  tenant  are  recorded  corresponding  as  expenditure  in  the  relevant  period.  

2.12  Contingent  compensation  The  company  performs  an  assessment   for   their   contingent  compensation  arrangement  and  disclose   it  as  contingent   liability  as  long  as  the  compensation  is  not  probable.   If  the  assessment  comes  to  the  conclusion  that  the  compensation  is  more  likely  than  not,  the  company  is  recording  an  accrual  for  the  estimated  compensation.  

 

3  INFORMATION  RELATING  TO  ITEMS  ON  THE  BALANCE  SHEET  AND  INCOME        STATEMENT    

3.1  Cash  and  cash  equivalents  

CHF   31  December  2016   31  December  2015  

of  which  in  CHF   252,750   2,994,864  

of  which  in  USD   3,347,297   35,402,713  

of  which  in  EUR   407,924   1,547,029  

of  which  in  GBP   13,447   197,481  

of  which  in  EGP   208,963   463,537  

Total  cash  and  cash  equivalents   4,230,381   40,605,624    

3.2  Other  current  receivables  –  Third  Parties  Accounts  receivables  include  a  position  in  the  amount  of  CHF  203,383  (31  December  2015:  427,439),  whose  value  is  determined  by  the  market  value  of  ODH  EDRs.  This  position  is  valued  at  lower  of  cost  or  market.  A  provision  is  formed  for  the  whole  outstanding  amount  of  CHF  203,383.  

3.3  Investments  in  subsidiaries  Investments   are   valued   at   acquisition   cost   less   adjustments   for   impairment.   On   a   regular   basis   the   Company’s   management  reviews   the   recoverable   value   of   the  Company’s   investments   in   the   various   destinations,   and   accordingly   reduces   the   carrying  value  by  the  amount  of  any  impairment  losses.  

The  Egyptian  revolution  in  2011  has  negatively  affected  the  performance  of  the  Company’s  Egyptian  arm  under  Orascom  Hotels  &  Development  S.A.E.   (“OHD”).  OHD’s  different  operating  segments,  especially   real  estate  and  hotels  being  the  key  revenue  and  value  drivers  of  OHD,  have  been  negatively   affected  by   the  deteriorated  economic   conditions   that   took  place   in  Egypt.  This   is  represented  in  downsized  demand  for  real  estate  purchases  and  declined  flow  of  tourists.    

 

F-­‐95  

The   valuation  model   of   the   Company   captures   the   different   investments,   whether   greenfield   projects,   brownfield   projects,   or  operating  projects.  The  valuation  model  adopts  various  approaches  depending  on  the  category  of  the  project:  as  for  the  greenfield  projects  and  brownfield  projects,  the  model  keeps  it  at  investment  cost  given  the  uncertainty  of  the  future  assumptions  and  the  absence  of   track   record   for   those  projects.  One  of   the  major   contributors   to   the   investments’   value   is   land  banks   in  Egypt,   for  which  valuation  depends  very  much  on  developments  and  sales  that  are  achievable  over  a  long-­‐term  period.  Due  to  this  long-­‐term  view  and  the  current  political  and  economic  situation,  there  remains  a  significant  uncertainty.  

For   the  operating  projects,  DCF   valuation   techniques   applying   a   two-­‐phase  model   for   the  hotels   segment  were  used.   The   first  phase  is  a  5-­‐year  period  which  shows  the  evolving  status  of  the  hotel  segment  indicated  by  being  back  to  the  operating  standards  of   before   the   2011   revolution.   And   the   second   phase   is   a   5-­‐year   period   which   shows   the   steady   performance   of   the   hotel  operations.  Major  underlying  assumptions  are  occupancy  and  average  room  rates  for  hotels  and  the  number  of  real  estate  units  to  be  sold.    

The  various  assumptions  and  future  projections  incorporate  the  various  political,  economic  and  operational  facts  prevailing  at  the  time  of  preparing  the  valuations.  Future  developments  may  impact  the  value.  

In  January  2015,  the  Swiss  National  Bank  decided  to  discontinue  the  minimal  exchange  rate  of  Euro  1.20  to  the  CHF.  This  had  a  significant  impact  on  the  CHF  /  EGP  exchange  rate  as  well.  Management  monitored  the  development  after  this  decision  and  came  to   the   conclusion   that   a   full   recovery   of   CHF   /   EGP   exchange   rate   is   not   to   be   expected   in   the   near   or   middle-­‐term   future.  Therefore,  an  impairment  of  CHF  81  million  as  recorded  in  Q1  2015.  

