2011 ANNUAL REPORT

Mazagan Resort, El Jadida Depa Annual Report 2011

Contents

Overview ------04 Chairman’s Statement ------05 CEO’s Review ------07 Financial Highlights ------11 Year in Review ------13 Operations and Backlog Macroeconomic Impact Consolidating The Business Diversifi cation ------22 Financial Summary ------26 Board of Directors and Shareholder Information ------30 Shareholder Breakdown Corporate Governance and Risk Management------35 Corporate Governance Review Reporting and Guidance Policies Audited Financials ------39 Sign-Off by Chairman and Chief Executive Offi cer ------41

Disclaimer

This annual report contains forward-looking statements that refl ect the Management’s current views with respect to future events. Such statements are subject to risks and uncertainties that are beyond Depa’s ability to control or estimate precisely.

The information and opinions contained in this annual report may not be published, duplicated, copied or disclosed in whole or in part or otherwise used for any purpose than the purpose for which this annual report has been issued.

No representation or warranty, expressed or implied, is given by the Management as to the accuracy or completeness of the contents of this annual report or of the projections included within: or that any matters referred to herein have remained unchanged after the issue of this annual report.

Factors that may cause the actual results to differ materially from those predicted by such statements include, but are not limited to, unanticipated changes in demand for the Company’s products and services, changes in future market and economic conditions in the Company’s principle markets, the behavior of other market participants and the impact legal and/or of regulatory changes as well as changes in accounting principles and practices. Depa does not intend or assume any obligation to update any forward-looking statements to refl ect events or circumstances after the date of these materials, should any such events and/ or circumstances change.

Depa Annual Report 2011 Overview l 04

Depa in 2011

Revenue (AED Million) Gross Profi t (AED Million)

2007 1,420 2007 281

2008 1,972 2008 389

2009 2,689 2009 430

2010 1,814 2010 114

2011 1,736 2011 289

Net Profi t [before minority interest] (AED Million) Backlog (AED Billion)

2007 181 2007 1.62

2008 225 2008 2.70

2009 284 2009 2.09

2010 (206) 2010 2.18

2011 59 2011 3.80

Number of hotels and major Number of projects buildings completed in 2011: 07 completed in 2011: 378 Depa Annual Report 2011 Chairman’s Statement l 05

Abdullah Al Mazrui Chairman, Board of Directors

Dear Shareholders,

In 2010, we wrote about consolidating the business and streamlining our operations in anticipation of a period of renewed growth.

We now see the signs of stabilization and potential growth. Although 2011 was not as strong a year as we had expected, mainly due to macroeconomic and political reasons beyond our control, we still ended the year with positive cash fl ow from operations, revenues in line with market expectations and operating margins consistent with our historical norms. In addition, we entered 2012 with a record-backlog level indicating the Company’s strong future potential.

Financial Overview 2011 was a year that marked an of signing mega-projects in the infl ection point in the business, region, which were signed later in and the fi nancial results refl ect the year than originally planned. this. Revenues in 2011 of AED In addition, the Company has 1,736 million were in line with to taken a provision of AED 16.75 2010 at AED 1,814 million. Gross million following the news, on 20 profi t margins returned to levels March 2012, that Arcapita has comparable with the prior years fi led for bankruptcy protection, of 2008 and 2009, coming in at resulting in a 2011 net margin 16.6% for 2011 compared with before minority interest of AED 19.7% for 2008 and 16% for 2009. 59.1 million compared to a loss Net profi t before minority interest of AED 205.6 million in 2010. In was AED 75.8 million for the year summary, the key indicators under review and was impacted illustrate that the year 2011 was mostly by signifi cantly higher indeed a year of turning the G&A than prior years as we kept business upwards and into the staff on board in anticipation growth potential ahead. Depa Annual Report 2011 Chairman’s Statement l 06

Dividends In light of the turbulent macroe- allow the Company to maintain conomic and regional times, the its strength throughout any chal- Board of Directors has decided lenges and uncertainties that not to issue any dividends for the may arise in the coming year. year 2011. We believe this will

Burberry-Mall of the Emirates, Depa Annual Report 2011 CEO’S Review l 07

Mohannad Sweid Chief Executive Offi cer

Depa’s strategy of executing luxury interiors around the world anchored the business through the more diffi cult years. This helped the Company end 2011 in a stronger position than a year ago and marks 2011 as our turnaround year in which our revenues stabilized, our gross margins returned to historical norms, and our backlog grew signifi cantly. With Depa’s backlog at a record high, the Company is poised for growth in the coming years across the many geographies in which it operates.

Overall, 2011 was a diffi cult year in which to operate across the globe, with our operations being impacted by the global economic environment regardless of which country in which we were based. As the macro-economic situation in the region remained uncertain in 2011 , we found many of our projects being ‘held’ for a while and project works starting many months after originally intended. As a result, our revenues for the year ended 31st December 2011 were impacted by these delays and we closed the year with revenues of AED 1,736 million compared with AED 1,814 million in 2010. Furthermore, as we anticipated projects to start in the short-term, we experienced the associated G&A costs for the entire year rather than in solely the project operating period. With the additional impact from the Arcapita provision, net margins were reduced to 3.1% for the year, as compared with a negative 10.9% for the 2010 year and 8.7% profi t for 2009. Depa Annual Report 2011 CEO’S Review l 08

Diversifi cation We continue to operate in high- The Company continues to growth markets such as Angola pursue a diversifi ed client and and . Projects such as project base and is currently the InterContinental Hotel in An- operating in twenty countries gola and the Baku Flame Tower around the world. In 2011, we in Azerbaijan have presented continued our efforts to engage us with further opportunities to clients in , increasing our explore these new markets and revenue from AED 214 million in execute interesting projects. We 2010 to AED 225 million in 2011. value the diversifi cation and op- We currently operate in four portunities these markets provide countries in Asia: Singapore, as they allow us to enter new , Thailand, and , countries with secure clients. where we are executing new works, such as the W Hotel and As a business that has been oper- the Fraser Suite-Singapore, both ating on a global scale for many of which were signed in 2011. years, our management and operational teams have consider- In Asia, we have also established able experience in developing a factory and showroom in Chi- people, establishing networks na, under the control of Design and simultaneously operating Studio, which will complement across multiple locations. Accord- their manufacturing capability. ingly, growing the business across This will also exploit an untapped multi-markets is an area where interior contracting market niche our expertise is unrivalled, giving of ‘fi tting out’ apartments, which us a real market advantage. are handed over as shell units by the developer to the home- In terms of market segment diver- owner. sifi cation, we have recently seen a signifi cant increase in infrastruc- Most notably, we have seen the ture projects announced in the portion of our backlog contrib- GCC and Asia, including projects uted by the wider GCC increase where we are active, such as the from 48% in 2010 to 53% in 2011. New Doha International Airport This increase is primarily due to and the Mumbai International the recent projects we have Airport. This trend is in line with signed in and Saudi Ara- our growth expectations for this bia, namely the 27 lounges at the market segment, and our reper- New Doha International Airport toire of work in this area, from the and the King Abdullah Petroleum Stations to the Dubai Studies & Research Center. Over Airport and allows us to be in a the last few years, we have identi- prime position to potentially capi- fi ed the wider GCC as a potential talize on the growth in this market source of revenue growth in the segment. near-term, and we are pleased that this strategy is bearing fruit. Depa Annual Report 2011 CEO’S Review l 09

Al Jahwhara Versace Showfl at, Jeddah

Backlog cash from its operations. As this We ended 2011 with a record trend continued through to 2010, backlog that is increasingly diver- we took the decision to further sifi ed outside our home-market of develop and strengthen internal the UAE. With an AED 3,796 mil- commercial, planning and pro- lion backlog, compared to AED ject selection criteria. In 2011, giv- 2,179 million at the end of 2010, en the delay in starting contracts we fi nd ourselves in a strong posi- we experienced a slowdown in tion to grow the business over the revenues, and consequently cash next few years. Despite the New generation, which were AED 38 Doha International Airport being million compared with AED173.8 a signifi cant portion of our back- million in 2010. log, it is important to note the backlog would have remained at Reporting and Guidance a record level without this pro- Going forward, the Company has ject; illustrating the strength and decided to implement quarterly quality of new business genera- fi nancial reporting in line with tion. Going forward, we expect international best practice. We the pipeline for new projects to believe that this will help the in- remain strong in the near term vestment community understand and result in a continuous fl ow of Depa’s business cycle better. In work for the Company. addition, given the current mar- ket environment at the moment Cash Generation we will be reducing market guid- In 2008, the Company witnessed ance until markets become more its fi rst year of generating positive predictable. Project Picture here

Al Jawhara Versace Showfl at, Jeddah Depa Annual Report 2011 Financial Highlights l 11

The Company’s performance in million in 2010 were signifi cantly the year 2011 was strong, and better. Depa showed signs of recovery after the disappointment of 2010. On the operational side, 2011 Although revenues were margin- performance was in line with the ally lower at AED 1,736 million expectations. Some units saw compared to AED 1,814 million in growth while others shrunk, due 2010, contract gross profi t of AED to political and economical 288.5 million compared to AED circumstances during the year. 113.5 million in 2010 and net profi t after minority of AED 54.2 million The two best performing business compared to net loss of AED 198 units during the year were:

Lindner Depa Design Studio

Backlog amounted to AED 967 Backlog amounted to AED 555 million as of December 31 2011; million as of December 31 2011;

Gross profi t margin of 23.7% and Gross profi t margin of 29.2% and a net profi t margin of 9.7%; and a net profi t margin of 16.4%; and

Very strong cash position with net Very strong cash position with net cash (Including the deposits at cash of AED 72.2 million. the Group) of AED 56.6 million.

Revenue by Revenue by Activity Geographical Segmentation

FY 2011 FY 2011

Manufacturing 29% UAE 58%

ProcurmentProP 1%1

Rest of the Contracting 70% World 34% MENA 8% Depa Annual Report 2011 Financial Highlights l 12

Patchi-Dubai Mall, Dubai

Working Capital end of 2010. Our net cash posi- Working capital improved from tion at the end of FY2011 (calcu- AED 710 million in December lated as cash in hand less short 2010 to AED 669.8 million in and long term bank borrowing) December 2011. decreased to AED 70.1 million compared to AED 119 million at the end of 2010. Accounts receivables days decreased to 223 days in FY2011 (90 days excluding unbilled rev- Bad-Debt Provisions enues) compared to 235 days Due to the prudent approach (91 days excluding unbilled adopted in the year 2010, and revenues) in FY2010. It is important to the effective collection plans to note that our unbilled revenue applied in 2011, AED 14.3 million increased from AED 473 million (net of reversals) were provi- in FY2010 to AED 642 million in sioned during the year, com- FY2011 while the Accounts pared to AED 70.2 million in the Receivables decreased from year 2010. AED 16.75 million of AED 450 million to AED 432 million. these were provisioned post Accounts Payable days in- reporting period as a result of creased to 59 days in FY2011 Arcapita fi ling for bankruptcy compared to 55 days in FY2010. on March 20th, 2012. In addition, we have a remaining AED 11.2 Cash Position million of outstanding receivables relating to the Arcapita Head- Our cash in hand at year end quarters project. 2011 was AED 332.2 million com- pared to AED 450 million at the Depa Annual Report 2011 Year In Review l 13

Operations and Backlog As an operationally diverse Com- The fundamental strengths and pany working in twenty countries, operations of the Company re- our management has over the main unchanged, with contracting last ten years gained experience and manufacturing continuing to in establishing and growing these account for the most signifi cant global operations. That said, parts of the business. As we the challenges associated with consolidated some of the entities running a Company across such into the core Group, we now fi nd a large sector of the world are ourselves increasingly effi cient often local within different countries and able to execute on a wider as well as central due to our range of projects across our global scale. However, as we continue network. to pursue the many opportunities we encounter, we are tackling these challenges with the experi- Indeed, 2011 was a turning point ences and resolve needed to for our operations. With gross overcome them. This has resulted margins returning to historical in the Company signing its largest norms, anticipated GCC growth project to-date during 2011 in fi ltering in, and a record backlog, Qatar, which increased the portion we found ourselves closing the of backlog from the GCC from year in a much stronger and 48% as at 31st December 2010 to healthier position than that in 53% as at 31st December 2011. which it started.