In  January  2015,  15%  of  OHD  Investment  was  sold  in  a  public  offering  for  total  proceeds  of  EGP  506  million  equivalent  to  CHF  61.5  million,  which  was  equivalent  to  its  carrying  amount.  The  costs  related  to  this  offering  were  CHF  2.5  million,  which  resulted  in  net  proceeds  of  CHF  59.0  million.  

In  2016,  the  Egyptian  pound  dropped  by  55%  against  the  Swiss  Franc.  The  devaluation  of  the  Egyptian  pound  was  initiated  in  the  first  half  of  2016  by  the  decision  of  the  Egypt  Central  Bank  to  devalue  the  Egyptian  Pound  against  the  USD  by  approximately  14%  compared  to  the  foreign  exchange  rate  as  at  31  December  2015  resulting  in  a  similar  devaluation  of  the  Egyptian  Pound  against  the  Swiss  Franc.  On  3  November  2016,  the  Central  Bank  of  Egypt  decided  to  float  the  Egyptian  pound  and  allowed  banks  to  deal  in  the  foreign  currencies  with  flexible  rates,  which   led  to  a  further  devaluation  of  the  Egyptian  Pound.   In  addition,  Central  Bank  of  Egypt  raised  interest  rate  for  deposits  in  EGP  by  approximately  3%  to  face  the  rise  in  prices  a  currency  devaluation  may  bring.  

As  at  31  December  2016  and  2015,  the  Company  directly  holds  the  following  investments:  

Company,  domicile,  purpose   Ownership  %   Share  capital  

 31  December  

2016  31  December  

2015      

Orascom  Hotels  &  Development  S.A.E.   84.79%   84.79%   EGP    1,009,811,630    (previously:  EL  Gouna  Development  &  Hotels  S.A.E.),  Egypt          Real  estate  development,  hotel  management          

Arena  for  Hotels  Company  S.A.E.,  Egypt   99.85%   99.85%   EGP              20,000,000    Hotel  operation          

Orascom  Development  &  Management  Limited,  Cyprus   100.00%   100.00%   EUR                                1,000    Management  company          

ORH  Investment  Holding  Ltd,  BVI   100.00%   100.00%   USD          125,000,000    International  holding  company          

Lustica  Development  AD,  Montenegro   90.82%   90.82%   EUR                        11,025,000    Real  estate  development,  hotel  management          

Andermatt  Swiss  Alps  AG,  Switzerland  (ASA)   49.00%   49.00%   CHF   231,147,000  Real  estate  development          

Orascom  Development  International  AG,  Switzerland     100.00%   100.00%   CHF                        1,400,000    Real  estate  development          

Orascom  Hotels  Management  AG,  Switzerland   100.00%   100.00%   CHF   9,000,000  

Hotel  Management          

 

   

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3.4  Tangible  fixed  assets  

CHF   31  December  2016   31  December  2015  

Machinery  and  equipment   114,459   239,187  

Office  equipment  and  computers   10,478   8,358  

Furniture  and  fixtures   -­‐   -­‐  

Total  tangible  fixed  assets   124,937   247,545    

3.5  Current  interest-­‐bearing  liabilities  –  Shareholder  The  balance  of  “Current   interest-­‐bearing   liabilities  –  Shareholder”  as  at  31  December  2016   is  due  to  Mr.  Samih  O.  Sawiris   in  the  amount  of  CHF  20,730,879  (31  December  2015:  CHF  15,945,914).    An  amount  of  CHF  84,241,891  has  been  converted  in  December  2015   into   share   capital   during   the   capital   increase.   Please   refer   to   note   number   3.9.   for  more   information   around   the   capital  increase.    