Qatar

1227 1200

600

450 336 300 243 153 190 128 150 99 109 113 87 90 37 0 2006 2007 2008 2009 2010 2011

Saudi Arabia

407 400

200

150

100 55 61 54 61 50 41 28 6 21 0 0 0 1 2006 2007 2008 2009 2010 2011

Backlog Revenue (AED million) Depa Annual Report 2011 Year In Review l 14

Asia (Backlog) AED million FY 2011 FY 2010 Total Value: AED 1,025 Total Value: AED 591

525 378

121

93 424 1631163

198198 444 18 34

India Singapore Malaysia Thailand Azerbaijan

Asia (Revenue) AED million FY 2011 FY 2010 Total Value: AED 397 Total Value: AED 214

196 64 95

17

1

434

117272 2323

India Singapore Malaysia Thailand Azerbaijan Depa Annual Report 2011 Year In Review l 15

Sector Comparison Putting aside these two events, Depa has implemented a sector the Company has witnessed diversifi cation programme, increased diversifi cation of pro- targeting hospitality, infrastructure, ject work over the last few years, and residential projects, and this specifi cally in the infrastructure programme has been augmented segment, where we have been signifi cantly by two key events: increasingly active on projects such as the Dubai Metro, the Dubai Airport, the New Doha 1. The acquisition of Design International Airport and the Studio last year, which increased Mumbai International Airport. We the portion of our backlog and continue to expect this market revenues derived from Residen- segment to provide a signifi cant tial Space; and portion of the backlog in 2012, as we have won several projects 2. The signing of the New Doha across these various sectors. International Airport contract, Consequently 33% of our business which will temporarily increase comes from the hospitality sector, the portion of our backlog attrib- 45% from infrastructure, 11% from uted to infrastructure. residential works, 8% from Yachts and 3% from Shops and Offi ces.

Backlog by Sector

FY 2011 FY 2010 Residential Residential 18% 11%

Infrastructure 8%

Shops & Offi ces 3%

Hospitality Yacht 4% 33% Infrastructure Theming 45% Hospitality 3% Other Shops & Yacht 8% 63% Offi ces 1% 3% Depa Annual Report 2011 Year In Review l 16

Backlog in Qatar and the one in Saudi We ended 2011 with a very strong Arabia have pushed our backlog backlog list of projects. We defi ne higher than historical norms. The backlog as the remaining value of GCC is a key component of our work we have on projects where short-term growth strategy and we are on site. The backlog value we are confi dent we can add that the Company held as of 31st further GCC projects. December 2011 was AED 3.8 bil- lion, which is the highest amount Although the current backlog we have ever closed a year. is at a peak in terms of histori- cal values, we do not believe it The diversifi cation of the backlog is representative of future end- is fundamental to the growth of of-year backlog fi gures in the the Company; and the location near term. However, there are of the project and the client as- opportunities to add to more sists in our risk management. De- projects, including large infra- spite the large value of the New structure work in the GCC and Doha International Airport con- South Asia, medical centers in tract, the project is undertaken by the MENA region, and hospital- our joint venture, Lindner Depa, ity work across the GCC, Asia and is likely to be completed over and Africa. Although we do not an eighteen month period. expect to replenish the backlog at the same rate at which we will be executing it, the market does The backlog is being driven signif- provide ample opportunity for icantly by GCC growth, primarily further work. in Government-funded construc- tion projects. Both the project

Private Yacht Depa Annual Report 2011 Year In Review l 17

Top Backlog Projects List (only projects where over AED 10m work is remaining are shown)

Project Name Country Total Backlog (AED)

Doha Project Qatar 929,237,700 King Abdullah Petroleum Studies and Research Center 220,161,859 Blue Diamond Hotel Angola 213,357,930 Singapore Projects (12 Projects) Singapore 195,225,537 King Saudi University Saudi Arabia 185,475,757 Hospital Morocco 174,562,500 Twin Tower Hotel Qatar 119,398,598 Mumbai International Airport India 114,281,931 Baku Flame Tower Azerbaijan 111,760,567 Private Yacht Spain 106,174,859 City Center Qatar 71,722,869 Fraser Suite Singapore 61,911,135 Ramada Hotel Qatar 59,579,513 Private Yacht Holland 57,361,861 Cleveland Clinic UAE 50,766,422 W Hotel Singapore 48,536,085 Private Yacht Germany 45,373,241 Private Yacht Germany 44,146,733 PPM Conrad Hotel UAE 39,841,409 Private Yacht Germany 36,267,793 Lanson Place Malaysia 36,077,406 IPIC Headquarters UAE 34,161,901 Cairo Festival City 33,710,779 Port Baku Azerbaijan 32,139,951 Grand Hotel Malaysia 28,576,297 The Boulevard 28,197,209 The Ritz Carlton India 24,030,712 Hamad Medical Corporation Qatar 23,437,391 Capital Centro UAE 20,898,336 Al Raha Beach Hotel UAE 18,680,756 Central Market UAE 16,220,673 JW Marriott Hotel Azerbaijan 15,759,579 Ritz Carlton Hotel UAE 14,687,021 Fairmont Palm Hotel & Resort UAE 14,065,637 ITC Chennai India 12,689,431 Chester Terrace UK 12,485,688 Magnolias India 12,315,721 New Doha International Airport Qatar 11,511,634 Traders Hotel Malaysia 10,738,861 Confi dential Qatar 10,352,717 Total 3,295,882,001 Depa Annual Report 2011 Year In Review l 18

Carolina Herrera-Mall of the Emirates, Dubai

Comparing year-end backlog imately AED 3 billion which illus- numbers with subsequent year trates the general growth trend end revenues, it is apparent that discussed earlier. However, we we have historically averaged a do not anticipate this ratio for this ratio wherein we complete the coming year as we believe that value of the prior year’s backlog this is an exceptional backlog within the following year, despite fi gure given the delay in signing our average project duration of several projects. Nevertheless, 15 months. Even without the New the strength of this backlog fi gure Doha International Airport, the will likely drive Company growth Company would have witnessed in the near term. a record-high backlog of approx-

Backlog & Revenue

3,796 3,500

3,000 2,689 2,700

2,500 2,090 2,180 1,736 1,972 1,814 2,000 1,673 1,619 1,500 1,420 1,048 1,000 0 2006 2007 2008 2009 2010 2011

Backlog Revenue (AED million) Depa Annual Report 2011 Year In Review l 19

Macroeconomic Impact As an interior contractor, we operate As the world’s economic health is in at the end of the construction cycle. fl ux, we are, as a business, experienc- Accordingly, our peaks, troughs, ing the impact of this on our opera- and growth periods are delayed by tions regardless of the location of our approximately 18 - 24 months com- operations. pared to those of the main contrac- tors. We are now witnessing many of these contractors picking up steam 2011 saw the ‘Arab Spring’ impact the and beginning to experience growth, Middle Eastern economies as govern- indicating that the macroeconomic ments naturally ensured stability prior conditions affecting our work may to undertaking large projects. As a fi nally be behind us. result, many mega projects were put on ‘hold’ for a portion of the year, with works starting during the latter Consolidating the Business part of 2011 rather than the fi rst half of As the Company evolves and matures, the year, impacting revenues gener- we continue to reorganise the struc- ated from these projects during the ture of our business to better leverage fi scal year. our strengths and identify potential synergies within the Group. 2011 saw further streamlining over and above In the GCC specifi cally, we have that which begun in 2010, with the seen, since September 2011, many following key changes taking place: projects (re)started as well as encour- aging news that could spearhead growth over the next few years. These 1. The merger of Mivan Depa into include governments announcing the Depa Group: increased infrastructure spending and After acquiring Mivan’s stake in private-sector projects coming on our joint venture, Mivan Depa, we stream. Accordingly, we have seen merged the business unit into the our share of work in the GCC increase Group’s global operations, and saw signifi cantly through the signing of two the departure of Paul Austin, the head key projects: the New Doha Interna- of Mivan Depa and a regional CEO. tional Airport and the King Abdullah By merging Mivan Depa into the Petroleum and Research Centre. larger Depa group, this allows Depa to use the specialist ‘theming’ knowl- In Asia, we are witnessing signs of an edge that we had acquired through economic slow-down, although its the seven years of this JV across a growth rate continues to remain in wider number of different business positive territory. We are anticipating units and countries. continued growth, albeit at a slower rate than in previous years from Asia, 2. The integration of the Pino Meroni specifi cally from the hospitality sector operations into Depa Industrial Group: In an effort to consolidate operations In Europe and the United States, we and extract different synergies from continue to experience diffi cult trad- both manufacturing and contract- ing as the economy is taking longer ing divisions, we have integrated Pino than anticipated to turn around. The Meroni’s operations into Depa Indus- Parker Company and Depa UK have trial Group, one of our manufacturing- underperformed in the last year as a focused facilities. result of this, and we will continue to experience minimal growth from these countries. Depa Annual Report 2011 Year In Review l 20

3. The establishment of Design China are handed over to fi nal Studio China: clients as shell and core. We have established and launched a showroom and manufacturing As a result of these, as well as entity in Guangdong, China, under some additional changes, the the operational direction of Design Group’s structure has been Studio. Historically, Design Studio modifi ed into the one as set out would outsource additional manu- below, under the chart, enabling facturing capacity from China the Management to oversee the in order to meet client demand. many operations across the globe Consequently, in a bid to in-source in a more effi cient manner. We this capacity, we built this factory expect to continue our streamlin- to meet this demand as well as the ing efforts into 2012 in order to demand of a new market niche; ensure maximum effi ciency and the fi t-out requirements of individual productivity across the Group. home-owners - as apartments in

Mohannad Sweid (Group CEO)

Bernard Lim Nadim Walid (Regional CEO) Akhrass Zakaria (Regional CEO) (Regional CEO)

Design Studio Depa Depa Deco PLC Dubai Abu Dhabi

Vedder DDS Depa Depa Singapore Azerbaijan Qatar

Depa The Parker DDS Depa Saudi Arabia Company Malaysia Jordan and MEP

Jwico DDS Depa Depa (Associate) Thailand India Saudi Arabia

Decolight Design Studio Lindner Depa (Associate) China Depa Morocco

Royal Thai Depa Dragoni (Associate) AI Barakah

Depa Industrial EI Diar Group

Carrara Contracting Manufacturing Diversifi cation l 06

DIOR VIP Room – Dubai Mall, Dubai Depa Annual Report 2011 Diversifi cation l 22

Diversifi cation always been a core Company Over the years, the Company strategy. has become increasingly diversi- fi ed across market segments and Diversifi cation efforts begun over geographies. As a consolidator ten years ago and these have in the specialist markets in which been successful in drawing in we operate, as well as being one projects and revenues from over of the largest interior contractors twenty countries, fi fteen market in the world, global growth and segments, and three operational expansion into new countries has areas.