3.6  Other  current  liabilities  

CHF   31  December  2016   31  December  2015  

Third  parties   95,044   127,743  

Total  other  current  liabilities   95,044   127,743    

3.7  Provisions  and  similar  items  required  by  law  

CHF   31  December  2016   31  December  2015  

Provision  for  disputes   665,000   465,000  

Bad  debt  provision   203,383   427,439  

Total  provisions  and  similar  items  required  by  law   868,383   892,439    

3.8  Reserves  from  tax  privileged  capital  contributions  As  of   1   January  2011,  Swiss   tax  authorities  have   introduced  a   regulation   concerning   capital   contribution   reserves.  Distributions  from   such   reserves   are   exempt   from  Swiss   income  and  withholding   tax.   In   order   to   reflect   this   regulation,   capital   contribution  reserves   have   been   classified   separately   in   the   balance   sheet.   The   capital   contribution   reserves   in   the   amount   of   CHF  2,999,972,181  have  been  approved  by   the   tax  authorities.  An  amount  of  CHF  141,452,006  out  of   this   statutory   capital   reserves  from  tax  contributions  has  been  used  in  the  capital  increase  through  converting  it  in  share  capital,  as  the  offering  price  was  CHF  11.28,  which  was  below  the  par  value  CHF  23.20.  Therefore,  the  capital  contribution  reserves  from  tax  contributions  decreased  to  CHF  2,858,520,176  as  per  31  December  2016  and  remained  unchanged  as  per  31  December  2016.    

3.9  Share  capital  As  at  31  December  2016  the  Company’s  Share  capital  of  CHF  937,510,283  (31  December  2015:  CHF  937,510,283)  was  divided  into  40,409,926  (31  December  2015:  Shares  40,409,926)  registered  shares  with  a  par  value  of  CHF  23.20  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).  

During  December  2015  the  company  increased  its  capital  by  CHF  275,309,723  by  issuing  11,866,779  shares  with  a  nominal  value  of  CHF  23.20.  The  offering  price  was  CHF  11.28  per  share  which  was  financed  by  cash  injection  with  an  amount  of  CHF  49,615,380  and  settlement  of  the  shareholder  loan  with  CHF  84,241,887.  The  difference  between  the  offering  price  and  the  nominal  value  was  deducted  from  the  statutory  capital  reserves  from  tax  contributions  with  an  amount  of  CHF  141,452,006.  The  costs  for  the  ODH  capital  increase  were  CHF  3,776,769.  

   

F-­‐97  

3.10  Finance  expenses  

CHF   2016   2015  

Interest  expense   701,637   1,063,352  

Total  finance  expenses   701,637   1,063,352    

3.11  Finance  income  

CHF   2016   2015  

Interest  income   3,523,020   2,920,320  

Foreign  exchange  gain,  net   1,922,018   1,132,887  

Total  finance  income   5,445,038   4,053,207    

 

4  OTHER  INFORMATION,  WHICH  IS  NOT  ALREADY  VISIBLE  IN  THE  BALANCE          SHEET  OR  INCOME  STATEMENT    

4.1  Residual  amount  of  leasing  liabilities    Leasing  liabilities,  which  will  not  expire  and  may  not  be  terminated  within  twelve  months,  are  subject  to  the  following  repayment  structure:  

CHF   31  December  2016   31  December  2015  

<  1  year   232,800   232,800  

1  –  5  years   931,200   931,200  

>  5  years   2,793,600   3,026,600  

Total     3,957,600   4,190,400    

4.2  Total  amount  of  assets  pledged  or  assigned  to  secure  own  liabilities  and  assets  under  reservation  of  ownership      Andermatt  Swiss  Alps  (ASA)  

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  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  2016,  36,985  ASA  shares  owned  by  the  Company  (31  December  2015:  36,985)  with  a  net  book  value  of  CHF  957  each,  amounting  to  a   total  book  value  of  CHF  35,384,945   (31  December  2015:  CHF  35,384,945),  have  been  pledged  as  a   security   to   the   canton  and  municipality.  Additionally,  land  with  a  value  of  CHF  1,000,000  has  been  pledged  (31  December  2015:  CHF  1,000,000).  

Orascom  Hotels  and  Development  S.A.E.  (OHD)  

As  at  31  December  2016,  34,512,392  OHD  shares  owned  by  the  Company  (31  December  2015;  34,512,392)  with  a  net  book  value  of  CHF  4.60  each,  amounting  to  a  total  book  value  of  CHF  158.9  million  (31  December  2015:  CHF  158.9  million),  have  been  pledged  as  a  security.  