Revenue: Country Segmentation

0 0 2 4000 1 31 175 163 117 215 94 183 3500 15 322 209 406 243 11 214 6 109 51 324 Europe 3000 98 1 153 43 Asia 28 74 164 29 2500 132 113 87 61 Africa 232 54 45 90 Rest of GCC 2000 606 373 61 Qatar 1500 534 Suadi Arabia 458 UAE Ex-Dubai 1000 956 1,090 1,111 Dubai

500 631 453 Revenue 0 2006 2007 2008 2009 2010 2011

Backlog: Country Segmentation

6 4000 29 3 129 108 227 381 105 328 315 3500 3 128 472 251 590 1,025 Europe 3000 96 99 67 37 55 Asia 9 262 228 2500 190 Africa 652 21 432 210 39 Rest of GCC 2000 358 336 Qatar 1500 Suadi Arabia 41 1,227 1,212 UAE Ex-Dubai 915 1000 336 1,119 Dubai 803 500 407 327 214 Backlog 0 123 2006 2007 2008 2009 2010 2011 AED million Depa Annual Report 2011 Diversifi cation l 23

Revenue: Market Segmentation

4000 20 62 134 111 24 160 168 48 187 34 110 3500 216 0 13 54 510 18 142 35 95 23 189 3000 125 251 78 202 313 Others 180 401 165 2500 Infrastructure 153 88 294 674 436 Theming 2000 203 Yacht

1500 Shops and Offi ce

Residential 1000 711 892 Hospitality 469 575 1,230 777 500 Revenue 0 2006 2007 2008 2009 2010 2011 AED million

Backlog: Market Segmentation

4000 28 31 45 58 96 35 19 47 22 180 329 21 397 318 150 54 3500 136 93 62 36 154 36 1,025 3000 119 159 394 1,721 256 Others 49 2500 619 704 215 Infrastructure 432 39 Theming 2000 314 107 Yacht

1500 395 Shops and Offi ce 226 Residential 1000 684 731 1,625 1,163 1,364 1,259 Hospitality

500 406

214 Backlog 0 2006 2007 2008 2009 2010 2011 AED million Depa Annual Report 2011 Diversifi cation l 24

Private Yacht

As a result of the gradual and However, Depa did witness, to- increased diversifi cation, the wards the end of 2011, momen- management team has become tum in project-starts in the GCC increasingly adept at managing area, with signifi cant contribu- operations across many countries tions to our backlog coming from and identifying new opportuni- Qatar and Saudi Arabia; and we ties for growth and synergies believe that in the short-term, the across the Group. The ‘promot- GCC will continue to be a key ing from within’ policy that has area of growth for our business. been adopted for many years contributes to the high level of Towards the end of 2011, we competency and knowledge opened our fi rst manufacturing that our managers have about facility in Guangdong, China. our operations, and subsequent- Operated by Design Studio, ly, their ability to manage several this factory has a two-fold operationally and geographically purpose: the fi rst is to absorb the diversifi ed business units. previously-outsourced portion of Design Studio’s manufactur- 2011 was the fi rst year the Com- ing requirements; the second pany witnessed a global impact is to produce complete interior on its operations and revenues, fi t-out components for the sale regardless of location, due to to individuals that wish to fi t-out macroeconomic issues. There their homes. We have identifi ed were no areas where growth and an underserved market in China revenues exceeded expecta- where individuals who purchase tions or mitigated the impact of properties need to execute the under-performing areas, as has fi t-out, as property is handed over historically been the case. as shell and core in China. Thus, Depa Annual Report 2011 Diversifi cation l 25

we established a show-room that The factory produces kitchens, is due to open in the fi rst quarter as well as doors, and has the of 2012 to market this need and technology to manipulate the have set up our new factory with desired product output. the ability to cater to this market.

Hollland

Germany Korea

London Zurich

China Spain Azerbaijan Jordan Morocco

Miami Egypt Qatar Saudi Arabia UAE India Thailand

Malaysia

Singapore

Angola

Estimated Backlog AED 150 M DDS Parker Depa Annual Report 2011 Financial Summary l 26

Hackett - Dubai Mall, Dubai

Financial Summary for the UAE increased to 13.5% In FY2011, our revenue was AED in FY2011 compared to 2.5% in 1,736 million compared to AED FY2010. 1,814 million in FY2010, illustrating a slight decrease of 4.3% which General and is due to delayed start of some Administration Expenses projects and slow progress on The G&A expenses excluding any others as a result of the slowdown provisions in FY2011 were AED in the global economy. 162.5 million compared to AED 179 million in FY2010. Our G&A Contract Profi t as a percentage of turnover was Our contract profi t was AED 9.3% in FY2011 compared to 9.8% 288.5 million (16.6% of revenue) in FY2010. in FY2011 compared to AED 114 million (6.3% of FY2010 revenues Provisions for Doubtful Debt including the impact). Provisions for doubtful debts The signifi cant increase in con- were AED 14.6 million in FY2011 tract profi t is attributable to a compared to AED 70.2 million number of variation orders and in FY2010 - without the impact successful closure of two large of the Arcapita headquarters projects in UAE and Singapore. projects this would have been In addition, the high contract a decrease of 79.2%. This is due profi t margin of Design Studio to a good recovery rate and also contributed to this increase also because the Management as we consolidated Design had taken a more prudent and Studio’s fi nancials for the full year conservative approach in FY2010 in FY2011. Contract profi t margin towards booking provisions Depa Annual Report 2011 Financial Summary l 27

Business Park, Al Khobar

against receivables and unbilled Studio, which we acquired in revenues, especially in situations Q4 2010. This compared to where we felt our clients are AED 6.3 million in FY2010. fi nancially challenged. Some of these provisions were reversed Other Income in FY2011 as the clients made Other income was AED 13.1 million the payments. compared to AED 24.6 million in FY2010. Goodwill Impairment Unlike FY2010, there is no good Finance (Costs)/ will impairment in FY2011 as the Income, Net fair value of our investments is The net fi nance cost was AED 13.4 higher than their carrying value. million in FY 2011 compared to a In FY 2010 we had impaired cost of AED 4.2 million in FY 2010, goodwill by AED 40.9 million and is broken down as follows: as we had taken an extremely cautious approach regarding • The fi nance cost was AED27.5 the valuation of our investments. million in FY 2011 compared to AED 19.0 million. It should be noted Amortization of that total fi nance cost including Intangible Assets those allocated to contract cost The amortization of intangible was AED 6.2 million in FY 2011 assets in FY2011 was AED 44.5 compared to AED 23.5 million million compared to AED 25.9 mil- in FY2010. lion in FY2010. The increase was mainly due to the full year amor- • The fi nance income was AED tization amounting to AED 22m 14.1 million in FY 2011 compared on the intangible assets of Design to AED 14.9 million. The decrease Depa Annual Report 2011 Financial Summary l 28

is related to the decrease in Accounts receivables days the Bank and Cash balances decreased to 223 days in FY2011 (from AED 450 million as of Dec (90days excluding unbilled 31, 2010 to AED 332 million as revenues) compared to 235 of Dec 31, 2011). days (91 days excluding unbilled revenues) in FY2010. It is important Taxation to note that our unbilled revenue Our tax charge in FY2011 was increased from AED 483 million AED 15.7 million compared to tax in FY2010 to AED 642 million in charges amounting to AED 22.1 FY2011 while accounts receiv- million and deferred tax charges able decreased from AED 450 amounting to AED 26.6 in FY2010. million to AED 433m. Accounts payable days increased to 59 days in FY2011 compared to Combined, all of the above 55 days in FY2010. resulted in a net profi t of AED 59.1 million with a net profi t margin of 3.4% in FY2011, compared to Cash Position a net loss of AED 205.7 million in Our cash in hand at year end FY2010. Net profi t after deducting 2011 was AED 332 million non-controlling interest is AED compared to AED 450 million at 54.2 million. the end of 2010. Our net cash position at the end of FY2011 Working Capital (calculated as cash in hand less short and long term bank Our working capital declined borrowing) decreased to AED slightly from AED 710 million in 70.1 million compared to AED 119 December 2010 to AED 669.8 million at the end of 2010. This is million in December 2011.

Private Yacht Depa Annual Report 2011 Financial Summary l 29

Private Yacht

due to two major capital invest- our operating activities ments – our new head offi ce in was AED38 million in 2011 as Dubai and the new Design Studio compared with AED 173.8 factory in China. million in FY2010. Our cash used in investing activities amounted Balance Sheet to AED 53.2 million in FY2011 Total assets this year remained compared to AED 206.2 million virtually unchanged, and came in FY2010. The FY2010 number in, at 31 December 2011, at AED was high as a result of two ac- 3,030 million compared to AED quisitions; Design Studio Furniture 3,038 million as of 31 December Manufacturer Ltd and Carrara 2010. On the other hand, total Industrial Company. liabilities decreased by 3.1%, from AED 1,327million as of 31 Cash used in fi nancing activities December 2010 to AED 1,285.9 was AED 69.7 million for FY2011, million as of 31 December 2011. which includes dividends of AED 79.9 million, compared to AED 9.9 Total equity as of 31 December million in FY2010. 2011 was AED 1,744 million com- pared to AED 1,710 million as of Capital Expenditure 31 December 2010. The Company’s capital expendi- ture in FY2011 amounted to AED Cash Flow and 70.7 million compared to AED 47 Bank Facilities million in FY2010. Design Studio’s The Group’s total borrowings at capital expenditure was AED 49.3 31 December 2011 were re- million in FY2011 which mainly duced to AED 262.1 million com- includes the purchase of pared with AED 330.7 million at machinery for the new factory the end of 2010. Ca sh fl ow from established in China. Depa Annual Report 2011 Board Of Directors And Shareholder Information l 30

Board of Directors On 22nd August, 2011, Depa one executive member, the welcomed a new Board mem- Chief Executive Offi cer, and two ber, Mr. Chris Foll, to our Board independent members, Faisal Al of Directors, which now consists Matrook and Helal Al Marri. of eight members, including

Abdullah M. AL Mazrui, serves National Investment Corporates, as Chairman of the Board of Investcorp, Abu Dhabi Education Directors for Depa United Group Council, Abu Dhabi Economic as well as Emirates Insurance Council, Dun & Bradstreet and Company; Mazrui Holdings LLC, Emirates Specialties Company. International School of Chouiei- He is a member of the Advisory fat, Aramex, Jashanmal National Board of Insead Business School, Company, Chemanol, Modecor Abu Dhabi and EDHEC Business and The National Investor. Mr School, . He holds a de- Mr. Abdullah M. Al Mazrui Mazrui also sits on the Board gree from Chapman University of (Chairman) of Directors for the following California, USA. organizations and institutions:

Mohannad Sweid is the CEO manufacturing companies. Prior and co-Founder of Depa United to setting up Depa, Mr Sweid Group. He has more than 25 worked in Saudi Arabia as Man- years of experience managing aging Partner for Rochan Fine Mr. Mohannad Izzat design consulting fi rms in the Arts and Vesti Corporation in Sweid (CEO) Middle East and USA. In 2005, Boston (USA) as Vice President Mr Sweid spearheaded Depaís for Middle East Operations for. Mr international expansion into Asia, Sweid studied architecture and Africa and Eastern Europe as well design at the Boston Architec- Mohannad Sweid as the Companyís acquisition tural Centre. (Chief Executive Offi cer) strategy that included leading interior contracting and furniture Depa Annual Report 2011 Board Of Directors And Shareholder Information l 31