Island  Lastavica  with  fortress  Mamula  in  Herceg  Novi  

As  at  31  January  2014,  Orascom  Development  Holding  submitted  a  bid  pursuant  to  the  invitation  to  tender  issued  by  the  tender  committee  for  valorisation  of  tourism  location  for  the  purpose  of  long  term  lease  of  the  site  island  Lastavica  with  fortress  Mamula  in  Herceg  Novi  with  an  amount  of  EUR  300,000.  

 

   

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4.3  Shareholder  rights  and  options  held  by  management  and  Board  of  Directors  and  information  on  allocation  of  shares  and  options  to  executive  officers,  directors  and  employees  Shareholder  Rights  and  Allocation  of  Shares  to  Board  of  Directors:  

The  compensation  of  the  members  of  the  Board  of  Directors  is  gross  CHF  120’000.  The  compensation  is  paid  out  half  in  cash  and  half   in   the   form   of   shares   of   the   Company.   The   annual   share   element   of   the   members   of   the   Board   of   Directors   therefore  comprises  shares  in  the  value  of  CHF  60’000.      

The  members  of  the  Board  of  Directors  are  entitled  to  additional  compensation  in  shares  in  the  value  of  CHF  20’000  for  services  as  a  member  or  chair  of  a  Committee  and/or  in  the  value  CHF  40’000  for  the  service  as  Lead  Director  of  the  Company.  The  valuation  of  the  shares  (for  purposes  of  the  calculation  of  the  number  of  shares  allocated  to  each  member  of  the  Board  of  Directors)  is  based  on  the  average  share  price  of  the  ODH  share  (ODHN)  at  Zurich  Stock  Exchange  during  the  last  six  months  prior  to  the  grant  date.  The  shares  are  not  subject  to  any  vesting  or  blocking.  

The  members  of  the  Board  of  Directors  do  not  have  any  specific  further  shareholder  rights  and  do  not  participate  in  any  additional  share  allocation  plans.  

Shareholder  Rights  and  Allocation  of  Shares  to  Members  of  the  Executive  Management:  

The  bonus  policy  of   the  Group   for  members  of   the  Executive  Management   includes   a   cash-­‐bonus  and  a  deferred   share-­‐bonus.  100%   of   the   cash-­‐bonus   and   40%   of   the   share-­‐bonus   are   based   on   the   member   of   the   Executive   Management’s   personal  performance.  60%  of  the  share-­‐bonus  is  based  on  the  (financial)  performance  of  the  Company.  

The  cash-­‐bonus  can  reach  at  maximum  25  %  of  the  Executive  Member’s  annual  gross  base  salary.  The  share-­‐bonus  can  reach  at  maximum  100  %  of  the  Executive  Member’s  annual  gross  base  salary.  

The   share   price   that   is   relevant   to   determine   the   number   of   ODH   shares   to   be   granted   to   the   member   of   the   Executive  Management   is   the  average   share  price  of   the  ODH  share   (ODHN)  at  Zurich  Stock  Exchange  during   the   last   six  months  of   the  performance  year  (closing  prices  of  all  trading  days  between  July  1  and  December  31).  

The  members   of   the   Executive  Management   do   not   have   any   specific   further   shareholder   rights   and   do   not   participate   in   any  additional  share  allocation  plans.  

4.4  Liabilities  towards  staff  pension  schemes  There  are  no  liabilities  as  at  31  December  2016  (31  December  2015:  CHF  0).    

4.5  Joint  liability  in  favour  of  third  party  The  Company,  together  with  certain  Swiss  subsidiaries,  is  part  of  a  Swiss  value  added  tax  (VAT)  group,  resulting  in  a  joint  liability  for  taxation  for  VAT  purposes.  

4.6  Contingent  liability  The  Company  has  contractually  granted  a  variable  compensation  amount  to  its  new  CEO,  Khaled  Bichara  (“Contingent  Compensation”).  The  Compensation  amount  is  due  6  years  after  the  start  date  (1  January  2016)  or  earlier  if  an  acceleration  event  occurs.  In  summary,  the  compensation  amount  is  10%  of  the  share  price  increase  above  an  annual  average  increase  of  8%  (based  on  the  fixed  spot  share  price  of  CHF  11.37).  The  contingent  Compensation  will  be  paid  in  cash  or,  at  ODH’s  discretion,  in  shares  if  the  annual  average  increases  in  the  share  price  are  met.    As  of  9  May  2016,  the  General  Assembly  of  ODH  approved  the  abovementioned  compensation  plan.  