Riad Kamal is the Founder and fi rm to go public in the UAE. Itís Executive Chairman of Arabtec impressive portfolio includes; the Construction and CEO of Burj Khalifa, the Emirates Palace Arabtec Holding. He founded hotel in Abu Dhabi, the Okhta Arabtec Construction in Dubai Centre Tower in St. Petersburg as in 1974. Today it is one of the fi ve well as the interior for the Burj Al largest contractors in the MENA Arab. Mr Kamal holds a degree region with offi ces extending in Civil Engineering and a Masters out to India and Russia. Arabtec in Structural Engineering from Mr. Riad Burhan Taher Kamal Construction was the fi rst private Imperial College of London. (Non-Executive)

Orhan Osmansoy has been the J.H. Whitney & Co.; CEO of The National Investor a US private equity fi rm and (TNI), an Abu Dhabi based also served as Vice President investment and advisory company at Morgan Stanley, in both since 2004. He has spent the last New York and London. 8 years spearheading its expansion across the GCC. Mr Osmansoy Mr Osmansoy serves as Board has nearly 20 years of experience Director for Colliers International in investment banking and private Middle East and Depa United Mr. Orhan Osmansoy equity having previously worked at Group. (Non-Executive) Dexter Capital Group in London,

Marwan Shehadeh is the Group he established the Middle East Director for Corporate Develop- operations for Hard Rock Café ment of Al Futtaim Group, Inc. before joining Kingdom Hotel Managing Director of Al Futtaim Investments as CFO in 1998. Capital and Senior Executive Offi cer of Al Futtaim Investment Shehadeh holds a Masters Degree Management Ltd. Shehadeh in International Business from the joined Al Futtaim in 2003, as Institut D’Etudes des Relations Director of Finance of Dubai Internationales, Paris and has Mr. Marwan Shehadeh Festival City LLC. Shehadeh completed a general management (Non-Executive) started his career in corporate executive programme at fi nance at Chase Manhattan Harvard Business School. Bank, New York. In 1994, Depa Annual Report 2011 Board Of Directors And Shareholder Information l 32

Helal Saeed Almarri is the sits on a number of boards within CEO of Dubai World Trading the UAE, including the Dubai Centre (DWTC) having joined the Chamber of Commerce and exhibition and conference group Aramex. Almarri holds an MBA in 2004. As CEO, Almarri oversees from London Business School the strategy and development of and is also a qualifi ed chartered the group. Prior to DWTC Almarri accountant fromthe Institute of worked at McKinsey & Company Chartered Accountants in and KPMG in London. Almarri also England and Wales. Mr. Helal Saeed Almarri (Independent Non-Executive)

Faisal Matrook serves as an Group, Jasaf Group, NOOR independent Non-Executive Capital, Al Alahlia Shipping Director of the Board of Agency, Al-Sharif Group Directors for Depa United and Amwaj Islands Co. Group as well as Chairman and Director of prominent and Mr Matrook has a National well-known UAE and Bahrain- Diploma in Business Administration based companies. These include from Scarborough Technical Contech Engineering Group, College. Mr. Faisal Al Matrook Advanced Technical Services (Independent Non-Executive)

Chris joined Gulf Capital as Chief and Vietnam for Hutchinson. Financial Offi cer in 2010 from Previously, Chris was based in Hutchinson Telecommunications Australia where he worked at International, a leading provider Holcimlzs, one of the worldís of global communications. For leading suppliers of cement and the last nine years he has held aggregators; Adelaide Brighton senior leadership roles including Group and later QNI Ltd. Chris is CFO and COO and worked in a qualifi ed Chartered Accountant. diverse countries such as Mumbai Mr. Chris Foll (Independent Non-Executive) Depa Annual Report 2011 Board Of Directors And Shareholder Information l 33

The attendance of Board remuneration for fi scal year members for the fi scal year 2011 2011 was AED 1,500,000. Senior displayed below. The Board management bonuses for the remuneration for 2011 was AED fi scal year 2011 have not yet 240,000 per member per annum. been determined. The Chief Executive Offi cer’s

Board Meetings Attendance FY 2011

9-Feb 30-Mar 18-May 22-Aug

Abdullah Al Mazrui O X O O

Mohanad Sweid O O O O

Riad Kamal O O X X

Orhan Osmansoy O O X O

Marwan Shehadeh O O X O

Faisal Al Matrook X O O O

Helal Al Marri O O O O

O Present X Absent

Audit Committee Meetings Attendance FY 2011

7-Feb 22-Aug 7-Sep

Helal Al Marri O O O

Orhan Osmansoy O O O

Marwan Shehadeh X O O

Faisal Al Matrook X O X

O Present X Absent Depa Annual Report 2011 Board Of Directors And Shareholder Information l 34

Shareholder Breakdown

FY 2011

20%

15% 55%5

7% 3%

Middle East Continental Europe

UK & Ireland Africa

North America Other Asia

FY 2011

64.91%6%

2.33%

3.77%

28.72%

0.27%

Institutional Investors Company- Related Holders Trading, Lending and Miscellaneous Unidentifi ed

Retail Investors Depa Annual Report 2011 Corporate Governance And Risk Management l 35

In line with international best ties relating to the composition practice on corporate govern- of our Board of Directors, perfor- ance, the Company reviewed, mance of Directors, the induction in collaboration with KPMG, its of new Directors, appointment Corporate Governance and of committee members and Operating manuals in 2011 in succession planning for senior order to ensure alignment with management. The Nomination international best practices in Committee is responsible for these areas. In addition, several determining the appropriate new policies and governance skills and characteristics required frameworks were established in of our Directors and directors light of corporate developments of our subsidiaries. The Nomina- and expansions. tion Committee’s responsibilities include: The committees we have estab- lished remain in place and are: a) identifying individuals quali- the Nomination Committee, the fi ed to become members of our Remuneration Committee and Board of Directors the Audit Committee, all of which report directly to the Board of b) recommending individuals to Directors. Their scope of work be considered for election at the and responsibilities are outlined next Annual General Meeting of below: the Company or to fi ll vacancies