4.7  Subsequent  events  Delisting  of  EDRs  from  the  Egyptian  Exchange  

On  1  March  2017,  the  Extraordinary  General  Meeting  of  ODH  approved  the  Board  of  Directors'  proposal  regarding  the  voluntary  delisting  of  the  Egyptian  Depositary  Receipts  (EDRs)  from  the  Egyptian  Exchange.  The  Board  of  Directors  called  the  meeting   in  accordance  with  the  requests  of  the  relevant  authorities  in  Egypt  to  present  to  the  shareholders  of  the  company  the  proposal  to  approve   the   delisting.   Based   on   the   Extraordinary   General  Meeting's   approval   the   currently   proceeds   to   undertake   all   further  actions  required  to  complete  the  delisting  of  the  EDRs.  

There  have  been  no  other  significant  events  subsequent  to  31  December  2016.  

4.8  Other  The  presentation  of  the  prior  year  cash  flow  statements  has  been  adjusted  to  be  in  line  with  the  current  year  presentation.  

F-­‐99  

   

 

 

Statutory Auditor’s Report To the General Meeting of ORASCOM DEVELOPMENT HOLDING AG, ALTDORF Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Orascom Development Holding AG, which comprise the balance sheet as at December 31, 2016 and the income statement, the statement of changes in equity, the cash-flow statement and notes for the year then ended, including a summary of significant accounting policies. In our opinion the financial statements (pages F-86 to F-95) as at December 31, 2016 comply with Swiss law and the Company’s articles of incorporation. Basis for Opinion We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter We draw attention to note 3.3 of the financial statements disclosing the existence of a significant uncertainty relating to the valuation of the investments in subsidiaries. Our opinion is not modified in respect of this matter. Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Deloitte AG General-Guisan-Quai 38 8022 Zürich Schweiz Telefon: +41 (0)58 279 6000 Fax: +41 (0)58 279 6600 www.deloitte.ch  

 

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06OrascOm FINaNcIaL sTaTEmENTs

06OrascOm FINaNcIaL sTaTEmENTs

Annual Report - 2016 Strategically decentralized F- 9897F-F-­‐100  

Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Non-current receivables, affiliated companies and investments

Key audit matter How the scope of our audit responded to the key audit matter

The statutory balance sheet presents non-current receivables, affiliated companies amounting to CHF 271.2 million and investments amounting to CHF 1,193.5 million as at December 31, 2016, which is further explained in note 3.3.

There are triggering events present indicating that non-current receivables from affiliated companies and investments balances were potentially no longer recoverable from subsidiaries.

Management’s annual impairment test for non-current receivables from affiliated companies and investments balances is considered to be judgmental, as the recoverability of the non-current receivables and investments is depending on political and economic assumptions for middle east and especially Egypt, which are inherently uncertain. As the balances are material to the statutory financial statements as a whole, the recoverability of non-current receivables and investments in subsidiaries represents a key audit matter.

We tested the design and implementation of the Company’s relevant controls.

We assessed the appropriateness of management’s accounting policies regarding the recoverability of the non-current receivables, affiliated companies and investments.

We challenged the recoverability of non-current receivables, affiliated companies and investments, and critically assessed whether the assumption are appropriate for the different valuations that support the recoverability of non-current receivables, affiliated companies and investments.

We validated the appropriateness and completeness of the related disclosures in the financial statements.

F-­‐101  

Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

Liquidity and financing

Key audit matter How the scope of our audit responded to the key audit matter

We identified that the most significant assumption in the Company’s assessment of its ability to continue as a going concern is liquidity within the Group, which is ensured by the commitment from the chairman to provide up to CHF 60 million in cash until December 2018. The calculations supporting the assessment require management to make judgments on estimated future cash-inflows and cash-outflows. Liquidity cannot just be considered from a stand-alone perspective, it needs to be addressed for the whole Group, as if liquidity issues on subsidiaries’ level result in going concern issues for subsidiaries such going concern issues could trigger impairments on the Company’s level (ultimate holding), which could impact the Company’s going concern.

The Group’s cash projection is fundamental to assess the appropriateness of the basis adopted for the preparation of the financial statements and therefore represents a key audit matter.

Refer to Note 26.1 of the Group’s financial statements for the commitment and Note 3.5 for the actual shareholder’s loan from Chairman.