1. The Nomination Committee c) preparing a description of the which assists our Board of Direc- role and capabilities required for tors in discharging its responsibili- a particular appointment

Rose Rayaan Rotana, Dubai Depa Annual Report 2011 Corporate Governance And Risk Management l 36

Armani Hotel, Dubai

d) developing and recommending allowed to participate in any to our Board of Directors appro- discussion or decision regarding priate corporate governance his/her own remuneration and the guidelines. Chief Executive Offi cer is not to be present when the Remuneration The Nomination Committee Committee discusses issues relating comprises two Directors, to his remuneration. The Remu- currently: Mr. Riad Kamal and neration Committee may Mr. Mohannad Sweid. approve remuneration for members of the Executive 2. The Remuneration Committee Management. All other which assists our Board of Directors recommendations must be in determining its responsibili- referred to our Board of Directors ties in relation to remuneration, for approval. The duties and including making recommenda- activities of the Remuneration tions to our Board of Directors Committee during the year are regarding the Company’s policy disclosed in the Company’s on remuneration, executive op- annual report and accounts. tions, share grants and determin- ing the individual remuneration The Remuneration Committee and benefi ts package for each comprises three Directors, cur- of the non executive Directors, rently: Mr. Marwan Shehadeh, executive Directors and senior Mr. Helal Al Marri, and management. The Remuneration Mr. Mohannad Sweid. Committee also reviews human resources policies for employees 3. The Audit Committee which who are below general manager assists our Board of Directors in level, at least once every three discharging its responsibilities years. No committee member is with regard to fi nancial report- Depa Annual Report 2011 Corporate Governance And Risk Management l 37

ing, external and internal audits tion of the external auditor, results and controls, including reviewing of its risk management, internal the Company’s annual fi nan- compliance and control systems cial statements, reviewing and review and a summary of any monitoring the extent of the non complaints managed in the past audit work undertaken by ex- year. The ultimate responsibil- ternal auditors, advising on the ity for reviewing and approving appointment of external auditors the accounts and the half yearly and reviewing the effectiveness reports remains with our Board of of the Company’s internal audit Directors. activities, legal and regulatory compliance, internal policies and The Audit Committee comprises controls and risk management four Directors, currently: systems. In addition, the Audit Mr. Orhan Osmansoy, Mr. Helal Al Committee is required to prepare Marri, Mr. Marwan Shehadeh an annual report for our Board and Mr. Faisal Al Matrook. of Directors which sets out its fi ndings on the above, including recommendations for the selec-

Damac Heights Offi ce, Dubai Depa Annual Report 2011 Corporate Governance And Risk Management l 38

Reporting and Guidance Policies Going forward, and in line with Given the uncertain macro- international best practice, the economic situation and the Company will report fi nancial uncontrollable severe cyclical- results on a quarterly basis. As ity in our earnings and business, an interior-focused Company, we believe that any guidance our industry is highly cyclical with provided to the market cannot revenues and earnings varying be deemed as accurate, and signifi cantly between fi scal quar- accordingly, we will no longer ters. As such, we will be providing be publishing growth or future historical quarterly data in order guidance. to facilitate an accurate assess- ment of operational and fi nan- cial performance.

Business Park, Al Khobar Depa Annual Report 2011 Audited Financials l 39

Selected Income Statement Data Dec 2011 % of Turnover Dec 2010 % of Turnover

AED (million)

Contract Income 1736.0 1814.3

Contract Cost (1447.5) -83.4% (1700.8) -93.7%

Contract Profi t 288.5 16.6% 113.5 6.3%

Gerneral and administrative expenses (152.6) -8.8% (208.9) -11.5%

Provision for doubtful accounts (14.3) -0.8% (70.2) -3.9%

Amortization of intangible assets (44.5) -2.6% (25.9) -1.4%

Loss on impairment 0.0 0.0% (40.9) -2.3%

Loss on Valuation of derivative fi nancial instrument (1.0) -0.1% 0.0 -2.3%

Other Income/(expense) 14.0 0.8% 24.5 1.4%

Finance Income/(cost) net (13.3) -0.8% (4.1) -0.2%

Share of profi t/(loss) from associates (2.0) -0.1% 55.1 3.0%

Net Profi t for the period before tax 74.8 4.3% (156.9) -8.6%

Income Tax (15.7) -0.9% (48.7) -2.7%

Net Profi t for the period 59.1 3.4% (205.6) -11.3%

Attributable to:

Equity holders of parent 54.2 3.1% (198.2) -10.9%

Minority Interest 4.9 0.3% (7.4) -0.4% Depa Annual Report 2011 Audited Financials l 40

EBITDA/EBIT Dec 2011 % of Turnover Dec 2010 % of Turnover

Profi t for the year 59.1 3.4% (205.6) -11.3%

Income Tax 15.7 0.9% 48.7 2.7%

Finance cost 27.5 1.6% 19.0 1.0%

Finance Cost recognised on cost of sales 6.2 0.4% 4.5 0.2%

Interest income (14.2) -0.8% (14.9) -0.8%

EBIT 94.3 5.4% (148.3) -8.2%

Depreciation 40.0 2.3% 42.3 2.3%

Amortization of intangible assets 44.5 2.6% 25.9 1.4%

Loss on impairment 0.0 0.0% 40.9 2.3%

EBITDA 178.8 10.3% (39.2) -2.2%

EBIT

Adjusted for

Share or (profi t) loss associate 2.0 0.1% (55.1) -3.0%

Other income (14.0) -0.8% (24.5) -1.4%

Adjusted EBIT 82.3 4.7% (227.9) -12.6

Depreciation 40.0 2.3% 42.3 2.3%

Amortization of intangible assets 44.5 2.6% 25.9 1.4%

Loss on impairment 0.0 0.0% 40.9 2.3%

Adjusted EBITDA 166.8 9.6% (118.8) -6.5%