We tested the design and implementation of the relevant controls and assessed the appropriateness of the methodology applied for the cash projection that builds the basis for the Group’s going concern conclusion and consequently also for the stand-alone conclusion. Our audit procedures on the cash projection underlying the going concern conclusion, amongst others, included:

corroborating cash projection with management and members of the Board of Directors

testing mechanical accuracy of the liquidity forecast

critically assessing how the Group’s assumptions tie back to the budget approved by the Board of Directors

audit that the necessary waivers are obtained which support exclusion of cash-outflow for loan repayments and interest payments

performing historical back testing to obtain an understanding of the past precision for the commitments from the chairman to identify potential management bias effects included in the cash projections

Responsibility of the Board of Directors for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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Orascom Development Holding AG Report of the Statutory Auditor

for the Year Ended December 31, 2016

In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse: http://expertsuisse.ch/en/audit-report-for-public-companies.This description forms part of our auditor’s report. Report on Other Legal and Regulatory Requirements

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. Furthermore, we draw attention to the fact that half of the share capital and legal reserves are no longer covered (article 725 paragraph 1 CO). Deloitte AG Roland Mueller Adrian Kaeppeli Licensed Audit Expert Licensed Audit Expert Auditor in Charge Zurich, April 10, 2017  

 

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AG: Aktiengesellschaft (abbr. AG) is the German name for a stock corporation.

ARR: Average Room Rate is a statistical unit often used in the lodging industry. The ARR is calculated by dividing the room revenue (excluding services and taxes) earned during a specific period by the number of occupied rooms.

Company: Orascom Development Holding AG.

EBIT: Earnings Before Interest and Taxes is an indicator of a company’s profitability, calculated as total revenue minus total expenses, excluding tax and interest. EBIT is also referred to as “Operating Earnings”, “Operating Profit” and “Operating Income”. The indicator is also known as Profit before Interest and Taxes (PBIT), and is equal to the net income with interest and taxes added back to it.

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization is an indicator of a company’s financial performance, calculated as total revenue less total expenses, excluding tax, interest, depreciation and amortization. EBITDA is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.

EBITDA Adjusted: Earnings Before Interest, Taxes, Depreciation and Amortization adjusted to better reflect optimization of core operating activities net of any extraordinary items such as Provisions & impairments, FOREX losses, Capitalized G&A expenses, Share in associates and Fair value differences

EDRs: Egyptian Depository Receipts

EFSA: Egyptian Financial Supervisory Authority

EGX: The Egyptian Exchange is one of the oldest stock markets established in The Middle East. The

Egyptian Exchange traces its origins to 1883 when the Alexandria Stock Exchange was established, followed by the Cairo Stock Exchange in 1903.

GOP: Gross Operating Profit means the profit of our hotel business after deducting operating costs and before deducting amortization and depreciation expenses. It excludes all costs related to non-hotel operations.

GOP PAR: Gross Operating Profit per Available Room a key performance indicator for the hotel industry, defined as total gross operating profit (GOP) per available room per day

Group: Orascom Development Holding AG and its subsidiaries.

KPI: Key Performance Indicators are financial and non-financial metrics used to help an organization define and measure progress toward organizational goals.

M2: square meter

MBA: The Master of Business Administration is a master’s degree in business administration.

MCDR: Misr for Central Clearing, Depository and Registry provides securities settlement and custody services in Egypt by applying central depository system, effect central registry of securities traded in the Egyptian capital market and facilitate securities trading on dematerialized shares.

MENA: Middle East and North Africa

NAV: Net Asset Value is a term used to describe the value of an entity’s assets less the value of its liabilities

OHM: Orascom Hotels Management

RevPAR: Revenue Per Available Room equals average room rate (ARR) multiplied by average occupancy.

SIX Swiss Exchange: The SIX Swiss Exchange is Switzerland’s principal stock exchange and part of the Cash Markets Division of SIX Group. It operates several trading platforms and is the marketplace for various types of securities. The SIX Swiss Exchange is supervised by the Swiss Financial Market Supervisory Authority (FINMA).

TRevPAR: Total Revenue per Available Room is similar to RevPAR but also takes into account other room revenues e.g. food and beverage, entertainment, laundry and other services.

UAE: United Arab Emirates

UK: United Kingdom

8.0 Glossary of Terms

08GlOSSARy OF TERMS

186 Annual Report - 2016

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